South-east Asia: Between the devil and the deep blue sea
South-east Asia is in a tricky position when it comes to receiving climate finance as stipulated by COP29. On the one hand, Myanmar, the Philippines, Thailand, Vietnam and Cambodia were, until 2019, among the 20 countries most exposed to climate risks, according to the Global Climate Risk Index, which is published by non-profit organisation Germanwatch.
But South-east Asia is expected to continue its fast economic growth, accompanied by more greenhouse gas emissions, noted Dr Kim Jeong Won, a senior research fellow at ESI.
This growth has reclassified many Asean nations as middle-income countries, reducing their eligibility for development financing, she added.
Among the developing nations, the least developed countries and small island developing states are recognised as having the greatest need for support.
Given the competition for funding, a significant gap already exists between the required investments and actual finance that the countries have received. For example, only 9.7 per cent of investments from the UN’s Green Climate Fund – the world’s largest fund of its kind – has been channelled to South-east Asia.
Similarly, only 6.3 per cent of investments from the UN’s Adaptation Fund has been allocated to Asean countries, said Dr Kim.
She added: “South-east Asian countries are expected to compete for limited bilateral and multilateral public funding with other low-income developing countries.”
If they want to attract a greater share of private funding, it is vital that countries develop more innovative finance models and attractive climate-related projects, she noted.
Ms Lau Xin Yi, sustainable finance lead for South-east Asia at the Carbon Trust consultancy, is looking at a newer type of finance tool called climate transition bonds.
The proceeds from these bonds can be used for a wider range of decarbonisation projects, including those in hard-to-abate sectors such as steel, cement and petrochemicals.
Despite guidelines to prevent greenwashing, Ms Lau noted that about 90 per cent of the transition bonds issued globally has been dominated by Japan’s issuances.
“Climate transition bonds can help South-east Asia unlock more capital needed for its low-carbon transition. More capital will be channelled towards clean technologies, but how transition is achieved will vary across sectors and regions,” said Ms Lau.
