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The shift towards a sustainable future in the Asia-Pacific region holds significant global economic implications. Despite being a driver of worldwide growth, the region’s heavy reliance on coal has resulted in substantial greenhouse gas emissions. Addressing climate mitigation and adaptation needs in emerging and developing Asia requires an annual investment of at least US$1.1 trillion for mitigation and adaptation, but they only receive US$333 billion, showing a a substantial shortfall of at least US$800 billion in climate financing, an International Monetary Fund (IMF) research by Cheng Hoon Lim, Ritu Basu, Yan Carriere-Swallow, Ken Kashiwase, Mahmut Kutlukaya, Mike Li, Ehraz Refayet, Dula-ni Seneviratne, Mouhamadou Sy, and Ruihua Yang mentioned.

Given the depletion of public finances due to the pandemic, policymakers must tap into the potential of private capital to bolster the fight against global warming effectively. Achieving this objective necessitates a coordinated effort from various stakeholders, including governments, central banks, financial supervisors, and multilateral institutions. Key strategies include phasing out fossil-fuel subsidies, which currently stand at a record US$1.3 trillion, expanding carbon pricing, bridging critical data gaps, and promoting innovative financing through public-private partnerships. The urgency of climate finance is underscored by the slow progress in combating climate change. Global temperatures are on track to exceed the critical 1.5 degrees Celsius threshold above pre-industrial levels, and efforts to halve 2019 greenhouse gas emissions by 2030 fall significantly short, targeting only an 11% reduction. 

Asia’s pivotal role in the global transition to sustainability is emphasized by its contribution to two-thirds of global growth last year, and it is expected to do so again in 2024. However, its heavy reliance on coal means it contributes over half of global green-house gas emissions. The region’s commit-ment to addressing climate hazards is evident in revised Nationally Determined Contributions under the 2015 Paris Agreement. Asia can play a crucial role in demonstrating how to balance economic growth and environmental sustainability.

However, Pacific island countries and smaller economies face challenges accessing international capital markets and global climate funds due to stringent accreditation requirements. Larger countries also encounter obstacles, as green bonds may be as costly as conventional securities due to investor skepticism. A survey of 19 Asian countries highlights gaps in data, disclosures, and taxonomies, exacerbated by incon-sistent national climate policies that can promote fossil fuel subsidies. These challenges pose a threat to investor confidence and raise concerns about greenwashing, potentially undermining the legitimacy of environmental claims by bond issuers. Additionally, increasing geo-economic fragmentation could jeopardize collective action to combat climate change, the IMF report added.