Climate finance: new approaches, new networks

Our senior consultant Soumik Biswas discusses the challenges and opportunities to boost climate action


The impact of climate change on the global economy is generally an accepted phenomenon, however, the estimates for the extent of damage varies. One estimate predicts approximately 1.6% of global GDP will be wiped out because of climate change. Another estimate suggests that if temperatures rise by only 2.5°C, global GDP would fall 15% and if it rises by 3°C global GDP would fall 25%: a 0.5°C shift would see an additional 10% downward shift.

Low- and middle-income countries in the South Asia and Asia-Pacific region have been taking substantial actions to mitigate and adapt to the effects of climate change, which have been seen with more frequency and more severity in recent years. For some of these countries, such as Bangladesh, India, Indonesia, Philippines, or the Pacific islands states, the threat that vagaries of climate change pose to their economic growth is more prominent than others. One of the primary concerns in taking action to tackle climate change has been where the funding will be found? It is widely acknowledged that, in spite of funding from international sources, national and sub-national budgets will continue to be the main source of funding.

This is the case with the countries in South-East Asia and Asia-Pacific region, where climate action funds have been found from within their domestic budgets, without much recourse to external assistance or international climate finance. The growing challenge of addressing climate change issues in low- and middle-income countries requires a structured approach that uses government planning and budgeting systems to develop a systematic response. The following issues must be addressed to pave this path leading to more finance to tackle climate action.

  • Integration

One of the best ways to address climate change at the local, regional, and national level is by adapting priority policies and funding that already steer country investment and development. This can be done by integrating climate change considerations into the overall development planning across sectors.

  • Accountability

To date, countries in South-East Asia and Asia-Pacific have mostly followed a top-down, government driven approach towards climate action. A more inclusive and structured approach between government, civil society, media, and other state and non-state actors, both within and across countries in the region, is currently missing. This means accountability and transparency of decision making and fund allocation is absent, as are formats that encourage debate. This also hinders the pace at which models of “co-governance” between relevant and interested parties can be shared and replicated in regard to climate change financing. Governments in the region are beginning to recognise the need to facilitate this participation, but lack access to information and guidance about how best to do so.

  • Access to finance

International climate finance can play a vital role in mobilising additional funding from domestic sources. For example, a project in Odisha, India, which received $34.5 million from the Green Climate Fund was able to secure additional co-financing from the state government in total value of $165 million. However, accessing international finance can be unpredictable, with funds taking a long time to be released. To help governments reach their climate goals, the timeliness and predictability of international finance needs to improve.

  • Impact on growth

Policymakers need to understand how different drivers of growth are currently being affected by climate change and make judgements on how this could affect a country’s growth trajectory in the future. This will provide policymakers with better evidence to inform decisions and build consensus around the best available climate action.

  • Inclusion

An understanding of the different needs and the impact of climate action and inaction on the most vulnerable in society is needed. Addressing gender issues or issues pertaining to the disabled or marginalised groups separately in national budgeting processes poses risks. Mainstreaming these considerations offers the best solution to ensuring no one group becomes more marginalised or impacted as climate action progresses.

  • Innovation

There is a significant gap between resources available and resources required to finance climate action. Domestic budgets are severely constrained by competing priorities. Innovative approaches are needed to bridge this finance gap. This could include harnessing the power of disruptive technologies, such as solar micro-irrigation, using new business models and establishing new partnership structures bringing government, the private sector, development banks, and civil society together.

New approaches

Over the last few years, several innovative measures have been developed in some regions of Afghanistan, Pakistan, Nepal, and India through the Action on Climate Today (ACT) programme. Measures including the prioritisation of tools for assessing climate impact on relevant budgets, developing climate projects with stakeholder participation, and generating innovative funding and co-financing approaches from national and international sources. A wide range of tried-and-tested ideas to mainstream climate finance already exists across the region, although the uptake is expectedly uneven. A number of countries in Asia and the Pacific have adopted solutions to climate change planning and financing that could benefit other countries, but that knowledge is not commonly shared. Moreover, the challenge for many countries remains in how to utilise new knowledge and systems to access international finance.

New networks

One approach aiming to address this is the establishment of a regional network bringing together stakeholders from national and regional areas across the Asia-Pacific region. Funded by the Department of International Development, UK, through the United Nations Development Programme, the Climate Finance Learning Network connects the public and private sector, multilateral donors, and civil society from 13 countries (Afghanistan, Bangladesh, Cambodia, Fiji, India, Indonesia, Nepal, Pakistan, Philippines, Thailand, Tonga, Vanuatu and Vietnam). The network will share accumulated learning and an understanding of the contextual nuances of proposed solutions in different territories and steer climate policies across the region to quicken the uptake of climate action to directly benefit local populations. The network that will work across six work streams (noted above), hopes to build a bank of knowledge and solutions that can be utilised not just in this region, but globally.

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