Leading the Way in Sustainable Infrastructure - Ashok Lavasa

Leading the Way in Sustainable Infrastructure - Ashok Lavasa

Speech | 21 August 2023 Read time: 7 mins

SHARE THIS PAGE

Keynote address by Ashok Lavasa, ADB Vice President (Market Solutions), at the 8th Asia Sustainable Infrastructure Finance Leaders Dialogue: “Leading the Way in Sustainable Infrastructure”, 21 August 2023, Singapore   I would like to thank The ASSET, Infrastructure Asia, and the Monetary Authority of Singapore for organizing this dialogue on sustainable infrastructure finance, a topic that remains highly relevant as economies work to accelerate their climate and development commitments under a post-pandemic backdrop.    Infrastructure lays the foundation for achieving sustainable economic progress, connecting consumers to markets, and increasing access of communities to basic social services. It is critical for unlocking the region’s enormous potential for sustained and inclusive economic growth.   While the sustainable development agenda calls for a massive investment in infrastructure, we simply cannot ignore the well-being of our planet and its inhabitants. Climate change has led to more extreme and frequent weather events, ravaging communities and ageing infrastructure. The COVID-19 pandemic revealed vulnerabilities and inadequacies in our social and digital infrastructure. As a result, governments have redirected scarce resources to social assistance programs, crisis response, and economic recovery, pushing back decades of progress across key sectors.    To progress, we need to incorporate elements of disaster risk reduction and climate action in our approach to poverty alleviation and infrastructure development. The sustainable development goals must be integrated in our development architecture.    The region will require $1.7 trillion in infrastructure investments every year to propel its economic trajectory and boost climate adaptation and mitigation. This amount is double of what we estimated back in 2009.    There are, however, several roadblocks towards sustainable infrastructure development. First, governments are fiscally constrained from investing in capital-intensive infrastructure projects. Second, there lies the challenge of attracting private capital into specific markets. Currently, an estimated $200 trillion of private capital is invested in global capital markets. However, only a small percentage is invested in developing countries.    We need to break through these barriers to bridge the region’s infrastructure gap.    Collaboration among development finance institutions and the public and private sector will push this endeavor. As governments work to transition to net zero while meeting key development targets, the private sector will play a bigger role in helping build viable and high-quality infrastructure. The private sector has access to significant amount of funds and can help bring innovative financing solutions to the market including local currency project finance loans, green, social, and blue bonds, sustainability linked loans and funded and unfunded risk participation structures, to name a few.   Mobilizing private capital for sustainable infrastructure, however, is hindered by limited liquidity and the lack of de-risking mechanisms and investment incentives and guarantees. Investors are wary of the risks and possibly low returns that come with these projects.    We can unleash the potential of the private sector for sustainable infrastructure investments by scaling up innovative financing and promoting sound infrastructure governance and market standards.   At its core, innovative financing such as PPPs and blended finance provides novel approaches for mobilizing increased capital to bridge the infrastructure gap. They act as a magnet to attract private and institutional finance by de-risking project financing, enhancing liquidity, returns, and capital adequacy, and reducing volatility.    ADB has found success in leveraging innovative financing tools such as blended financing for its key priorities. In support India’s decarbonization efforts through the transport sector, ADB had structured and mobilized a financing package, comprising of a subordinated loan and grant of from the Clean Technology Fund (CTF), a grant from the Climate Innovation and Development Fund (CIDF), and senior loan from the Asian Infrastructure Investment Bank in addition to our own financing, to develop 255 electric battery-powered buses (e-buses) to serve 5 million people a year on 56 intercity routes in India.   Private sector mobilization will also need strong institutions and an enabling environment. Local strategic and regulatory frameworks must be integrated with national policies.    A sound business plan and a pipeline of ready infrastructure projects will boost investor confidence. As such, governments must have the capacity to design and prepare a pipeline of attractive, viable, and high-quality infrastructure projects.   