The Glasgow Financial Alliance for Net Zero (GFANZ) Asia-Pacific Network is to develop guidance on how financial institutions can fund the managed phase-out of coal power generation in the region.
The work aims to drive investment capital into such projects and will involve the Monetary Authority of Singapore (MAS) and the Japan-led Asian Development Bank (ADB). Financial institutions interested in contributing have been invited to get in touch.
It is the first big initiative by the GFANZ offshoot since its launch in June. The network is hosted by the Singapore Stock Exchange, with support from MAS, state wealth fund Temasek and Bain & Company. It is chaired by MAS managing director Ravi Menon.
No timeline was provided on the guide’s delivery.
ADB has previously floated a proposed coal decommissioning fund, supported by HSBC and Prudential. However, the concept has been criticised amid claims it would overshoot the global 1.5C climate target, overpay for coal assets and disregard Just Transition objectives.
The announcement by GFANZ APAC was made at a transition finance-themed event organised by MAS, McKinsey and blended finance non-profit Convergence.
Blended finance solutions
Separately, MAS said it will back a S$5 million ($3.5 million; €3.5 million) scheme to fund proof of concept and feasibility studies on blended finance solutions and “mobilise capital into high-impact target sectors that are significantly under-capitalised in Asia”, such as transport, infrastructure and nature-based solutions.
Blended finance uses public funding to mitigate investment risk and boost returns for investments that would be unable to proceed on strictly commercial terms.
MAS managing director Ravi Menon called for a “more systematic and coordinated approach to mainstream blended finance”, describing such programmes as “too few and too small”.
“Economic development will drive demand for fossil fuels, which is still the cheapest way to generate electricity and power mobility in many parts of the world,” Menon said. “We need to shift the energy mix progressively, first to relatively less emissions-intensive fuels like natural gas, and then to renewables.”