COP29: Singapore to commit US$500 million as concessional capital for climate action
The government will match dollar for dollar the concessional capital raised by other partners involved in the blended-finance initiative
THE Singapore government will commit US$500 million as concessional capital to support a blended-finance initiative launched by its central bank last year, said Sustainability and Environment Minister Grace Fu on Tuesday (Nov 12).
The government will match every dollar, up to US$500 million, of concessional capital committed by other partners involved in the initiative, known as Financing Asia’s Transition Partnership (Fast-P).
Blended-finance programmes feature a mix of grants and concessional loans designed to lower the cost of capital, thereby attracting more commercial capital.
“This combined pool of concessional capital will be used to crowd in commercial capital and other sources of finance to accelerate capital flows to support Asia’s green transition,” said Fu in a virtual speech at the launch of the Singapore Pavilion at the COP29 climate summit in Baku, Azerbaijan.
If other partners – be they sovereign governments, development finance institutions, multilateral development banks or philanthropic foundations – can match Singapore’s commitment, Fast-P will be able to build up a pool of concessional capital of up to US$1 billion, said Ravi Menon, the ambassador for climate action, at the launch of the Singapore pavillion.
This pool can then be utilised to crowd in up to US$4 billion of commercial capital, ultimately bringing the total to US$5 billion.
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This amount was the target Fast-P aimed to mobilise when the initiative was announced at COP28 last year in Dubai.
Fast-P intended to raise this sum by bringing together international public, private and philanthropic partners, and to use the funds to de-risk and finance marginally bankable energy transition and green projects in Asia.
At the time, the Singapore government said it would contribute concessional capital to support the partnership, though it did not disclose the amount.
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As the Republic is not obligated under the Paris Agreement to provide funds for climate action, this commitment of US$500 million is voluntary.
The topic of climate finance will take centre stage at this year’s climate talks, given that countries have to agree on a new climate finance quantum which developed countries are obligated to provide to developing countries to support their climate action.
“Since its launch, Fast-P has achieved good momentum, attracting reputable partners,” Menon noted.
“A number of other partners are close to finalising their investment due diligence to commit concessional capital, which will be matched by the Singapore government. With this strong support, Fast-P aims to commence commercial fundraising early next year, and make its first investments by the next COP,” he added.
Blended finance for hard-to-abate sectors
An infrastructure debt programme for industrial transformation was also launched.
It is the third fund under the Fast-P initiative and will focus on hard-to-abate sectors, such as cement and steel, and technology solutions like carbon removal.
The first two funds were announced last year at COP28. The first one is a green investment partnership between the Monetary Authority of Singapore (MAS), state investor Temasek, the Allied Climate Partners, and the World Bank’s International Finance Corporation (IFC).
The second fund is a partnership between the Asian Development Bank and the Global Energy Alliance for People and Planet to finance Asia’s energy transition.
In a separate statement on Tuesday, MAS said it has already engaged asset managers to implement the three programmes under Fast-P.
New partners
In addition to these early joiner partners, the network has expanded to prepare for capital raising and deployment in 2025, MAS added. The new partners include AIA, BlackRock, IFC, Mitsubishi UFJ Financial Group, and Nippon Export and Investment Insurance; they have signed an agreement at COP29 indicating their intent to collaborate on the third programme.
The third fund focuses on providing debt financing to companies looking to decarbonise their businesses, including projects in hard-to-abate sectors, technology solutions for the low-carbon transformation, and industrial opportunities.
Other investors that have started discussions on collaborating with Fast-P are HSBC and the European Commission, as well as the development banks of Germany, the Netherlands and the United Kingdom.
Under the first Fast-P programme, the green investment partnership, debt financing platform Pentagreen Capital will be managing the investments.
Temasek and HSBC, as founding shareholders of Pentagreen, will commit capital to support this fund.
The European Commission and the development banks of Germany and the Netherlands are also in discussions to join the partnership, which will focus on managing and deploying capital to marginally bankable green and sustainable infrastructure in Asia, such as renewable energy and storage, electric vehicles, transport, as well as the water and waste management sectors.
As for the second programme, on energy transition, MAS is in discussions with debt financing solutions provider Clifford Capital to be the fund’s manager.
At COP29, the governments of Germany, Japan and New Zealand welcomed the establishment of this partnership, which will invest in energy-transition projects, including the early retirement of coal assets, renewable energy, as well as grid modernisation and development.
MAS said that it is encouraged by the strong support from multilateral development banks, sovereign and development finance institutions, as well as philanthropies, which have agreed to partner the central bank on the Fast-P initiative.
“MAS is glad to collaborate with like-minded and international partners to forge a collective public-private partnership that seeks to mobilise capital for Asia’s transition,” it said in its statement.
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