Catalyzing Climate Finance with the Shandong Green Development Fund

Abstract

In 2019, the Asian Development Bank (ADB) approved a $100 million loan contributing to climate finance for the $1.5 billion Shandong Green Development Fund Project. The fund introduces an innovative leveraging mechanism to catalyze private, institutional, and commercial capital for the development of climate-friendly infrastructure and business in Shandong Province, the People’s Republic of China (PRC). The project focuses on the twin strategic agendas of environmentally sustainable growth and inclusive economic growth. The fund will finance a portfolio of mitigation and adaptation projects assessed against both financial and climate eligibility criteria using the Green Climate Fund investment framework. The project will contribute to the transition to low-carbon and climate-resilient development paths in Shandong Province. The fund will act as the financial arm of the Shandong Provincial Government to implement its progressive climate policies and to decarbonize its economy. The fund holds seed capital of $400 million from international financial institutions, $360 million from public sources, and $740 million from private investors to cofinance about $7.5 billion of climate-positive investment, achieving a leveraging ratio of over 1:5. By 2027, the fund aims to contribute to (i) climate change mitigation, measured through carbon emission reductions of 3.75 million tons annually, and (ii) climate change adaptation, measured through improvement in climate resilience of over 3 million beneficiaries. It is the first climate fund in the PRC to be categorized as effective gender mainstreaming.