Climate philanthropy key to South-east Asia’s green transition

MORE climate philanthropy is needed in South-east Asia, to serve as a magnet for the private capital needed to fund the region’s green transition.

Such charitable giving does not have to be on the same grand scale of Patagonia’s founder donating his US$3 billion apparel company to a non-profit for the climate cause, or Jeff Bezos setting up a US$10 billion climate fund.

Instead, much smaller cheques can still make a difference. When aggregated, such funds can draw more private investors into climate projects – especially commercial investors that would not participate otherwise.

Climate philanthropy is still a small and young scene. In 2022, only about 1.6 per cent of the US$811 billion in philanthropic giving went towards climate change mitigation, according to a report by the Climateworks Foundation, a Us-based charity.

The report also found that more than 60 per cent of country- or region-specific funding went to the US, Canada and Europe.

There is room for climate philanthropy to play a bigger role in developing regions, especially South-east Asia, where numerous projects are in need of funding.

These include financing the early retirement of coal power plants, as plant owners and workers need to be adequately compensated if the pollutive fossil fuel is to be phased out. South-east Asia also faces a huge need for infrastructure financing – estimated at US$2.8 trillion by the Asian Development Bank. Clean energy infrastructure – solar and wind farms, hydropower plants and electricity grids – need to be developed urgently but come with steep price tags.

There is also a funding gap for climate research and technologies that could be game changers, such as carbon capture and storage facilities and climate-resistant crop varieties specific to this region.

The key problem is that such high-risk ventures are often unbankable. Citing this challenge, the Monetary Authority of Singapore’s chief sustainability officer Gillian Tan recently urged philanthropists to open their wallets for climate action.

Specifically, she called upon them to contribute towards “blended finance”, a financing mechanism where funds from risk-tolerant investors – like philanthropists and development funds – pull in more private capital. There is a good basis for this call. Unlike commercial capital, philanthropic money comes with a longer time horizon and far less onerous terms. It is less sensitive to economic fluctuations, and when structured as multi-year grants, can provide stable financing.

The recent boom in family offices in Singapore puts the city-state in a good position to push for more climate philanthropy throughout the region.

Indeed, efforts have been growing in recent years. In 2020, several philanthropic organisations launched a high-risk funding initiative, the South East Asia Clean Energy Facility, or Seacef. Managed by Singapore-based Clime Capital, the initiative aims to crowd in more than US$2.5 billion of private investments for clean energy projects in the region.

Separately, Singapore last year launched the blended finance initiative Fast-p – short for Financing Asia’s Transition Partnership – with the aim of investing up to US$5 billion in Asia’s green transition. Discussions are underway with potential partners, including philanthropists, Tan said in her speech. In another positive sign for the region, more major philanthropic organisations plan to expand to Cambodia and the Philippines, which could draw more funds to under-served climate projects.

Much more of such efforts will be needed in the coming years, as South-east Asia braces for extreme weather and the resulting economic impact. Climate philanthropy isn’t just a matter of altruism, but of self-preservation, too.