The Asian Development Bank (AfDB) encourages developing countries in Southeast Asia to harness the obligations of the Sustainable Development Goals (SDGs), to help the recovery of struggling economies still reeling from the Covid-19 and to help them achieve the United Nations Sustainable Development Goals (SDGs).
The Sustainable Development Goals Accelerator Bond (SAB) offers investors a structured payment guarantee mechanism and cheaper funds for projects that help achieve climate and SDG goals. the ODD are a series of ambitious goals to tackle global issues such as poverty, hunger, climate change and gender equality by 2030.
The new bond is expected to help countries reduce the perceived investment risks posed by an issuing entity, industry or project without a history of bond issuance, by offering coupon rates and exit guarantees as incentives. for investors, the bank said in a statement. report released Friday titled Accelerating sustainable development after Covid-19: the role of SDG obligations.
The framework will allow variations in the structure of funds between countries and issuers of accelerator bonds or other SDG bonds, the AfDB said.
“The Covid-19 pandemic has slowed the momentum for sustainable and equitable growth in most developing countries in Asia and many countries are at risk of falling short of their sustainable development goals for climate resilience, gender equality and human development, âAfDB Vice President said. Ahmed M. Saeed.
âFor countries looking to finance large-scale, sustainable projects and programs, capital markets represent an underutilized but viable mechanism to attract investment in the SDGs. “
Bridging the financial gap
Although Southeast Asian countries issued a record $ 12 billion worth of green, social and sustainable bonds in 2020, their financing needs have only increased amid the world’s biggest crisis. health care for a century, noted the AfDB study.
Developing countries in Southeast Asia were already struggling to fund initiatives to achieve the SDGs before Covid struck. The un estimates that the region will need US $ 210 billion per year from 2016 to 2030 to support investments in climate-compatible infrastructure, renewable energy, energy efficiency, food security, agriculture and the use of land.
Achieving the SDGs will be all the more difficult with the onset of a Covid-induced economic slowdown in the region for the first time in six decades with $ 163 billion to $ 253 billion in projected losses in gross domestic product, study finds .
The funding mechanism is expected to supplement public funds and support projects that contribute to the SDGs but are not commercially bankable. The SAB obligation could also help cash-strapped public entities and city-level projects that support one or more of the SDGs to access funds.
Fund a green recovery
The SAB can be used for green recovery strategies in South East Asia to help tackle climate change and support projects that will address climate change mitigation and adaptation.
âThe SAB is certainly useful in supporting projects that address the challenges emerging from the current pandemic. The AfDB suggests that âgreenâ stimulus strategies be adopted by countries to mitigate the impacts of Covid, âthe bank said.
Thailand, for example, issued its first sustainability bond issued in August of last year. The Thailand Sustainability Bond offers two tranches of fixed rate government bonds for a total amount of approximately US $ 964 million. The proceeds will be used to finance the green infrastructure of Bangkok’s Mass Rapid Transit Orange Line (East) project, which has been certified to the Climate Bonds standards under its low-carbon transport sector criteria, as well as others. social projects supporting the country’s recovery against Covid-19 like the SDGs. 3 (public health) and 8 (job creation).
Other green salvage projects that the SAB could potentially support include the Epifanio de los Santos Avenue Greenway Project (EDSA) in Manila, Philippines.
The bank approved a $ 123 million loan to build five kilometers of covered walkways connected to transit stations along the country’s main artery, as part of the city’s recovery from the pandemic. It is expected to create much-needed jobs during the construction period, with $ 61 million to spend on local raw materials.
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