Eco Wallet

South Asia is one of the most vulnerable regions globally, with more than half of the population affected by one or more disasters. With an increase in temperature and precipitation over the last 60 years, there are increasing incidences of droughts and floods. More than 800 million people are living in regions likely to become hotspots. This poses severe risks to critical infrastructure, threatens food security and livelihoods, and deteriorates living conditions. Strategic climate investments will effectively enable countries to adopt adaptation and mitigation strategies to reduce climate risks and pave ways for sustainable development and resilience.

The Paris Agreement highlights the collective role of the developed countries to provide $100 billion per year by 2020 to restrict global warming well below 2°C if not 1.5°C above the pre-industrial temperature level.

According to the Global Finance Report 2021, although the total global climate finance flows has increased over the last decade, reaching USD 632 billion in 2019/2020 (Annual average), it is still insufficient to meet the target of limiting global warming to 1.5°C. Climate finances should increase to at least 590% – to USD 4.35 trillion annually by 2030 – to meet our climate objectives.

As highlighted by ADB, the cost of climate change will depend on how the global community tackles climate change. Based on current trends, South Asia may need to spend an average of 0.86% of its GDP or an equivalent of $73 billion from now to 2100 to adapt to climate change.

The combined efforts by countries to keep temperatures below 2 degrees centigrade, will help South Asia’s economy to be only reduced by 1.3% annually by 2050 and 2.5% by 2100, and the cost of shielding itself from the worst of the impacts would be nearly halved to around $40.6 billion or 0.48% of GDP.

The South Asian countries are proactively building resilience and seeking investments for mitigation and adaptation from both public and private sectors for sustainable development of water, industry, land use, transport, energy infrastructures, etc. Different mechanisms and tools are used for climate finance solutions. The GCF institutions operate through nationally designated authorities like  NEPA in Afghanistan, department of Macro fiscal and Development Finance in Bhutan. The GCF operates through the Ministry of Environment Forests and Climate change In India, Ministry of Environment forests and Climate change and International economic cooperation coordination Division (Ministry of Finance) In Nepal , Ministry of Climate Change in Pakistan  and through the Ministry of Mahaweli Development and Environment in Sri Lanka, etc.

South Asian countries have used different instruments like government budgetary expenditures, grants, low cost project debt, project level equity from the public sector and balance sheet financing through the private sector. Instruments like green bonds are used by India and Pakistan for sustainable renewable power projects. In Bangladesh IDCOL lending small and utility scale renewable energy projects. Nepal NEA anticipates developing more than 4000 MW of hydropower projects between 2020-2030 through subsidiary companies. In Sri-Lanka the   Hatton National bank also embodies the green concept through energy and water saving.

Bangladesh and India are using Blue bonds to promote sustainable fishing protection and prevent coral degradation. Additionally, Pakistan’s, Maldives and Sri Lanka implements ocean and its resource protection. Other innovative tools like microfinancing is used by different SHG’s, climate change adaptation funds to provide low interests loans to small farmers and small enterprises. The Pali karma Sahayak and BRAC in Bangladesh, Rural micro finance development center and clean energy development Bank in Nepal etc. are different tools through which micro financing for climate change are practiced.

In the context of Paris agreement both adaptation and mitigation measures are effective, maximum climate change investments flows towards mitigation measures. COVID-19 pandemic impacts reassured the importance of strengthening adaptation strategies. Cyclone Amphan in Bangladesh alarmed the need of improvements in the early warning system and the evacuation efforts. Such adaptation measures helped save lives of people as compared to the earlier cyclone events. Upgradation and communication in the Indian EWS had led to better communication of weather services. Additionally, capacity building programmes have strengthened climate resilience.

The South Asia region at the moment has huge climate finance investment potential. Innovative solutions like – implementation of systemic risks management approaches, sector-wide decarbonization strategies, collaboration of public and private investments requires strategic investments. Currently, different financial frameworks Bangladesh’s climate fiscal framework, Nepal’s climate change financing framework, Pakistan’s roadmap of climate change and investments are developing climate solutions integrated with financial investments.

Climate investments in South Asia will not only ensure fulfillment of the national objectives and commitments but will also lead to a resilient and sustainable future.