Climate development finance

Southeast Asia is among the world’s regions most vulnerable to climate change. A growing population, alongside rising urbanisation and industrialisation, is driving demand for more infrastructure and energy services. The ADB estimates the region requires $210 billion annually for climate-resilient, low-carbon infrastructure.¹

Yet Southeast Asia’s clean energy spending is only 2% of the global total, despite the region accounting for 9% of the world’s population, 6% of its GDP, and 4% of energy consumption.² Annual energy investment averaged $72 billion between 2021 and 2024 and would need to reach $130 billion to meet the region’s energy goals — a gap international development finance is well placed to close.³

Trends

Over the past decade, ODF incorporating climate objectives has increased. Climate-related funding grew from $9 billion in 2015 to a 2021 peak of $14.3 billion. In 2024, climate-related funding amounted to $11.7 billion, a decline of 8% that reflects the overall decrease in ODF to the region. As a share of total ODF, however, climate-related funding rose from 44% in 2023 to 45% in 2024. The region has averaged $12.7 billion in climate-related ODF annually since 2021, well above the pre-pandemic average of $8.2 billion. Climate-related ODF is disbursed throughout the region as non-concessional loans (44%), concessional loans (35%), and grants (21%).

Most of the growth in climate ODF has come from projects where climate objectives are classified as a “significant” rather than “principal” objective. Climate action is increasingly identified as a “significant” goal in the policy triggers attached to multi-billion-dollar budget support loans. This has allowed ODF targeting climate objectives to grow even as projects with a “principal” climate objective have declined.

In 2024, funding for projects with climate as the “principal” objective increased slightly in both absolute and relative terms, representing 16% of climate-related ODF to Southeast Asia. However, “principal” climate-related finance is well below its pre-pandemic annual average of $2.9 billion, or 36% of climate-related ODF.

Climate-tagged ODF in Southeast Asia targets the energy, transport and storage, and government and civil society sectors. The energy sector has received 25% of climate-related support since 2015. However, this share has fluctuated over the reporting period, rising from 33% in 2015 to a peak of 44% in 2018 before falling steadily to 14% in 2024. The transport and storage sector’s share of climate-related ODF has risen steadily from 9% in 2015 to 24% in 2024, reflecting investment in mass transit systems and railway projects across the region. Within “principal”-tagged climate ODF, the energy sector’s share is higher still, at 49% since 2015, primarily for large-scale hydropower, though this share fell to 19% in 2024.

Between 2015 and 2024, climate-related ODF in Southeast Asia shifted from human development towards infrastructure. This reflects the end of large pandemic support packages that carried climate tagging, alongside a rise in hydropower and mass transit projects.

Key partners

The ADB has been Southeast Asia’s largest provider of climate-related development finance, contributing $25 billion (24% of the regional total) between 2015 and 2024, with 88% disbursed through non-concessional loans. Most of this went to the government and civil society sector, although some was pandemic-era financing that listed climate as a policy objective. The energy sector, mostly sustainable energy projects, was another significant recipient.

Japan, China, and France — the region’s second-, third-, and sixth-largest providers of climate-related ODF respectively — each exceeded the ADB’s level of “principal” climate support. On that narrower measure, the order differs: China has contributed 31% of “principal” climate-related assistance since 2015, Japan 25%, and France 12%. The ADB, by comparison, has provided 8%.

China’s “principal” climate-related ODF in the region is typically disbursed through non-concessional loans (98%) and is dominated by hydropower projects, whereas Japan’s, usually disbursed through concessional loans (96%), is concentrated in transportation projects. France has focused its support on disaster risk, climate change management, and adaptation budget support, and disburses most of this assistance through concessional loans (94%).