The Asian Development Bank (ADB) has signed a memorandum of understanding with HSBC, Temasek, and Clifford Capital Holdings to set up a debt financing platform to boost commercial development of sustainable infrastructure projects in Asia, with an initial focus on Southeast Asia.
The platform aims to turn marginally bankable projects into bankable ones by providing concessional capital and addressing policy and regulatory constraints hampering private investments in sustainable infrastructure. The partners’ initial focus will be on clean transport, renewable energy and energy storage, and water and waste management. Additional areas such as climate adaptation, agriculture and land use, and technology-led solutions could be included in the future.
“As developing countries in Asia transition toward a greener and sustainable future, ADB is stepping up its engagement with governments and other aligned actors to expand the pool of bankable, sustainable infrastructure projects, increase their risk-return profile, and attract financing from private investors,” said ADB Vice-President Ahmed M. Saeed. “ADB will provide technical assistance in project development and sector reforms and work with our partners to use blended finance and other risk mitigation solutions to mobilize sustainable infrastructure financing across Asia.”
Developing Asia needs to invest $26 trillion, or $1.7 trillion a year, from 2016 to 2030 to maintain its growth momentum, end poverty, and address climate change. Southeast Asia is one of the most vulnerable regions to climate change.
The public sector has financed most of Asia’s infrastructure projects, but it cannot meet the rising demand in the region. Increasingly, governments are encouraging the private sector to invest in infrastructure. However, up to 65% of Asia’s infrastructure projects are not considered bankable, and it requires significant upfront cost and time on project preparation to get the projects to a bankable stage.
Marginally bankable projects typically face a range of barriers to accessing private sector finance. These may include a variety of capability, policy, and economic issues which can impact a project’s ability to attract commercial financing.
The initiative aims to bridge the financing gap by helping countries develop bankable sustainable infrastructure projects based on global standards. Following an initial feasibility assessment, it is envisaged that HSBC and Temasek will be equity partners in the platform and ADB and Clifford Capital Holdings will be strategic partners.
The platform will apply international best practices for environmental, social, and governance, in line with safeguards standards set by international financial institutions. It may also consider emerging initiatives such as the FAST-Infra Sustainable Infrastructure Label.