COP31: Singapore launches blended finance initiative to fund climate adaptation in South-east Asia

[SINGAPORE] The Republic launched its second blended finance initiative with a target of raising up to US$500 million to finance climate adaptation projects in South-east Asia, starting with its agri-food sector.

The fund aims to support agri-food companies and solutions that struggle to access financing in commercial terms, and help them scale climate-resilient practices.

The Singapore government is prepared to contribute catalytic capital to the fund, alongside contributions from its international partners, said Singapore’s ambassador for climate action Ravi Menon at the launch of the initiative at the COP31 Singapore Pavilion on Tuesday (Nov 10), held on the sidelines of the United Nations climate summit in Antalya, Turkey.

“Interest from development finance institutions (DFIs), multilateral banks and commercial lenders has been encouraging,” he added.

This is the second blended finance initiative launched by the Singapore government for climate-related purposes and will be managed by the Monetary Authority of Singapore (MAS).

The first, known as Financing Asia’s Transition Partnership, focuses on financing climate mitigation projects in the region, while the new fund will support climate adaptation.

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Climate adaptation refers to measures that help societies prepare for and reduce their vulnerability to the effects of climate change. It has generally received less attention and funding than climate mitigation, which focuses on reducing greenhouse-gas emissions.

How Singapore’s climate adaptation fund will work

The blended finance initiative is part of a larger programme, known as Scaling Projects and Investments for Resilience in Asia (Spire), to strengthen the climate resilience of South-east Asia’s agri-food systems, said MAS, the National Climate Change Secretariat (NCCS) and Enterprise Singapore (EnterpriseSG) in a joint media statement on the same day.

Unveiling this new programme, also at the sidelines of COP31, Minister for Sustainability and the Environment Grace Fu said that the programme aims to build an ecosystem for adaptation investment, so as to unlock finance and scale resilience solutions across South-east Asia.

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“We will need MDBs (multilateral development banks), DFIs, financial institutions, research organisations and other partners to develop and operationalise these components,” said Fu in a pre-recorded speech aired at the Singapore Pavilion.

In addition to the blended finance fund, there will be two other pillars under the Spire programme.

One is a data platform that will bring together climate, agricultural and investment data to translate them into actionable insights. This could include identifying climate risks and adaptation opportunities, informing project development and investment decisions, and measuring resilience outcomes. EnterpriseSG will be in charge of this pillar.

To support data collection, Singapore, along with ecosystem partners, will establish a solutions centre for smallholder farmers in the region.

The centre will develop a data insights platform to better understand the pressing challenges facing the region and help investors, researchers, project developers and solution providers develop and scale climate-resilient solutions.

Another pillar is a market development facility that aims to build promising agri-food adaptation opportunities into investment-ready projects.

Led by Singapore investment company Temasek’s philanthropic arm, Temasek Trust, the facility will bring together technical expertise and project development support to help projects meet investors’ requirements, aggregate smaller projects into portfolios of sufficient scale, and connect them with potential investors, buyers and implementation partners.

“Several philanthropies and multilateral organisations have expressed interest in helping to fund and develop the facility,” said Menon.

The decision to have these three pillars under the programme came about after discussions with more than 60 stakeholders, which included development banks, investors, philanthropies, agri-businesses and technical experts.

“Three gaps came up again and again. A data gap. Without good data and common yardsticks, no one can spot the opportunities, price the risks, or prove the impact. A project gap. Good ideas are too early-stage to meet an investor’s requirements. A financing gap. Returns are uncertain, payback is long, and track records are thin,” said Menon.

“The lesson was clear: We must address the barriers to investment, not simply increase the supply of capital,” he added.

The three pillars will be coordinated by a steering committee comprising NCCS, MAS, EnterpriseSG and Temasek Trust, and chaired by Menon.

Spire aims to serve as a pathfinder for mobilising and scaling private-sector investment in climate adaptation across the region, said the joint media statement. It will also create opportunities for Singapore-based financial institutions, investors and agri-tech solution providers to participate in regional adaptation investments and scale their solutions.

Menon said that the success of Spire will be judged on two dimensions: how much investment is mobilised, and the resilience outcomes being delivered on the ground.