Credit: Khoa Nguyen/iStock by Getty Images

Explainer: How Asia Can Unlock $800 Billion of Climate Financing

Governments, central banks, financial supervisors, and multilateral institutions must coordinate and develop a comprehensive strategy to attract more private capital.

Countries in the Asia-Pacific region face a shortfall of at least $800 billion in climate financing. With public finances depleted by the pandemic, policymakers must unlock the vast potential of private capital to join the fight more effectively against global warming.

Doing so will demand a coordinated and multi-faceted approach by actors on all sides, from governments and central banks to financial supervisors and multilateral institutions. Important strategies include phasing out fossil-fuel subsidies, which have reached a record $1.3 trillion. It will also be key to expand carbon pricing, bridge critical data gaps, and promote innovative financing along with public-private partnerships.

Here's an explainer based on our latest research, which draws on recent chapters of the Global Financial Stability Report on scaling up climate finance and other IMF studies on climate issues:

Action to unlock much more climate finance requires coordination among agencies overseeing climate initiatives, plus collaboration between local and global entities:

—This blog reflects research by Cheng Hoon Lim, Ritu Basu, Yan Carriere-Swallow, Ken Kashiwase, Mahmut Kutlukaya, Mike Li, Ehraz Refayet, Dulani Seneviratne, Mouhamadou Sy, and Ruihua Yang.