1、FINANCING SUSTAINABLE INFRASTRUCTURE IN ASEAN April 2020 A report by Exclusive Knowledge Partner Supported by AUTHORSHIP the social factors commonly cited are (1) resettlement and compensation, (2) workers health and safety and working conditions, as well as (3) inclusion of marginalised groups. 1 T

2、he existence of various sustainability standards used to evaluate projects also requires harmonisation. How people understand and manage the key E the social factors commonly cited are (1) resettlement and compensation, (2) workers health and safety and working conditions, as well as (3) inclusion o

3、f marginalised groups. Within the power and transport sectors, interviewees suggested six areas of interest, namely, solar projects, wind projects, geothermal projects, roads, rails, and seaports. However, when these projects are mapped against the E working conditions Complex and opaque regulation

4、Inclusion of marginalised groups Bribery and corruption 2.1.1 Environmental risks 2.1.1.1. Loss of biodiversity POWER SECTOR PROJECTSTRANSPORT SECTOR PROJECTS SOLARWINDGEOTHER- MAL ROADSRAILSSEAPORTS DEGREE OF SEVERITY GreenGreenAmberRedAmberAmber Southeast Asia occupies only three percent of the wo

5、rlds total land area, yet is inhabited by almost 20 percent of the worlds known plant and animal species.72 As infrastructure needs for power and transport in ASEAN are greatest in rural areas, some of which are proximate to pristine forests or large water bodies, their impact on biodiversity, parti

6、cularly vulnerable national species, is significant. Renewable energy projects tend to take a large toll on biodiversity although their manifestations could vary depending on the scale and type of project. For instance, solar farms run the risk of incinerating birds passing through, and wind turbine

7、s also pose collision risks to birds and bats. Constructing roads that cut through forests also threatens flora and fauna. Roads open up forests and wildlife to loggers and poachers, and increase the likelihood of roadkill. Furthermore, when roads penetrate pristine areas, they foster human settleme

8、nt, hunting and forest clearance for agriculture effects that ripple outward from a single through road.73 Eco-bridges, often built to improve the “green-ness” of roads, do not adequately serve wildlife that lose their habitats. A study showed that 20 viaducts across Peninsular Malaysia were only ef

9、fective crossing structures for two out of six target mammal species, and that viaducts were poorly used by carnivores such as tigers.74 2.1 ESG-related risks of infrastructure financing 18 2.1.1.2. Greenhouse gas emissions POWER SECTOR PROJECTSTRANSPORT SECTOR PROJECTS SOLARWINDGEOTHER- MAL ROADSRA

10、ILSSEAPORTS DEGREE OF SEVERITY Green NB: Fossil fuels would be red GreenGreenGreenGreenGreen The effects of climate change may be debilitating for the global economy experts estimate that climate change could cost one to two percent of global GDP by 2050.75 For Southeast Asia, the projected impact t

11、otals three percent of regional GDP.76 Of the global greenhouse gas emissions that drive climate change, an estimated 70 percent is attributed to infrastructure construction and operations including power plants, buildings and transport.77 Our interviewees cited carbon intensity as a top environment

12、al consideration for power projects, more so than for transportation projects such as roads, rails and ports, since vehicles are the main culprit for emissions in the transportation sector. Globally, vehicles are responsible for 24 percent of emissions from the use of fossil fuels for energy, and 15

13、.7 percent of the overall total from human activities.78 Cars contribute slightly more than two thirds of emissions produced by all vehicles.79 While electric vehicles were brought up by interviewees as an area to look into in the field of green transport, it is outside the scope of this report, whi

14、ch focuses on physical infrastructure such as roads, rails, and ports. Although Singaporean financial institutions have been moving away from coal, coal-fired power still forms a large part of ASEANs energy mix. 91 percent of ASEAN banks still finance new coal-fired power plants.80 Indonesia is on t

15、rack for the third-largest coal-fired power capacity of new plants under development, behind China and India. Vietnam follows in fourth place, while the Philippines and Thailand will be home to multiple new coal power stations.81 As investors from Europe and the US adopt more rigorous ESG criteria,

16、it will leave a vacuum of financing for ASEANs coal plants, which other international financiers may fill instead. According to the Institute for Energy Economics and Financial Analysis, Chinese banks and companies are funding over one quarter of coal plants under development outside the country.82

