Singapore will launch a new Asia-focused blended finance initiative, which aims to mobilise up to US$5 billion ($6.67 billion) for green and transition projects.
Senior Minister Teo Chee Hean says the government is prepared to contribute “catalytic capital” in support of the partnership, known as Financing Asia’s Transition Partnership, or Fast-P.
“The initiative will draw on concessional capital to catalyse commercial capital from a range of partners, including multilateral development banks and philanthropists, in support of Asia's transition to net zero,” says Teo in his Dec 3 welcome address at the Singapore Pavilion’s two-day Green and Transition Finance programme.
According to Teo, “some partners” have already pledged their support for Fast-P. “We are confident that more will follow.”
Teo first spoke about the initiative when delivering Singapore’s national statement at the World Climate Action Summit on Dec 2. The event was part of the COP28 climate conference in Dubai.
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Fast-P is an expression of Singapore’s “longstanding support” for transformative global action on climate change, says Teo at the Singapore Pavilion. “We can get to net zero if we are prepared to approach it creatively and act collectively. Blended finance through Fast-P is one example of Singapore’s contributions to this effort, bringing together the public, private and people sectors to drive climate finance and climate action in the region.”
Singapore’s monetary contribution to Fast-P will form part of the “concessional capital” required in the blended finance structure. These cheaper forms of funding, often from the public sector, help attract private capital into projects deemed risky or less profitable.
There are many reasons why capital is not flowing to green and transition projects, says Monetary Authority of Singapore (MAS) managing director Ravi Menon in his opening remarks on Dec 3. These range from insufficient expertise in project development to regulatory, political and foreign exchange risks.
Speaking after Teo at the Singapore Pavilion, Menon says blended finance is needed to mobilise the necessary capital for “marginally bankable green and transition projects”.
“Governments, development finance institutions and philanthropies could provide concessional capital in the form of grants, limited guarantees and debt or equity at below-market rates of return. Multilateral development banks can provide technical assistance, in the form of project development expertise, capacity building and institutional support,” says Menon. “This combination of concessional capital and technical assistance will reduce project risk and improve bankability.”
To reach the US$5 billion fund target, MAS is reaching out to “many banks and institutional investors” to bring in commercial capital, says Menon. According to Menon, Fast-P will target three key areas of green and transition investments that are “most pertinent” in Asia.
The “energy transition acceleration” theme will cover transition projects like the managed phase-out of coal together with renewable energy replacement.
The “green investments” theme will invest in projects involving mature technologies, such as scaling renewable energy, grid modernisation, and electric vehicle infrastructure.
Finally, the “clean technologies” theme will focus on emerging green technologies that are being piloted, such as the use of hydrogen and carbon capture, utilisation and storage.
See also: MAS's Ravi Menon launches Singapore Pavilion at COP28 in Dubai
Financiers and investors will form partnerships, managed by an asset manager, with dedicated investment and impact objectives for each investment theme, says Menon.
MAS has found partners for the former two of the three themes. On Dec 3, MAS signed a memorandum of understanding (MOU) with Allied Climate Partners, the International Finance Corporation and Temasek Holdings on a “green investments partnership”.
Signed at COP28, the partnership aims to identify and develop a pipeline of investments in sectors including renewable energy and storage development, electric vehicle infrastructure, sustainable transport, water and waste management.
According to a statement, Temasek will leverage its network of portfolio companies and partners across its ecosystem — including Pentagreen Capital, a joint venture with HSBC — for origination and investment opportunities.
MAS will enter another MOU this week with the Asian Development Bank (ADB) and Global Energy Alliance for People and Planet (GEAPP), which is backed by The Rockefeller Foundation, Bezos Earth Fund and Ikea Foundation; on an “energy transition acceleration partnership”.
“Public finances the world over are in stressed conditions,” says Menon. “There is ample private capital in the world — some $400 trillion in assets under management — yet so little of it is going into the net-zero transition effort. Only by synergising the catalytic power of public capital and the abundance of private capital can we get transition finance right. We need to act together.”
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Photos: Ministry of Communications and Information (MCI), COP28 Singapore Pavilion
