The Asian Banker Wednesday, 24 July 2024

ADB, GEAPP, and MAS to establish Asia energy transition acceleration finance partnership

5 min read

The Asian Development Bank (ADB), Global Energy Alliance for People and Planet (GEAPP) and the Monetary Authority of Singapore (MAS) today announced their intent to establish a blended finance partnership to accelerate energy transition at scale in Asia.

Economic growth, demographic expansion, and increased urbanisation have increased energy demand growth in Asia. 85% of Asia’s energy consumption is from fossil fuels. To reduce emissions while achieving its development goals, Asia needs to accelerate and scale up innovative financing solutions for its energy transition.

ADB, GEAPP and MAS have signed a Memorandum of Understanding (MOU) to set up an energy transition acceleration finance partnership to mobilise concessional capital from the philanthropic and public sectors, de-risk projects, and crowd-in private capital from around the globe to finance energy transition projects in Asia. Such projects include the early phaseout of coal assets to be replaced with renewable energy, and decarbonisation projects in hard-to-abate sectors. The MOU was signed at the 28th Conference of the Parties (COP28) to the United Nations Framework Convention on Climate Change.

Through the collaboration, the partners will develop a pipeline of opportunities, and deploy innovative and scalable financing structures to drive decarbonisation in Asia. The partnership will also explore using high-integrity transition carbon credits to improve the commercial viability and sustainability of retiring and replacing coal assets with renewable energy, and facilitate the mainstreaming of such transactions. The transactions will reference global best practice standards, including the Glasgow Financial Alliance for Net Zero (GFANZ) APAC guidelines, Singapore-Asia Taxonomy, and ASEAN taxonomy.

The partnership aims to raise up to $2 billion in concessional and commercial capital from other like-minded partners. ADB will provide origination, transaction and technical support through its presence and network in countries across the region. The partnership will benefit from ADB’s broader Energy Transition Mechanism (ETM) initiative including policy support for just energy transition, contributions from the governments of Japan, Germany and other countries under the ETM Partnership Trust Fund, and pipeline of investable projects. GEAPP will contribute philanthropic capital, its experience in the energy transition, and a coalition of committed partners.

MAS will mobilise key stakeholders in Singapore’s financing ecosystem, including infrastructure finance platforms such as Clifford Capital. MAS will also enable policy support for the collaboration, including through its transition planning guidance to financial institutions, transition focused taxonomy, and work in developing highintegrity transition carbon credits via the Transition Credits Coalition (TRACTION). All three partners also intend to mobilise and contribute catalytic capital, to crowd in other concessional and commercial capital providers and like-minded partners.

Masatsugu Asakawa, president  of ADB, said: “Time is running out to make a meaningful impact on climate change and it is clear that not enough is being done to curtail the most polluting sources of greenhouse gas emissions. This financing partnership with MAS and GEAPP – two leading, like-minded partners – is a significant step towards attracting the requisite capital to phase out coal assets more quickly and replacing these with cleaner energy. This partnership forms a critical alliance in our region’s battle against climate change.”  

Kitty Bu, vice-president of GEAPP Asia said: "GEAPP, as a robust alliance with access to catalytic capital, is in a unique risk-tolerant position to enable allocation of funds and resources towards climate solutions. By bringing in diverse partners, GEAPP aims to create avenues to streamline capital flow using blended finance. This bridges the gap for early-stage projects that have long-term potential but may not attract investment at the nascent stages. We are confident that the energy transition acceleration finance partnership with ADB and MAS will be pivotal in mobilising necessary capital to create new markets and strengthen the existing clean energy ecosystem."

Ravi Menon, managing director of MAS, said: “Blended finance and carbon credits are key success factors for an effective and just energy transition in Asia. MAS is pleased that this energy transition acceleration finance partnership with ADB and GEAPP has both of these key components. We encourage global philanthropies, development finance institutions, long term investors, banks and other financiers to join us in this public-private partnership to expand Asia’s access to clean energy, reduce greenhouse emissions and contribute to a more sustainable planet.”

Re-disseminated by The Asian Banker

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