BritCham in the Press: 'Singapore’s blended finance platform seeks insurers’ participation: Ravi Menon'
Source: The Business Times
Singapore’s blended finance initiative is seeking the participation of insurance companies as its next steps, given their expertise in risk mitigation, said Ravi Menon, the country’s ambassador for climate action.
“Insurance companies, because of their expertise in identifying and assessing risk, and being able to cover and insure for risks, can also play an important role,” he noted on Tuesday (Sep 9) at a sustainability dialogue organised by the British Chamber of Commerce Singapore.
Moreover, insurers may be able to cover specific kinds of project risks that cannot be mitigated by concessional capital or technical assistance, so that multiples of private capital can be mobilised for the blended finance platform, he added.
Blended finance is a capital-raising approach that leans on investors with higher risk appetites – such as multilateral development banks, development finance institutions, philanthropists and governments – to provide concessional or catalytic capital to pull in more commercial investors.
Known as Financing Asia’s Transition Partnership (Fast-P), Singapore’s blended finance initiative was launched in 2023 at the United Nations climate change conference in Dubai. It aims to mobilise US$5 billion by bringing together both public and private-sector partners to de-risk and fund transition and marginally bankable green projects in Asia.
In 2024, the Singapore government announced that it would dedicate US$500 million to supporting Fast-P, by matching every dollar of concessional capital committed by other partners up to that amount.
Since its launch, Fast-P has partnered philanthropic capital providers such as Allied Climate Partners, and multilateral institutions including the Asian Development Bank and International Finance Corporation.
The initiative also counts development finance institution British International Investment (BII), as well as commercial players HSBC and MUFG, among its partners.
However, there are currently no insurance companies within Fast-P’s partnership network.
First fund closes US$510 million
On Monday, the Monetary Authority of Singapore (MAS) announced that one of the three programmes under Fast-P had achieved its first close, with US$510 million raised.
This first fund, the Green Investments Partnership (GIP), will be deployed towards green and sustainable infrastructure projects in Asia in the coming months. Its investors include Singapore investment company Temasek, HSBC, Allied Climate Partners and BII.
Menon said that two of these projects are a bioenergy programme and a renewable energy portfolio.
The bioenergy programme replaces fossil fuels with agriwaste feedstock, and intends to reduce more than 100,000 tonnes of emissions each year. The renewables portfolio comprises solar, hybrid solar and battery storage projects, which are estimated to cut 250,000 tonnes of emissions annually.
The other potential projects include electric vehicles and waste management.
GIP is managed by Pentagreen Capital, a sustainable infrastructure debt financing platform set up by Temasek and HSBC.
Singapore committed US$51 million to the fund. The final close of US$510 million has demonstrated Fast-P’s premise of crowding in a pool of capital that is 10 times larger than the initial amount, to facilitate Asia’s green transition, said Menon.
The Singapore government’s commitment was equally matched by concessional capital from other financiers. This base of US$102 million in concessional capital, in turn, attracted US$408 million of commercial capital.
This means that this first close achieved the initial target of using concessional capital to raise four times the amount in commercial capital, Menon added.
BII and HSBC committed a total of US$74 million to GIP. BII also pledged about US$95 million to the Fast-P platform.
Issue to remain on Asean table
Fast-P has two other funds besides GIP.
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.
The third fund focuses on providing debt financing to companies aiming to decarbonise their businesses. This spans projects in hard-to-abate sectors, technology solutions for low-carbon transformation, and industrial opportunities.
Each of Fast-P’s three funds has a target of US$1 billion. Assuming all three funds manage to reach this goal, the remaining US$2 billion out of the target size of US$5 billion will be allocated to where the pipeline is strongest, said Menon.
He noted that the second fund focusing on phasing out coal has been met with “mixed success”, although it is the “single most important thing to do in Asia”.
He also said that there is interest among the Asean chairs to emphasise the importance of sustainability and the climate, so that “this issue doesn’t go off the table when we have so much else to deal with”.
The Asean chairmanship rotates annually among the member states. The current chair is Malaysia, with the Philippines set to take the seat next year. Singapore’s turn will come in 2027.
“What is very encouraging is that sustainability and climate (are) on the table – areas like adaptation, to start with. This is something that several countries in Asean are interested in,” Menon pointed out.
“Climate change is going to affect South-east Asia quite badly – heat waves, droughts, floods, rising sea levels. We need to get a better sense of what the climate risks (are), how they translate into business risks and economic risks.”
However, Asean is lagging the African and Latin American regions in formulating carbon market policies that will support the generation of high-quality carbon credits.