Public-Private Partnerships to Raise Capital for Net-Zero Transition

Published on: 05 October 2022
by KnowESG
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The Singapore Monetary Authority (MAS), in collaboration with knowledge partners McKinsey & Company and Convergence Blended Finance, and with the assistance of the Glasgow Financial Alliance for Net Zero (GFANZ), hosted the inaugural Transition Finance Towards Net Zero (TFNZ) Conference lately. The conference catalyses major public and private sector players to mobilise capital at scale to assist economies and companies in decarbonising.

The conference focused on scaling "blended finance," which entails using concessional and catalytic funding to attract private capital at commercial rates for financing projects with long-term benefits. 

Concessional capital is financing that provides better terms than commercial capital, such as grants, technical support, and debt at below-market rates, to reduce the total risk of the project. Catalytic capital is finance that is patient or more risk-tolerant or that comes with added value, such as technical project or structuring guidance, to attract private sector financiers.

The conference highlighted blended finance applications such as nature-based solutions and the managed phase-out of high carbon-emitting assets. Discussions focused on concrete actions to scale up the use of blended finance and demonstrating success cases and lessons learnt.

The conference featured the launch of a S$ 5 million Asia Climate Solutions Design Grant by MAS and Convergence Blended Finance that will: 

  • Provide early-stage grant funding for proof of concept and feasibility studies on innovative and scalable blended finance solutions to fund sustainability projects; and 

  • Mobilise capital into high-impact target sectors that are significantly under-capitalised in Asia, such as early-stage climate adaptation and mitigation technology, clean energy access, sustainable transport, sustainable cities and infrastructure, sustainable agriculture, and nature-based solutions.

The GFANZ Asia-Pacific (APAC) Network has announced the launch of an initiative to develop guidance for financial institutions on how to enable the managed phase-out of coal power generation in the Asia Pacific. 

This guidance is intended to give the clarity required to assist in driving capital into such projects. The Asian Development Bank and the MAS will participate in this project, and financial institutions interested in contributing are invited to express their interest.

Mr Ravi Menon, Managing Director, MAS, said: 

“Asia accounts for more than half of the world’s greenhouse gas emissions and will be decisive in the global transition to net-zero. Bringing together public and private capital synergistically is critical to Asia’s decarbonisation efforts. MAS has been working with like-minded partners to facilitate and scale such blended finance solutions. This conference is part of that effort and we are thankful to the many thought leaders, policymakers, and practitioners who participated and generously shared their insights and perspectives.” 

Mr Oliver Tonby, Senior Partner at McKinsey Singapore, said: 

“The transformation of the global economy needed to achieve net-zero emissions by 2050 would be universal and significant, requiring $9.2 trillion in annual capital spending on physical assets until 2050. Catalysing effective capital reallocation and new financing structures, including deploying collaborations across the public and private sectors, is required at unprecedented scale and speed. Forums like this, that bring together government and business leaders from Asia and around the world, are a vital step in fostering discussion and finding solutions to complex and challenging transition issues.” 

Ms Joan Larrea, CEO, Convergence, said: 

“Blended finance, through the strategic use of catalytic funding, can provide critical de-risking for private sector investment and improve project bankability, and play an impactful role in addressing the financing gap for the net zero transition. We want to actively promote the creation of more blended finance solutions and are excited to see concrete efforts to grow the blended finance ecosystem in this region.”

Source: Monetary Authority of Singapore

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