Low-income economies will struggle to fill climate finance gap: Moody's

By Ovunc Kutlu

ISTANBUL (AA) - Low-income economies will struggle to fill climate finance gap, according to a report by the US-based global credit rating agency Moody's.

"Vast sums are needed for the world to shift to a low-carbon economy, build resilience, and adapt to the effects of climate change," said the report released on Thursday. "Investment has risen rapidly since the 2015 Paris Agreement, but it will take a lot more to reach the goal of global net zero emissions by 2050."

The rating agency said wide investment gaps exist for both climate mitigation to reducing greenhouse gas emissions, and adaptation in order to adjust to the effects of climate change.

The agency estimates nations spending almost $2 trillion on clean energy this year, including low-carbon power, infrastructure, energy efficiency and electrification, adding there will be an estimated annual climate mitigation investment gap of nearly $2.4 trillion by 2030.

"Adaptation investment has drawn much less funding, given its more limited commercial potential, and is well below estimated annual needs of about $400 billion, standing around $72 billion in 2022," said the report.

"This adds up to an annual climate investment gap of $2.7 trillion by 2030 – around 1.8% of global GDP – and exposes vulnerable communities to rising risks from climate change, particularly in emerging markets where investment needs are largest," it added.

Climate change also has far-reaching credit implications for economies and businesses through physical effects on livelihoods and infrastructure, or through the changes involved in reducing carbon emissions, according to Moody's.

It advised that early investment in clean energy can prevent big economic losses from climate change.

"In addition to lives preserved, rapid climate spending could lead to higher growth and more revenue for governments globally over time," said the report.