Asia is prime for circular financing
KUALA LUMPUR: The future is in green financing and Asia, including Malaysia, is poised to take a leadership position in this sector given its population growth and acceptance towards creative innovation.
Speaking at the The Economist’s Sustainability Summit Asia 2018, Richard Kooloos, the director of sustainable banking of Amsterdam-based ABN AMRO Bank said his bank’s success within this segment can easily be replicated in this region.
“We no longer support or finance projects that are not part of the circular economy. Unlike traditional business models, under which raw materials are converted into products that you throw away at the end of their life cycle, the circular economy runs on the re-use of raw materials and products,” he explained.
“The new business models need innovative financing. We have clients who subscribes furniture instead of selling them so that furnitures can have some 30 years life cycles instead of three years. Original furniture subscribers can return the furniture, where it is upholstered and new subscribers can get the same furniture. These types of businesses have a different kind of financing as they don’t have a large upfront profit, but gains smaller monthly payment instead.”
The appetite for circular financing in Asia is also healthy, given that most countries in Asia are growing at an incredibly fast rate.
“In economies like China and even emerging ones like Malaysia, we have seen rapid growth of not just existing towns and cities, but also new ones. Circular design works best in new cities as well where we can recycle concrete and build new buildings. As this a type of business, we need a new type of financing for it too,” said Kooloos.
It is important however for banks to find like-minded clients in the early days of attempting circular financing as not all are open to it.
“My advice to them is too look into their existing clients and work with those who are the most innovative. As their success grows, more innovative companies will come to see you out,” continued Kooloos.
ABN AMRO Bank is the Netherlands’ third largest bank. It has a market capitalisation of €23 billion.
Also at the same event, Energy, Technology, Science, Climate Change and Environment Minister Yeo Bee Yin said the government is pushing forward with the increase electricity generation from renewable energy (RE) agenda.
“To achieve the 20 per cent RE target that we have set out, large scale solar (LSS) needs to be added to the system. The government has implemented two LSS project cycles with an installed capacity of 958MW,” she said.
“Out of the total, three projects with a capacity of 32.5MW have reached the date of commercial operations. Other projects are expected to start generating energy by the end of 2018 to 2020.”
She noted that in the government’s electricity supply planning, the increase in the proportion of RE in electricity generation would reduce carbon emission intensity in the electricity supply sector by 49 per cent as well a cost savings of RM270 million for the period from 2018 to 2037.
Source: NST