Bridging the financing gap for climate impact in Asia: Challenges and opportunities

ACCORDING to the latest United Nations Emissions Gap report, we are racing past our 1.5 degree Celsius goal towards a 2.5 to 2.9 deg C temperature rise above pre-industrial levels. With Asia currently responsible for half of the world’s carbon emissions, there is an urgency for the region to accelerate climate action as the UN Climate Change Conference (COP28) gets underway this week. Yet Asia’s energy demand continues to grow, and it battles the multiple forces of economic development and the need to uplift its communities against the costs of a green transition.

For a dose of reality confronting the green transition, look no further than South-east Asia. South-east Asia’s Green Economy 2023 Report forecasts that energy demand, powered by a burgeoning middle class and a reliance on heavily subsidised energy and electricity, will grow by 42 per cent over the decade to 2030. This means that decarbonising the region while meeting energy demands and the need to deliver just and equitable economic growth will not be an easy feat. But we cannot concede defeat, because it would be impossible to become a net-zero world without Asia’s green transition.

Constraints in deploying capital

While there is general recognition that more capital needs to be channelled towards Asia’s transition to a greener economy, there are challenges. It often requires high upfront capital costs with insufficient or uncertain investment returns, uncertainties in policy direction, and market-access issues. Many projects are also either marginally bankable or unbankable. Furthermore, there is a dire need to uplift lives and communities, which means that climate objectives cannot be pursued in isolation without also considering socio-economic goals.