$20 trillion climate investment opportunities found in Asian cities

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IFC’s report entitled Climate Investment Opportunities in Cities analyses cities’ climate-related targets and action plans in six regions, identifying opportunities in priority sectors such as green buildings, public transportation, electric vehicles, waste, water, and renewable energy. It highlights the innovative approaches that cities already use – such as green bonds and public-private partnerships – to attract private capital and build urban resilience.

Investment potential in cities in East Asia-Pacific and South Asia, accordingly, are estimated at $17.5 trillion and $2.5 trillion across the six priority sectors, totalling $20 trillion to 2030.

It says with its plans, policies, and projects, the Asia-Pacific region has the highest climate smart investment potential of any region in the world, with by far the biggest opportunity in green buildings, estimated at $17.8 trillion by 2030.

With more than half of the world’s population currently living in urban areas, cities consume over two-thirds of the world’s energy and account for more than 70 per cent of global carbon dioxide emissions. How cities address climate change will be critical to efforts to limit global warming to 1.5 degrees Celsius, according to the Intergovernmental Panel on Climate Change (IPCC).

“There is a great urgency to address climate change – we must take meaningful action now,” said IFC CEO Philippe Le Houérou. “Cities are the next frontier for climate investment, with trillions of dollars in untapped opportunities. To deliver on the promise of climate-smart cities, the public sector needs to enact reforms that are aimed at attracting more private sector financing.”

“With the expected dramatic increase in urban population centres in Asia, there is even more of an opportunity for a low-carbon transition in cities, which already account for much of the GDP in this region,” said IFC regional director for East Asia and the Pacific, Vivek Pathak. “In Jakarta, there is about $30 billion investment opportunity, particularly in green buildings, electric vehicles, and renewable energy. The report shows megacities in Asia also have significant potential for investments that yield emission reductions.”

A corner of Ho Chi Minh City - the southern economic hub of Vietnam. (Photo: Cafef.vn)

Globally, green buildings will account for $24.7 trillion of cities’ climate investment opportunities. Significant investment potential exists in low-carbon transportation solutions such as energy-efficient public transport ($1 trillion) and electric vehicles ($1.6 trillion). At the same time, clean energy ($842 billion), water ($1 trillion), and waste ($200 billion) remain essential components of sustainable urban development.

In the Asia-Pacific, the report estimates the investment potential in green buildings is $17.8 trillion, in waste $104 billion, in public transport $352 billion, in renewable energy $407 billion, in climate-smart water $571 billion, and in electric vehicles $783 billion.

Addressing climate change is a strategic priority for IFC. Since 2005, IFC has invested $22.2 billion in long-term financing from its own account and mobilised another $15.7 billion through partnerships with investors for climate-related projects. The latest report is part of the Climate Investment Opportunities report series initiated by IFC in 2016.

Based on IFC’s analysis of the climate pledges made by the region’s four countries studied for this report – China, Indonesia, the Philippines, and Vietnam – the total estimated climate-smart investment potential is more than $16 trillion by 2030. Nearly 81 per cent of this potential is construction of new green buildings in China ($12.9 trillion) – this is the result of China’s aim to move 250 million people into cities by 2025 and is reflected in their Nationally Determined Contribution (NDC). Beyond China’s green buildings sector, the opportunity to develop the region’s urban areas is immense and is largely composed of three primary sectors: buildings, transport, and waste.

The commercial investment potential in climate-smart urban transport for the four countries is almost $1.4 trillion, and for the municipal solid waste sector the opportunity is over $53 billion. Construction of new green buildings is a $345 billion opportunity in Indonesia, the Philippines, and Vietnam. Opportunities for investment in climate-smart agriculture, forestry, and land-use projects across the region are also important, but the current lack of available data for these sectors hindered IFC’s ability to produce investment estimates of sufficient quality.

Vietnam’s climate-smart business investment potential, as per IFC’s Climate Investment Opportunities in Emerging Markets report, is estimated at $753 billion, with the majority ($571 billion) going towards the country’s transportation infrastructure needs by 2030. Potential investment in renewable energy totals $59 billion, with over half of this ($31 billion) in solar photovoltaic and another $19 billion for small hydropower projects. New green buildings represent an almost $80 billion investment opportunity.

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