Amidst the challenging macroeconomic landscape in many countries and growing concerns about public debt sustainability, the progress in financing climate action in Asia and the Pacific continues to lag. This issue becomes increasingly critical as global emissions and energy demands rise. A new report by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) sheds light on the pressing matter of sustainable finance in the region. It addresses the challenges and opportunities for policymakers, regulators, and private finance in bridging the financing gap.
“Inaction is no longer an option. All stakeholders must commit to accelerating change by transforming their financing priorities, processes, and programs to meet the Sustainable Development Goals and climate action ambitions,” emphasized Hamza Ali Malik, Director of the Macroeconomic Policy and Financing for Development Division, ESCAP.
NATIONALLY DETERMINED CONTRIBUTIONS
The Sustainable Finance: Bridging the Gap in Asia and the Pacific report reveals that only 17 out of the 51 Asia-Pacific countries party to the UNFCCC have assessed and reported their financial needs to meet their Nationally Determined Contributions (NDCs). Moreover, only seven have broken down financial requirements between adaptation and mitigation efforts. Additionally, the region is facing increased economic losses due to disaster-related and natural hazards, with forecasts indicating up to $1.4 trillion in losses in a worst-case climate change scenario.
SCALE UP CAPITAL
The report offers ten principles for action, addressing the need for cooperation among stakeholders to shift and scale up capital for climate action. These principles aim to reduce obstacles, address the under pricing of climate-related risks, and tackle sectoral and regional mismatches between capital and investment needs. The recommendations also consider the unique contexts of individual nations, including those of the least developed countries and Small Island developing states.
Eugene Wong, CEO of the Sustainable Finance Institute Asia, urged all stakeholders to act swiftly and find areas where they can contribute to deliver solutions. The report recognizes that there is ample capital and liquidity to close the global financing gap in sustainable finance but highlights the challenges in effectively deploying capital for climate action.
MOBILIZING PRIVATE CAPITAL
The Asia-Pacific region presents a significant opportunity for mobilizing private capital on a large scale to fund the climate transition. Collaboration between the public and private sectors is essential to enable policy and regulatory frameworks, leverage financing options like local currency and blended finance facilities, and harmonize transparency expectations and ensure investor confidence.
The report launch at the Ministry of Foreign Affairs of Thailand on October 2nd received commendation from Cherdchai Chaivaivid, Director-General of the Department of International Economic Affairs of the Ministry of Foreign Affairs of Thailand. He stressed the importance of the report and expressed Thailand’s readiness to support international collaboration on sustainable finance. The report offers a practical way forward for tangible actions that countries can undertake individually and collectively to address the critical issue of sustainable finance.