Asean needs track record in returns from ESG projects to attract private capital
Srini Nagarajan, who is managing director and head of Asia at British International Investment (BII), noted that, for that to happen, the region needs to develop a regulatory framework that is steady and favourable towards sustainability-focused investments, as well as streamline the processes in executing such projects, such as in land acquisition rights, grid infrastructure and transmission networks.
This is all the more important in the current environment where interest rates are elevated, as the incentives for investing in emerging markets have become much more strained, added Nagarajan, who was speaking with The Business Times.
'South-east Asia lacks bankable opportunities in the energy transition space... Private investors will come, provided there is a track record of having made money. That's very, very critical... Once you have the track record, the belief in the overall system, goes up substantially,' he said.
'That's how China and India were able to attract private capital. So I think these (South-east Asian) countries are in an evolution stage in that journey. So we need more and more bankable opportunities in these markets. There is a lot of money waiting to come from the OECD (the Organisation for Economic Co-operation and Development) markets in Asia and also the West.'
As a region made up predominantly of emerging markets, the higher risks involved in investing in South-east Asia – whether actual or perceived – have often either kept investors away, or resulted in expectations of a higher premium on returns.
A NEWSLETTER FOR YOU
Friday, 12.30 pm ESG Insights
An exclusive weekly report on the latest environmental, social and governance issues.
Sign Up
Sign Up
This has presented a challenge especially in energy transition investments, as sustainable-energy infrastructure tend to be capital-intensive projects.
As a development finance institution, BII's role is to catalyse such private investments by de-risking projects through a patient and flexible approach to risk and returns so as to maximise development impact.
BII entered the South-east Asian market in early 2023 – as part of its expansion plan in Asia – with a mandate of deploying £500 million (S$869.6 million) by 2026 to support the region's energy transition towards a low-carbon economy.
It has committed more than £206 million thus far, including a US$80 million partnership with a debt-financing platform, Pentagreen Capital, that has Temasek and HSBC as its founding shareholders.
The capital is also deployed via two other investing platforms – Skye Renewables and Sustainable Asia Renewable Assets – which BII has established with other partners.
Besides such platforms, it also invests directly through debt, equity or a hybrid of both – which is known as mezzanine – and indirectly through funds, as well as provides loans to commercial banks to help small and medium-sized enterprises become more environmentally sustainable. As at the end of 2023, BII's portfolio value in South-east Asia was US$53 million across 27 companies.
As a whole, it has committed to channel 30 per cent of its annual new commitments towards climate, and South-east Asia is an important market for BII to deliver on these mandates.
Investment focus
The impact investor's investment focus in the region are: utility-scale clean-energy projects, commercial and industrial power generation for corporates, water and waste management, electric vehicles (EVs) and EV infrastructure, as well as waste-to-energy facilities.
In particular, BII is prioritising markets including Indonesia, the Philippines, and Vietnam, given their vulnerability to the impacts of climate changes, reliance on fossil fuels, lack of bankable projects, as well as significant need for private capital.
'I think that's where our capital is much more relevant – in these markets. South-east Asia has very diverse markets, with varying degrees of infrastructure development and regulatory environment, which is still evolving.
'And the private-sector investments into the area of renewable energy are very important,' said Nagarajan.
Given its role in mobilising third-party capital, BII takes on high risks in early-stage projects, with the view of bringing in commercial investors once cash flow is generated.
Nagarajan pointed out that, while BII invests in five-year strategy cycles, it has to ensure that its investments are aligned with the timelines of climate initiatives and that these projects do not face premature exits.
As a provider of patient capital, BII said it can afford to act countercyclically and look beyond headline risks.
