IMPACT= Mobilising capital for Asia's climate transition

Welcome to the Impact Equals podcast from British International Investment, where we explore the impact investment industry. What it is, why it matters, and how it's transforming global business. In today's episode, we're discussing South and Southeast Asia and asking how we can mobilize private capital for climate investment at scale. The numbers aren't striking. Asia's energy demand is expected to grow by 60% between now and 2040, and Southeast Asia alone is estimated to need around $130 billion in investment for its energy transition by 2030. As part of the launch of our 2025 annual review, Impact in Action, we hosted a panel discussion at our London office exploring the opportunity, the barriers that still need to be overcome, and how the right partnerships can help turn climate ambition into investable projects on the ground. So in this conversation, we hear from Gillian Tam, Assistant Managing Director and Head of the Development and International Group at the Monetary Authority of Singapore, the driving force behind Fast P, the Financing Asia Transition Partnership, a $5 billion blended finance platform. We also hear from David Ludwig, Chief Executive Officer of IBVote APAC, a Renewable Energy Developer building solar and battery storage projects across Southeast Asia, and they're joined by Holger Rothenbush, Managing Director and Head of Infrastructure and Climate here at BII. And the discussion is chaired by Joe Fry, Managing Director and Head of our Capital Markets Group. So let's join Joe then as she opens the conversation. I'm delighted to have a fantastic panel here with me to help explore these topics. Firstly, delighted to be welcoming Gillian Tan from the Monetary Authority of Singapore. Gillian will bring her perspective on how Singapore is working with partners to mobilize capital for Asia's climate transition. This includes initiatives like Financing Asia's Transition Partnership, also known as Fast P. This initiative aims to bring together different sources of capital from public, private and philanthropic sources to help finance Asia's green transition. We're also joined by David Ludwig, CEO of IBVote APAC. He will share a developer's view on the Renewable Energy Opportunity across Asia, drawing on IBVote's experience in the market and your own experiences across the region. And I'm also pleased to have Holger Rothenbush, my colleague from BII. He heads up our Infrastructure and Climate team and he'll bring his perspective from BII's experience within the markets, giving us more background on how BII has supported climate investment across the region and also how we've worked to bring private capital alongside BII. So firstly, to Gillian, I briefly touched on Fast P, which was created to help address Asia's climate finance gap. If you could tell us a bit more about the climate finance gap in Southeast Asia and why addressing it is so important. Thanks very much, Joe. And thank you also to BII for having me today. You asked why Southeast Asia, excuse me, I think the reality is that Southeast Asia as a region is going to be one of the most consequential growth stories of the next decade, right? So close to 700 million people. Collectively, I think we are now Southeast Asia's fifth, sorry, where the world's fifth largest economy and the demographics and other macroeconomic factors really speak to amazing growth in the region. With growth and change in demographics will come a massive need for energy transition and sustainable infrastructure development. On energy demand alone for Asia, we expect a 60% increase from now between now and 2040. So that's absolutely massive. If you double click and do Southeast Asia specifically, you're looking at something like $130 billion for the energy transition between now and 2030. So really significant. So we set up FASP with three goals. The first is really capital mobilisation. The second is coordination and the third is just making sure the whole thing was repeatable. So just on capital mobilisation alone, FASP is a $5 billion blended finance vehicle. The Singapore government put in $500 million of concessional capital. But the requirement is that it be matched dollar for dollar one for one with concessional capital from other providers. The idea is that $1 billion worth of concessional capital then crowds in four times at least of commercial capital which makes up a $5 billion platform for sustainable and transition investments in Asia. So we've had some success. We're very grateful for BII's close support in all of this. One of our funds, the Green Investments Partnership, recently announced second close at $800 million which is substantial. Just this week in London Climate Action Week, another one of our funds, the Energy Transition Acceleration Fund, also announced first close at $250 million. So we're very grateful for that. But to be honest, it's actually not so much the money that is of note, I think, but the range of partners that have come into this vehicle. So on the DFI side, as I mentioned, BII really strong anchor investor there, we've appreciated that. We have other DFI's including the Australian DFI's and many others, including some of the European ones, have come in strongly there too. We've got the philanthropies and we've got senior capital providers that might not otherwise have looked at a product like this, such as DBS and BPI. So that's capital mobilization. The coordination piece is also very important because platforms like this allow for quite different parties to come together and actually hammer out details of a deal of a platform, understand each other's requirements, and I think that's built trust. And it's been interesting because