Financing Climate-Friendly Cooling at City Scale

A FAST Response to Climate Change

Wang Xiaoying/China Daily

The UN’s new initiative presents a promising framework to make agriculture and food systems more sustainable and resilient

Agriculture and food systems are profoundly vulnerable to climate change. Severe droughts and floods, changes in rainfall patterns, and other climatic impacts affect agriculture more than any other sector. Asia and the Pacific, in fact, will be the region most affected by worsening climate impacts; recent events include record-breaking droughts in the Yangtze River basin, which resulted in an estimated $5 billion worth of damage while affecting countless lives.

At the same time, globally, agriculture and food contribute to more than one-third of global greenhouse gas emissions, according to a 2019 Intergovernmental Panel on Climate Change special report on climate change and sustainable land management. This makes food and agriculture critical as both a vulnerable sector heavily affected by climate change and a significant contributor to climate change.

Agriculture and food systems also offer meaningful opportunities to address climate change. One is to achieve more sustainable food security by strengthening the system’s resilience and investing in inclusive adaptation to climate change. Another is to mitigate climate change through emissions reduction and carbon sequestration.

Both these opportunities can be achieved by promoting sustainable agricultural and food systems, and engaging key stakeholder groups, including women — a larger percentage of whom depend on agriculture for their livelihood. This is particularly important in developing countries, which face significant food security challenges. Such a sustainable transformation will significantly contribute to the United Nations 2030 Sustainable Development Goals while helping maintain the 1.5 C ambition to limit climate change impacts.

Encouragingly, in November 2022, the presidency of the 27th United Nations Climate Change Conference (COP 27) launched the Food and Agriculture for Sustainable Transformation Initiative (FAST), which is aimed at directing climate resources, particularly finance, to develop more sustainable agriculture and food systems. It will focus on three pillars: finance, knowledge and capacity, and policy. A detailed implementation plan is being finalized, but several critical components are essential to help achieve success.

First, the FAST must promote effective coordination among development partners to identify gaps and avoid duplication of work. The FAST will be facilitated by the United Nations’ Food and Agriculture Organization and will require active and effective participation by other agencies. Earlier, the Asian Development Bank announced plans to deliver more than $14 billion from 2022 through 2025 to support food security, including through strengthening food systems against climate change and preventing biodiversity loss.

Other organizations are on the same track. The World Bank has made agriculture and food priorities in its first climate change action plan, aiming to leverage more resources for sustainable agriculture. Development partners will need to work together under the FAST framework for meaningful impacts in the developing world.

Second, the FAST must support enabling environments, including policy incentives and governance that promote inclusive, climate-positive change in food systems. Policies and institutions at the local, national, and international levels need to incentivize the development and adoption of new technologies and practices and ensure adequate finance, including private sector investments. Governments or inter-governmental agencies should take the leading role in establishing sound policies and incentives, and ensuring effective implementation.

Third, the FAST should support stakeholders along the value chain, from production, processing, and storage to trading and consumption, to improve their resilience to climate change. For example, higher temperatures and humidity lower on-farm productivity as weeds and disease increase the risk of post-harvest losses, particularly for traders and aggregators who deliver in bulk to processors. Climate adaptation can be strengthened through storage technologies such as cold chain and improved drying techniques.

Fourth, the FAST must promote promising innovations to support adaptation and build resilience while increasing productivity. New crop varieties can better withstand climate shocks and improve yields. Solar energy can be used for irrigation, storage, transportation, and processing. Digital technology can expand access to farming knowledge and services allowing farmers to adapt practices to local conditions and improve market access and profitability.

Climate-smart practices, such as no-till farming, bio-waste management, agro-forestry, and landscape management, will also support mitigation by sequestering carbon and reducing GHG emissions. Automatically controlled drip irrigation combined with dynamic soil testing can improve system resilience to extreme droughts.

