Asian Development Bank establishes Indonesian fund for green infrastructure

The new fund is called Sustainable Development Goals Indonesia One-Green Finance Facility (SIO-GFF) and is the first of its kind in Southeast Asia. The SIO-GFF aims to finance at least 10 projects, of which at least 70% of the projects by value will be green infrastructure projects, according to an AfDB press release.

The SIO-GFF will primarily provide loans and will also provide equity, convertible debt and guarantees to reduce credit risk. It will also design financially viable projects to attract financing to complement public spending, including from private, institutional and commercial sources.

Renewable energy expert John Yeap of Pinsent Masons said: “Multilateral institutions undoubtedly have a key role to play in catalysing investment in countries that have yet to develop deep domestic capital markets, and in particularly in green financing. In turn, the country of investment must ensure clear and transparent policies, including around an internationally recognized green taxonomy.

“Indonesia, as the largest country in Southeast Asia, has the potential to lead the region in green and sustainable investments and the current infrastructure fund will be an important part of achieving this goal” , did he declare.

The facility is expected to catalyze a maximum of eight times the fund’s value for investing in climate-friendly infrastructure.

Anggia Rukmasari, expert in infrastructure law at Indonesian law firm Legalexica, said: “The SIO-GFF is a concrete boost to help countries like Indonesia achieve their sustainable development goals. To follow up on this, the government can start promoting this funding facility to target local stakeholders, ensuring that the information is crystal clear regarding eligibility to apply. In addition, the government should also create an efficient application procedure as well as a system for monitoring its implementation. »

The AfDB will re-lend the loan to Indonesian public infrastructure finance company Sarana Multi Infrastruktur (SMI), which will manage the fund.

The AfDB has also approved additional technical assistance to expand the services of the SMI to support other borrowers and catalyze private financing. This additional funding includes $1.2 million from the Australian Department of Foreign Affairs and Trade and $375,000 from the Luxembourg Financial Sector Development Partnership Special Fund.

According to the AfDB, Indonesia’s annual climate-adjusted infrastructure financing needs were estimated to average $74 billion from 2016 to 2020, with an annual infrastructure financing gap of $51 billion.

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