This report examines critical policy gaps and barriers to climate finance, such as constrained fiscal space, weak institutional capacities to implement Nationally Determined Contributions (NDCs), policy and regulatory gaps, and lack of investment-ready projects. To enable green growth and sustainable development in the region, these barriers need to be overcome in line with each country’s long-term strategic development vision and broad legal framework, as well as international commitments to reduce greenhouse gas emissions through initiatives such as the NDCs.
The report also discusses a range of financial instruments and mechanisms, including project finance, funds and facilities, thematic bonds, carbon pricing and debt for climate swaps, and highlights their utility, scalability, governance and related monitoring issues. Implementing these instruments and mechanisms can help overcome existing challenges to climate change finance and unlock the growing private sector demand for green and climate investment opportunities.