17、ASEAN has set an aspirational target to increase its renewable energy component to 23 percent by 2025 in the ASEAN energy mix, up from about nine percent in 2014.83 Our interviewees pointed out that a transition towards renewables cannot be made overnight power grids need to be modernised to accommo

18、date renewable energy sources, and the livelihoods of people working in fossil-fuel reliant industries need to be considered. Despite the fact that the cost of producing solar energy is falling globally, the lack of economies of scale, coupled with poorly designed power purchase agreements, makes th

19、e transition to solar energy difficult in ASEAN. In light of these realities, some of our interviewees suggested that new technologies, such as ultra-supercritical technology, can make coal-fired plants more efficient. Some of our interviewees also suggested natural gas as an alternative to coal, be

20、ing that it is less polluting as a traditional energy source. Investing in gas-fired power plants also involves a variety of considerations including efficiency, grid structure and the energy needs in the country. 19 2.1.2 Social risks 2.1.2.1 Resettlement and compensation POWER SECTOR PROJECTSTRANS

21、PORT SECTOR PROJECTS SOLARWINDGEOTHER- MAL ROADSRAILSSEAPORTS DEGREE OF SEVERITY AmberAmberAmberRedRedRed Among the social considerations of infrastructure development, those around land acquisition are particularly intractable. Land rights and regulatory approvals are complex, and in developing ASE

22、AN countries, land ownership is not well-documented. Developing countries also struggle with the dichotomy of acquiring land for infrastructure development and balancing landholder interests. Transportation projects, namely roads and railways, tend to incur risks associated with land acquisition mor

23、e so than power projects, because they may potentially cut through many established communities that need to be resettled should the project go through. Projects that necessitate land acquisition are risky because they bring about myriad challenges, both regulatory and social. In the absence of laws

24、 that make land concession mandatory, households may be reluctant to sell inherited land to government, since compensation does not guarantee a windfall in the long term.84 On the other hand, the governments mishandling of land acquisition processes has resulted in political tensions in ASEAN countr

25、ies, which creates risks for investors. For instance, Burmese communities have called for the suspension of Myanmars Kyaukpyu Special Economic Zone project, due to disputes over compensation and resettlement, as well as resentment over Myanmar and Chinese authorities ignoring due diligence in order

26、to expedite the project.85 Reuters reported that Myanmar authorities began working on land acquisition contracts before the completion of appropriate environmental and social impact assessments (ESIA), breaching development laws.86 Even in countries like Indonesia where laws are in place, details ar

27、ound resettlement and compensation still need to be hammered out. Should the landowner not agree with the governments terms and conditions of the land concession, they would have to contest the contract in state court. Land acquisition can thus be a lengthy process, which is why some developers hope

28、 to avoid the issue altogether, sometimes by building around whole communities, which may result in less efficient transport networks. 20 2.1.2.2 Labour health and safety; working conditions POWER SECTOR PROJECTSTRANSPORT SECTOR PROJECTS SOLARWINDGEOTHER- MAL ROADSRAILSSEAPORTS DEGREE OF SEVERITY Gr

29、eenGreenAmberRedRedRed Labour-related issues are not immediately visible to financial institutions, as they crop up during project construction. Yet issues such as labour exploitation pose reputational risks to financial institutions when they are detected and reported by the mass media. Moreover, w

30、orkers that sustain fatal injuries, protest or strike cause delays to infrastructure projects, which add to operational costs that lending financial institutions need to bear. Many of our interviewees pointed out that there are gaps between compliance to labour standards on paper, and the actual imp

31、lementation of those standards. Requirements for adequate accommodation, medical compensation, and so on may not actually be met on the ground, and workers may have limited access to grievance mechanisms, or a lack of awareness about such channels, to resolve these issues. Furthermore, the safety of

32、 workers is a large concern in developing ASEAN countries. Our interviewees provided anecdotes of workers showing up at project sites without any shoes or helmets, having not been briefed on minimum safety precautions. Cambodia, notorious for its lax safety laws and labour protections, has a record

