Singapore is providing $500 million in concessional capital for climate action

The Singapore government will provide $500 million in concessional capital to support a blended finance initiative launched by its central bank last year, Sustainability and Environment Minister Grace Fu said on Tuesday (Nov 12).

The government will match every dollar, up to $500 million, of concessional capital provided by other partners involved in the initiative, known as Financing Asia’s Transition Partnership (Fast-P).

Blended finance programs include a mix of grants and concessional loans that aim to reduce the cost of capital and thereby attract more commercial capital.

“This combined pool of concessional capital will be used to mobilize commercial capital and other sources of financing to accelerate capital flows and support Asia’s green transition,” Fu said in a virtual speech at the opening of the Singapore pavilion at the COP29 Baku climate summit , Azerbaijan.

If other partners – be they sovereign governments, development finance institutions, multilateral development banks or philanthropic foundations – can match Singapore’s commitment, Fast-P will be able to build a pool of concessional capital of up to $1 billion, Ravi Menon said . the Ambassador for Climate Protection, at the opening of the Singapore Pavilion.

This pool can then be used to raise up to $4 billion in commercial capital, bringing the eventual total to $5 billion.

This is the amount Fast-P wanted to mobilize when the initiative was announced at COP28 in Dubai last year.

Fast-P intended to raise this sum by bringing together international public, private and philanthropic partners and use the funds to de-risk and finance marginally bankable energy transition and green projects in Asia.

At the time, the Singapore government said it would provide concessional capital to support the partnership, but did not disclose the amount.

Since the Republic is not obliged to provide funds for climate protection under the Paris Agreement, this commitment of $500 million is voluntary.

The issue of climate finance will take center stage at this year’s climate negotiations as countries need to agree on a new amount of climate finance that developed countries must make available to developing countries to support their climate action.

“Since its launch, Fast-P has achieved good momentum and attracted reputable partners,” noted Menon.

“A number of other partners are nearing completion of their investment due diligence to provide discounted capital that will be matched by the Singapore government. With this strong support, Fast-P aims to start commercial fundraising early next year and make its first investments by the next COP,” he added.

Mixed financing for sectors that are difficult to contain

An infrastructure debt program for industrial transformation was also launched.

It is the third fund under the Fast-P initiative and will focus on hard-to-abate sectors such as cement and steel, as well as technology solutions such as carbon removal.

The first two funds were announced at COP28 last year. The first is a green investment partnership between the Monetary Authority of Singapore (MAS), state investor Temasek, Allied Climate Partners and the World Bank’s International Finance Corporation (IFC).

The second fund is a partnership between the Asian Development Bank and the Global Energy Alliance for People and Planet to finance Asia’s energy transition.

In a separate statement on Tuesday, MAS said it had already appointed asset managers to implement the three programs under Fast-P.

New partners

In addition to these early entry partners, the network has expanded to prepare for capital raising and deployment in 2025, MAS added. New partners include AIA, BlackRock, IFC, Mitsubishi UFJ Financial Group and Nippon Export and Investment Insurance; They signed an agreement at COP29 expressing their intention to cooperate on the third program.

The third fund focuses on providing debt financing to companies seeking to decarbonize their businesses, including projects in hard-to-abate sectors, technology solutions for the transition to a low-carbon economy and industrial opportunities.

Other investors that have started discussions about working with Fast-P include HSBC and the European Commission, as well as the development banks of Germany, the Netherlands and the United Kingdom.

As part of the first Fast-P program, the green investment partnership, Debt financing platform Pentagreen Capital will manage the investments.

Temasek and HSBC, as founding shareholders of Pentagreen, will provide capital to support this fund.

The European Commission and the development banks of Germany and the Netherlands are also in discussions about joining the partnership, which will focus on managing and deploying capital for marginally bankable green and sustainable infrastructure in Asia, such as renewable energy and storage, electric vehicles and transport as well as the areas of water and waste management.

Regarding the second energy transition program, MAS is currently negotiating with debt financing solutions provider Clifford Capital as manager of the fund.

At COP29, the governments of Germany, Japan and New Zealand welcomed the launch of this partnership, which will invest in energy transition projects, including the early retirement of coal-fired power plants, renewable energy and grid modernization and development.

MAS said it is encouraged by the strong support of multilateral development banks, sovereign and development finance institutions and philanthropies that have agreed to work with the central bank on the Fast-P initiative.

“MAS is pleased to work with like-minded and international partners to create a collective public-private partnership aimed at mobilizing capital for change in Asia,” its statement said.