Lending for climate investments in emerging markets represents less than 5% of banks’ cumulative portfolios, a World Bank report has revealed, calling on financial institutions to do more to support these investments.
“This observation has serious consequences,” the World Bank underlines in a recent report, to the extent that banks dominate the financial sector in developing countries.
Noting that climate change is expected to have a significant impact on economic prospects and development outcomes in emerging markets and developing economies (EMDEs), it requires “much larger investments than currently,” the report argues.
EMDEs face significant financing gaps in low-carbon and climate-resilient investments, says Axel van Trotsenburg, WB senior managing director for development policy and partnerships, who advocates for scaling up climate action and mobilizing private investment.
This type of financing is 10% in EMDEs, and 76% in advanced economies, notes the World Bank in its report entitled “Finance and Prosperity 2024”.
The first in a future annual series designed to analyze developments and vulnerabilities in the financial sector in low- and middle-income countries, this report focuses on two topics: the link between banks and sovereign debt, and the climate challenge for the banking sector.
In this regard, the report recommends that countries increase bank reserves well in advance, strengthen the effectiveness of financial safety nets, conduct stress tests and put in place a range of essential tools.
LNT
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– 2024-09-04 12:20:22
