Finance
Augmenting blended finance is the need of the hour
Developing nations would need $127 billion per year by 2030 to adapt to climate change. But the funding available to them is $46 billion. How does one fill this gap? In a panel discussion on financing the green transition at the Mint Sustainability Summit, Nawal Saini, MD, Brookfield Renewable Power & Transition Group, said there was a need to deepen the bond markets and make available long-term fixed-rate capital. Brookfield, meanwhile, is doing its bit, especially in solar.
“We are trying to bring more solutions (to add more efficient capacity and reduce cost for the consumer). We’re also looking at manufacturing (of modules, etc.) and we can ‘green’ those industrial parks or factories, besides looking at green hydrogen, green ammonia, for contracted cash flows,” he said.
Ritu Arora, CEO & CIO Asia, Allianz Investment Management Singapore, said emerging markets like India carried additional risk, which is partially mitigated when funding comes from multilateral institutions or development finance institutions (DFIs). She added that while blended finance — where funding comes from government as well as private capital — was being used, there was ‘information asymmetry’. “Since private finance has not funded these kinds of projects, we do not have information to price these risks, which DFIs and multilateral institutions have,” she said, pushing for information flow between the two.
Kamran Khan, managing director and head of ESG for Asia Pacific, Deutsche Bank, said that the role of multilateral development banks (MDBs) needed a relook because developed economies were running deficits and borrowing from developing economies, turning the development finance model on its head. “Today, it becomes even more important that MDBs leverage private capital… if I could speak to the new World Bank president, my message would be to make leveraging private capital a core requirement of success of a multilateral institution,” he said.
“Blended or hybrid technologies need to be married to blended finance options,” said Gauri Jauhar, executive director, Energy Transitions and Clean Tech Consulting, Commodity Insights, S&P Global, adding that creating a realistic timeframe for the transition to green would help.
For Vivek Kumar Dewangan, chairman and managing director, REC Ltd, which recently raised $750 million in green bonds, the challenge remained on how to bring down the cost of financing. For this, he suggested the government could consider reducing the withholding tax on interest payment, which has gone up to 20%, leading to overall costs going up by 1% per year.
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Updated: 29 Aug 2023, 12:32 AM IST