The FAST should also campaign for responsible consumer behavior to minimize individual’s ecological or carbon footprint, especially in advanced countries. Reducing consumption of processed food and red meats, as well as food waste can significantly reduce emissions.

Finally, and most importantly, the FAST must focus on farmers, as they are the primary agents for sustainable transformation on the ground and are most vulnerable to climate change, especially women, who represent approximately 43 percent of the agricultural labor force globally (47.5 percent in the PRC). Critically, women farmers show greater sensitivity toward environmental activities and are more involved with sustainable agriculture practices. They must be equipped with sufficient knowledge, technologies, and incentives to make transformation happen.

The FAST presents a promising framework to make our agriculture and food systems much more sustainable and resilient to climate change, and to reduce carbon emissions. Its success depends on a comprehensive, inclusive, and integrated approach that considers all stakeholders along the value chain.

Zhiming Niu

Zhiming Niu

Senior Project Officer (Environment), East Asia Department, Asian Development Bank

This Op-Ed is reproduced from China Daily.

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Meeting Global Climate Ambitions through Regional Collaboration

Ma Xuejing/China Daily

At the 27th United Nations Climate Change Conference (COP 27) in Sharm el-Sheikh, Egypt, from Nov 7-18, the global community came together to discuss how to accelerate climate action. The findings are clear — global climate commitments and needed action are set to fail in keeping global warming below the 1.5 degrees Celsius tipping point.

The impacts of climate change are becoming increasingly severe in Asia and the Pacific, and they demand our urgent attention and intervention.

The drought in Sichuan province this summer was a stark reminder of this reality. Home to 94 million people, Sichuan normally generates 80-85 percent of its electricity demand through hydropower. This constitutes around 25 percent of the PRC’s overall hydropower generation; equivalent to that of France, Turkiye, and Norway combined.

When reservoir levels fell due to the extreme drought in August, hydropower could no longer generate sufficient electricity. The surrounding processor chip factories — dependent on hydropower — were forced to close, dealing a blow to the livelihoods of workers and their families. The incident also showed how climate change impacts are interlinked, as chips from Sichuan are critical components globally for smartphones, car manufacturing, and renewable energy technology.

The need to adapt to the impacts of climate change has never been more urgent. This requires unprecedented collaboration to drive innovative solutions, both scientific and financial, that can be shared across communities. By working together, we can leverage resources to prevent catastrophic damage to human health, our economies, and social well-being by reducing the severity of climate-induced disasters triggered by natural hazards, and by mitigating the damage done by slower onset impacts such as sea level rise and increased desertification.

The PRC’s new National Climate Change Adaptation Strategy 2035 is an insightful and integrated endeavor to steer the country toward climate-resilient development. The strategy was prepared by the Ministry of Ecology and Environment, but released jointly by 17 national ministries, reflecting the urgency and deep understanding of climate change as a cross-cutting global phenomena. The Asian Development Bank and the Global Center on Adaptation are proud to have provided support to develop this new strategy.

The strategy emphasizes preparedness and prevention, and comprehensively addresses vulnerabilities such as extreme weather events. It also considers emerging threats such as climate-induced migration of vector-borne diseases. The strategy focuses on the need for sound governance, and on the social and economic impacts of climate change including on livelihoods, health, education and urban planning.

Crucially, the strategy pushes the boundaries of adaptation by suggesting approaches such as assisted relocation for residents who live in vulnerable areas considered “high-risk”. Asia and the Pacific may see hundreds of millions of climate refugees by 2050 due to sea-level rise, extreme weather events, and water insecurity.

According to a study, eight Asian nations — the PRC, Bangladesh, India, Vietnam, Indonesia, Thailand, the Philippines, and Japan — account for 70 percent of people living on “at-risk land”.

