HSBC's three-pronged plan for sustainable infra projects in Asean

KUALA LUMPUR: HSBC has put forward a three-pronged plan whereby Asean countries can attract private financing towards economically and environmentally sustainable projects.

The banking group suggested on Friday  that a sustainable infrastructure report; the creation of an Asean urban infrastructure network and an Asean blended finance framework.

The recommendations were contained in its paper “Financing sustainable infrastructure in Asean” on how the region could better attract private investment towards economically and environmentally sustainable projects. 

The recommendations, presented to Asean Finance Ministers on Friday ahead of their annual ministerial summit, were in response to the region being disproportionately affected by climate change and the growing need for private investment to help bridge infrastructure funding gaps. 

To recap, the Asian Development Bank (ADB) forecasts that, if left unaddressed, climate change could reduce the region’s gross domestic product (GDP) by 11% by the end of the century. 

ADB added Asean's public sector can cover less than 50% of the total investment required. To fill this gap, Asean member states must take steps to promote greater private sector participation in infrastructure financing. 

Its first recommendation  was to launching an annual “Doing sustainable infrastructure report”.

HSBC said so far,  there was no single, standardised, validated and dedicated report that governments, international organisations, development banks and the private sector could rely on to evaluate progress and identify opportunities for further improvements in Asean. 

Partnering with multilateral organisations, the report aims to provide a checklist of best practices that countries and cities can consider to better enable financing of sustainability linked infrastructure. 

It could include periodic progress reports on Asean member states’ investment environments and efforts to promote financing for sustainable infrastructure.

There were suggestions on ways to increase financing for sustainable infrastructure based on key metrics and feedback from public stakeholders in government, international organisations and the private sector.

Its second recommendation was to create an Asean urban infrastructure network. Built on Asean's Smart Cities Network, it would aim to provide capacity building for municipal, procurement and other public sector leaders so that they are better equipped to work with the private sector to develop bankable and sustainable infrastructure projects.
 
The initiative could include developing toolkits (e.g. templates, models, other resources) for officials to leverage when developing sustainable infrastructure projects. 

This would also include training for officials on key topics in sustainable infrastructure, leveraging existing initiatives and training programme. 

There could also be an annual smart cities infrastructure leaders forum for Asean officials to connect and share best practices. 

HSBC said the third recommendation was to develop an Asean blended finance toolbox.  The tool box, which would partner development banks and the private sector,  could look into standardising instruments that address common risks associated with sustainability linked infrastructure projects.

Hence, the move would enbable them to meet the investment requirements of different sources of financing.

They could also work with the industry and development banks to introduce a blended finance approach to structured finance in order to “crowd in” a broader spectrum of investors looking for long term returns.

“Work with international and national development banks to establish Asean-focused facilities and programmes for blending,” it said. 

HSBC’s head of business corridors for Asia-Pacific Mukhtar Hussain said: ”Addressing environmental challenges is no longer simply a moral dimension but an economic one. 

“The development of sustainability linked infrastructure using public and private sector financing is the only way that Asean can address the challenges that climate change presents to its economies,” he said. 

Mukthar pointed out climate change affects individuals, countries, corporates and investors so finding and delivering constructive solutions should be a jointp effort including global banks like HSBC. 

An estimated US$100 trillion of investment is needed in new sustainable infrastructure globally over the next 15 years – including financing for clean energy infrastructure, sustainable transport, energy efficiency and waste management – to meet the goal of the Paris Climate Agreement to limit global temperature increases to “well below” two degrees celsius over pre-industrial times. 

The third commitment under the Paris Agreement is “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”.