THE Asian Development Bank (ADB) has proposed the creation of national green financing vehicles to catalyze environmentally and financially sustainable infrastructure investments in Asia and the Pacific.
In a report titled “Catalyzing Green Finance: A Concept for Leveraging Blended Finance for Green Development” released on Tuesday, the Manila-based multilateral lender highlighted the constraints for developing a large pipeline of bankable green infrastructure projects and calls for an integrated approach to transforming country financial systems.
The report outlines the concept of a Green Finance Catalyzing Facility (GFCF), which would serve as a model for countries to create their own financing vehicles and implementing mechanisms.
ADB said mobilizing additional funds from the capital markets is a major objective of these vehicles.
The lender said GFCF’s nature as a facility, rather than a fund, would enable a holistic approach to green finance, providing project development and structuring support and establishing a financing mechanism which links financial incentives with green targets, leveraging, credit ratings, and capital markets access.
“The choice that Asia makes in bridging infrastructure gaps will have profound implications for its people and the planet,” Bambang Susantono, ADB vice president for Knowledge Management and Sustainable Development, said in a statement.
“The publication is timely in providing practical institutional solutions for enhancing countries’ financial systems to help them chart a greener, more sustainable future,” Susantono said.
The report also responds to ADB member countries’ needs to address the persisting shortfalls in infrastructure investments, estimated at over $1.7 trillion annually until 2030, taking into account climate change mitigation and adaptation costs.
It said the potential cost of climate change impact on Asia-Pacific countries’ gross domestic product could go far beyond the global averages, such as for China, India, Indonesia, the Philippines, Thailand, and Vietnam.
“These predicted costs of climate change impacts have to be seen in light of an already high burden on the region with regard to, for instance, foods, storms, droughts, and earthquakes. Such natural disasters have resulted in 85 percent of global deaths and 38 percent of global economic losses from 1980 to 2009 in the region,” it added.
Green finance covers a much bigger scope than climate finance and includes all financing instruments and investment decisions that are geared towards low-carbon, sustainable, and inclusive development, it explained.
The private sector would have to contribute over 50 percent of required green investments in many countries.
The report is targeted at government and private sector professionals and informs country-specific structures that can assist in strengthening green growth initiatives, while allowing countries to reduce their national-level fiscal burden.