we've seen some partners come in on one fund and then feel comfortable enough to jump in on the second. So I think we will see more and more of that, which brings me to that last point, which is a repeatability. At the end of the day, for us, it was very important that we move from a transaction by transaction approach to a platform approach, which is what we've done with FastP. So you know, you like the fund manager, you diligence, the manager, you understand the investment focus and thesis, and then you let it go and let the fund manager who knows the region well, do his thing and do, you know, all that needs to come with that. And that's very important. But if one last point is that if I can be very ambitious, I think we actually need to stretch this further, right? So beyond sort of just, you know, kind of bashing things out at the platform level, we need to actually find a way to agree on a way of doing these platforms and structures so that this is repeatable again and again. And we're not sitting there having bespoke negotiations again and again. And I guess as you, I mean, you've touched on a bit there on the replicability, but as you aim to bring in more private investors into climate finance in Asia, how do you see that working? Yeah, it's a great question. And it's actually what we've been spending a lot of time thinking about lately that need to bring in mainstream institutional investment into climate finance. And I think here, you know, if it was a Sesame Street, the letter of the day would be P, because really it comes down to three P's, right? PR or public relations, products and participation. So PR, what do I mean? The truth is we love blended finance, but actually blended finance has a bit of a PR problem. So institutional investors, the folks that maybe don't come to London climate action, we, you know, can be a bit suspicious of what blended finance is. So through the fast-pre process, we realise when speaking with institutional investors that some of them thought that the fact that you need a blended finance sort of wrapper around these investments means that there must be something wrong with these investments and therefore need blending or a subsidy to make them okay. And we need to shift that mindset, right, from concessionality or subsidy to investability. And that brings me to the second P, which is products. And what I mean here is that, you know, we really need to think about how we sell this and package this product in a way that institutional investors understand. So rather than saying, oh, hi there, here's a blended finance opportunity for you, which, you know, a pension fund or a large asset owner may not understand. You need to say, here's an investment-grade debt product. This is the target yield. It's got, you know, amazing downside protection for the senior tranche. And, you know, wonderful governance and standards because BII is involved, right, among others. So, you know, we really need to shift that focus and meet mainstream investors where they are and will unlock a lot of capital if we can do that. And the final P is participation. And, you know, really this must be the first step. I've, you know, walked into many rooms at London Climate Action Week and been privileged to be at roundtables. Very often it's kind of the same community, you know, We all know each other very well, but the private sector. You know, the large banks, the large institutional investors have been somewhat underrepresented in some rooms. We need to change that. No, thank you so much, Jenny, and absolutely. And maybe moving a bit more to where the capitals deployed to, David, could you briefly give us a bit of an overview of what IBVogue does in Asia and tell us a bit about the opportunities you see in the renewable energy development space? And thank you for having me here today. Yes, IBVogue is originally a German European-based developer of renewable energy, mostly solar and battery storage. And in Asia, we are active actually for the last 10 years and fully committed for the last five years to set up a dedicated platform that is really focusing on Southeast Asia. The Southeast Asia for us is basically a mix of five countries, predominantly the Philippines, Indonesia, Malaysia as well as Vietnam and Thailand. So over the last five years, we've been active in the development, mostly of solar and battery projects. And yeah, last year we have been privileged to start working with actually both BII and the Green Investment Initiative, Pentegrine, who have funded a very transformational loan that we have received into our platform that enabled us to really kickstart the construction of large assets in the Philippines. Great, and I guess you mentioned there the $80 million facility with Pentegrine and BII supporting solar and battery storage. And why does this type of financing matter for moving projects from development into construction? Yeah, so over the last years, we've seen actually big movement in Southeast Asia in terms of both government and private sector off-take auctions where we could secure relatively large power purchase agreements. And while actually Southeast Asia is relatively developed from the senior project finance perspective, so in all of our markets, we don't see any major issues to secure project finance on actually from even lower banks, so the banking market is very well developed. However, the struggle, I think, for earlier stage platform that we were definitely maybe 18-24 months ago is to really mobilize the more capital on the equity side. And there I think we, as a smaller platform that is not backed by major funds, struggle to basically get our initial capital to start building a size of a portfolio that we can own and then further