Renewing ASEAN’s Climate Commitments
August 2023 saw the Singapore Government raise USD2.1 billion of green bonds. The sale, which reopened the city-state’s 50-year maiden sustainability-themed note issued a year earlier1, raised an additional 125% on top of the USD1.7 billion2 offered then.
Both issuances are part of an effort to raise up to USD35 billion of environment-focused funding by the end of this decade. Proceeds from this latest offering will help finance the ambitious Singapore Green Plan 2030, which outlines the city-state’s ambitious near-term environmental targets3, including construction of two mass electric rapid transit lines that will crisscross the island nation4. The city-state’s central bank, the Monetary Authority of Singapore, acted as the agent for the sale, with Standard Chartered being one of the appointed bookrunners.
This latest offering underlines a rush by borrowers globally to finance projects that will support sustainable development. The first eight months of 2023 has seen over USD344 billion of green bonds issued5 by both sovereign and corporate players.
Building the momentum in transition finance is critical in channelling capital and closing the financing gap. We remain committed to supporting industry initiatives such as the Monetary Authority of Singapore’s Project Greenprint, which leverages technology and data to enable green finance.
Patrick Lee
Cluster Chief Executive Officer, Singapore & ASEAN Markets (Malaysia, Vietnam, Thailand & Rep Offices)
Collective ambition
Fellow Southeast Asian nations have also set ambitious environmental targets, with nine of the 10-member Association of Southeast Asian Nations (ASEAN) having committed to achieving net zero emissions by 2050.
Indeed, the environmental outlook for ASEAN is very positive. The proliferation of climate solutions could enable the trading bloc to reduce energy-related carbon dioxide emissions by 75% by 20506. Renewable energy could account for 65% of ASEAN’s total energy usage by this date, up from 19% in 2018; and new technologies could make the trading bloc 45% more energy efficient than it was in 20187.
The impact of ASEAN’s plans is equally as upbeat economically. By 2030, up to six million new jobs could be created, with up to USD2 trillion in investment allocated to green projects regionally8. Furthermore, electricity could be provided to 100% of Southeast Asia’s 726 million people by then9.
Bridging the investment gap
Realising ASEAN’s net zero promise will require a constant flow of capital.
However, deployment of green capital has cooled of late, declining by 7% since 202110. High capital costs and constraints on market access, combined with unsatisfactory returns and policy uncertainty, have combined to impact investment flows into net zero projects.
Governments and multilateral financial institutions (MFIs) are unable to meet the cost of the region’s energy transition alone. Green infrastructure investment in the region is now running at a USD100 billion shortfall each year11.
How can ASEAN bridge its green investment gap?
Fortunately, help is at hand. Financial institutions like Standard Chartered are already stepping up to bridge the financing gap and support several ground-breaking projects. One such venture is the Phu Yen Solar Power Plant in Vietnam, which reduces the nation’s emissions by 123,000 tons of carbon dioxide equivalent (tCO2e) annually. With a capacity of 257 megawatts (MW), it is the largest such facility in the country, and one of the biggest in ASEAN.
Aside from its size, the project is noteworthy on several other fronts. Not only will it fast-track the country’s plans to increase its solar capacity from 16.6 gigawatts (GW) in 2020 to 18 GW by 2030; it also demonstrates that despite heightened financial market volatility, some financiers remain willing to support impactful projects, especially in the form of blended finance that leverages the capabilities of both public and private sector financiers. Multilateral development financier Asian Development Bank (ADB) provided direct financing for the project under a USD27.9 million A-loan facility; with Standard Chartered and other regional commercial banks participating in a USD148.8 million syndicated ADB-facilitated B-loan facility12.
The deal is Vietnam’s first certified green loan, and Asia’s first certified green B-loan13.
Impact through innovation
Indonesia, too, is breaking new ground. Aspiring to source 48% of its electricity from renewable energy14, up from about 11% today15 the nation’s ambitious plans could stall due to a lack of available land. More than half of Indonesia’s land comprises rainforest, something the Indonesian government is keen to maintain; with the remaining land needed for agriculture, industry, and urban dwellings.
