Trio to launch $1bn Asia climate fund

The Asian Development Bank, Japan-based Orix Corporation and Holland's Robeco have launched an environment-friendly fund in Asia.

The Asian Development Bank (ADB) is backing Japan’s Orix Corporation and the Netherlands' Robeco Institutional Asset Management (Robeco) in a $1 billion initiative to support projects throughout Asia that will offset climate change.

The three partners have handed their Hong Kong-based private equity venture, Asia Climate Partners (ACP), an initial $400 million to invest in renewable energy, clean technology, natural resource efficiency, water, agriculture, forestry and other climate-friendly initiatives.

The vehicle will invest 20 percent in funds and 80 percent in direct and co-investments, with a focus on growth and mid-market buyout opportunities, as well as environmental infrastructure development and construction financing, in ADB’s “Developing Member Countries”.

“ACP will have the flexibility to take minority positions as well as control investments,” added Todd Freeland, director general of ADB’s Private Sector Operations Department.

Although high efficiency technologies have been notoriously expensive in the past, Freeland explains that the partners will be expecting good returns for ACP as the cost curve for renewable and other clean energy technologies has significantly decreased over the last five years. According to him, it is now “at or approaching parity with traditional energy sources in many other markets”. He stressed the benefit of strong regulatory support for the growth of clean energy in creating a favorable operating and investment environment.

“The substantial resources that the funding partners are committing to ACP will help position it as the preeminent investor in this asset class in Asia from day one, and represents a clear signal of the depth of our collective belief in the investment strategy and its return potential,” said Freeland.

There is increasing public and private sector focus in the region on challenges such as water quality, inadequate and unreliable supplies of energy and inefficiencies in the utilisation of energy and other natural resources. The firms have assessed that, considering the traditionally low levels of financial mobilisation in the area to address those issues, “investment in renewable energy and resource efficiency has the potential to grow two to three times economic growth in Asia over the next several decades”.

Yuichi Nishigori, corporate senior vice president at Orix, added: “The energy and environmental sectors are core components of our business strategy […]. Asian countries are in need of securing rapid and sustainable economic growth and must satisfy the ever-increasing needs of their people for a higher living standard and quality of life. This initiative will contribute to providing necessary capital for Asian economies to meet such demands.”