The Asian Development Bank and the UK Government have signed a memorandum of understanding to develop a trust fund of around $134 million to help ASEAN countries scale up green financing and embrace climate-resilient development.
The UK-ASEAN Catalytic Green Finance Facility (ACGF) Trust Fund will leverage UK and ADB funds to accelerate a pipeline of low-carbon and climate-resilient infrastructure projects and catalyze financing from public and private capital sources.
The fund will be part of the ASEAN Green Recovery Platform launched at the 2021 United Nations Climate Change Conference (COP26) last November.
“We are facing a climate crisis and Southeast Asia needs rapid and innovative solutions to help countries raise financing to deliver their climate targets and ambitions,” ADB president Masatsugu Asakawa said in a release Wednesday.
“This new fund will build on a longstanding UK-ADB partnership through an innovative revolving fund structure that will mobilize public and private funds and build a robust pipeline of climate projects in the region,” he added.
ASEAN countries are grappling with increasing costs of climate change, which add to the existing investment needs of $210 billion per year for infrastructure in the region and exacerbate the heightened vulnerability of people and the economy after the Covid-19 pandemic.
“As a trusted partner to ASEAN, this UK financing delivered through the ADB is imperative to help deliver new honest and reliable green investment - creating jobs and putting UK expertise at the heart of tackling climate change,” UK Minister for Asia Amanda Milling said in the release.
“It’s another step in delivering the UK’s commitments made at COP26 in Glasgow last year,” she said.
The fund will leverage financial resources for the ACGF, an ADB-managed regional green financing vehicle, owned by the ASEAN countries and ADB. Since its launch in 2019, the ACGF has attracted $2 billion in co-financing pledges and included five projects in its formal financing pipeline.
It has helped develop a longer pipeline of 29 green infrastructure projects and provided advisory support that has enabled countries to tap capital markets through the issuance of more than $5.6 billion in green bonds. The UK-ACGF Trust Fund will build on these efforts and support countries through loans and technical assistance to mobilize capital, including through regional initiatives such as the Blue SEA (Southeast Asia) Finance Hub, based in Indonesia.
ADB recently elevated its ambition to deliver climate financing to its developing member countries to $100 billion from 2019 to 2030. The bank is committed to ensuring at least 75% of the total number of its operations will support climate change mitigation and adaptation by 2030. The UK is a founding member of ADB.