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Finance

Promoting Green and Innovative Finance Across Southeast Asia

  • Project Name: The Innovation Hub and The ASEAN Catalytic Green Finance Facility
  • Region/Country: Southeast Asia
  • Sector and Themes: Finance
  • Year: 2018–Present
  • Project Leaders: Anouj Mehta
Promoting Green and Innovative Finance Across Southeast Asia
The SERD Innovation Hub, was set up in 2018 to develop green and bankable innovative finance projects that can catalyze private, commercial, and institutional capital for each dollar of sovereign finance.

For the global COVID-19 recovery to safeguard against future pandemics, drive sustainable growth, jobs, and investment, it has to be green. Green finance, green systems, green policies. Now is the chance to do better for people and the planet.

—Jorge Moreira da Silva, director, Development Co-operation Directorate, Organisation for Economic Co-operation and Development

Development challenge

The Southeast Asia region has rapidly depleting natural resources due to pollution and unsustainable use, and huge climate change vulnerabilities. Estimates indicate a 60% higher regional carbon footprint by 2050, and regional climate change impacts are expected to cause an almost 11% drop in gross domestic product (GDP) by 2100 from impacts on agriculture, health, ecosystems, and labor productivity. The region requires an estimated $210 billion annually from 2016 to 2030 in investments for climate-resilient infrastructure.[1 However, there is an estimated $102 billion per year financing deficit.

Solution

The SERD Innovation Hub, one of the first in ADB with an innovative finance focus, was set up in 2018 to develop green and bankable innovative finance projects that can catalyze private, commercial, and institutional capital for each dollar of sovereign finance. The Innovation Hub’s activities are underpinned by a regional project, the Green and Innovative Finance Initiative for Scaling Up Southeast Asian Infrastructure (GIF), and a vision and strategic road map for its activities.

Knowledge products and services delivered

In its 2 years of operations, the SERD Innovation Hub has delivered across five planned activity pillars:

  1. creation of a pool of experts and TA fund;
  2. copious knowledge- and capacity-building events, training, and publications;
  3. development of innovative finance concepts and pilot projects;
  4. establishment of global partnerships for knowledge and cofinancing commitments; and
  5. the first regional green fund of $1.5 billion, the ASEAN Catalytic Green Finance (ACGF) Facility. This fund was developed and launched in 2019, to support ASEAN member states to source public and private financing for infrastructure projects that promote environmental sustainability and contribute to climate change goals. In its first year of operations the ACGF approved 4 green projects worth $1.4 billion. The project formalized 13 partnerships for knowledge, capacity, and project development. It also mobilized emergency supplies to respond to the COVID-19 pandemic in just 3 days, implementing distribution over 2 months for more than 800,000 people in the Philippines in an innovative collaboration with government, private sector, and national government entities.
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Impact and results

The SERD Innovation Hub has helped change the mindset for green and innovative finance across ADB with the ACGF a highly visible and pioneering focus for the bank. A major success in the era of COVID-19 has been green bond market development, with support for the successful issuance of the Thailand Sustainability and Social bonds in late 2020. The Innovation Hub is also now supporting bonds development in Indonesia and the Philippines. ADB approval of green and innovative projects achieved with the hub’s support are a model for effective leveraging of funding to meet climate objectives.

Lessons for Replication

The operation of the hub has shown how collaboration is critical to meet emerging challenges faced by the region. Regional departments must be proactive in identifying new and emerging opportunities to support, one key example being the promotion of green recovery strategies. An internal pool of experts within the SERD Innovation Hub team has proved crucial in applying specific key performance indicators such as green criteria at a project level, as this a fundamental element for green projects and requires extra effort and analysis.

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Former ADB President Takehiko Nakao (standing, fifth from left), Thailand Minister of Finance Apisak Tantivorawong (standing, sixth from left), ASEAN Ministers of Finance and senior officials, and representatives from development and private sector partners during the launch of the ASEAN Catalytic Green Finance Facility in Chiang Rai, Thailand.

Now is the right time to strengthen the ASEAN Catalytic Green Finance Facility’s role within the fund. Going forward, vehicles like this will be key to continue supporting a green recovery from COVID-19.

—Brahmantio Isdijoso, chair, ASEAN Infrastructure Fund and director of Government Support and Infrastructure Financing Management, Ministry of Finance, Indonesia