The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development Bank Institute (ADBI), the Asian Development
Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any
consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

Financing Low Carbon Transition in Asia

MDBs’ Role to Support NDCs Implementation:

Project Bankability, Credit Enhancement, and Market development

Xianbin Yao
21 February 2019
Outline of key points
• Nationally Determined Contributions
• Sector priorities
• Policy changes and capacity development
• Investment needs
• Implementation challenges
• Risks and perceptions of risk
• Pipeline of bankable projects
• Overcoming barriers
• Opening new channels
• Emerging initiatives in Asia
• China, India, ASEAN
• Asian bond market initiative
• Credit guarantee & investment facility
• MDBs support NDC implementation
• Project development
• Advanced technology
• Sharing of good practices
• Catalyze and mobilize financing
• Policy reforms and institutions development
• MDB’s joint initiatives
• Domestic resource mobilization
• Public financial management
• Financial market development
• Role of national development banks
Nationally Determined Contributions
– Asia’s priorities and challenges in
making low carbon transition

East Asia (2)

A survey of 39 NDCs Southeast Asia (9)
across Asia and Pacific South Asia (6)

(by ADB, July 2018) Central and West Asia (9)

Pacific Islands (13)

Focus on low carbon Sector investment and

transition in energy development plans
From 2014 to 2030
sector
Salient findings … and NDC implementation
✓ Major shifts of power mix (e.g. decreasing share of Implementation
coal, increasing share of renewable energy), challenges
o Yet shifts vary greatly by countries (e.g. rising
share of coal in Southeast Asia) o Awareness and behavioral
change
✓ NDCs to reduce Asia’s average carbon intensity in
power generation by 29% o Subnational and local
o And impacts can be further enhanced if initiatives
countries adopt more ambitious goals o Pilots for replication and
✓ A variety of policy instruments in place (especially on scale-up
renewable energy, and energy efficiency)
o Greater focus on market-based instruments, and
on assessing policy effectiveness
✓ Asia’s total investments in energy systems estimated
at $4.8 trillion between 2016 to 2030
o Over 90% will be in PRC, India, Indonesia,
Kazakhstan, Pakistan, and Viet Nam
o Renewable energy and power grid each to
account for 1/3 of total investments
Power generation mix under NDCs: 2014 and 2030

Source: Yongping Zhai et al (2018) “Impact of Nationally Determined Contributions on Energy Sector:
Implications for ADB and Its Developing Member Countries .”
 Total Investment Needs to Achieve the NDC Scenario and
Enhanced Low Carbon Goals in Selected Countries

Source: Yongping Zhai et al (2018) “Impact of Nationally Determined Contributions on Energy Sector: Implications for ADB and Its Developing Member Countries .”
 Energy Policy Instruments in developing Asia

Source: Yongping Zhai et al (2018) “Impact of Nationally Determined Contributions on Energy Sector: Implications for ADB and Its Developing Member Countries .”
ADB Climate Financing, 2017
 ADB Climate Finance, 2011 – 2017

https://data.adb.org/dashboard/climate-change-financing-adb-2017
 ADB 2030
Climate Change
Strategic
Framework
 • Sector priorities • Mobilize concessional financing
ADB to Scale- • Energy systems • Small low income countries
• Transportation
Up Climate • Urban development
• Blended financing
• Trust funds priorities
Financing • Thematic priorities
• Climate and disaster resilience
• Project development
• capacity building and
By 2030 - 75% • Natural assets and eco-systems
• Water–food–energy security nexus
knowledge work
• Partnership priorities
of ADB • Financing priorities
• Concessional financing – small • Institutional investors

committed countries and blended financing

• Greater engagement with private
operations (in sector – leveraging and mobilizing
• Support for innovative PPPs –
catalyzing
#s) • Carbon financing – market
development
• New and emerging partners
• Improve business environment
• Advisory services
• Policy-based operations
• Domestic resource mobilization
 • Private co-financiers and investors
Project financing • Infrastructure with large financing needs
(debt and equity)
Catalyzing and • PPP operations

Mobilizing “Crowd-in” • B loans

Financial products
• Partial risk guarantees, partial credit guarantees
• Risk transfers, and risk sharing arrangements

Resources
By 2030, 1 to Making markets in
green finance
• Underwriting and syndication, including in local
currencies

2.5 matching
ratio ADB making use of
innovative • Green bond, water security bond, clean energy
financing bond
instruments
 • ADB announced the advance platform in November
2018
• Scope
• To help countries to better engage with potential
sources of climate finance, and to make use of
innovative finance mechanisms
NDC Advance • To identify and prioritize climate projects
Platform – a • To support countries in tracking how projects deliver
against their NDC goals
country focused • This platform augments the ADB’s role as project
support facility developer, with mechanisms such as
• Project design advance
• Project development facility
• Project preparation technical assistance
Bankability – a binding
constraint
Key risks affecting bankability

• Unpredictability of revenues, esp. in the initial

years of operations
• Land acquisition problems
• Environmental clearance delays
• Construction period delays
• Cost increases
• Non-availability of long tenure financing
• Options for easy exit from projects
• Additional greening costs
Climate/Green Bond Opportunities

Source: Bonds and Climate Change: the state of market 2018

Promoting green bond markets

• Setting preconditions for local currency green

bond markets
• Establishing a policy framework for green bonds
• Expanding the supply of green bonds
• Facilitating demand for green bonds
• Promoting general market development
• Supporting regional initiatives to develop green
bond markets
Latest global issues:
On 5 July 2018, ADB raised €600 million with the issue of a 7-year green bond.
On 20 Sept 2018, ADB raised $750 million with the issue of a 10-year green bond.
On 17 Jan 2019, ADB raised A$1.0 billion with the issue of a 5-year green bonds

https://www.adb.org/site/investors/main
Highlights of discussion
• NDCs are transparent planning tool • To support NDC implementation is ADB’s corporate
priority
• To be enhanced for more ambitious
• As project developer
goals
• Advanced technology
• To strengthen policy focus
• Good management practice
• To engage subnational governments, • As financier
private and community initiatives • Innovative financing
• Project bankability is a major risk • Catalyze and mobilize financing
• To translate plans to project pipelines • As policy advisor
• To overcome policy institutional barriers • Policy reforms
• To explore new channels of financing • Institutions development
• MDB’s joint initiatives
• Domestic resource mobilization