Hence, while it would definitely have to exit businesses and recycle its capital into newer investment streams, it does not do this due to constraints in a fund's life. Rather, its exits are a result of businesses maturing and being able to attract more commercial capital, and thus requiring less development capital.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
3 hours ago
- Straits Times
Relief in Taiwan as Trump's 100% chip tariff fails to bite, but experts say it's too early to relax
Sign up now: Get ST's newsletters delivered to your inbox Taiwan Semiconductor Manufacturing Company has so far pledged a total of US$165 billion (S$212 billion) in investment to build six state-of-the-art fabs in Arizona. TAIPEI – Taipei heaved a temporary sigh of relief even as US President Donald Trump said that he would slap a shocking 100 per cent tariff on imports of semiconductors, the crucial components that form the backbone of Taiwan's economy. That is because companies that commit to making chips in the US would be exempted – according to Mr Trump – which would mean that Taiwan Semiconductor Manufacturing Company (TSMC), the crown jewel of the island's tech industry, would likely be spared. The firm, which is the world's largest contract manufacturer of chips, has so far pledged a total of US$165 billion (S$212 billion) in investment to build six state-of-the-art fabs , or semiconductor plants , in the US state of Arizona. But while things don't look too dire now, the impact of the tariff on Taiwan's chip industry could yet be far-reaching. Large clients of smaller Taiwanese chip suppliers could demand that they move some of their production to the US to sidestep the punishing duties; this could lead to a decline in Taiwan-based chip production and affect the island's position as a key part of the global tech supply chain, say analysts. And while Mr Trump's latest tariff measure is part of a push to boost domestic chip manufacturing, it could lead to higher prices of electronic devices such as smartphones, which could in turn depress demand for such devices and the chips that drive them. Such an outcome would mean uncertainty for Taiwan's semiconductor industry. Still, on Aug 7, TSMC stocks surged nearly 5 per cent to close at a record high of NT$1,180 (S$51), reflecting investor confidence in the wake of Mr Trump's announcement. Top stories Swipe. Select. Stay informed. Singapore Liquor licences for F&B, nightlife venues extended to 4am in Boat Quay, Clarke Quay Singapore Chikungunya cases in Singapore double; authorities monitoring situation closely Singapore Student found with vape taken to hospital after behaving aggressively in school; HSA investigating Asia Cambodia, Thailand agree on Asean observers monitoring truce, but fundamental differences remain Singapore CDC and SG60 vouchers listed on e-commerce platforms will be taken down: CDCs Asia Australia's purchase of Japanese frigates signals a new era for Indo-Pacific security Singapore Jail for driver who drove over leg of special needs woman in accident on church driveway Singapore Some ageing condos in Singapore struggle with failing infrastructure, inadequate sinking funds Officials in Taiwan were also cautiously optimistic. Speaking to lawmakers during a parliamentary briefing on Aug 7, National Development Council chief Liu Chin-ching argued that a steep 100 per cent tariff rate would not necessarily be disastrous even for Taiwan's smaller chipmakers that do not have a US presence. 'Taiwan currently holds a leading position in the world (in chipmaking) and I believe that if the leader and competitors are all on the same starting line, the leader will continue to lead,' he said. Taiwan is a global powerhouse in chipmaking, with 60 per cent of the world's chips and almost all of the most advanced ones produced there. But experts warned that the lack of details about how the new tariff would be applied means that it is still early days yet to assess its full impact. 'The scope and mechanism of the chip tariff remain unclear. Further developments will need to be closely monitored,' said Ms Joanne Chiao, assistant research manager at Trendforce, a Taiwanese tech research firm. For starters, how much manufacturing a company would need to commit to the US to qualify for a tariff exemption is unclear. It is also unknown if Mr Trump's exemption would cover only chips produced entirely on domestic soil, or also the semiconductors that foreign companies with a US presence , such as British firm Arm, or American companies import from overseas. American chip designers such as Qualcomm typically send their designs to TSMC to be manufactured in Taiwan, before the chips are imported into the US. Moreover, more clarity is needed on whether the new tariff would apply to raw semiconductors and integrated circuits, or also chips in end devices such as smartphones and laptops. During the first quarter of 2025, only around 4 per cent of Taiwan's total exports of electronic components, including semiconductors, were shipped directly to the US. The vast majority of Taiwan-made chips were sent to other countries where they were assembled into consumer electronics. But Professor Julien Chaisse, an international trade expert at City University of Hong Kong, said that it would be 'misleading' to think this would mean that Taiwan's chip exports could be naturally immune to Mr Trump's tariff measure. 'The US government doesn't need a direct shipment to apply pressure – it can change how it interprets rules of origin,' he told The Straits Times. 'If Washington starts insisting that any product with a certain percentage of Taiwanese-made components falls under the tariff, then the effect spreads quickly,' he said. Prof Chaisse added that Mr Trump's tariff also posed a threat to Taiwan's future position in the global tech supply chain. 'Larger buyers may start demanding more Taiwanese capacity be built inside the US, just to sidestep tariffs,' he said, noting that this would, in turn, drain investment from domestic expansion in Taiwan. 'This will have consequences for how Taiwan grows its chip sector over the next five years,' he added. Ultimately, Mr Trump's push to rebuild chip manufacturing in the US will drive up costs for everyone in the supply chain. 'A high tariff on chips would inevitably raise the price of smartphones and laptops, which would also hurt demand for electronic products,' said Ms Liu Pei-chen, an analyst at Taiwan Institute of Economic Research. 'This will bring a lot of uncertainty to the chip industry,' she added. For now, however, Taiwan retains a major advantage – the US will still need to rely on the island for its semiconductor needs, particularly for advanced chips. Taiwan's intricately connected semiconductor ecosystem, which was built up over decades, is not easily replicated. The island's dominance in the sector extends to the technical prowess and efficiency among its chip engineers, which means it is not a simple matter of plonking a factory wherever one wishes. 'Even with the big investments happening in US fabs, it will take years before local production can cover demand,' said Prof Chaisse. 'In the end, this feels like pressure aimed at getting more investment from Taipei. Not because Taiwan is a threat, but because Trump wants quick wins he can point to.'
