[DUBAI] The Monetary Authority of Singapore (MAS) is partnering two bodies – the Asian Development Bank (ADB) and the Global Energy Alliance for People and Planet (GEAPP) – to set up a blended-finance fund, which will aim to raise up to US$2 billion in concessional and commercial capital to finance energy transition in Asia.

This is the second fund to come under the Financing Asia’s Transition Partnership (Fast-P), a blended-finance initiative recently launched by Singapore’s central bank which targets to raise at least US$5 billion.

Blended-finance programmes feature a mix of grants, concessional loans and commercial capital designed to lower the cost of capital.

The US$2 billion target of this partnership set up to accelerate the transition to cleaner energy, unveiled on the sidelines of the United Nations climate change conference in Dubai, will be counted towards Fast-P’s overall mobilisation target of US$5 billion.

The first fund under Fast-P was a green-investments partnership with MAS, state investor Temasek, the Allied Climate Partners and the World Bank’s International Finance Corporation, which was announced two days ago.

This energy transition-focused fund will aim to mobilise concessional capital from the philanthropic and public sectors to de-risk projects, and crowd in private capital from around the globe to finance energy-transition projects in Asia.

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These projects include the early phase-out of coal-fired power plants and the replacement of these with renewable-energy sources, as well as other decarbonisation projects in hard-to-abate sectors, such as cement and steel manufacturing.

Speaking at the signing of the memorandum of understanding on Tuesday (Dec 5), MAS managing director Ravi Menon said that the partnership will also test the use of credible transition credits to improve the economic viability of coal phase-out transactions.

“Blended finance is critical in achieving Asia’s energy transition. It reduces the cost of capital for energy-transition projects in two ways: One, it leverages concessional capital from the public and philanthropic sectors to crowd in multiples of private commercial capital.

“Two, it brings together technical assistance and institutional support to reduce project risk. But blended finance needs to move from bespoke deal-by-deal structuring to a portfolio or platform approach,” he said.

ADB and MAS will explore the use of transition credits to finance the early retirement of a coal plant in Mindanao in the Philippines. The multilateral development bank is working to phase out this plant before its original retirement date through its energy-transition mechanism programme.

ADB will contribute to this partnership by providing technical support and a pipeline of investable projects through its energy-transition mechanism programme.

GEAPP will contribute philanthropic capital, and MAS will mobilise financial institutions and provide policy support through its transition-planning guidance and taxonomy.

The Singapore government will contribute concessional capital to support the blended-finance partnership, though the amount is not confirmed at this point.