expand. And I think this loan was very critical for us because it's a $80 million facility, but in the end, it will be fully deployed by the end of this year and we will mobilize more than $400 million of project finance against those $80 million. And I think that goes to what Jillian is saying, that it's basically catalysts that is required to really then get projects into construction. No, that's great to hear, right? It's a kind of missing piece of capital that is the projects are developed and functioning. Obviously, you can get bank financing. But great to hear how we're filling some of the gaps, hopefully, across the market. Holger, moving to you, BI is obviously been active, financing in the climate space across south and south east Asia, including partnerships like the one we've just discussed. But can you tell us a bit about your experiences and BI's experiences in the market and a bit about how we're thinking about mobilizing commercial capital across these markets? Yeah, of course, I'm delighted to be here, being joined by friends and colleagues. I would very much sort of build on what David and Jillian had said and using the PPP that Jillian mentioned. As a DFI, we are very much looking at what's the problem and what's the product and where the partners that we need to work with. So the problem clearly, Jillian outlines very clearly the challenge in south and south east Asia is significant with regards to the energy transition that needs to happen, the capital that is required, the lack of public funding and the need to be mobilizing commercial capital. So that's definitely an area where we feel we have to lean in. And then more specifically, the problem is very much at the early stage and greenfields risk where the commercial investors are less willing to be to be coming in on. The product which we are then sort of looking at is very much along the lines of what David outlined, which is risk capital. So we have found that on the senior credit and of the spectrum, there is plenty funding available, but there is a lack of bankable projects, there is a lack of risk capital which ultimately brings projects to investibility. And that is very much what we are looking to be providing, which is then very much encapsulated in this strategy that we have recently launched the British climate partners, where we are focused on the energy transition generation transmission distribution and immobility across south and south east Asia, providing equity into equity platforms, which we are setting up. We recently launched an equity platform in India alongside a partner called Copenhagen Infrastructure Partners, which is a private equity partner, where we are looking to be developing energy generation projects in India. And we are also looking to provide miserable capital very much along the lines of what we did with IBFUCT in order to be supporting players that are already in the market by the grappling to be growing their business for lack of risk capital. And the last one on partners is always critically important, and I'm very pleased to be joined by two partners. So obviously, IBFUCT and David here, where we found a very sort of aligned thinking in terms of what the business focus is and also the way that the business is being executed, as well as the FASP program in Julian through Pentegrine, which is a co-investor of ours, in the IBFUCT transaction. So this is really, I think, encapsulating very nicely the constellation of the combination that we are looking for in order to be addressing those issues, because I think it's obvious that none of us, single-handedly, would be able to be approaching any of these issues, rather than it takes different partners, different kinds of capital, different kinds of capabilities, to be coming together to make a contribution. No, that's great. Thank you very much, Holger, for setting out so clearly the different kind of elements. If we come to a kind of quick fire round, we've talked a bit about it, but Julian, maybe to you first, in terms of if you had to name one barrier that most needs solving, what would it be, and then I'll come to David and Holger. It's a great question. I think it is the addiction to bespokeness. So, Holger's absolutely right. We cannot do this alone, and you need the partners. The trouble is, each partner has their own way of doing things, and I think we end up having to have very bespoke transactions, platforms, negotiations each time, and that creates frictions and inefficiencies in the system. No, that's great. David, from your perspective? Well, I would say in the markers where we act if it's still the regulatory framework, which is improving, and a positive example is, I think, the Philippines where there's been a very structured regime for the last five years, but we're still lacking that in some of our other markets, and I think for private companies like us, predictability in markets and regulatory regimes is really the most important part. Holger, from your perspective? Yeah, I think I would go with the challenge to bring domestic capital into the space. Mostly we are attracting international capital, which is amongst others here, but ultimately, infrastructure should be owned by domestic institutional investors, and that is where I think there's a barrier in particular in Southeast Asia to have investable structures and products, where insurance companies and pension funds can be crowded into infrastructure investors. And you see that as quite different to the international angle, or? Yeah, no, definitely. I mean, even within the Asian region, I mean, India, I think, is a very good example as to where significant progress is being made there. They have introduced legislation to allow for yield codes, which are