The Asian Development Bank (ADB) has signed a US$100mn risk-sharing agreement with the UK’s development finance institution in a bid to plug the financing gap for renewable energy deals in south and south-east Asia. 

The partnership with British International Investment (BII), announced on January 18, aims to help international banks increase the amount of funding they provide to local lenders in the region, starting in Vietnam. 

In turn, that will help local importers finance purchases of solar panels, wind turbines, electric vehicles and “climate-smart” agricultural goods, supporting the transition to generating and using energy from cleaner sources. 

In a joint announcement, the two institutions say the programme “addresses demand for longer tenor finance to support climate-related projects particularly within the renewable energy sector”. 

It also aims to narrow the trade finance gap – defined as the global unmet demand for financing – which the ADB estimates to total at least US$2.5tn. 

The facility focuses primarily on local banks that struggle to meet demand for longer-tenor transactions in support of climate-related projects, and is delivered through the ADB’s trade and supply chain finance programme. 

The agreement strengthens the programme’s capacity “to further grow green supply chains in Asia-Pacific region, with a focus on energy transition goods that are essential for tackling climate change”, says Suzanne Gaboury, the ADB’s director-general for private sector operations. 

South and south-east Asia are two of the world’s regions most vulnerable to climate change, the announcement says. However, highly polluting coal remains a vital energy source across the Asia-Pacific. 

The ADB has long sought to tackle this issue, announcing in 2021 it would no longer provide support for extraction and power projects in the coal and oil sectors. 

Andrew Mitchell, the UK’s minister for development and Africa, says the agreement demonstrates the development finance sector’s ability to “mobilise the private finance so urgently needed to support countries in their transition to low carbon, climate-resilient economies”. 

Admir Imami, BII’s director and head of trade and supply chain finance, adds: “Trade finance is not only critical to job creation and economic growth, but also a key enabler for green sectors to thrive by facilitating trade of green goods and strengthening the supply chain industry in the region.” 

Increasing access to credit “will empower financial institutions and businesses to deliver strong impact[s] on productivity, sustainability and inclusion”, Imami says.