Emerging Asia’s climate pledges look like empty promises

Many emerging Asian economies require billions of development finance to meet climate and economic growth targets. Developed countries have repeatedly committed to supporting the green transition but they have consistently fallen short of expectations. 

Developed countries committed to mobilizing US$100 billion per year by 2020 to support climate action in developing countries but fell well short of expectations.

Indonesia, for example, requires about $281 billion of funding from 2018 to 2030 — or about $22 billion annually — to achieve its Nationally Determined Contributions and reduce greenhouse gas emissions by 43.20% with international support.

Several Asian economies, including Indonesia and Vietnam, have been negotiating a Just Energy Transition Partnership (JETP). 

JETP Indonesia includes $10 billion in public sector pledges from International Partners Group members and other actors such as the European Union, United States, Japan, Canada, Denmark, France, Germany, Italy, Norway and the United Kingdom. It also includes a commitment to mobilize an additional $10 billion in private financing. 

But relying solely on such promises poses risks to national climate and development progress due to uncertainties and signals of backsliding by developed countries. Indonesia and other emerging Asian economies need to recognize the challenges associated with accelerating the implementation of climate finance commitments.

Public and private climate finance is difficult to deliver internationally. This climate finance often lacks specified sovereign commitments and relies on risk-reward analysis for private-sector investments. This contrasts with China’s approach of combining public and “commercial” finance through policy banks and state-owned enterprises.

Even with international climate finance through JETP, financing large-scale green energy projects becomes challenging due to increased foreign exchange risks. This limits local financial institutions’ capacity to provide long-term loans. 

Sovereign guarantees, which are essential for derisking larger projects, are harder to obtain due to sovereign debt risks. The dominance of state-owned enterprises in most Asian developing countries’ energy markets also restricts private investor participation in power and grid projects.

Developing Asia needs developed world financing to make the green transition. Image; Facebook

Lastly, support for domestically financing the energy transition has experienced setbacks due to energy security concerns amid rising energy prices. This has resulted in increased coal production in Indonesia and reversals of no-new-coal commitments in countries like Pakistan.

Developing Asian economies can consider strategies to address these challenges such as strengthening commitments, mitigating investment risks, improving market mechanisms and cooperating with regional partners.

To accelerate the green energy transition, developing economies can strengthen political and regulatory commitments. Green-minded investors — including development finance institutions — cannot credibly provide coal-transition finance while political support for coal is not reduced. 

This was highlighted in the June 2023 draft of the Glasgow Financial Alliance for Net Zero Guide to Managed Phaseout of Coal in Asia-Pacific. The guide states that the foundation for attracting green and coal-transition finance is to ensure the “credibility of relevant energy transition and coal phaseout commitments and plans.”

Existing climate change partnerships with multilateral organizations or bilateral countries — such as Indonesia’s partnership with Norway — can help strengthen domestic institutions and capacity building.

Another strategy for developing economies is to enhance collaboration between local financial partners and major donor countries to mitigate investment risks. This can be achieved through currency hedging support and guarantee instruments to attract private investors. 

Recent discussions at the Summit for a New Global Financing Pact in Paris emphasized the importance of innovative financing mechanisms.

The development of innovative financing mechanisms could consider ASEAN’s sustainable finance taxonomy with a traffic light system which supports coal retirement and Indonesia’s new sustainable finance framework. This would help to build on Bank Indonesia’s previous experience of issuing green bonds.

Market mechanisms should also be improved to attract private investors across the green energy supply chain. Providing tax incentives for green energy projects, expediting negotiations of green energy power purchase agreements and ensuring priority payments for green electricity provision can attract these private investments. 

Encouraging green transition investments in state-owned enterprises through international partnerships could also leverage green finance instruments.

Developing economies should also seek cooperation with regional partners such as China and South Korea for additional renewable energy project funding. China’s increasing investments in overseas green energy and hydropower projects — as well as its efforts to “green” the Belt and Road Initiative — make it an important regional partner.

