ADB Proposes SDG Accelerator Bonds for Green Infrastructure Projects in Southeast Asia
Manila: The Asian Development Bank (ADB) has launched a new report aimed at helping developing countries tap into global capital markets to support a green, resilient, and inclusive recovery from the coronavirus disease (COVID-19) pandemic and meet the Sustainable Development Goals (SDGs).
The publication, Accelerating Sustainable Development after COVID-19: The Role of SDG Bonds, is a guide to using SDG bonds as a mechanism to attract global private financing. It proposes a new kind of SDG bond, the SDG Accelerator Bond, which could help countries reduce the perceived investment risk posed by an issuing entity, sector, or project with no track record on bond issuance. The new bond proposes to combine exit guarantees and other credit enhancement structures with incentives to help countries meet SDG targets.
“The COVID-19 pandemic has slowed down the momentum for sustainable and equitable growth in most of developing Asia and many countries are at risk of not meeting their SDG targets in climate resilience, gender equality, and human development,” said ADB Vice-President Ahmed M. Saeed. “For countries looking to fund sustainable projects and programs on a large scale, capital markets represent an underused but viable mechanism to bring in SDG investments.”
Southeast Asian countries issued a record $12 billion in green, social, and sustainability bonds in 2020, but their financing needs have only grown amid the COVID-19 pandemic. The SDG Accelerator Bond builds on global best practices in project finance and aims to standardize the risk–return structure to ensure investor appetite and help local governments and new state-owned entities access funds. The framework would allow variations in fund structure among countries and issuers of the accelerator bond or other SDG bonds.
The report showcases successful sustainability bonds issued in the region, including those supported by the ADB-managed Association of Southeast Asian Nations (ASEAN) Catalytic Green Finance Facility (ACGF).
Established in 2019, the ACGF is an ASEAN Infrastructure Fund initiative. It is owned by all 10 ASEAN countries and ADB and supported by 13 partners, including the Sustainable Development Investment Partnership, a joint initiative of the World Economic Forum and the Organisation for Economic Co-operation and Development.
With $1.7 billion in cofinancing pledged so far, the ACGF is funding the financial design of more than 25 projects. It is helping some countries develop green recovery strategies, including policies, de-risking vehicles, and projects. The ACGF is also assisting in the issuance of green and sustainable bonds.
Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability is a priority in ADB’s Strategy 2030. ADB has made a commitment to deliver $80 billion in climate finance between 2019 and 2030, and will ensure that at least 75% of its projects will address climate change mitigation and adaptation by 2030.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.