33、of accidents at construction sites. Building owners often flout safety measures and cut corners, which lead to accidents. In July 2019, 28 workers died in Sihanoukville, when a Chinese-owned building under construction collapsed on them.87 The negligence of labour rights can be observed across the v

34、alue chain in infrastructure development, right down to the production of building materials. In Cambodia, debt-bonded labourers extract, mould, and fire clay in hazardous conditions to meet Phnom Penhs growing demand for bricks bricks that have since been termed “blood bricks”.88 21 2.1.2.3 Inclusi

35、on of marginalised groups POWER SECTOR PROJECTSTRANSPORT SECTOR PROJECTS SOLARWINDGEOTHER- MAL ROADSRAILSSEAPORTS DEGREE OF SEVERITY GreenGreenAmberAmberAmberAmber Within ASEAN, Indonesia and the Philippines have significant populations of indigenous people. Such communities may consider certain are

36、as or landmarks culturally or religiously significant, making it difficult for developers and regulators to negotiate land concessions. While many international standards mandate Free, Prior and Informed Consent (FPIC) as a prerequisite for infrastructure projects, achieving it fully is difficult in

37、 practice. Some developers have even fabricated the obtaining of FPIC for example, a few indigenous communities in Quezon, Philippines, were reportedly duped into signing an FPIC for the controversial Kaliwa dam, having been told that they were registering for a food distribution programme.89 Women

38、are disproportionately affected by mandatory resettlements and the accompanying loss of livelihood. As heads of the household, men tend to be allocated land and compensation after land acquisitions, leaving women vulnerable as they need to depend on male relatives for access to land for farming afte

39、r relocation.90 These effects extend to a womans dependents. The needs of women, children and the elderly may not be represented adequately during outreach and engagement activities carried out by developers, compounding the marginalisation of these vulnerable groups in infrastructure development. 2

40、2 2.1.3 Governance risks 2.1.3.1 Lacking expertise A comment frequently made by our interviewees is that developing countries in ASEAN do not have enough government officials with the necessary expertise to oversee the conceptualisation and execution of infrastructure projects. Government officials

41、require technical, legal and financial skills, as well as robust frameworks through which decisions around infrastructure projects can be made.91 Lacking capacity around a stricter compliance with E (2) References are made to international sustainability standards, frameworks and / or principles; an

42、d (3) Steps taken to review or assess the sustainability practices of their clients are provided. This disparity in the understanding of sustainable infrastructure across standards, frameworks and principles reflects the need for existing financial institutions to look to multiple sources in order t

43、o develop a comprehensive assessment and management of E this is coupled with analyses as to the degree of consistency in defining sustainable infrastructure, especially how key E minimise, mitigate and / or compensate for adverse project impacts on the environment and affected people when it is not

44、 possible to avoid them; and assist borrowers / clients to improve their safeguard systems and develop the capacity to manage E they comprise the majority of international project finance debt within developed and emerging markets.100 Those which adopt the EPs tend to be international financial inst

45、itutions and the Asian EPFIs are headquartered in China, India, Taiwan, Japan and Korea. None are from ASEAN. 3) Green Bond Principles Another potential source of financing is green bonds. Green bonds proceeds are to be exclusively used to finance or re-finance in part or in full new and/ or existin

46、g eligible green projects. Unlike project finance, green bonds are associated with various standards, frameworks and principles, all of which make the process of issuing green bonds appear more complicated. When issuers develop their own Green Bond Framework as guidelines for their green bond issuan

47、ces, the framework may reference the Green Bond Principles (GBP) provided by the International Capital Markets Association (ICMA). The GBP allows the issuer to define what is “green” and contributes by suggesting project categories which may be eligible.101 On the other hand, the Climate Bonds Initi

48、ative has green definitions, which are sector specific.102 A few interviewees saw the Climate Bonds Standard as “best practice”. As of November 2018, over 40 percent of ASEAN green bonds proceeds go towards low carbon buildings.103 The second largest sector is energy, with solar and geothermal being

49、 the two most common energy types financed.104 There remains various obstacles to higher green bond issuances. These include the lack of projects eligible for green bonds as well as the lack of mature issuers of green bonds in the region. This is because many issuers whether infrastructure-related companies or banks lending to such companies lack internal E (2) References are made to international sustainability standards, frameworks and /