ACGF plays crucial role in boosting ASEAN green development - MoF

In its Economic Outlook 2022 report released today, the Ministry of Finance (MoF) said AMS could also identify and utilise the ASEAN Catalytic Green Finance Facility (ACGF) loan facilities for their green project developments, assisted by the green development partners to shift to low-carbon and climate-resilient infrastructure development.

"The ACGF provides the impetus needed by AMS to bridge the viability gap for green infrastructure projects in the ASEAN region and contribute positively to the global climate change agenda," it said.

The report highlighted that infrastructure is crucial as an enabler of growth and to reduce poverty, and in recent years, there has been a strong call for sustainable development, which in turn gives rise to demands for more green infrastructure projects.

"The Asian Development Bank (ADB) estimates that that Southeast Asia will require US$184 billion per year from 2016 until 2030 to support investments in infrastructure projects, and this will increase to US$210 billion per year to equip new infrastructure with climate-compatible components.

"Public budgets remain the primary source of financing for infrastructure in Southeast Asia, especially for transport and water supply and sanitation. However, the widening investment gap and limited public budgets signify the need for greater private investment in infrastructure projects," the report said.

The MoF noted that in Southeast Asia, substantial private investment for green infrastructure is hampered by the inadequacy of commercially bankable projects with attractive risk-return profiles.

Additionally, green infrastructure projects are generally considered high risk due to the adoption of more advanced technology, which may incur higher capital cost and operating expenses.

"Revenue streams, especially for utilities, are generally dependent on public policies and regulations, thus increasing the risk profiles of green projects.

"Therefore, establishing bankable green investments with risk-return policies which appeal to investors requires the strategic use of public finance to address the risk aspects of a green project," it noted.

It is also crucial to ensure that projects are well structured as green to be eligible for green financing by engaging advisory services.

"However, structuring a project to be green will be challenging if generic project advisors only concentrate on the technical preparation of projects and do not encourage change towards green alternatives.

"The ACGF addresses these challenges by providing project financial structuring support to create bankable projects and innovative use of concessional funds to de-risk projects.

"The ACGF also supports the development of project pipelines and capacity building in green and innovative financing approaches," it said.