'Common language' and risk data critical to mobilise private capital, close sustainable infrastructure financing gap: Indranee

THE lack of a common language on green finance and incomplete data on climate risk characteristics of infrastructure assets are among the key barriers standing in the way of unlocking private capital to support Asia's future infrastructure needs, said Second Minister for Finance and National Development Indranee Rajah.

There remains a "significant financing gap" for Asia's sustainable development needs, she said in a keynote address at the Asia Infrastructure Forum on Wednesday. The forum was organised by Infrastructure Asia, a platform set up by the Singapore government to support Asia's social and economic growth through infrastructure development.

Asia attracted approximately 70 per cent of global inflows, or US$22 billion, into environmental, social and governance funds last year, but green and sustainability-linked bonds and loans make up less than 5 per cent of total global bonds and loans market share, Ms Indranee said.

"There is a pressing need for Asia to mobilise private capital to support its future infrastructure needs," she said.

Challenges brought on by the Covid-19 pandemic and climate change have highlighted the importance of sustainable infrastructure for countries to build economic resilience, the minister added.

A 2017 report by Marsh & McLennan regarded 55-65 per cent of infrastructure projects in Asia as "not bankable", which means they are not economically viable and thus require the governments' or multilateral development banks' involvement, either in the form of financing or as an anchor investor to take on more risk.

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A common language on green finance is a vital first step to provide clarity and confidence to channel public and private capital towards green projects, Ms Indranee said.

The Green Finance Industry Taskforce, convened by the Monetary Authority of Singapore (MAS), is developing a taxonomy that sets out clear definitions and criteria about what activities can be considered green, or in transition towards green.

Regional bodies are also working to develop an Asean Taxonomy for Sustainable Finance, which takes transition into account and caters to the varied development stages of each Asean member-state.

There is currently also little data on the materiality of climate change risks embedded in infrastructure assets, the minister added.

She noted that index data and benchmarks provider EDHECinfra is developing a database of climate risk characteristics of global infrastructure assets, which aims to inform investors how these risks can impact the assets' financial performance.

During her speech, Ms Indranee also introduced the new Asia Sustainable Infrastructure Panel, an international panel of experts that will advise Infrastructure Asia on the latest trends and best practices in sustainable infrastructure, as well as help identify opportunities for the private sector to participate in Asia's sustainable infrastructure development.

Chaired by Ms Indranee herself, the panel also includes waste recovery platform Anaergia's chief executive Andrew Benedek, chairman of the Centre for Liveable Cities Cheong Koon Hean, chairman of the Capella Hotel Group Guy Harvey-Samuel, ex-chief executive of the Multilateral Investment Guarantee Agency Keiko Honda, Cambridge University geotechnical and civil engineering professor Robert Mair, Guggenheim Partners' global chief investment officer Scott Minerd, and chief executive of greentech company Envision Group Zhang Lei.

She also highlighted that Singapore is Asean's largest green finance market, accounting for about 40 per cent of cumulative Asean green bonds and loan issuances in 2020.

Ms Indranee also called for local governments to better understand the considerations of private sector players.

"As governments look to crowd in private sector capital into infrastructure projects, they can also consider engaging the private sector to better understand their considerations and risk appetites. Tools could include policy dialogues, sustainable business promotion, and engagement with business associations," she said.

She cited as an example partnerships between Cambodian and Singaporean authorities, as well as private sector players in the two countries, on the restructuring of Phnom Penh's waste collection system.

"(Such) discussions have created a pipeline of opportunities to enhance Cambodia's waste management sector… Such partnerships create a win-win solution for both the Cambodian government and the private sector. Government-to-government, or G2G, partnerships are also crucial to enable exchange of ideas and support quality infrastructure development across Asia," Ms Indranee said.

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