ACGF Overview

Southeast Asia Needs Green Infrastructure

Infrastructure is the backbone of Southeast Asia’s economic growth, but the region faces a huge investment shortfall of more than $100 billion a year. To plug this gap, private capital must play a much larger role in financing infrastructure projects.

At the same time, the investment focus must change. The environmental costs of infrastructure⁠—natural resource depletion, air and water pollution, greenhouse gas emissions⁠—are of increasing concern.

Southeast Asian countries recognize that to achieve their sustainable development and climate change goals, infrastructure must be designed, built, and operated based on the principles of sustainability and inclusive green growth. In other words, countries must invest in “green infrastructure” that is environmentally sustainable, low-carbon, climate-resilient, and meets the needs of local communities.

The Financing Challenge

Addressing the investment shortfall and transforming to green infrastructure are big challenges. Public financing is inadequate to meet the huge investment need, while a lack of commercially attractive projects continues to constrain the flow of private capital into infrastructure in Southeast Asia. Private sector financiers are particularly wary of investing in green infrastructure projects as they often entail larger initial costs and are perceived as high-risk. ACGF supports green finance to help bridge the investment gap.

How the ASEAN Catalytic Green Finance Facility Will Help

The ASEAN Catalytic Green Finance Facility (ACGF)—an initiative of the ASEAN Infrastructure Fund (AIF)—was launched in April 2019 to accelerate green infrastructure investments in Southeast Asia.

The ACGF provides ASEAN member governments with technical assistance and access to over $1 billion in loans from cofinancing partners. The ACGF’s technical assistance supports governments to identify and prepare commercially viable green infrastructure projects while the ACGF loans are utilized to cover upfront capital investment costs. This two-pronged approach “de-risks” green infrastructure projects, making them more attractive to private capital investors.

Catalytic

De-risking projects and mobilizing commercial finance

Green

Supporting projects with clear green targets

Facility

Pooling public development capital

To be financed under the ACGF, projects must be sovereign or sovereign-guaranteed and fulfil eligibility criteria that includes:

• Clear environmental goals and targets
• A financial sustainability plan
• A roadmap for attracting private capital investment

The ACGF focuses on projects that promote renewable energy, energy efficiency, sustainable urban transport, water supply and sanitation, waste management, and climate-resilient agriculture. In addition to project preparation and financing support, the ACGF provides knowledge services, and training programs to strengthen the regulatory environment and build the institutional capacity of ASEAN governments to scale up green infrastructure investments.

The ACGF is owned by the finance ministries of the 10 ASEAN member countries as well as ADB, which also manages the facility. Cofinancing partners are ADB, Agence Française de Développement, AIF, the European Investment Bank, the European Union, KfW, and the Republic of Korea.

Cofinancing

Nine partners have committed $1.8 billion in cofinancing and funds for technical assistance to the ACGF. By the end of 2022, $504 million of the partner funds were committed to ACGF-eligible projects in the ADB pipeline.

In addition to cofinancing, the ACGF also has in-kind knowledge partnerships with Climate Bonds Initiative, Global Green Growth Institute, Infrastructure Asia and the Organisation for Economic Co-operation and Development.