The PRC recognizes that the global climate challenge demands integrated solutions which address adaptation and mitigation simultaneously. For example, climate-smart agriculture promotes more resilient and sustainable production and value chains while reducing greenhouse gas emissions. Afforestation and wetlands amelioration and conservation offer resiliency benefits while sequestering carbon. This integrated approach is extremely important to leverage impact amid scarce resources and an increasing need for climate action.

The Asian Development Bank’s Yellow River Ecological Corridor (YREC), launched in 2021, supports the regional climate adaptation priorities of the PRC’s strategy. It is a comprehensive approach, designed to protect and restore the Yellow River basin’s diverse and fragile ecosystems, address climate change mitigation and adaptation, and enable more equitable and sustainable green rural-urban economic development.

The YREC will partner with the Chinese government to develop a basin climate risk assessment report, establish a climate change management framework, and prepare an adaptation plan. The strategy provides sound guidance for this work and serves as an excellent platform for climate engagement and action at the sub-regional level and among development partners.

It is also a meaningful tool to promote South-South cooperation, reflecting the global nature of the climate crisis. the PRC already has 38 climate change cooperation agreements with other countries. It has helped to develop community-led early warning systems for floods and provided micro-satellites and meteorological mobile stations to Ethiopia, Bolivia, and Uruguay, while supporting climate-related capacity development in over 100 countries.

As we move to implement COP 27 agreements, the 1.5 degree aspiration remains. Time is running out for action to mitigate climate change, and the economies of Asia and the Pacific are uniquely vulnerable.

The PRC’s National Climate Change Adaptation Strategy 2035 provides a tangible national blueprint that can help guide other countries looking to prepare climate change action plans. These plans require large amounts of financing, yet climate action must also be seen as an opportunity, not only as a cost. Smart climate investments create new business ventures, help communities become more resilient and sustainable, and integrate climate awareness and action across the economy and wider society.

We need to work together on climate action to provide finance and sound governance, foster knowledge and planning, seek innovation, and share capacity development to secure a sustainable and resilient Asia and the Pacific.

 Safdar Parvez

Safdar Parvez

Country Director, PRC Resident Mission, ADB

 Thomas Panella

Thomas Panella

Director, Environment, Natural Resources and Agriculture Division, East Asia Department, ADB

This Op-Ed is reproduced from China Daily.

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Decarbonization in Times of Crisis: An Asian Perspective

Opening remarks at the 2022 Asia Pacific Green and Low-Carbon Development Forum in Hunan, PRC. Photo: ADB.

Addressing the ongoing climate crisis is the only way out of the economic recession we are heading into. Technological and financial cooperation in Asia Pacific should lead the way.

Toward the end of World War II, three strange bedfellows (Churchill, Roosevelt, and Stalin) set the foundations of the United Nations in Yalta. In view of what was at stake in reference to the Yalta Conference, Winston Churchill famously said “Never let a good crisis go to waste”.

A triple energy, food, and climate crises are looming

Fast forward almost 80 years, we find ourselves living through various combined crises at once, and we should use them to increase our commitment to solve them without backing out. The Covid-19 pandemic created havoc across the world and required unprecedent containment measures. But restarting economies after so many months created a painful bottleneck effect that squeezed global supply chains. And if that was not enough, the Russian invasion of Ukraine created the perfect storm in energy markets, which rippled across all other economic sectors. The result, an energy crisis that is causing a global inflation we have not seen in a generation. A food crisis that will bring millions to hunger. And let us not forget that the climate change crisis never left, and that the world keeps getting warmer and climate-triggered disasters nastier. The danger of economic recession is very real.

Not only policy, finance or technology, but all should be deployed

With this bleak background, the 2022 Asia Pacific Green and Low-Carbon Development Forum in Hunan, the People’s Republic of China (PRC) brought together over 500 participants to discuss decarbonization in Asia Pacific region, with millions joining online the various sessions. It was discussed that governments should be serious about their climate objectives. Not just to sign some document at the different conference of parties (COPs), but to action on them. The PRC has established the “1+N policy framework”, with “1” referring to the long-term objective of carbon neutrality in 2060, and “N” the various solutions to achieve carbon peaking in 2030. And the country has already included these guiding objectives in its latest Five-Year Plan at all levels of government, which are already being executed.