This picture taken on May 31, 2016 shows a Chinese-run construction site along the Mekong River in Vientiane. Grain by grain, truckload by truckload, Laos' section of the Mekong river is being dredged of sand to make cement -- a commodity being devoured by a Chinese-led building boom in the capital. But the hollowing out of the riverbed is also damaging a vital waterway that feeds hundreds of thousands of fishermen and farmers in the poverty-stricken nation. / AFP PHOTO / LILLIAN SUWANRUMPHA
This picture taken on May 31, 2016 shows a Chinese-run construction site along the Mekong River in Vientiane. Photo: Asia Times Files / AFP / Lillian Suwanrumpha

China–Indonesia partnerships, supported by the Belt and Road Initiative International Green Development Coalition and Indonesia’s Institute for Essential Services Reform, can accelerate green Chinese investments in Indonesia. 

South Korea is another promising regional partner in climate cooperation with its commitment to supporting the Green Climate Fund in providing a total of $30.3 billion for climate projects in partner countries.

Successfully accelerating the greening of the energy system in emerging Asian economies requires significant willingness and risk-taking to tackle financing and political constraints in addition to important transition considerations.

Mengdi Yue is Visiting Researcher at the Green Finance & Development Center at Fudan University.

Christoph Nedopil is Associate Professor and Director of the Green Finance & Development Center at Fudan University.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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AmBank and Huawei sign MOU for sustainability financing and business solutions

Will introduce Solar Energy, Green Data Centers, EV Charging, and Energy Storage solutions
NRECC working on Long-Term Low Emissions Development Strategies

AmBank and Huawei Technologies Malaysia (Huawei Malaysia) have signed a Memorandum of Understanding to propel their organisations’ sustainability agenda. The MoU scope entails both parties working together in support of the introduction…Continue Reading

Italy flirting with NATO Asia-Pacific expansion

Italian Prime Minister Giorgia Meloni. Photo: Wikimedia Commons

Italy’s right-wing Prime Minster Giorgia Meloni returned from recent talks with US President Joe Biden that included discussions of how to distance her country from tight economic ties with China.

The discussion was part of NATO’s efforts to “de-risk” – that is, reduce – economic activity with Beijing.

Meloni let it be known she was working to cancel Italy’s participation in China’s so-called Belt and Road Initiative, the trade and infrastructure partnerships that Rome joined four years ago. Meloni indicated Rome could somehow maintain “good relations with China” even as it dropped Belt and Road.

One of Chinese leader Xi Jinping’s signature foreign policy programs, Belt and Road drives relations with countries from the Pacific to Africa and, in Italy’s case, into Europe.

China’s Belt and Road Initiative was conceived as a new version of the ancient Silk Road between the Han and Roman empires. Map: Library of Congress

No sooner had Meloni returned to Rome from Washington than her defense minister, Guido Crosetto, described Italy’s Belt and Road participation as “improvised and atrocious.”

“The issue today is: how to walk back without damaging relations, because it is true that China is a competitor, but it is also a partner,” Crosetto said.

The Meloni-Crosetto diplomatic duet mirrored Biden’s tricky two-track strategy of dealings with China, which he regards as a combined economic powerhouse and military threat. Washington’s policy couples apparently benign cooperation on issues like trade and carbon emissions reduction with an adversarial approach toward what the US and allies call China’s international “coercive behavior” and challenge to “the rules-based international order.”

Meloni, for example, expressed hopes that benign post-Belt and Road relations with Beijing will continue. But she also steered clear of touting Italy’s other China policy feature: entry into the anti-China arms race. Italy joined the United Kingdom in a partnership with Japan to develop new fighter jets.

Japan, Italy, UK to collaborate on next-generation fighter. Image: US Naval Institute.

It was the first time since World War II that Japan partnered with militaries other than the United States. Tokyo had become alarmed at what it sees as China’s aggressive posture toward uniting Taiwan with the mainland, its unilateral occupation of island outcroppings in the South China Sea and support for Russia’s invasion of Ukraine. As a result, Japan is undergoing a massive weapons development program.

