Banks in Emerging Markets Fall Short on Climate Financing

Banks in Emerging Markets Fall Short on Climate Financing: A recent World Bank report reveals that in nearly 60% of banks in Emerging Market and Developing Economies

(EMDEs), climate-related lending accounts for less than 5% of their overall portfolios,

while over 25% of banks offer no climate financing at all. This is particularly

concerning given the significant impact of climate change on

economic opportunities and development outcomes in EMDEs,

which require substantial investment to address.

The report highlights the crucial role banks in EMDEs can play in

bridging the climate financing gap, as they dominate the financial sector in these economies. However, the current level of climate-related lending is insufficient,

and more needs to be done to encourage private investment in low-carbon, climate-resilient projects.

word bank

Axel van Trotsenburg, World Bank Senior Managing Director of Development Policy and Partnerships, emphasized the need for increased climate action

and private investment in EMDEs. Pablo Saavedra, World Bank Vice President for Prosperity, noted the importance of the banking sector in this transition process

and highlighted innovative approaches being tested globally, such as green and sustainable taxonomies, to support climate financing.

The report also highlights the underfunding of adaptation efforts,

with only 16% of domestic and international climate finance in EMDEs being channeled towards adaptation. The adoption of green and sustainable taxonomies is essential to increasing climate-related lending, but currently, they only cover 10% of EMDEs, compared to 76% of advanced economies.

the finance

The Finance and Prosperity 2024 report is the first in an annual series examining financial sector developments and vulnerabilities in low- and middle-income countries, and it underscores the need for increased focus on climate financing in EMDEs.