DEVELOPING COUNTRIES will need to invest about $6 trillion between this year and 2030 to meet their climate goals, the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) said.
“The global financing gap to reach net zero emissions by 2050 is substantial. Developing countries need to put up an estimated $5.8-5.9 trillion in the pre-2030 period to meet their Nationally Determined Contributions (NDCs),” it said in a report.
“Asia-Pacific economies urgently need to step up action to tackle the climate challenge. The Asia-Pacific region is home to five of the 10 largest emitters in the world and accounts for almost half of the world’s greenhouse gas emissions. It is also one of the most vulnerable regions to climate change,” it added.
The report said that governments should “build sustainable finance markets and drive down risk and perceptions of risk.”
“When commitments and priorities in climate action and sustainable finance are communicated clearly to markets, long-term investments can be accurately priced and undertaken with investor confidence,” UNESCAP said.
“Policymakers are also responsible for budget allocations in terms of incentives or tariffs that affect the returns in fossil fuel dependent sectors, and in thus shifting the financing of the energy mix of the sector,” it added.
For example, the report said that governments can help promote the shift towards green objectives through sustainable finance instruments.
“There has been a promising increase by governments in the region in issuing sovereign green, social, sustainable and other bonds, labeled GSS+ (Green, Sustainable, Social), that raise capital for specifically GSS+ uses,” it said.
At the end of 2022, the global market for outstanding GSS+ bonds rose to more than $3.8 trillion.
“Annual issuances in Asia and the Pacific increased from $5 billion in 2015 to $206 billion in 2022. Although corporate issuances dominate this market, sovereigns and jurisdictions are increasingly tapping into it, with Hong Kong, China; Indonesia; Malaysia; New Zealand; the Philippines; Singapore; and Thailand issuing between $1 billion and $2.5 billion each in 2022,” it added.
The report also noted that regulators have created environmental and social risk management (ESRM) guidelines for financial institutions.
“Many central banks in Asia and the Pacific, notably in Bangladesh, Nepal, and Philippines, have taken active steps to develop and roll out ESRM guidelines for banking sectors and individual financial institutions,” it added.
UNESCAP also highlighted the importance of climate finance partnerships; developing quality data to assess climate-related financial risks; and the adoption of sustainable finance roadmaps, among others. — Luisa Maria Jacinta C. Jocson