Because the UK and Italy both belong to NATO, China complained about the alliance’s expansion to its shores. In June, Beijing’s mission to the European Union said China opposes “eastward movement into the Asia-Pacific region” by NATO.

“Any act that jeopardizes China’s legitimate rights and interests will be met with a resolute response,” the diplomatic note said.

The official Xinhua news agency chimed in and called NATO a “grave challenge” to global peace. “NATO is spreading its tentacles to the Asia-Pacific region with an express aim of containing China,” Xinhua asserted.

‘NATO is spreading its tentacles to the Asia-Pacific region with an express aim of containing China.’

Xinhua

Italy’s bifurcated policy toward China mirrors the ongoing one that Joe Biden is trying to practice. High-visibility dispatches of US officials to Beijing this spring and into summer exemplified the effort to find common ground on some issues while, at the same time, the US puts into place its long-planned military “pivot” to Asia.

In early July, Treasury Secretary Janet Yellen met with Chinese trade counterpart in Beijing to discuss economic disagreements. She said economic competition between the US and China ought not be a “winner-take-all” contest. Chinese officials, on the other hand, made a specific demand: the US must remove sanctions recently placed on Chinese companies.

Shortly after Yellen’s visit, Secretary of State Antony Blinken “had candid and constructive discussions on a range of bilateral, regional, and global issues” with top Chinese diplomat Wang Yi. According to a State Department report on the meeting, Wang told Blinken the US must “stop interfering in China’s internal affairs and compromising China’s sovereignty” – an apparent reference to Washington’s efforts to shore up Taiwan’s defenses against Chinese military pressure.

Wang also said the US ought also to stop “suppressing China’s economy, trade and technology.” That complain centered on obstacles to technology transfers to China and sanctioning of Chinese companies.

US climate change envoy John Kerry then arrived to encourage cooperation to reduce carbon emissions. China appeared reluctant to join hands in the effort; while Kerry was visiting, President Xi Jinping told officials at a climate conference that China’s reduction of carbon emissions “must be determined by the country itself rather than swayed by others.”

In contrast to these cold official meetings, China rather warmly greeted former Secretary of State Henry Kissinger, who made a surprise visit to Beijing. His diplomacy opened the way for relations between the People’s Republic and the US more than 50 years ago.

Kissinger and Xi in Beijing 2023. Photo: China Daily

Kissinger was provided a lavish luncheon with Xi, who urged the 100-year old visitor to play a role in getting bilateral relations on track.

Prior to all this outreach, the Biden administration has been feverishly working to construct interconnected military relationships in the seas bordering China:

  • The US renewed a program of military cooperation along with Britain and Australia, in which Australia is slated to construct and host nuclear submarines.
  • Washington also revived a moribund grouping known as the Quadrilateral Security Dialogue, or Quad, involving the US, India, Australia and Japan – to discuss defense issues.
  • Another grouping known as the Asia-Pacific Four, made up of Japan, Australia, the Republic of Korea and New Zealand, began to exhibit signs of being a branch of NATO. Its members have attended the past two NATO summits.
  • The Philippines recently increased the number of nominally temporary military camps for US use from five to nine. The US closed its Cold War-era military bases in the Philippines in 1992.

This necklace of military relationships does not constitute an alliance in the style of NATO, in which members pledge by treaty to defend each other in case of attack. Still, China views it all as an effort to hem it in militarily. And it has responded by sending an aircraft carrier beyond the coastal China Seas into areas generally patrolled by US ships and by transferring jet bombers from land to both its operating carriers; a third newly built ship is soon to come into operation.

Beijing has island-hopped beyond its coastline. Last year, it signed a pact with the Solomon Islands, an archipelago northeast of Australia. According to a leaked secret document, under the deal the Solomons government “may request China to send police, armed police, military personnel and other law enforcement and armed forces” and that Beijing could also send ships for stopovers and to resupply.

Despite this foray into a distant outpost, China’s attention appears focused on Taiwan and the possibility of invading it to forcibly join the island to the mainland. In April, China held naval and air maneuvers in which its forces surrounded Taiwan to secure control of “the seas, air and information” and to simulate precision strikes on “key targets.”  