The forum discussed the importance of introducing new zero-carbon technologies in the energy sector, but it was also remarked that technology innovation alone is not enough. The willingness to adopt innovation is limited, as people prefer mature technologies rather than jumping at scale into something promising but unproven. Policies, carbon finance, and soft skills are needed to structurally transform the economy.

Energy transition and carbon markets are a necessary first step

There were focused sessions on the energy transition and how to optimize the use and transformation of energy resources. Digitalization was also an important topic of discussion, and the potential of artificial intelligence, cloud computing, and big data to increase resource consumption efficiency and decarbonization of electricity generation and supply chains.

It was mentioned that accurate carbon emission monitoring systems and a functional carbon market, like the recently launched national Emission Trading Scheme (ETS) in the PRC are essential to achieve a low carbon economy. The ETS, once fully developed, will be essentially a multi-sectoral tradable performance standard, for being both a policy tool and a financing mechanism. It provides the carrot and stick to steer development of high-emitting sectors, like power generation.

Cities and industries transformation could lead the way

More than half of the four billion residents in Asia-Pacific live in urban areas and about a billion are likely to join them by 2050. Asian cities, with an ever growing population, need to decarbonize across all sectors, from buildings and construction materials, to urban transport or water supply. Green buildings were discussed, and how to achieve zero-energy buildings by reduced energy consumption and solar generation. And as the PRC is the factory of the world, the development of Industry 4.0 is being put forward by building and retrofitting industrial zones to become carbon neutral. Transforming industrial parks into smart eco-parks that aim at zero environmental impact in their processes and operations, by eliminating air and water pollution through appropriate treatment and waste disposal, as well as significantly reducing greenhouse gas emissions.

Delegates pointed out that billions of dollars in funding are needed to meet the PRC’s dual carbon objectives, and climate finance are crucial in this structural low carbon transformation. Private sector participants remarked that MDBs could be agents for change and enable private sector involvement in ambitious decarbonization programs. Like with ADB’s Energy Transition Mechanism, MDBs bring credibility to projects, encouraging institutional investors to get involved.

A common effort is needed to fight these crises

Each year, the forum brings together many different stakeholders that need to cooperate, share lessons and knowledge, and learn from each other’s experience. Government officials, academia, business people, investors and financiers, all have to join forces to help the PRC and Asia-Pacific reduce its dependence on fossil fuels, reduce carbon emissions, improve food security and climate resilience, and work for a clean and sustainable world for future generations to thrive. If we do not take this task seriously, more (and worse) crises will keep hitting us, driving more people into poverty and reversing the impressive economic development of the last three decades. Perhaps we should follow Churchill’s advice and do not let these crises go to waste. It is about time to act.

Alfredo Baño Leal

Alfredo Baño Leal

Senior Energy Specialist, Asian Development Bank

Climate Change Adaptation Strategy of the PRC

A climate-resilient agriculture is key to food security. Photo credit: ADB.

The National Climate Change Adaptation Strategy 2035 emphasizes nature-based solutions, a region-specific approach, and climate-resilient investments.


Along with greater natural hazard risks and changes to terrestrial and aquatic ecosystems, climate-related economic losses have increased significantly over the last decades. Between 1990 and 2019, damage to property, crops, and livestock from disasters triggered by natural hazards in the Asia and Pacific region amounted to almost $1.5 trillion. In 2020 alone, Asia’s overall losses related to natural hazards amounted to $67 billion, of which only $3 billion, or less than 5%, were insured. Global climate change and frequent extreme weather events seriously threaten the development and even survival of humanity, leading to a global consensus that active measures must be undertaken.