called investment trusts, in India, which really connect domestic pools of capital to operating infrastructure assets, which are the natural owners of these types of assets. And that does ultimately make for very efficient funding of these assets, which the North Star investment that I had mentioned earlier is very much predicated on, is so that the originating assets and ultimately are selling those assets post completion to these types of investors. So there's good examples that one can follow, and I'm very hopeful that we could make some progress in this direction in Southeast Asian countries. No, it's great to hear about accessing their local investors as well as obviously all the kind of work that's been done with the international investors. And as a final question, looking ahead, as you think about one thing you would most like to see kind of the flip side to the barrier question, most like to see from the different actors within the space, whether that's investors, policymakers, deifies or other partners. What would you like to see to scale climate investment? Maybe firstly to you, Holger? Yeah, like I think I would just need to lead on to what I had said. I'm passionate about the value chain that you have to look at. It's really to fix the entire from project development to finance execution, but then also to the ownership, and the back-end, I think, in particular, in more sophisticated markets, relatively speaking emerging markets in Asia, is really critically important. And that does require benign policy and regulatory action, which includes text incentives to ultimately really unlock the capital that is available in the countries, which will then also have the potential to address the currency challenge. Because obviously, if we are funding infrastructure projects in part currency, IE currencies that are not originating in those countries, it always creates another barrier for investments. And by developing the domestic capital markets, we can make a contribution to overcoming that. No, great. JDM, from your perspective? Yeah, I think greater openness to alignment would be really helpful. And I mean that among the partners and the folks that are active in our ecosystem, and this actually relates to points that a few of us have made on this panel, which is that if we want to bring in that institutional investment piece, they need to see much greater, I guess they need to develop much greater familiarity in the products, in the structures, and the standards we use. And it really helps if we, the ones who are active in the space, who are putting out product in the space, can actually align among ourselves. So what we found in FastP, and to be honest, that's been an interesting insight in itself, is that, you know, DFI's, there's a great variance in how DFI's work, the standards they expect, their interpretation of sort of common standards that have been put out there. And that in turn, I think, leads to very protracted negotiations, even at the fund level. And if we want to scale this, and we want to make it repeatable, we can't afford to go through this process again and again, right, for the amount of investment needed. So my hope and dream is really one day to get all of us in a room together, and kind of align on some basic parameters, whether that's on additionality, or what we expect to see with impact and mobilization. You know, I think that alignment would be super helpful. If nothing else, as a starting point, it's been interesting that when you look across DFI's and other investors and philanthropies, they've got quite different reporting requirements. So, you know, requirements for the fund to report on. And disclosure and reporting is, you know, very, very important for transparency and for learning. And I think this is an area where we could afford to maybe find a common standard, you know, have it built out in a practice, sort of, guide of sorts. And then, you know, really kind of have that implemented across the board. So much more alignment. No, and look, I think we're very much, we're very much in agreement with you. And obviously, given the kind of size of the problem, and there's limited capital to use particularly in the concessional space, absolutely looking to work with other DFI's, other MDB's, other partners in this space to be able to move faster more consistently and absolutely create kind of common standards between us. So, totally agree with that as a key focus area. David, from your side, what would you, what would you say? Well, I would agree with Julian on the efficient reporting. And besides, I would maybe follow up on the, just on the regulatory framework, I think we are quite on a positive path in Southeast Asia. And I hope that that continues. And that's also initiatives like, like, FASP and what the AI is doing. This is very important for that to work with governments and regulators to keep the momentum. Great. Well, thank you so much for joining the panel. And thank you for sharing your expertise and your different viewpoints on the region, both from the development side and from the kind of international and local investor side. We very much look forward to working with you and seeing more in the space and more capital moving into the markets. And that brings us to the end of the discussion and the end of this episode of The Impact Equals Podcast. Thank you to Joe, Gillian, David and Holger for their contributions. This conversation was recorded at the launch of our latest annual review impact in action. If you want to explore the full report, you can do so at bii.co.uk. That's about it for today. If you enjoyed this episode, please do like and subscribe wherever you get your podcasts. Thanks for listening. We'll see you again soon.