As for Italy, Beijing seems unready to give up on its once promising economic partnership, as exemplified by Belt and Road. Michel Geraci, an Italian politician who favors close relations with China, wrote in China’s English-language China Daily newspaper that Meloni would err in dumping Belt and Road.

Instead, he advised Meloni to focus on making changes in the Belt and Road deal “to put emphasis on stronger cooperation with China on climate action, peace and security, and Africa’s development.”

All of these issues are of greater interest to members of Meloni’s coalition partners who are unconcerned about China’s growing influence and power.

In short, Geraci thinks Meloni needs to embrace benign, non-security related issues with China and dump Biden’s concerns about China’s military power.

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Xi Jinping meets Henry Kissinger as US seeks to defrost China ties

Former U.S. Secretary of State Henry Kissinger speaks during a meeting with Chinese Foreign Minister Wang Yi (not pictured) at the Great Hall of the People in Beijing, China November 22, 2019.Reuters

Chinese president Xi Jinping has met former top diplomat Henry Kissinger, as the US pursues warmer ties with China.

Mr Kissinger’s surprise trip to the Chinese capital comes amid a flurry of visits by top US officials.

The former secretary of state, who played a crucial role in helping China emerge from diplomatic isolation in the 1970s, has also met senior Chinese officials this week.

The US has stressed he is visiting in his capacity as a private citizen.

But given his outsized stature in China, he is likely playing a crucial role as a backchannel for US-China negotiations, say experts.

Mr Kissinger was welcomed by Mr Xi at the Diaoyutai State Guesthouse, a more intimate space than the sprawling Great Hall of the People where official meetings with foreign diplomats are usually hosted.

A brief read-out did not give further details of their meeting, but lauded Mr Kissinger as a “legendary diplomat” and noted his previous achievements in brokering US rapprochement with China.

Mr Kissinger, who landed on Monday, also met top diplomat Wang Yi and defence minister Li Shangfu – who is under US sanctions – this week.

Chinese statements on the meetings have struck a conciliatory tone, with Mr Wang and Mr Li emphasising the need for respect, co-operation and “peaceful co-existence” between the two superpowers.

The read-outs also quoted Mr Kissinger as saying he was a “friend of China” and that “neither the United States nor China can afford to treat the other as an adversary”.

It is not known to what extent the US government was involved in Mr Kissinger’s trip. A State Department spokesman said earlier this week that they were aware of his visit, and that Chinese officials had also informed Secretary of State Antony Blinken when he visited Beijing in June.

Apart from Mr Blinken, Mr Kissinger is the only US figure Mr Xi has met in recent weeks – a measure of the respect the 100-year-old veteran diplomat still commands in China. Treasury Secretary Janet Yellen and US special envoy for climate John Kerry have also paid visits to Beijing, but did not get face time with China’s president.

Though Mr Kissinger has gained a controversial reputation in other parts of Asia for his role in the Vietnam War, in China, he remains highly regarded for helping the country emerge from diplomatic isolation.

In 1971, while the US and China officially had no diplomatic ties, Mr Kissinger had paid secret visits to Beijing to arrange a visit by then-US President Nixon.

The following year Mr Nixon landed on Chinese soil and met top leaders including Mao Zedong. It paved the way for the normalisation of US-China diplomatic relations and the opening-up of China to the world.

Since then, Mr Kissinger has been welcomed in China more than 100 times, Thursday’s read-out said.

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Singapore launches mandatory climate reporting consultation | FinanceAsia

Earlier this month, Singapore’s Accounting and Corporate Authority (Acra), together with Singapore Exchange Regulation (SGX RegCo), instigated a public consultation on a proposed set of mandatory climate-related disclosures (CRDs). The two bodies partnered in June 2022 to form Singapore’s Sustainability Reporting Advisory Committee (Srac).

