Green Finance for Asian State-Owned Enterprises: An Opportunity to Accelerate the Green Transition

GREENFINANCEFORASIANSTATE-OWNEDENTERPRISES ANOPPORTUNITYTOACCELERATETHEGREENTRANSITION JUNE2023 ASIANDEVELOPMENTBANK GREENFINANCEFORASIANSTATE-OWNEDENTERPRISES ANOPPORTUNITYTOACCELERATETHEGREENTRANSITION JUNE2023 ASIANDEVELOPMENTBANK CreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO) ©2023AsianDevelopmentBank 6ADBAvenue,MandaluyongCity,1550MetroManila,PhilippinesTel+63286324444;Fax+63286362444 www.adb.org Somerightsreserved.Publishedin2023. ISBN978-92-9270-150-5(print);978-92-9270-151-2(electronic);978-92-9270-152-9(ebook) PublicationStockNo.TCS230223 DOI:http://dx.doi.org/10.22617/TCS230223 TheviewsexpressedinthispublicationarethoseoftheauthorsanddonotnecessarilyreflecttheviewsandpoliciesoftheAsianDevelopmentBank(ADB)oritsBoardofGovernorsorthegovernmentstheyrepresent. ADBdoesnotguaranteetheaccuracyofthedataincludedinthispublicationandacceptsnoresponsibilityforanyconsequenceoftheiruse.ThementionofspecificcompaniesorproductsofmanufacturersdoesnotimplythattheyareendorsedorrecommendedbyADBinpreferencetoothersofasimilarnaturethatarenotmentioned. Bymakinganydesignationoforreferencetoaparticularterritoryorgeographicarea,orbyusingtheterm“country”inthispublication,ADBdoesnotintendtomakeanyjudgmentsastothelegalorotherstatusofanyterritoryorarea. ThispublicationisavailableundertheCreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO)https://creativecommons.org/licenses/by/3.0/igo/.Byusingthecontentofthispublication,youagreetobeboundbythetermsofthislicense.Forattribution,translations,adaptations,andpermissions,pleasereadtheprovisionsandtermsofuseathttps://www.adb.org/terms-use#openaccess. ThisCClicensedoesnotapplytonon-ADBcopyrightmaterialsinthispublication.Ifthematerialisattributedtoanothersource,pleasecontactthecopyrightownerorpublisherofthatsourceforpermissiontoreproduceit.ADBcannotbeheldliableforanyclaimsthatariseasaresultofyouruseofthematerial. Pleasecontactpubsmarketing@adb.orgifyouhavequestionsorcommentswithrespecttocontent,orifyouwishtoobtaincopyrightpermissionforyourintendedusethatdoesnotfallwithintheseterms,orforpermissiontousetheADBlogo. CorrigendatoADBpublicationsmaybefoundathttp://www.adb.org/publications/corrigenda.Notes: 1.Inthispublication,“$”referstoUnitedStatesdollars. 2.ADBrecognizes“China”asthePeople’sRepublicofChina;“Korea”astheRepublicofKorea;and“Vietnam”asVietNam. CoverdesignbyMarodeGuzman. Printedonrecycledpaper Onthecover:Stateownedenterpriseswillbecrucialtothelow-carbontransitioninAsiaandthePacific,andgreenfinancecanmakethattransitionpossible.(AllphotosarefromADB.) Tables,Figures,andBoxesiv Acknowledgmentsv Abbreviationsvi ExecutiveSummaryvii 1Introduction:AsianState-OwnedEnterprisesandtheOpportunityofGreenFinance1 AsianState-OwnedEnterprisesandtheNeedforaGreenTransition1 TheDominantRoleofState-OwnedEnterprisesinEmergingMarkets1 FinancefortheGreenTransitionofState-OwnedEnterprises4 OpportunitiesforState-OwnedEnterprisesthroughGreenFinance5 GoodState-OwnedEnterpriseGovernanceasaPrerequisiteforGreenFinance6 StructureoftheReport9 2GreenFinancefortheGreenTransitionofState-OwnedEnterprises10 GrowingToolboxofGreenFinanceInstruments10 GreenBonds13 ApplicabilityofGreenFinanceInstrumentsforState-OwnedEnterprises17 SecuringtheEnablingEnvironmenttoIssueState-OwnedEnterpriseGreenBonds19 3HowtoIssueGreenState-OwnedEnterpriseBonds19 ImprovingState-OwnedEnterpriseCorporateGovernance20 EnsuringBankableand“Green”Issuances21 DirectSupportMeasuresforState-OwnedEnterprisesbyDevelopmentPartners27 4SupportMeasurestoAccelerateState-OwnedEnterpriseGreenBondIssuances27 DirectSupportMeasuresforState-OwnedEnterprisesbyDevelopmentPartners27 IndirectSupportMeasurestoImprovetheEnablingEnvironmentforState-Owned28 EnterpriseGreenBondIssuances30 5ConclusionandOutlook30 Appendixes 1RegulatoryApproachestoGreenFinanceStandards31 2InternationalGreenBondStandards33 References36 Tables 1ClimateCommitmentsofADBDevelopingMemberCountries3 2TypesofGreenBonds13 3OverviewofRequirementsforUtilizingGreenFinanceInstruments18 Figures 1InvestmentsofState-OwnedEnterprisesbyEconomyTypeandSector,20192 2SustainableFinanceLandscape10 3SustainableFinanceInstrumentTool11 4GreenBondIssuances2014–2021forDifferentRegions(top)andCumulativeShareofGreenBond15 IssuanceforDifferentIssuersinDevelopingCountriesinAsiaandthePacific(bottom) 5BankabilityFactorsforState-OwnedEnterpriseCorporateDebt22 6Public–PrivatePartnershipAgreements24 7BlendedFinanceMechanism25 8OutlineofGreenBondIssuance25 Boxes 1InvestinginGreenEnergyBringsTangibleFinancialBenefitsComparedwithFossilFuels7 2SocialBondsforThailand12 3ImprovingState-OwnedEnterpriseEfficiency—TheCaseofthePhnomPenhWaterSupplyAuthority23 4AnchorInvestmenttoSupportGeorgiaRailwayGreenBondIssuance28 ThisstudywaspreparedbyChristophNedopil,consultant,underthesupervisionofDavidRobinettandtheAsianDevelopmentBank’sState-OwnedEnterpriseWorkingGroup,chairedbyHiranyaMukhopadhyay. Theauthorswouldliketothankthefollowingpeoplefortheirhelpfulcommentsandinsights:RafaelAbbasov,GiacomoGiannetto,AnjumIsrar,AndrewMcCartney,and