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Banks take cue from SEC’s approved guidelines for green financing

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With the recent issuance of approved guidelines from the Securities and Exchange Commission, banks haven take a cue from this and showed strong desire for green financing in the country. This means those who are in “green projects” can apply financing now as long as the green projects are located in the ASEAN region.

Asian Development Bank Institute (ADBI) said that, “There is so much reluctance from most of the banks to fund green energy projects and this becomes a “major barrier” to the expansion of the alternative power source in the region.”

In its working paper titled “Financial Barriers to Development of Renewable and Green Energy Projects in Asia,” ADBI said despite growing awareness in the region on the unsustainability of fossil energy-dominated energy mixes, most countries are still facing a lot of challenges posed by financial reasons from pursuing a green energy mix.

The absence of venture capital and limited government-provided funds, funding the capital-intensive green energy projects has become difficult, said the think tank of the multilateral development bank.

The reluctance to finance green projects, because they are seen as very risky with a low rate of return, has been the major problem to the expansion of green renewable energy in Asia.

ADBI. said, “Addressing the financing challenge is both possible and necessary to remove the barrier to green energy expansion in Asia and this has been discouraging developers from undertaking such projects”.

It also pointed out that some of the larger economies in the regions like China and India are now making an effort to improve their energy mix to include more renewable sources of power.ADBI recognizes that bank loans are more suitable for financing short to medium-term projects because the resources come from deposits.

ADBI think tank said, “If banks allocate their resources to long-term infrastructural projects (bridges,highways, ports, airports, etc.) and mega energy projects (such as large hydropower projects), then there would be a maturity mismatch”.

ADBI said that it is necessary to lessen financial barriers to the development of green renewable energy.It also urges the use of various non-bank financial solutions and tools such as green bonds, green credit rating and community-based financing.

With this new development in the renewable energy sector, banks can now expect more business opportunities for them to finance the “green projects” following the approved guidelines released by the Securities and Exchange Commission.

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