Straits Times
3 hours ago
- Straits Times
Who pays for Trump's tariffs?
Sign up now: Get ST's newsletters delivered to your inbox Higher tariffs on goods from dozens of trading partners kicked in on Aug 7, ranging between 15 per cent and 41 per cent. PARIS - US President Donald Trump says the United States will reap billions of dollars from his tariff blitz, but who pays the bill? Higher tariffs on goods from dozens of trading partners kicked in on Aug 7 , ranging between 15 per cent and 41 per cent. Here is a look at the effects of Trump's tariff onslaught. Higher prices for US consumers? The tariffs are paid by US-based companies to US customs when they import goods from abroad. US consumers could see a range of products become more expensive if companies choose to raise prices to offset the higher costs of importing goods. For instance, Japanese cars face a 15 per cent tariff, while made-in-Vietnam T-shirts now have a 20 per cent duty. But companies have other options: they can absorb the higher cost, which would hit their bottom line, or they can try to negotiate lower prices with exporters. Top stories Swipe. Select. Stay informed. Singapore Liquor licences for F&B, nightlife venues extended to 4am in Boat Quay, Clarke Quay Singapore Chikungunya cases in Singapore double; authorities monitoring situation closely Singapore Student found with vape taken to hospital after behaving aggressively in school; HSA investigating Asia Cambodia, Thailand agree on Asean observers monitoring truce, but fundamental differences remain Singapore CDC and SG60 vouchers listed on e-commerce platforms will be taken down: CDCs Asia Australia's purchase of Japanese frigates signals a new era for Indo-Pacific security Singapore Jail for driver who drove over leg of special needs woman in accident on church driveway Singapore Some ageing condos in Singapore struggle with failing infrastructure, inadequate sinking funds US Federal Reserve chairman Jerome Powell estimated at the end of July that higher tariffs were beginning to be felt on certain goods. For example, the US toy company Hasbro, maker of the Monopoly board game and the owlish electronic toy Furby and which imports half of its products from China, began raising prices in May and June. Procter & Gamble, the maker of Tide laundry detergent and Pampers diapers, has projected a US$1 billion (S$1.29 billion) hit from US tariffs over the next year said it would institute limited price hikes in the United States. The tariffs are even more problematic for US economic sectors which don't have an option to switch to local suppliers, said Dr Philippe Chalmin, emeritus professor at Paris-Dauphine University. The United States imports lots of copper, a key metal in electrical machinery and wiring, which Mr Trump announced would face a 50 per cent tariff on August 1. 'Half of what the United States needs is imported from Chile, and following the announcement the price of copper on the US market rose 25 per cent compared with the global reference price,' said Dr Chalmin. In the end, however, the Trump administration backpedalled and applied the tariff only to semi-finished copper products such as pipes and wires. Loss of competitiveness The bill could also weigh on companies which depend heavily on exports, with the rising prices of their products in the United States leading to a loss of competitiveness. This is the concern for the European wine and spirits sector, which has yet to obtain an exception from US tariffs. Higher prices on Champagne or Chianti could easily push US consumers to grab a bottle of Californian wine. The impact 'will be all the harsher' since in addition to the tariffs the value of the dollar has fallen, which further increases the price of the bottles on shelves in US shops, warned Mr Gabriel Picard, president of the French Federation of Wine and Spirits Exporters. He estimated that this combined effect could result in a €1 billion (S$1.49 billion) loss for French producers. 'There will be sectoral differences and even within the same sector, it will depend on the negotiating power' between the producer, the wholesaler, and the retailer, said Mr Bruno de Moura Fernandes, head of macroeconomic research at Coface, a firm which provides insurance and financial services for exporters. However, he said that the effect will be especially significant for industries already facing difficulties remaining competitive against their American counterparts, notably in chemicals and steel sectors. Thinning margins Some companies have already announced that they will cut into their profit margins to offset the effects of US tariffs. Automakers, among the first affected by US tariffs, have already seen sales and profits hit. German auto giant Volkswagen said in July that US tariffs had cost it €1.3 billion in the first half of the year as it reported falling profit. It now forecasts a profit margin for the year of between four and five per cent, down from 5.5 to 6.5 per cent previously, amounting to billions of euros for the group. US tariffs prompted Japanese auto giant Toyota – the world's largest carmaker by sales, to cut its annual net profit forecast by 14 per cent. AFP