ADB continues to be a committed partner on sustainable infrastructure for Asia and the Pacific. Let me share what ADB is doing to mobilize the private sector, scale up sustainable infrastructure finance, and promote good governance among our member countries:    First, ADB is continuously providing upstream support to help member countries create an enabling policy environment for investors. Through our Office of Markets Development and Public-Private Partnerships, which I oversee, we help member countries design and implement regulatory mandates and building their capacities on institutional, policy, and legal reforms.   Second, ADB is working midstream with public sector agencies to structure and high-quality sustainable infrastructure projects through its PPP transaction advisory services and project preparation support. Most recently, ADB worked with the Government of Bangladesh to prepare and market a four-lane, 13.5-kilometer expressway that will ease traffic congestion in Dhaka and other major cities. The project mobilized $261 million from the private sector. ADB also continues to expand its Asia Pacific Project Preparation Facility (AP3F), with new funding partners, to help member countries facilitate sustainable infrastructure development under PPP modalities.    Third, ADB is using its sovereign and nonsovereign financing windows to draw in private investments, as part of its downstream support, to support climate mitigation as well as transition financing. As an example, ADB led the structuring of the largest project financing and syndication in the ASEAN, totaling $693 million, to build a 600-megawatt wind power plant in Lao PDR.    In Kazakhstan, ADB provided a loan, using entirely its own capital resources, to decommission inefficient coal power and replace inefficient coal-based power generating units with combined cycle gas turbine units, supplying clean energy for Almaty.   Fourth, ADB is maximizing innovative financing to help member countries build more sustainable infrastructure. One example is its Leading Asia’s Infrastructure Fund, LEAP. With contributions from JICA, the co-financing fund leverages ADB’s existing private sector window to expand infrastructure financing in the region. To support rural digital connectivity in Southern Philippines, ADB, together with cofinancing from LEAP, provided a loan to build telecommunications towers that will enable mobile network operators to provide a full range of mobile and data services to consumers.   ADB has advised, structured, and mobilized project financing for one of the largest utility-scale solar park in Central Asia and a digital infrastructure and fully leveraged ADB’s integrated upstream, midstream, and downstream sector engagement, innovatively mobilized commercial cofinancing through a sovereign-backed partial credit guarantee and B-loan syndication   In support of Indonesia’s circular economy, ADB structured the first limited-recourse project financing for a plastic recycling plant in the Southeast Asia region and ADB’s second blue loan validated under our Ocean Finance Framework, diverting PET bottles from landfills, open burning, or leakage into the ocean, and offsetting carbon emissions.    In our journey to net zero, we are helping the region transition away from coal-based energy through our Energy Transition Mechanism, ETM. ETM is a regional, transformative, blended-finance program that seeks to retire existing coal-fired power plants on an accelerated schedule and replace them with clean power capacity. As an example, ADB is working with private partners in Indonesia to jointly explore the early retirement of its first coal-fired power plant.    To summarize, if Asia and the Pacific is to bridge its infrastructure gap and meet its SDG and climate commitments, developed and developing countries must work together. Collaboration among different territories and stakeholders–Development Financial Institutions and the Public and Private Sector–will create an enabling environment and attract more private and institutional capital for sustainable infrastructure. I want to conclude by inviting everyone to engage, discuss, and collaborate with ADB to meet the region’s growing infrastructure demands. I am hopeful that these dialogues will connect our pathways and ignite greater collaboration towards sustainable development and climate action in the region. Let us all work together to realize our shared ambition of a resilient, inclusive, and prosperous Asia and the Pacific.   Thank you very much.  Keynote address by Ashok Lavasa, ADB Vice President (Market Solutions), at the Mongolia Economic Forum 2023: “Welcome to Mongolia”, 9 July 2023, Ulaanbaatar, Mongolia Opening remarks by Lisa Kelaart-Courtney, Director, Prevention and Compliance Division, ADB Office of Anticorruption and Integrity, at the Beneficial Ownership Seminar and Exchange of Information on Request Assessor Training, 3 July 2023 Remarks by Masatsugu Asakawa, President, Asian Development Bank, at the Loan Signing Ceremony for the Davao Public Transport Modernization Project, Davao City, Philippines, 1 July 2023 Closing remarks by Ashok Lavasa, ADB Vice President for Private Sector Operations and Public–Private Partnerships, at the Solidarity and Commitment Toward a Carbon-Neutral Asia and the Pacific with Clean Energy, Asia Clean Energy Forum, 16 June 2023, Manila, Philippines #J-18808-Ljbffr