Green Finance Strategies for Post-COVID-19 Economic ...

1 ASIAN DEVELOPMENT BANKGREEN Finance Strategies FOR Post-COVID-19 Economic RECOVERY IN SOUTHEAST ASIAGREENING RECOVERIES FOR PEOPLE AND PLANETOCTOBER 2020 ASIAN DEVELOPMENT BANKGREEN Finance Strategies FOR Post-COVID-19 Economic RECOVERY IN SOUTHEAST ASIAGREENING RECOVERIES FOR PEOPLE AND PLANETOCTOBER 2020 Creative Commons Attribution IGO license (CC BY IGO) 2020 Asian Development Bank6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, PhilippinesTel +63 2 8632 4444; Fax +63 2 8636 rights reserved. Published in 2020. ISBN 978-92-9262-380-7 (print); 978-92-9262-381-4 (electronic); 978-92-9262-382-1 (ebook)Publication Stock No. TCS200267-2 DOI: The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.

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4 Left side from top to bottom: Essential food packs provided to the most vulnerable households under Bayan Bayanihan program (photo by Eric Sales/ADB); President Masa Asakawa visiting ADB-supported slum upgrading and Green infrastructure projects in Makassar City, South Sulawesi, Indonesia on 2 March 2020 (Photo by Ariel Javellana/ADB); Philippine Army soldiers distribute food packs to residents of Barangay Hulong Duhat in Malabon City, Metro Manila (photo by Veejay Villafranca/ADB); Center photos from top to bottom: Fishermen exploring the waters for a catch in Malekula, Vanuatu (photo by Eric Sales/ADB); Plants along the shores of East Tanjung PInang, capital of Riau Islands Province, Indonesia (Eric Sales/ADB); Biodiversity Corridor project for the preservation of the Bidoup Nui Ba National Park (photo by Lester Ledesma/ADB).

5 Right side from top to bottom: Burgos Wind Farm seen in the background in Ilocos Norte, Philippines (photo by Al Benavente/ADB); BTS Skytrain at the heart of Bangkok s commercial and business neighborhood (photo by Lester Ledesma/ADB); Solar panels and turbines at the Burgos Wind and Solar Farm in Burgos, Ilocos Norte in the Philippines (photo by Al Benavente/ADB).iiiContentsFigures and Boxes vForeword viKey Messages from Peer Reviewers viiAbout the Authors ixAcknowledgments xAbbreviations xi1 The COVID-19 Impact: Context and Synopsis 12 A Green Recovery: Criticality and Challenges 5A.

6 The Four Criticalities 71. Job Creation Criticality 72. Natural Capital Criticality 83. Climate Change Criticality 94. Catalytic Capital Criticality 11B. Sizing the Green Finance Market 13C. Green Frameworks for Global Green Finance 153 Green Recovery Packages and Finance Mechanisms: Examples 17A. Green Recovery Packages 18B. Capital Markets Instruments 261. Green and Sustainability Bonds 262. Transition Bonds: Brown to Green 27C. Green Finance Catalytic Mechanisms: De-risking Projects 281. Shandong Green Development Fund, People s Republic of China 282. Climate Finance Facility, Development Bank of South Africa 293. ASEAN Catalytic Green Finance Facility 304. SDG Indonesia One - Green Finance Facility 305.

7 Green Public Private Partnerships, Cambodia Solar Power Project 316. Blending Finance through Domestic Financial Institutions, Clean Energy Finance 31 Investment Programme, India 7. Credit Enhanced Climate Bond, Tiwi and Makban Geothermal Project, Philippines 32 Contentsiv4 Green Finance Concepts to Stimulate Post-COVID-19 Recovery 33A. Government Catalytic Funds 341. National Green Finance Catalytic Facilities: De-risking Mechanisms 342. Debt for Nature Swap Funds 36B. Capital Market Instruments 371. COVID-19 Recovery Transition Bonds 372. Sustainable Impact Bonds 393. Green Securitization 40C. Specific Thematic Concepts 421. Integrated Health and Sustainable Infrastructure Clusters 422.

8 Oceans Financing and Blue Credits 445 Seeking Support from ADB and the ASEAN Catalytic Green Finance Facility 466 Conclusion 48 Bibliography 50vFigures1 Balancing Relief, Recovery, and Rejuvenation 32 A Fourfold Rationale for Green Recovery 73 Challenges in Attracting Capital to Green Infrastructure 124 Growth of the Green Finance Market 145 Global Green Bond and Loan Issuance Increases 266 ASEAN Country Issuances, 2019 277 Case Study of the Shandong Green Development Fund, 2019 298 Case Study of the Cambodia Solar Park Project.

9 2019 319 National Green Finance Catalytic Facility Schematic 3510 COVID-19 Recovery Transition Bonds Assurance Fund Structure 3811 Future Flow Securitization 4112 Health Care for Well-Being and Infrastructure Clusters 4213 ASEAN Sustainable Urbanisation Strategy Framework 4314 Investor Opportunities in the Sustainable Blue Economy 45 Boxes1 IMF Warning on Economic Fallout 22 Insights from Oxford Smith School of Enterprise and the Environment 63 Emerging Policy Suggestions for a Green Recovery 204 Future Flow Securitization for the Airline Industry An Illustration 41 Figures and BoxesviGovernments across Asia have deployed a significant amount of emergency capital in response to the coronavirus disease (COVID-19) pandemic, with an initial focus on protecting lives and livelihoods.

10 The next stage of the crisis will require governments to prepare long-term recovery and stimulus packages to support Economic growth and employment security. These plans will need to carefully factor in existing vulnerabilities in developing member countries, now further exacerbated by COVID-19 impacts. Countries in developing Asia were already facing the triple threats of climate change, biodiversity loss, and declining ocean health before the pandemic. In many major Asian cities, air pollution and water scarcity are already highly visible. Coastal populations, especially along Southeast Asia s long coastlines, are increasingly vulnerable to sea level rise and increasingly frequent typhoons.