Sustainable Finance Gap: Even while global emissions and energy needs continue to rise, progress in financing climate action in Asia and the Pacific has lagged behind due to many nations’ tough macroeconomic environments and worries about the sustainability of public debt.
The urgent need for sustainable financing in the region is highlighted in a new research by the Economic and Social Commission for Asia and the Pacific (ESCAP), which also examines the potential and challenges facing policymakers, regulators, and the private sector in closing this gap.
There is no longer a place for inaction. To achieve the Sustainable Development Goals and the ambitions for tackling climate change, all stakeholders must make a commitment to accelerating change by changing their financing priorities, procedures, and programmes, according to Hamza Ali Malik, Director of the Macroeconomic Policy and Financing for Development Division, ESCAP.
Sustainable Finance Gap
Only 17 of the 51 Asia-Pacific nations that are parties to the UNFCCC have evaluated and reported their financial needs to meet their NDCs, and only seven have divided those needs into those for adaptation and mitigation. Additionally, it is anticipated that in a moderate climate change scenario and $1.4 trillion in a worst-case scenario, regional economic losses due to disaster-related and other natural hazards will rise to an average of $1.1 trillion and $1.4 trillion, respectively.
Ten actionable principles for policymakers, regulators, and the private financial sector are presented in the paper Sustainable financial: Bridging the Gap in Asia and the Pacific. This includes initiatives for all stakeholders to shift and scale up capital in a cooperative and efficient manner to finance climate action, with a focus on removing barriers, addressing the underpricing of climate-related risks, and lowering sectoral and regional mismatches between capital and investment needs. These findings also take into account the particular national settings of least developed nations and small island developing States.
“At a time when numerous issues are putting pressure on the crucial but already lagging sustainability agenda, we need to shake off any inaction we may have and spark movement. This study offers useful and effective suggestions that we can put into practise right away. Finance is a major enabler for action. Eugene Wong, CEO of the Sustainable Finance Institute Asia, urged all stakeholders to “urgently identify the areas where they can play a role and come together to deliver solutions.”
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Additionally, the paper acknowledges that there is enough money and liquidity to fill the financing need for sustainable finance globally. However, as the research explains, there are still a number of obstacles to using resources for climate change successfully.
“The Asia-Pacific region offers a significant opportunity for the large-scale mobilisation of private capital to finance the climate transition, especially in the challenging industries. The public and private sectors should collaborate to enable policy and regulatory frameworks and, in turn, leverage crucial financing options like local currency and blended finance facilities, according to Ricco Zhang, Senior Director for Asia Pacific, International Capital Market Association. Voluntary market standards continue to harmonise transparency expectations and ensure investor confidence.
Aigul Kussaliyeva, Director of Sustainable Development, Astana International Financial Centre, stated that she believed “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.”
The book, which is a part of ESCAP’s yearly Financing for Development Report Series, was formally introduced on October 2 at Thailand’s Ministry of Foreign Affairs. Cherdchai Chaivaivid, Director-General of the Department of International Economic Affairs of the Ministry of Foreign Affairs of Thailand, spoke at the report’s launch and praised ESCAP for its leadership in promoting sustainable finance. He also emphasised the significance 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 undertake both collectively and individually.” He also emphasised Thailand’s willingness to support international cooperation on sustainable finance and to participate in future policy discussions around this topic.