In response to the worsening climate crisis, the People’s Republic of China (PRC) has been developing its National Strategy for Climate Change Adaptation 2035 (NCAS). The strategy puts forward an ecosystem-based approach to cover both natural ecosystems—including water resources, terrestrial ecosystems, and marine and coastal zones; and social and economic systems—including agriculture and food security, public health, infrastructure, urban and industrial development, of sensitive secondary and tertiary industries. It encourages the mainstreaming of climate adaptation with ambitious targets for all sectors and regions by 2035. It also prioritizes climate change monitoring, early warning system, risk management, and investments in a climate-resilient future.

To ensure implementation is tailored to a variety of contexts, the national adaptation strategy considers geographic characteristics and spatial planning. As such, the strategy’s implementation focuses on economic and ecological zones in the PRC, including Beijing-Tianjin-Heibei, Guangdong-Hong Kong-Macao Greater Bay Area, the Yangtze River Delta, the Yangtze River Economic Belt, and the Yellow River Basin.

This article summarizes some of the key discussion points shared at the 22 June 2022 Final Review Workshop of the Climate Change Fund (CCF) Project on Developing National Climate Change Adaptation Strategy 2035.

Climate Adaptation of Natural Ecosystems

Water sits at the center of the PRC’s adaptation efforts in many ways. Like many other countries, the PRC is exposed to droughts and floods of greater severity exacerbated by climate change impacts. Severe floods during the 2020 summer monsoon in the Yangtze River Basin were among the costliest disasters. Losses amounted to approximately $17 billion, of which only around 2% were insured. Water scarcity is also a concern in many provinces, particularly in the upper Yellow River Basin, which is affected by frequent droughts.

The NCAS emphasizes the importance of resilient water management systems and increasing investments to adapt to periods of both too much and too little water. This means integrating grey and green infrastructure, such as building reservoirs or sponge cities, as well as educating the public about saving water during periods of drought and raising general awareness of water-related ecosystem services. This also involves strengthening biodiversity or urban cooling during heatwaves, and developing innovative, community-led flash flood early warning systems.

Becoming an “ecological civilization” implies working in harmony with nature to adapt to climate change. Rural areas, which are often the most affected, are the most dependent on ecosystem services. It has long been recognized that restoring ecosystems promotes synergies between ecological conservation, sustainable livelihoods, and adaptation. To this end, the strategy highlights climate-resilient agriculture as key to food security. From a natural ecosystem perspective, a diversification of crops that can better absorb excessively dry or wet periods and smart farming practices, such as a less proliferate and more effective use of pesticides, will contribute to climate adaptation in rural areas while diversifying income streams.

Protecting marine biodiversity also increases resilience to climate change impacts, such as rising temperature, and protects livelihoods that depend on fisheries or ecotourism. This creates the basis for a blue economy and opportunities for future generations.

Climate Adaptation of Economic and Social Systems

There is a panoply of measures that governments and societies must take to ensure economic and social systems can thrive in a changing climate. Fundamentally, the NCAS recognizes the importance of strengthening green industrial development for adaptation purposes. In practice, this means steering vulnerable industries in the right direction through policies and regulations. This also entails modernizing and climate-proofing public infrastructure with different approaches to urban planning.

The strategy highlights the importance of effective climate risk assessment and monitoring in ensuring continued economic activity and investment amid adaptation efforts. Risk analysis shows how natural hazards can be avoided or the necessary measures to mitigate risks and improve resilience.

Digitalization will play a critical role in mainstreaming climate adaptation across all sectors, especially in risk assessment and early warning systems. By 2035, the national strategy envisions a climate risk management digital platform that provides weather and climate forecasts with seamless full coverage and intelligent and digital functions to assess specific risks. This platform will require close coordination among 17 ministries for effective planning, allocation of resources, and joint emergency response. 

