By Luisa Maria Jacinta C. Jocson, Reporter
OFFICIAL DEVELOPMENT ASSISTANCE (ODA) and lending programs are not enough to meet climate development goals, the Asian Development Bank (ADB) said.
“We are all under difficult budgetary conditions, but even if we could step up, ODA alone is not going to do the trick,” Niels Annen, ADB governor for Germany said at the ADB annual meeting streamed live from Incheon, Korea on Wednesday.
“We need to mobilize private capital. We haven’t been able to efficiently mobilize it to the most affected countries,” Mr. Annen, who is also the parliamentary state secretary to the federal minister for Economic Cooperation and Development in Germany, added.
“The traditional model of lending and grant-making will not be enough,” ADB President Masatsugu Asakawa told the meeting. [We should] maximize our financing capacity and leverage the enormous potential of the private sector.”
Developing Asia needs to invest $13.8 trillion in infrastructure from 2023 to 2030 to support growth and meet climate goals, the ADB said.
“Many of the developing instruments addressing climate change are still based on concessional loans,” Mr. Annen said. “Even those loans, because of ongoing situations, are getting refused. That should indicate how urgent the situation is.”
The Asia-Pacific region is one of the most vulnerable to climate change. Since 2000, more than 40% of climate-related disasters have occurred in Asia and the Pacific, the ADB said.
“We need to be reminded that the region’s industrialization comes with environmental costs. Asia’s carbon footprint has increased dramatically. Carbon emissions have tripled since 1995,” Mr. Asakawa said.
The region generates at least 50% of global carbon dioxide emissions, according to the ADB.
“Climate change is the most urgent because we are all affected,” Mr. Annen said. “Instruments like hybrid capital will be crucial. We need to come up with a new broad consensus.”
The ADB in a recent report recommended the use of “innovative financing mechanisms,” such as blended finance, debt-for-nature swaps, asset recycling and carbon credit markets.
“The Asia-Pacific needs to embrace climate smart policies to ensure trade and investment are part of the climate solution,” Mr. Asakawa said.
He cited the need to create regulations and incentives for businesses so they can shift to sustainable practices. “Support responsible business systems and better management practices and innovation to adopt cleaner technologies,” he added.
‘HIGH DEBT’Mr. Asakawa also cited the need to develop carbon-pricing mechanisms and explore green economy agreements to make international trade more sustainable.
“We do need to recognize that development is no longer possible without effective climate action. We must build resilience across borders and provide swift support to prevent future crisis,” he added.
ADB Governor for India and Indian Finance Minister Nirmala Sitharaman said it would take large financing requirements to support vulnerable sectors in the transition to net-zero emissions.
“Vulnerable sectors must be protected,” she said. “You are ensuring inclusivity by handholding the vulnerable sector. Borrowings and debt will increase because of the kinds of things you do to bring inclusivity. Knowingly, you get into a situation of high debt. You can’t avoid it,” she added.
Multilateral cooperation could make it easier for countries to achieve their climate goals, the ADB said.
“The world is becoming so interconnected and global economic shocks will not discriminate against any country, whether you’re an advanced or developing country,” ADB Governor for Indonesia and Indonesian Finance Minister Sri Mulyani Indrawati said. “Multilateralism is the only way for us to address this issue or challenge.”
Governments should ensure that cooperation is integrated into policies and reforms. “For this multilateralism to work, you need to have trust and confidence. You must be effective, governance needs to be legitimate enough to operate,” Ms. Indrawati said.
“We all need to do better. Asia has a significant role to play. Because of Russia’s war of aggression on Ukraine, all economies are affected by the global crisis,” Mr. Annen said. “We need cooperation right now. It’s going to be more difficult under these geopolitical circumstances.”
In 2022, the ADB extended $3 billion in financial assistance to the Philippines, the fifth highest in the region. This year, it is earmarking $4 billion worth of loan financing to support development projects.
This year, the National Government is expected to get about $19.1 billion worth of ODA and $9.2 billion worth of loans from multilateral development partners and $9.8 billion in loans from bilateral lenders.
