Amidst the challenging macroeconomic environment in many countries and concerns around public debt sustainability, progress in financing climate action in Asia and the Pacific has only fallen further behind, even as global emissions and energy needs continue to rise.
A new report by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) highlights the urgent issue of sustainable finance in the region as well as discusses the challenges and opportunities for policymakers, regulators and private finance in bridging this gap.
“Inaction is no longer an option. All stakeholders must commit to accelerate change by transforming their financing priorities, processes and programs, in order to meet the Sustainable Development Goals and climate action ambitions,” said Hamza Ali Malik, Director of the Macroeconomic Policy and Financing for Development Division, ESCAP.
Only 17 of the 51 Asia-Pacific countries party to the UNFCCC have assessed and reported their financial needs to meet their Nationally Determined Contributions (NDCs) and only seven have broken down financial needs between adaptation and mitigation. Moreover, average economic losses resulting from disaster-related and other natural hazards in the region are forecast to increase to US$1.1 trillion in a moderate climate-change scenario and US$1.4 trillion in a worst-case scenario.
The Sustainable Finance: Bridging the Gap in Asia and the Pacific report puts forward ten principles for action for policymakers, regulators and private finance. This includes activities for all stakeholders to cooperatively and efficiently shift and scale up capital to finance climate action, focusing on reducing obstacles, addressing the underpricing of climate-related risks, and reducing sectoral and regional mismatches between capital and investment needs. These insights further incorporate unique national contexts, as well as those for least developed countries and small island developing States.
“At a time where multiple challenges are pushing against the critical but already lagging sustainability agenda, we need to cast off any paralysis we have and galvanise action. Finance is a key enabler for action and this report provides practical and effective ideas that we can immediately act on. I urge all stakeholders to urgently identify the areas where they can play a role and come together to deliver solutions,” said Eugene Wong, CEO, Sustainable Finance Institute Asia.
The report also recognises that there is sufficient capital and liquidity to close the global financing gap in sustainable finance. However, various challenges remain, as discussed in the report, to effectively deploy capital for climate action.
“The Asia-Pacific region presents a huge opportunity for private capital to be mobilised at scale to fund the climate transition, especially in the hard-to-abate sectors. While voluntary market standards continue to harmonise transparency expectations and ensure investor confidence, both the public and private sectors should work together to enable policy and regulatory frameworks, and correspondingly leverage important financing options such as local currency and blended finance facilities,” said Ricco Zhang, Senior Director for Asia Pacific, International Capital Market Association.
“I believe every stakeholder group will discover valuable insights and actionable ideas within this report on how to channel capital towards climate-related investments and socially just transition, ultimately bolstering the sustainable finance market and ensuring funding for the Sustainable Development Goals,” shared Aigul Kussaliyeva, Director of Sustainable Development, Astana International Financial Centre.
The publication is part of the biennial Financing for Development Report Series produced by ESCAP and was officially launched at the Ministry of Foreign Affairs of Thailand on 2 October. Speaking at the launch, Cherdchai Chaivaivid, Director-General of the Department of International Economic Affairs of the Ministry of Foreign Affairs of Thailand, commended the leadership of ESCAP in promoting sustainable finance and stressed the importance of the Report, which “offered not only a comprehensive and in-depth analysis on sustainable financing, but also a practical way forward for tangible actions that countries could collectively and individually undertake.” He further reaffirmed Thailand’s readiness to support international collaboration on sustainable finance and to contribute to policy conversations on this issue going forward.