UN Climate Change News, 14 June 2018 - Countries in Asia and the Pacific face requirements to the scale of multi-trillion dollars over the next 20 years to finance the transition to low-carbon, climate friendly, sustainable, and resilient economies as set out in the Paris Agreement, according to the International Finance Corporation.
However, there is a wide gap between the amount of finance currently mobilized by governments and private sector actors and the scale of finance required to implement the Paris Climate Change Agreement.
This gap presents an unparalleled opportunity for the private sector to step in and facilitate the rise in collective ambition needed to tackle the climate challenge.
Regional experts gathered in Singapore earlier this month for the first Asia-Pacific Green Investment Catalyst (GIC) and Green Finance Conference to discuss how to bridge this gap and explore how Asian capital markets can be best leveraged to support sustainable and climate-aligned economic growth in the region and launch several facilities and initiatives.
The conference featured keynote speeches and panel discussions on Growing Green in Asia followed by a focused Green Investment Catalyst Roundtable on day two.
The meeting was attended by over 200 private sector and public debt capital market representatives including targeted financial sector partners and was coordinated by the UN Climate Change’s Regional Collaboration Centre in Bangkok (RCC Bangkok) and partner Institute for Global Environmental Strategies (IGES), in partnership with the UN Economic and Social Commission for Asia and the Pacific (ESCAP), Global Financial Markets Association (GFMA), and Asia Securities Industry and Financial Markets Association (ASIFMA).
In the lead-up to the conference and as the first phase of the GIC process, the organizing partners worked extensively with public and private stakeholders to incubate concepts and prepare deals for financial facilities and initiatives which can tap into capital markets and increase lending for green investments and climate-aligned growth. The outcomes of the first phase were presented, tested, discussed, and prepared for implementation at the Singapore meeting during the GIC Roundtable.
Mr. James Grabert, Director of Sustainable Development Mechanisms, UN Climate Change, emphasized that the GIC process supports “effectively translating policies, Nationally Determined Contributions, and national roadmaps into investment pipelines of bankable projects and providing risk-adjusted long-term returns for investors.”
Day one of the conference centered on ways, means and opportunities to grow green investment and finance in the Asian region. Green loans linked to environmental performance were highlighted as pioneered by several international banks and corporations based in Asia. The discussion focused on the significant potential for climate-aligned investment and identified barriers and how these could be addressed.
A strong case for green was made in the opening by Mr. Masagos Zulkifli, Singapore Minister for the Environment and Water Resources as financial sector plays a key role in promoting climate action by helping investors realise there is tangible value in sustainable development. Expected revenue from a Singapore carbon tax starting 2019 of S$1 billion will also be 100% used to help industries improve energy efficiency and reduce emissions.
Mr. Hongjoo Hahm, Officer-in-Charge, UNESCAP, cautioned that the region’s least-developed countries were highly vulnerable to climate impacts yet highly constrained in their ability to mobilize public climate finance, which opens up a huge opportunity for private sector climate-smart investments across the region.
Day two considered several concrete financial instruments and initiatives initiated by RCC/UNFCCC/UNESCAP together with financial sector and government partners in Cambodia, Lao PDR, Myanmar, and Thailand. Using a Green Investment Catalyst approach - a three-phase process comprising Prepare/Catalyze/Continue.
The initiatives aim to increase tangible private sector investments and projects on the ground that will help countries implement their Nationally Determined Contributions (NDCs) by promoting investment towards low emission and climate-resilient development strategies while removing barriers to green investment.
These include:
- Sustainability Bond Facility for Micro Finance Institutions (MFIs) – A bond facility for financing on lending to micro finance institutions in the region
- Syndicated Regional Green Lending Facility – A loan facility to provide mid-scale syndicated concessional loans to enterprises in the region
- Green lending facility for Asia-Pacific – A lending facility aimed at smaller enterprises in Asia-Pacific
- Asia Pacific Green Bond Standard and Green bond impact monitoring – An initiative to adopt a region-wide green and social bond standard, with tools to ensure continued monitoring of climate and green impact after loan or bond issuance
The initiatives were well-received among participants and several offered tangible avenues of support in moving them to the next stage of the GIC process; towards accelerated implementation. For example, partners are interested in pursuing the establishment of a regional MFI facility that will tap into capital markets for fundraising and provide loans for a pool of MFIs. On ASEAN green loans, participants expressed support for finding a regional solution to midsize projects green financing, such as looking for solutions on efficient green measurements, reducing transaction costs and the creation of connections between the international initiative and local banks.
Mr. Grabert added, “today, we are just planting the seed but we hope that some of these initiatives will grow bigger and succeed to help transform our economies to achieving these important goals for our planet and our future generations.”
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