Asian Development Bank

Promotion of green finance

This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs.

 

 

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Paris alignedADB is helping to drive green bond markets through its own issuance and its support of other issuers. It is less clear to what extent ADB is working with regulators on green finance.

Explanation

Green bond

ADB launched its green bond programme in 2015 with a $500 million green bond. In 2016, ADB launched a dual tranche 3- and 10-year green bond, raising $1.3 billion across both tenors.  Since 2015, the programme has raised about $7.6 billion, issued in various currencies. These bonds have focused mainly on transport and energy. However, ADB has been relatively slow to enter the green bond market given there has been a green bond market in the Asia Pacific region for a number of years, and Asia Pacific was the second largest region for climate-aligned bonds in 2017. ADB has also encouraged the green bond market by supporting Asian issuers. In 2019, for example, ADB invested $20 million in the AC Energy Green Bond Project, which primarily invested in solar and wind in the Philippines, Indonesia and Vietnam.  ASEAN+3 (Association of Southeast Asian Nations (ASEAN), China, Japan, and Korea) policy makers are also exploring options to promote green local currency-denominated bonds including identifying the barriers to green bond market development with support from ADB.

Greening the system

ADB has also provided assistance to developing member countries through green financial products from microfinance institutions (MFIs). For example, credit lines for MFIs were offered for energy efficient homes in Tajikistan. However, only a small number of individual projects are listed for MFI assistance.  

Other pioneering projects related to green finance include technical support to Punjab National Bank‘s to build institutional capacity on rooftop solar investment, as well as a project in Thailand aiming to show the viability of nonsubsidized solar power.

In 2017, ADB established a fund “to support the development and implementation of financial risk management products that can help unlock capital for climate investments and improve resilience to the impact of climate change” – the Asia-Pacific Climate Finance Fund (ACliFF).

ADB has recently launched the Green Finance Catalyzing Facility (GFCF) within the ASEAN Infrastructure Fund to mobilise public and private funds. The GFCG’s goals are to generate a pipeline of bankable green infrastructure projects and provide support in project development and structuring. ADB works together with experts from the G20 green finance task force on this. The facility is currently starting in China, to finance a pool of green projects sponsored by local governments. The facility aims to de-risk green investment and capacity-building throughout the region, focusing on eight key member countries and four infrastructure sectors.

It is less clear to what extent the ADB is working with regulators on green banking regulation or green fiscal reform, though a recent ADB paper highlighted the key role of regulatory issues for sustainable finance. The Bank officially became an observer of the Central Banks and Supervisors Network for Greening the Financial System (NGFS) in June. The Bank’s Chief Economist said this network’s work is a vital component of the regional and global financial system, but it is too early to tell whether this observer status will lead to increased colaboration between the ADB and central banks.

Recommendation: ADB should focus more on technical assistance to regulators on how to green national financial systems.

Case Study: Partial Credit Guarantee for Geothermal in the Philippines

Market failure addressed: tapping new capital sources – institutional investors.

In the Philippines, the ADB provided a partial credit guarantee to support a project bond issuance by AP Renewable Inc (APRI) to refinance capital expenditure on two major geothermal projects (the fourth and seventh largest in the world). Together with the Credit Guarantee and Investment Facility (CGIF), the ADB wrote a partial credit guarantee and a local currency loan to underpin the project bond. The participation of the ADB and CGIF allowed the successful placement of the first Climate Bond in the Asia Pacific region. It is also notable as being the first credit-enhanced bond in the Philippines power sector, and one of the first in South-East Asia more generally. As such, it introduced a new type of climate finance in the Asia-Pacific region where previously long-term infrastructure projects have relied on funding from traditional sources such as banks.  

Last Update: November 2020

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