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Infrastructure to drive Asia sustainability journey
Trillion-dollar needs mean massive private finance, Singapore family office opportunity
Tom King 30 Oct 2023

Infrastructure development will play a critical role in advancing Asia’s journey towards a low-carbon future, according to a recent report. And the four key enablers that will unlock and scale sustainable infrastructure in the region are:

  • Ensuring strong governance and consistency in standards
  • Engaging alternative funds to supplement existing capital pools
  • Scaling sustainable infrastructure with proven technologies
  • Investing in existing assets to reap outsized gains.

As well, there is a need for stronger collaboration among the public and private sectors to develop sustainable infrastructure that can support the transition, finds the Enabling a Sustainable Asia Today report published by the Asia Sustainable Infrastructure Advisory Panel, which was formed in 2021 to exchange the latest thinking and best practices on sustainable infrastructure.

Furthermore, key infrastructure sectors like energy, water and waste management, the report notes, may require more than US$1.8 trillion in investment to meet the region’s coming economic, urbanization and sustainability goals.

Private opportunities

This need, however, can also offer significant investment opportunities across Asia; and the transition, the report claims, could create as many as five million jobs for financiers, consultants, lawyers, engineers and technicians among others.

And while regional governments have increased their infrastructure expenditure and will likely continue to do so, the report notes, there is still a substantial gap to be filled.

Multilateral development banks are providing financial support for these endeavours, but they also have to constrain their balance sheets as infrastructure competes with other areas of lending.

Private financing, however, is available to fill this gap, as there is an estimated US$100 trillion in private capital, according to the report, managed globally by sovereign wealth funds, insurance companies, pension funds and other institutional investors.

Alternative pools of capital can also be used – among them, blended finance solutions, such as first-loss tranches, guarantees, convertible grants and concessional loans – to de-risk projects and potentially unlock more otherwise uninvested private capital.

Singapore SFOs

This conduit could even unlock an emerging pool of funds from family offices, which are undergoing a generational change in leadership and whose incoming principals tend to be more in tune and aware of the opportunities contemporary sustainable investing can offer.

With more than 1,100 such offices now said to be based in Singapore, the report argues, there is an opportunity to work with family offices and philanthropy funds that may be eager to invest in sustainable infrastructure projects in the region.

In line with this, Singapore’s central bank, the Monetary Authority of Singapore, calibrated incentives and requirements to encourage single family offices (SFOs) in the city-state to contribute more to environmental and social causes, and jobs.

To support the region’s net-zero transition, SFOs are also encouraged to invest in blended finance structures, especially those with concessional capital structures.

Concessional capital accepts lower returns or higher risks compared with other investmennt, but it can help to generate commercial investments into green and transition projects that are worthwhile but less attractive financially.

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