Innovative solutions in financing will help to accelerate green initiatives and infrastructure in ASEAN. By Jason Lee
The ASEAN Centre for Energy (ACE) estimates that US$214.3 billion of investment in green projects will be required to meet ASEAN’s targets – to have renewable energy make up 23 percent of the region’s total primary energy supply, and to reduce energy intensity by 30 percent from 2005 levels by 2025.
In Malaysia, developers of green projects may apply for Green Islamic Bonds, or “Sukuk”, supported by the Securities Commission Malaysia. Meanwhile, energy efficiency projects in Thailand can tap on the Revolving Fund administered by the Department of Alternative Energy Development and Efficiency (DEDE).
Other than increasing the avenues of credit available to borrowers, however, it is important to ensure that green projects are bankable in the first place. Ms Jenny Koh, Regional Director Asia of GuarantCo, said that favourable regulations and comprehensive Power Purchase Agreements will help to build investor confidence in such green projects. To further enhance confidence, organisations like GuarantCo – which is sponsored by the governments of Australia, UK, Sweden,
Switzerland and Netherlands – provides guarantees on loans taken out by less accredited borrowers.
For now, green financing is still led by governments and non-profit organisations such as the World Bank, in the hope that the private sector will follow suit. There are some encouraging signs that this is already happening. Singapore’s City Developments, for instance, launched a $100 million-green bond issue to retrofit an office building. Dr Pongpan Vorasayan, Professional Engineer at DEDE, also highlighted that the Revolving Fund has increased awareness of the bank ability of energy efficiency projects, resulting in the launch of similar funds by Thai banks.
Nevertheless, challenges remain in the green financing space. As with all kinds of financing, loan applications can be a tedious and highly selective process. Mr Adi Pranasatrya, Head of Sustainable Finance at PT SMI, shared that while the Green Climate Fund favours solar PV projects, it is still not easy to pursue large-scale solar PV projects in Indonesia.
Dr Jukka-Pekka Strand, Senior Infrastructure Finance Specialist at World Bank, noted that the organisation’s Green Climate Fund requires projects to have the potential for transformational impact on the local energy landscape.