Chasing the money in the race to net-zero

The Monetary Authority of Singapore (MAS) will be hosting a pre-COP27 blended finance conference to promote solutions in helping to fill Asia's transition financing gap for green industries and economies.

The conference, to be held in Singapore on 4 October, will bring together stakeholders, multilateral development banks, governments, catalytic donors, institutional investors, and financial institutions from around the world to manage risk and channel funds towards green and transition projects in the region.

In his recent remarks in conjunction with the release of the MAS Sustainability Report 2022, MAS managing director Ravi Menon argued that while traditional sustainability finance solutions have made headway, these may not be enough to close the financing gap required.

The risk vs. return ratio of many sustainability projects may be too high for investors; as such, he said, as of 2021, climate finance has only reached about 30% of the US$5 trillion of climate investments estimated by the International Energy Agency that would be required annually by 2030 to support the world's transition to net zero.

Menon said that funding from the public sector, multilateral banks, and philanthropic sources can potentially provide critical reduction of risk and improve project bankability, and can also lead to multiples of private sector funding. This type of synergising of public and private capital – through blended finance – was what he identified as a potential key part of the solution in bridging the financing gap.

Examples of blended finance platforms that Menon cited include the IFC-MIGA Private Sector Window Blended Finance Facility and the debt financing platform for green, sustainable infrastructure set up by HSBC and Temasek with support from Asian Development Bank and Clifford Capital.