Singapore to start deploying funds for clean energy infrastructure in Asia: MAS

SINGAPORE - Singapore will in the coming months be ready to deploy part of the US$500 million (S$646 million) it had set aside as initial funding for green projects in the region, with the set-up of a new office to advance a scheme announced in 2023.

This update to Fast-P – or Financing Asia’s Transition Partnership – was announced by Monetary Authority of Singapore (MAS) managing director Chia Der Jiun on May 7 at the Ecosperity Week sustainability conference.

“I am also glad to share that a Fast-P office, with a dedicated management team, will soon be set up to facilitate the deployment of up to US$500 million of concessional capital from the Singapore Government into Fast-P, alongside capital from other partners,” he said.  

The new office by the MAS will help to fund marginally bankable clean energy infrastructure in Asia, which can be deemed too risky or unprofitable for investors. 

The goal of Fast-P, an initiative

launched by MAS in 2023

, is to use an initial injection of funds by the Singapore Government to increase funding from other sources.

The US$500 million will come in the form of concessional funding, such as grants and loans provided at more favourable terms and below market rates. 

This funding will match, dollar for dollar, concessional capital from other partners, including other governments, multilateral development banks and philanthropic institutions.

The aim is to raise a total of US$5 billion with the help of other commercial and philanthropic partners.

The funds will go to three pillars – accelerating the energy transition away from fossil fuels to clean energy, ramping up green investments, and decarbonising emissions-intensive sectors like cement and steel production. 

The second pillar on green investments will be the first to commence investments in the coming months.

Mr Chia did not specify the types of clean energy infrastructure projects that will receive the funding. 

But this pillar focuses on renewable energy plants and storage, electric vehicles, transport, and water and waste management projects, said a 2024 MAS media release. 

Mr Chia noted that Asia’s demand for electricity is projected to rise at an annual rate of 4 per cent until 2035.

The International Energy Agency expects renewable energy to supply more than half of Asia’s increased electricity demand.

“Global corporate investment may also turn more cautious amid heightened trade and economic uncertainty,” Mr Chia added, underscoring the need for financing methods like Fast-P.

He noted that the insurance industry plays a key role in finding solutions to reduce the risk of renewables and decarbonisation projects for commercial investors.

At Ecosperity’s Financing Asia’s Transition Conference on May 7, Malaysia’s Natural Resources and Environmental Sustainability Minister Nik Nazmi Nik Ahmad shared Mr Chia’s views.

“While our ambitions are high, we need the financial infrastructure to match,” said Mr Nik Nazmi in a recorded speech.

Mr Chia also outlined the other ways that Singapore’s financial sector is pressing ahead with climate efforts, even as climate action elsewhere falters.

For instance, steps have been taken to shore up banks’ resilience to climate and nature risks, such as damage to assets and infrastructure from extreme weather, and disruptions to supply chains.

Revenue may come under threat, or companies may have to incur additional costs from new regulations or increased consumer scrutiny.

Thus, financial institutions here have integrated such risks into their internal credit risk models, asset valuation and due diligence processes, Mr Chia said.

“Doing so will enable them to better anticipate and manage financial loss, minimise stranded assets, and uncover new financing and investment opportunities,” he added.

Other than factoring in climate risks in financial assessments, financial institutions here are also increasingly aware of the impact of nature loss on operations. 

The Singapore Sustainable Finance Association had highlighted in a report that the degradation of nature represents a risk to companies’ activities and to financial portfolios. Nature gets stressed from economic activities that cause pollution and deplete natural resources.

The association’s white paper listed practical steps for financial institutions to incorporate nature into their business activity.

The paper – titled Financing Our Natural Capital – highlighted that plans to reverse negative impacts and restore nature can unlock US$4.3 trillion and 232 million jobs in Asia.

“Ultimately, financial institutions can respond on two fronts: by managing exposure to growing climate and nature-related risks, and by innovating to finance and de-risk adaptation, resilience and nature-positive solutions,” said Mr Chia.

In a further boost to climate finance, a global accelerator that aims to bridge the investment and capacity gap in developing countries was launched at Ecosperity on May 7.

Spearheaded by the Global Capacity Building Coalition – a grouping of climate finance organisations – the initiative is open to applicants who can showcase their efforts to develop climate finance to ramp up efforts in energy transition.

The coalition said in a statement that to increase climate finance to sustainable development in emerging economies, it is important to first strengthen the capacity of local financial institutions.

This is something that the accelerator hopes to do by highlighting and supporting capacity-building initiatives.

Recipients will, among other things, be provided with access to and advice from experts, and marketing and communication support.