Keynote address by Ashok Lavasa, ADB Vice President for Private Sector Operations and Public–Private Partnerships, at The Asset Event, at the 56th Annual Meeting, 5 May 2023, Incheon, Republic of Korea
Good morning, everyone.
Thank you to The ASSET for organizing this event on the topic of scaling up sustainable finance as it is an important issue for the future of our region.
As we face unprecedented global challenges, such as climate change, persistent inflation and social inequality, it is becoming more and more apparent that we need to take a more sustainable approach to financial decision-making.
At its heart, sustainable finance is all about investing money in a way that takes into account the environmental, social, and governance (ESG) considerations. Sustainable finance aims to create long-term value for investors, while at the same time, minimizing the negative impacts of economic activities on the environment and communities, hence contributing to the overall well-being of society.
Sustainable finance can be used to fund programs, projects and assets that create jobs, improve access to utilities, healthcare, education, and other basic needs, and promote social inclusion. By investing funds that support these goals, we can help to reduce inequality and promote sustainable economic growth.
In recent years, sustainable finance has gained significant momentum and governments, businesses, and investors are increasingly recognizing the importance of ESG considerations. Many countries have introduced regulations to promote sustainable finance, and companies are starting to report on their ESG performance.
We all know that climate change is one of the biggest threats facing our planet today. Sustainable finance has a crucial role to play in addressing this challenge by investing in clean energy, urban infrastructure, sustainable agriculture, and other environmentally friendly projects. By doing so, we can reduce our carbon footprint and help to mitigate the impacts of climate change.
In response to the impact of climate change, ADB has stepped up as the Climate Bank for Asia and the Pacific. We have elevated our ambition to provide $100 billion in cumulative climate finance from 2019 to 2030.
In our endeavor, the private sector is essential to ensuring the transition to net zero. Presently, the scale of investment needed is beyond what the public sector can provide. Fortunately, sustainable finance from private sources—in particular, green and social finance—is growing rapidly and brings many benefits. It meets the growing sustainability appetite of our stakeholders, mitigates sustainability risks, and broadens the financing base for projects. And it will bring positive environmental and social outcomes.
The most important step towards scaling up sustainable finance is to mobilize more private sector capital. The private sector has access to significant amount of funds and can help bring innovative financing solutions to the market including local currency project finance loans, green and blue bonds, sustainability linked loans and funded and unfunded risk participation structures, to name a few.
We see a strong trend amongst our clients in our developing member countries towards operating on ESG principles, and ADB will continue to provide capacity building, knowledge and financing to support our developing member countries in sustainable development.
Let me briefly highlight the key areas where ADB is working to scale up sustainable finance and mobilise private capital in Asia and the Pacific:
First, ADB is addressing upstream policy challenges that are hindering private investment in infrastructure. Our work includes support to improve regulatory frameworks, institutional reforms and capacity building of government agencies via our sovereign operations and Office of Public-Private Partnership, which I oversee.
Second, ADB is working midstream, with public sector agencies, to structure infrastructure projects that are bankable and commercially viable through our PPP transaction advisory services and project preparation support via The Asia Pacific Project Preparation Facility (AP3F) which is a trust fund managed by ADB. One recent example is the 457 MW Sherabad solar PPP project in Uzbekistan which is the largest solar power project in Central Asia and was developed, structured and tendered via ADB’s PPP transaction advisory support to the Government of Uzbekistan.
Third, ADB is working downstream, directly with private sector clients, to invest jointly in sustainable infrastructure projects. For example, ADB recently led the structuring and financing of the 600MW Monsoon Wind power project in Laos which is the largest wind power project in ASEAN and will export power to Vietnam. ADB successfully mobilized private sector funds via a B loan structure and also structured grants and concessional financing to improve bankability of the project for the private sector. Other relevant examples include ADB’s sustainability linked loan to Indonesian company PT Dharma Satya Nusantara to help the company expand sustainable wood processing, rural livelihood development, and climate-resilient agroforestry in Java, and ADB’s Crystal Gender Bond project, which is the first gender bond in Georgia which provides financing to women-owned micro, small, and medium-sized enterprises, an important but under-banked sector of the Georgian economy.
Fourth, we are helping the region transition away from coal-based energy via the Energy Transition Mechanism, ETM. ETM will accelerate the retirement of coal-fired power plants, increase demand for clean energy, and lower overall energy costs.
Fifth, to catalyze early stage investments to scale technology solutions for impact in Asia and the Pacific, our facility ADB Ventures aspires to be a leading ImpactTech support platform with a robust portfolio of investments. ADB Ventures has invested in several early stage tech companies with an aim to deliver meaningful impact towards sustainable development goals.
In conclusion, we need to continue to promote sustainable finance and encourage more investors to allocate their capital towards sustainable projects. We need to foster partnerships and collaboration between governments, the private sector, and civil society to promote sustainable finance. This can be achieved by creating platforms for dialogue and cooperation and promoting transparency and accountability in sustainable finance investments.
Let me end by inviting all of you to engage with ADB as we want to hear your perspective on the barriers and opportunities to scaling up sustainable finance and mobilizing private capital in Asia Pacific. Let’s work together to scale up sustainable finance in order to achieve a carbon neutral future by creating a region built on green investments that ensure resilient, sustainable economic growth for all.
Thank you very much.