Region-Specific Approach to Adaptation

The adaptation strategy of the PRC is based on geographic characteristics and regional spatial plans to ensure recommendations are relevant and impactful for key zones. The Yellow River and the Yangtze River basins are two of the key geographical units prioritized for enhanced basin-wide climate adaptation.

Figure 1: Basic Frame of Regional Adaptation

Source: Final Review Workshop of the Climate Change Fund Project on Developing the National Strategy for Climate Change Adaptation 2035.

The strategy emphasizes the importance of an adaptive economic and social basin system. For example, creating ecological corridors can help maintain and restore ecological connectivity and ecosystem integrity while promoting high-quality green development in the Yellow River Basin— the second largest river basin of the PRC.

A region-specific approach builds on stakeholder engagement and accountability. Local knowledge is important in formulating local adaptation plans. Consulting stakeholders strengthens community-led initiatives and recognizes local expertise and knowledge in tailoring adaptation efforts to specific locations. Establishing resilience at the community level first enables local communities to understand the relationship between the ecosystem and society. 


While more countries around the world embrace climate action and green development, policy and regulatory gaps remain, and private sector investments continue to be lacking. The economic slowdown triggered by COVID-19 and the reallocation of government spending toward emergency response initially contributed to widening these gaps. However, governments have since strengthened their climate commitments and dedicated more resources to green development and improving climate resilience, realizing that safeguarding the environment also translates to safeguarding businesses and the economy. Yet, more is needed. The PRC alone requires about ¥1.6 trillion RMB (about $22 billion) annually to achieve its national adaptation targets.

Figure 2: Climate Adaptation Delivers High Economic Returns

Source: Global Commission on Adaptation. 2019. Adapt Now: A Global Call for Leadership on Climate Resilience

Scaling up nature-based solutions can help protect, sustainably manage, and restore natural and modified ecosystems to address societal challenges effectively and adaptively, benefitting human and nature.

Adaptation efforts should find worthy allies across other branches of government. The judiciary can act as a key player in implementing adaptation legal frameworks, holding government and private entities liable for environmental offences, and using laws and regulations to protect, promote, and instigate adaptation initiatives. 

To activate plans for climate action, financial resources must be pooled and options, such as working with financial institutions (domestic, international, and private), must be considered. Cooperative financing models can be used to bring adaptation forward, especially at the provincial and sub provincial levels.

NOTE: The official version of the “National Climate Change Adaptation Strategy 2035” is in Chinese. Here is the link to the English translation if you wish to read or learn more about this strategy.

 Thomas Panella

Thomas Panella

Director, Environment, Natural Resources and Agriculture Division, East Asia Department, ADB

 Dongmei Guo

Dongmei Guo

Environment Specialist, Environment, Natural Resources & Agriculture Division, East Asia Department, ADB

Silvia Cardascia

Silvia Cardascia

Water Resources Specialist, East Asia Department, Asian Development Bank

This blog is reproduced from Development Asia.

Transition Finance is Critical to Address Climate Change

Transition finance provides financial services to high carbon-emitting industries. Photo: Ludvig Hedenborg

Transition finance, which provides financing to high carbon-emitting industries, should be part of a broad range of innovative financing options to address climate change.

Addressing climate change and taking action on its impacts and effects remain an urgent concern worldwide. There has been strong consensus that the financial sector should go beyond supporting purely green activities to effectively transform the existing carbon emitters. Realization of transition finance is crucial in the efforts to combat climate change.

Transition finance is a concept where financial services are provided to high carbon-emitting industries – such as coal-fired power generation, steel, cement, chemical, paper making, aviation and construction – to fund the transition to decarbonization.

The transition finance concept emerged from the understanding that effective decarbonization of the entire global economy will require much more than green finance. Green finance and sustainable finance – as they are currently defined – have focused largely on supporting activities that involve minimum pollution and carbon emissions. However, a much larger amount of financing is required in carbon-intensive sectors that need to decarbonize, and to eventually achieve net zero emissions.