The public consultation runs from July 6 until September 30, during which the public can access related documents through a portal on Acra and RegCo’s websites and submit feedback via a designated form. The two bodies (Acra and SGX RegCo) plan to consider public feedback and finalise the recommendations by 2024.

If further amendments are proposed to listing rules around sustainability reporting, a separate consultation will launch before the end of the year, SGX RegCo added in a press release.

The mandatory CRDs will require issuers listed on the Singapore Exchange (SGX) to report their climate impact in line with the standards set by the International Sustainability Standards Board (ISSB), starting from financial year 2025 (FY2025). 

Similar requirements for large non-listed companies with annual revenue of over $1 billion will be mandatory starting from FY2027, according to the recommendations. In doing so, Singapore becomes among one of the first markets in Asia to consult on CRDs that are set to affect large, non-listed companies. 

“To transition to a net zero economy, we need the critical mass to move the needle. With more companies adopting climate related disclosures, we are better able to drive actions and impact to meet our climate targets and make Singapore a better and more sustainable place for our future generations,” Esther An, chair of Srac told FinanceAsia.

New requirements

The new recommendations advance the city-state’s current reporting requirements, which were initially introduced in a phased manner in late 2021 to elevate Singapore’s role in Asia’s ESG arena and to uphold its position as a global business hub.

The market’s current CRDs require listed companies active in five prioritised carbon-intensive industries (finance; energy; transportation; materials and buildings; agriculture, food and forest products) to submit data related to their corporate climate impact.

However, the proposed amendments expand these requirements to all issuers listed on the SGX.

All SGX-listed corporates will be required to report their scope 1 and 2 emissions – those direct emissions that result directly from their activity or their production processes. 

Corporates will also be required to submit data around scope 3 emissions – the indirect pollutants that result from the full breadth of a company’s supply chain. However, because these involve more complex calculation, Srac is offering companies one to two years to prepare for these reporting requirements before having to submit exact data, the press release explained.

“Scope 3 emissions are typically the largest component of many companies’ greenhouse gas emissions,” An elaborated to FA.

“To facilitate companies in making the disclosure, the ISSB standards have provided relief. For example, the standards allow the use of estimates to prepare this disclosure when the information cannot be obtained without undue costs and efforts,” she explained.

External assurance on scope 1 and 2 emissions provided by Acra-registered audit firms will be expected from all listed firms starting FY2027, and from large non-listed companies starting FY2029, according to the recommendations. 

Dominoes

Commenting on the new disclosure requirements, Helge Muenkel, chief sustainability officer at DBS Bank told FA, “By starting with economically significant non-listed companies in Singapore, the goal is to eventually create a domino effect with better quality ESG data across the value chain, especially in relation to scope 3 emissions.”

As a Singapore-headquartered lender, DBS has been an active participant in Singapore’s sustainability effort. The bank announced in early July that it had upskilled over 1,600 institutional banking relationship managers and 170 credit risk managers to deepen their knowledge of sustainable financing practices, in order to better help corporate clients navigate the sustainability landscape.

Last September, market regulator, the Monetary Authority of Singapore (MAS) and SGX collaborated to launch a platform, ESGenome, aimed at enhancing companies’ ESG reporting processes, FA reported.  The assistance provided by the capability includes processes for sustainable procurement across supply chains.

To further facilitate large non-listed companies that are new to climate reporting, Srac suggests that scope 3 emissions need only be disclosed in the third year of mandatory reporting, An added.

The Srac team confirmed that mandatory CRDs for large non-listed companies with revenue over $100 million is set to commence from FY2030, but this timeline will be further reviewed in 2027, depending on the outcome from implementation of the current recommendations. 

“With more countries pledging for net zero and the rising carbon cost globally, climate strategy and reporting can help companies, listed or non-listed, to mitigate and adapt to risks in the transition to a low carbon economy,” An said. 

Whether the requirements will expand to include other aspects of ESG-related reporting remains undecided. The recommendations begin with CRDs as a starting point, An said, emphasising the urgency to combat climate change.

¬ Haymarket Media Limited. All rights reserved.

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