How do we address climate finance challenges in APAC?: IMF study answers
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To meet carbon emission reduction targets, Asia requires at least $1.1 trillion annually for climate-related initiatives, noted a new report published by the International Monetary Fund (IMF). However, existing investments fall short by $800 billion.
Countries in the Asia-Pacific region face a shortfall of at least $800 billion in climate financing. See our blog for more on how governments, central banks, and others can help close that gap: https://t.co/NJJK1Jk36a pic.twitter.com/p42JGorcdb
— IMF (@IMFNews) January 29, 2024
The survey of Asia-Pacific countries highlighted three main challenges in unlocking climate finance:
- Lack of data and disclosures, hindering climate risk reporting
- Conflicting national policies, such as the introduction of carbon taxes and fossil fuel subsidies
- Complex global environment, geoeconomic fragmentation, hindering cooperative action on climate change.
IMF notes that a coordinated approach is necessary to address these challenges, including governments, central banks, financial supervisors, and multilateral institutions.
According to the report,
Governments should
- establish a comprehensive strategy to enhance data framework, taxonomies, and disclosures
- phase out fossil fuel subsidies, and expand carbon pricing. Revenue generated from these measures should be reinvested in green technology, job creation, and support for vulnerable populations
- strengthen macroeconomic and public investment management
Central banks and financial supervisors should
- support the adoption of global and interoperable disclosure standards
- strengthen climate risk analyses and reporting, and incorporate climate-related financial risks into frameworks
- develop climate labels for sustainable investment funds and foster investor trust
The IMF, together with other multilateral institutions, can support by
- integrating climate-related risks and policies into surveillance and lending activities
- Reducing climate financing gaps through Resilience and Sustainability Trust
- strengthening data and statistics
- Increasing grant financing and concessional lending
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