By 2048, it is projected that the world economy could lose more than 18% of its current GDP if no action on climate change is taken. The ASEAN region is projected to lose up to 37.4% of its current GDP as a result of climate change. With many ASEAN countries boasting large coastlines, the region sees itself at high risk of multiple impact channels such as rising sea levels, heat stress, and reduced tourism revenues. Furthermore with many nations in ASEAN relying on agricultural exports to make up a significant portion of their GDP, drastic changes in weather patterns and rising temperatures threaten to hurt the ASEAN economies.
Understanding the threat of climate change, ASEAN has called on developed countries for climate finance support, stating that the progress of developing ASEAN states to mitigate and adapt to global warming rests heavily on the shoulders of international funding. Although the ASEAN coalition present a united belief that climate change is a global emergency, it is worth nothing that each ASEAN member’s timeline and goals towards diminishing carbon emissions and achieving net-zero differ across the board. Based on their respective national circumstance, ASEAN’s principle of non-interferrence portrays a more independent and autonomous approach towards fighting climate change.
Regardless of how each ASEAN member wishes to approach the issue of climate change, one thing remains clear. Funding is sorely needed to undertake such a gargantuan task, and the question on everyone’s mind is a simple one – where is that money coming from?
What Are Green Finance Initiatives?
A 360-degree approach that involves the public, private, and non-profit sectors, green finance initiatives attempts to increase levels of financial flows from stakeholders in order to advance sustainable development priorities. Ideally promoted through changes in each country’s regulatory frameworks and through harmonising public financial incentives, green finance initiatives ultimately align public sector finance decision making with the environmental dimensions of Sustainable Development Goals.
Examining green finance initiatives from a top-down perspective, policymakers aiming to promote green finance must initiate interactive dialogue between the private and public sectors, while providing guidelines and case studies of successful green financing. This would facilitate the next level of green financing to take place – the mainstream adoption of green bonds and green insurance. Finally, micro-credit for sustainble developments will eventually take place, where community enterprises and pilot projects for sustainability take root.
Given that ASEAN countries (barring Brunei and Singapore) only received a meagre 10.56% of total climate finance funds raised from 2000 to 2019, the need for green finance initiatives in ASEAN is apparent to see.
The Role Of Financial Instituitions In Climate Investments
The private sector’s participation in climate investments is key in climate investments. Financial institutions such as Citi, who committed to a 500 billion USD environmental finance goal in 2022, as part of its 1 trillion USD sustainable finance goal set for 2030 is a key emaple of how influential the private sector can be. Given that a net zero future is only achievable with large-scale adoption of emerging and bleeding edge technologies, there is an inherent financial risk present that the public sector cannot afford to shoulder alone. Involving the private sector alongside the public one to manage the risk is one such way to overcome financial hurdles.
Yet, as much as climate investments are necessary, stakeholders involved must be prudent to avoid being complicit in greenwashing – an approach whereby entities make purely cosmetic ‘green’ changes which are then further exaggerated in marketing and PR material. Regulation and accountability must be routine in order to avoid losing public trust and setting sustainability efforts back.
There exist a multitude of ways companies can take first steps in being involved with green financing. For example, by stipulating sustainable elements in financial instruments like term loans, revolving credit facilities, factoring and supply chain finance. By pairing financial commitment with staunch corporate values espousing sustainability and eco-consciousness, companies become more attractive to consumer and employees alike. The former, more likely to seek products with green credentials, while the latter often avoids companies that fail to adhere to corporate sustainability goals.
The Sustainable Approach To Investing
Invest in a climate revolution and put your money where your mouth is. Not all profits were made equal, and sustainable profits have proven to be the best way to do business. It’s just good business sense, after all.