From the need for clear taxonomy to possibly leveraging Energy-as-a-Service providers, industry experts and government leaders discussed how mobilising green financing would be key to accelerating the achievements of countries and companies towards net zero targets. See Xue Bing reports.
Moderated by Mr Abhi Bhuchar, Head of Energy and Industrials, Asia Pacific, Oliver Wyman, industry experts and government leaders discussed how green financing could accelerate the achievements of countries and companies towards net zero carbon targets.
Role of partnerships in financing
Maeda Tadashi, Chairman of the Board, Japan Bank for International Cooperation and Special Advisor to the Cabinet, the Government of Japan, highlighted that there are significant financing gaps for climate change where investors are worried about stranded assets. Mr Tadashi called on greater collaboration to address these gaps for new projects to achieve carbon neutrality.
Cindy Lim, Chief Executive Officer, Keppel Infrastructure, shared that there is rising demand for capital with increased awareness of sustainable development with rapid urbanisation. There is much to be done for private-public partnerships. The private sector could play a role as a force multiplier and ensure that the economic returns for infrastructure projects attract the right pool of capital.
Initiatives to curb carbon emissions
Lavan Thiru, Executive Director, Infrastructure Asia, discussed two points on the role of government:
- Governments could help to curb demand pull drivers and enable a suitable environment to provide confidence to investors. For example, Vietnam has been successful with controlled tariffs and long-term contracts, which provide confidence to investors.
- Synergies between renewable energy and energy efficiency could aid in reducing 90% of carbon emissions. Based on a report by the International Finance Corporation (IFC), there is potential for a 1-billion tonne carbon emissions reduction for Asia. However, this is not realised today as there are issues with scaling up and with aggregation platforms. Financing is required to catalyse these transition projects.
Importance of clear taxonomy for green financing
Dr Uwe Krueger, Head of Europe, Middle East & Africa (EMEA) and Head of Industrials, Business Services, Energy & Resources, Temasek International, further shared that long-term investors such as Temasek could serve as catalysts for the energy transition with the right partnerships. While addressing the funding gap, Dr Krueger emphasised the importance of having clarity on taxonomy to avoid greenwashing.
Dichotomy of financing green vs brown energy projects
On the emerging dichotomy of financing green versus brown projects, Tan Su Shan, Group Head of Institutional Banking, DBS Bank, raised two points on green financing:
- Managing risk premiums: There is a need, when it comes to mobilising capital for renewable energy projects, for markets to shift together. It is also essential to reduce risk premiums for banks to increase project bankability. It is also necessary to manage both financial returns and Environmental, Social, and Corporate Governance (ESG) goals for stakeholders with multilateral collaboration between banks, industries and governments.
- New renewable energy digital market for tokenisation: There is a possibility to tokenise long-term assets for renewables, which may interest the younger generation to invest.
Policies to facilitate green financing
Eng. Fahad Alajlan, President, King Abdullah Petroleum Studies and Research Center (KAPSARC), further shared the need for governments to implement long-term policies that can serve as guides for the private sector. This should also include a wider range of policies to cater to ESG and green financing. He called on governments to review their energy plans in order to ensure resilience and relevance to current conditions. This will also help to prepare for energy prices that could potentially soar further.
Ongoing efforts to enable energy transitions
Dr Krueger elaborated on how Temasek is currently investing into cutting-edge technology such as fusion technology. This would make a fundamental difference in the next 40 to 50 years and would be more relevant to Singapore. DBS Bank's Ms Tan further said Temasek-linked companies, such as Keppel and Sembcorp, have signed Memorandums of Understanding and have transited from brown to green projects. These can be financially sustainable and profitable with the right partnership and financial structure, she added.
Optimism for the future of sustainable finance
For their ending notes, the speakers concluded with the following:
- Mr Thiru highlighted the need to focus on scaling renewable energy. He said this may give us sufficient runway for renewable energy projects to take off, while providing the required grid stability.
- Mr Alajlan was positive about the carbon capture projects (approximately 200) in the pipeline that are pending financial investment decisions and the potential for green financing these projects.
- Ms Lim shared how small and medium-sized enterprises could leverage Energy-as-a-Service providers. These could assist with difficulties encountered in upfront capital expenditure to drive decarbonisation, while recovering fee payment over a long-term contract.
- Mr Tadashi emphasised the need to reduce costs and make renewable energy more affordable.
- Ms Tan is optimistic about SIEW 2022’s discussions on energy sustainability, availability and diversity and the transition framework from brown to green projects. She said that in the long term, the financial industry is holistically moving together to ensure that financing is done. This will help to ensure long-term projects are financed, with the ultimate aim to go green.
- Dr Krueger wrapped up the session on an optimistic note, noting that the preparedness for partnership is prevalent in addressing the challenges of mobilising green financing for energy infrastructure.
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