Context
The ACGF is an innovative finance facility dedicated to accelerating green infrastructure investment in Southeast Asia with over USD1.4 billion in loans from co-financing partners, under the ASEAN Infrastructure Fund (AIF). The ACGF’s technical assistance supports governments to identify and prepare commercially viable green infrastructure projects while the ACGF loans are utilised to cover upfront capital investment costs.
This two-pronged approach ‘de-risks’ green infrastructure projects, making them more attractive to private capital investors.
Stakeholders involved
- Asian Development Bank (ADB)
- ASEAN Infrastructure Fund (AIF)
- 10 ASEAN member countries
- Co-Financing partners include ADB, Agence Française de Développement, AIF, the European Investment Bank, the European Union, KfW, and the Republic of Korea
Problem
- ADB has been urging Southeast Asian policymakers to implement green and innovative financing to fill the estimated USD3.1 trillion investment gap required for climate adjusted infrastructure in the region.
- This issue and gap were intensified after COVID-19, with estimated 3.8% economic contraction and substantial impact on employment.
- Green infrastructure has been deemed as a critical source to the region’s economic recovery due to its scale and impact, which its importance of creating a de-risking and catalysing mechanism that can mobilise both public and private capital to support green infrastructure projects has been highlighted to the government.
Innovation
- Mobilising resources and building pipelines: The ACGF collaborates with governments and partners to originate and de-risk project opportunities, provide funding advice and technical assistance.
- Utilise equity provided by ASEAN member states into the AIF alongside support from ADB and other development partners. Leveraging facility helps governments use public and concessional funds better.
- The ACGF has also partnered with private investors on the Green Climate Fund to deliver the Green Recovery Program-post COVID-19.
Results and impact
- To date, the AIF has committed around USD500 million to nine projects, with a total portfolio size of approximately USD3 billion, across energy, urban, water and transport sectors. The Green Climate Fund (GCF) has allocated USD300 million to support the ACGF. ACGF has attracted more than USD1.4 billion in co-financing commitments.
- 20 finance ready green projects within 2 years: 12 are in the early stages of development where ACGF resources are being used to validate project concepts and integrate innovative models. The other 6 are using funds to structure financing, develop climate baselines and build in approaches to mobilise private finance. The first project was first?approved for financing in 2020.
- Demonstrable green impacts: EDSA Greenways Project in the Philippines, Agricultural Value Chain Competitiveness and Safety Enhancement Project in Cambodia alongside two other green impact projects have the potential to reduce 73,000 tons of CO2 per year. These projects can further downstream 26.7m tons of carbon emissions as a result of critical policy reforms. Approximately USD278 million private capital has been catalysed, reflecting a sustainable financing practice. Over a 30-year period, the 20 projects to be financed through the facility are expected to reduce CO2 emissions by 119m tons.
- Creating knowledge platforms and products to build awareness: Knowledge generation activities have been delivered through strategic partnerships with key global and regional actors on policy and knowledge, including the OECD, the Climate Bonds Initiative, and Infrastructure Asia.
Key lessons learnt
- Integrated “one-stop-shop” approach: Providing green projects with structuring, financing and policy framework/implications support plays a pivotal role in developing and encouraging governments to utilise public finance more innovatively to bridge the financing gap for green infrastructure.