The key challenge to transition finance is the lack of private sector financing for decarbonization activities due to various barriers, including: the lack of a clear definition of transition activities, which may lead to investor fears that their participation may be seen as “green washing,” or claiming to invest in an eco-friendly business that isn’t; lack of disclosure; which may encourage false transition activities; the lack of financial instruments that provide incentives better performance of emission reductions; and the lack of demonstration projects that show successful decarbonization is achievable in most of the high-emitting sectors.

To address these issues, and to effectively mobilize private investment in transition activities, a transition finance framework needs to be established. To make transition finance feasible, this policy framework should consider the following elements: identification of transition activities; disclosure and reporting; financing tools; incentives, and mitigating social impact.

First, there needs to be a credible approach to identifying and labeling transition activities. Any activity supporting a credible transition towards net-zero greenhouse gas emissions should be considered as transitional. One way to identify transition activities is to develop a “transition finance taxonomy” in which specific transition activities are presented with descriptions of technical pathways and emission reduction targets. This is being done in the European Union and some pilot regions in the People’s Republic of China, focusing on industries such as steel, cement, petrochemical, and agriculture industry.

The transition finance concept emerged from the understanding that effective decarbonization of the entire global economy will require much more than green finance.

The identification approaches should be flexible and dynamic, and serve to reduce the cost of market participants and mitigate risks.

Second, good reporting practices are also necessary to help prevent transition activities that convey a false impression or support an unsubstantiated claim on sustainability, where firms may claim to invest in emission reduction activities but are in fact involved in projects that lock-in high carbon emissions– a behavior often termed as greenwashing.

Third, a toolbox of financial instruments should be developed to support transition activities. This can include debt instruments such as transition and sustainability-linked loans and bonds. For example, if the fundraiser of a project can deliver stronger-than-expected emission reduction performance, investors will charge a lower interest rate. The toolbox can also include equity-related instruments, such as the transition funds launched in Europe. Additionally, existing instruments such as private equity, venture capital funds, buyout funds, and mezzanine financing facilities can also be adapted to facilitate transition activities. De-risking facilities should also be developed to help lower the perceived risks of transition.

Fourth, fiscal subsidies, tax incentives, and green finance-related incentives such as central bank financing facilities should be considered to support transition finance and enhance the bankability of transition projects.

Fifth, socioeconomic costs, such as unemployment, energy shortages, and inflation, need to be accounted for and disclosed during the design of transition activities. To mitigate these costs, assessing employment implications thoroughly and including mitigation measures in transition plans, such as employee training and reskilling programs, are crucial to realize “just transition.” Efforts are also encouraged to integrate such social elements (e.g., employment performance) in the key performance indicator design of sustainability-linked products.

Asia and the Pacific should take the following steps to promote transition finance:

First, regulators and financial institutions in the region should clarify the eligibility criteria for transition activities, which could be in the form of transition taxonomy, to lower the cost for banks and investors. This will guide companies to adopt the best technical pathways for transition.

Second, demonstration projects should be developed to highlight the feasibility of transition finance, which is new to most in the financial sector. Concrete examples are needed to counter the perception of high costs and risks. These could include transition project in coal-fired power generation, steel, cement, and petrochemicals.

Last, Asia and the Pacific should consider launching its own transition funds. Transition funds can be launched by either governments or international organizations, such as multilateral development banks and other international financial institutions, or through international collaboration among different countries to reduce the funding costs and risks for these transactions, and help attract private sector investment.

A broad range of activities, with innovative financing options, are needed to address climate change. Transition finance is an important part of that equation.

This blog post is based on information shared at East Asia Forum 2022.

Ma Jun

Ma Jun

President, Institute of Finance and Sustainability (based in Beijing)

 Akiko Terada-Hagiwara

Akiko Terada-Hagiwara

Principal Economist, East Asia Department, ADB

This blog is reproduced from Asian Development Blog.

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