CNA
3 hours ago
- CNA
Space tech developer Firefly's shares set to open nearly 29% above IPO price
Firefly Aerospace shares were indicated to open nearly 29 per cent above their initial public offering price on Thursday, as investors continue to pour capital into firms aiding expansion of the U.S. space and defense program. If the stock starts to trade at the last indicated price of $58 apiece on the Nasdaq, it could potentially value Firefly at nearly $8.15 billion — marking a striking turnaround for a once-beleaguered company. Firefly, which became the first private enterprise to achieve a successful lunar landing five months ago, raised $868.3 million in the IPO at $45 per share, above its already upsized marketed range. The company secured a valuation of $6.32 billion, ahead of both Trive Capital-backed Karman Holdings and Voyager Technologies, which went public earlier this year. "We at Firefly have had a lot of successes toward going public," CEO Jason Kim told Reuters on Thursday, noting the company's breakthrough moon landing, a rapid Pentagon launch with its medium-sized Alpha rocket in 2023 and a burgeoning business line that will offer maneuverable space vehicles for the U.S. Space Force. U.S. IPOs have picked up pace after tariff-driven volatility hampered listings in April, reigniting a long-awaited recovery of first-time share sales. "I think we will continue to see strong debuts for large-cap IPOs for the remainder of the year," said Ross Carmel, partner at law firm Sichenzia Ross Ference Carmel. Firefly has come a long way from a tumultuous past, including a bankruptcy in 2017 and a CEO ouster last year. Its bankruptcy led to billionaire Ukrainian investor Max Polyakov's Noosphere Ventures acquiring a majority stake in the company that, four years later, was forced to be sold to AE Industrial Partners over national security concerns raised by the U.S. government. Formed in 2014 by Tom Markusic, now its chief technology officer, Firefly started as a launch company centered on its medium-sized, 95-foot-tall Alpha rocket. It has since expanded into spacecraft and lunar lander business to provide mission services for governments and a nascent lunar market. "The best companies go through hard times and challenges, but the best companies get back up and then continuously improve," said Kim, who took the helm at Firefly last year after leading the Boeing-owned small satellite firm Millennium Space Systems. While Houston-based Intuitive Machines was the first private firm to reach the moon last year, its Odysseus lander made a lopsided touchdown, foiling most of its onboard customers' mission objectives. Firefly's Blue Ghost landed safely on the moon in March, a milestone for a scrappy unit that was once tertiary to other business goals. It was also a breakthrough moment for NASA and its contracting model designed to stimulate private missions to the moon. "Firefly has already demonstrated responsive launch capabilities and delivered a lunar payload — proof points that matter to the Space Force and NASA," said Ali Javaheri, emerging technology analyst at PitchBook. The company had a backlog of roughly $1.1 billion and more than 30 planned launches under contract as of March 31. "Investors will likely focus on backlog growth, gross margin trends as production scales, and Firefly's cash runway post-IPO," Javaheri said. The company, however, expects to incur net losses for the next several years, according to filings. SPACE SCRUTINY Rising geopolitical tensions and deteriorating international relations have put a spotlight on space and defense contractors, as U.S. President Donald Trump aims to bolster military and civil space programs with the efficiencies of for-profit companies. Elon Musk's SpaceX — which has about $22 billion in government contracts — has grown critical to the global satellite network, potentially managing a crucial element of the "Golden Dome" missile defense shield planned by Trump. SpaceX's rapid growth in the space industry and Musk's latest tensions with Trump, however, have prompted officials to open talks with other rocket and tech manufacturers, with some citing national security concerns around concentrated dependency. Kim said Firefly is eyeing a potential role in the Golden Dome program, noting its Alpha rocket could be used to launch test missile targets for the system or its Elytra spacecraft platform could host space-based missile interceptors envisioned by the program. "We will be able to rate up our production line to meet that growing demand," Kim said of Golden Dome. Firefly has had backing from U.S. defense contractor Northrop Grumman in a partnership to jointly build a bigger rocket named Eclipse, set for a debut launch from Wallops Island, Virginia, as early as 2026. "Northrop Grumman's involvement signals alignment with national security priorities, while Mitsui's presence opens pathways to Asia and helps shore up supply-chain resilience," PitchBook's Javaheri said.