To overcome this constraint, Indonesia is having to innovate. The 145 MW Cirata Floating Solar Power Plant is one such solution. It was showcased at the ASEAN Business Week event in Jakarta this September, when business leaders, policymakers and NGOs gathered to address ASEAN’s journey to net zero. Providing enough electricity to power 50,000 homes, and having created over 800 jobs, the Cirata project offsets 214,000 tCO2e16 annually. That it is built on a reservoir makes the project yet more remarkable: not only for the engineering excellence required to build it; but also, that it was able to secure financing at a time when the project’s technologies were new and untested technologies.
Recognising the project’s potential, Standard Chartered rose to the challenge, facilitating a USD112 million 16-year project finance loan, in partnership with two other lenders, while providing an interest rate hedging facility to shield loan repayments against market volatility.
Carbon collaboration
Transitioning ASEAN’s energy mix towards cleaner forms of power is but one solution to realising its net zero goals. Another is the carbon market. Recognizing the needs of multinational corporations and institutional investors for high-quality carbon credits, Standard Chartered co-founded Climate Impact X (CIX), a Singapore-based global marketplace, exchange, and auction house for trusted carbon credits17.
Launched in 2021, the advent of CIX is timely. Global demand for carbon credits is set to surge in the coming years, with up to 2 gigatons of carbon expected to be traded by 2030, 15 times the amount purchased in 202118. However, few venues currently provide the high-quality projects required by market participants, with most venues unable to supply timely updates on how projects are progressing. Meeting this information shortfall, CIX leverages satellite monitoring, machine learning and blockchain technology to provide continuous surveillance of projects. By doing so, the venture greatly enhances the transparency, integrity, and quality of credits on offer.
Recent additions to the venture include the launch of CIX Exchange19,a globally accessible spot trading platform for carbon credits, with a daily liquidity window at the intersection of Asia-Pacific and European trading hours; a global benchmark series to improve price transparency with upcoming contracts20;and a landmark oversubscribed auction for blue carbon credits worth 250,000 tons of carbon form the Delta Blue Carbon Project in Pakistan, the world’s largest mangroves restoration project21.
Realising a prosperous ASEAN
Realising ASEAN’s net zero ambition is no longer the sole responsibility of governments; it requires private sector partners like Standard Chartered to provide funding, deep insights, and industry leadership.
The bank is working with governments and MFIs — as well as fellow private sector financiers — to provide these requisites through various public-private partnerships. One example is the Just Energy Transition Partnership (JETP), which allocates capital to help phase out fossil fuels in emerging markets. In ASEAN, Standard Chartered and its JETP partners have committed a combined USD15.5 billion to support Vietnam’s energy transition22; and in Indonesia, the JETP will provide USD20 billion to help phase out coal and invest in renewable energy23.
The bank’s collaborative approach has enabled its partners to tackle some of the region’s most pressing sustainability issues like climate change, while simultaneously helping them to prosper over the longer term. As the only international bank with a presence in all 10 ASEAN member countries, Standard Chartered is well positioned to provide Southeast Asian governments, companies, and co-financiers with the capabilities needed to sustainably thrive across the region and beyond.
Article produced in partnership with Bloomberg Media Studios.
3 https://www.greenplan.gov.sg/targets
4 https://www.mas.gov.sg/-/media/mas/sgs/sgs-announcements-pdf/bonds-pdf/green-sgs-infrastructure-and-syndication/20230821-launch-of-the-reopening-of-the-50y-green-sgs-infra.pdf
6 https://www.irena.org/News/articles/2023/Feb/ASEANs-Dash-to-Net-Zero-Finishing-Line-Aided-by-IRENA
8 https://www.bain.com/globalassets/noindex/2023/bain-temasek-southeast-asia-green-economy-2023-report.pdf
10 https://www.bain.com/insights/southeast-asias-green-economy-2023/
11 https://www.adb.org/what-we-do/funds/asean-catalytic-green-finance-facility/overview
12 https://www.adb.org/news/adb-phu-yen-jsc-sign-viet-nam-s-first-certified-green-loan-257-mw-solar-power-project
14 https://www.reuters.com/business/energy/renewables-make-up-least-48-indonesias-2021-2030-electricity-plan-2021-06-04/
15 https://www.thejakartapost.com/news/2021/01/18/indonesia-misses-green-energy-mix-target-in-2020.html
22 https://www.vietnam-briefing.com/news/vietnams-jetp-agreement-unpacked.html/
23 https://www.aseanbriefing.com/news/indonesias-just-energy-transition-partnership/