MAS, Temasek ink MOU to address region’s sustainable infrastructure financing gap

THE Monetary Authority of Singapore (MAS) and Temasek have signed a memorandum of understanding with Allied Climate Partners (ACP) and the World Bank’s International Finance Corporation (IFC) to address the financing gap for Asia’s sustainable development needs. 

This will be done through the deployment of blended finance, mixing “both concessional capital from the philanthropic and public sectors, as well as private capital towards such projects”, said the four in a press statement on Sunday (Dec 3). 

The group will also identify and develop a pipeline of investments in sectors including renewable energy and storage development, electric vehicle infrastructure, sustainable transportation, and water and waste management. This will help to “address climate finance gaps and increase the bankability of green and sustainable projects in Asia, with an initial focus on South-east Asia”, they said. 

The four highlighted that they are committed to “delivering on environmental and social goals”, including meeting the region’s carbon reduction targets and creating jobs. 

Other critical components for bringing a project to bankability or financial viability will also be provided as needed, they said. 

For instance, ACP, a newly launched philanthropic investment organisation, will give origination and technical support, including early-stage financing in key countries across the region. IFC will lend its pre-investment advisory and co-development expertise, cross-regional and industry knowledge, as well as capital mobilisation capabilities. 

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Meanwhile, MAS will rally its networks across Singapore’s international financial centre, as well as the city-state’s infrastructure and sustainable finance and professional services ecosystem, and build on ongoing industry work in green and transition taxonomies. 

Temasek will leverage its network of portfolio companies and partners, including sustainable infrastructure debt financing company Pentagreen Capital, for origination and investment opportunities. 

Ahmed Saeed, chief executive officer of ACP, said: “Investors, developers, policymakers, business owners, and civil society leaders across emerging economies repeatedly emphasise the need for new and innovative financing mechanisms to support early-stage climate projects.”

“Nearly all estimates make clear (that) adequate progress requires trillions annually – far more than what governments, philanthropy, and development banks can provide on their own,” added Ajay Banga, World Bank Group president. 

A 2017 report by the Asian Development Bank indicated that the development of Asia will require about US$1.7 trillion per year in infrastructure investments until 2030 to “maintain its growth momentum, tackle poverty and respond to climate change”. 

In 2021, Second Minister for Finance and National Development Indranee Rajah noted that Asia attracted approximately 70 per cent of global inflows into environmental, social and governance funds – but green and sustainability-linked bonds and loans made up less than 5 per cent of total global bonds and loans market share. 

“This green investments partnership exemplifies the kind of public-private partnership that is key to mobilising the capital necessary for Asia’s transition,” said Ravi Menon, managing director at MAS. “By using blended finance and targeted derisking at the early stage of project preparation and construction, it will help to strengthen project bankability and crowd in private investment at scale.”

“Concessional capital providers play a crucial role here in unlocking the capital stack to attract commercial capital from investors like Temasek,” said Temasek chief executive officer Dilhan Pillay.