Mr. Sakai Ando, Mr. Francisco Roch, Ursula Wiriadinata, and Mr. Chenxu Fu
Financial markets will play a catalytic role in financing the adaptation and mitigation to climate change. Catastrophe and green bonds in the private sector have become the most prominent innovations in the field of sustainable finance in the last fifteen years. Yet, the issuances at the sovereign level have been relatively recent and not well documented in the literature. This Note discusses the benefits of issuing these instruments as well as practical implementation challenges impairing the scaling-up of these markets. The issuance of these instruments could provide an additional source of stable financing with more favorable market access conditions, mitigate the stress of climate risks on public finances and facilitate the transition to greener low-carbon economies. Emerging market and developing economies stand to benefit the most from these financial innovations.
International Monetary Fund. Monetary and Capital Markets Department
The Philippines is highly vulnerable to risks from climate change. The Philippines is categorized as one of the world’s most vulnerable countries to climate change and natural disasters, especially typhoons. Depending on where a severe typhoon hits the Philippines, it could potentially cause a systemic impact. All major cities and most of the population reside on the coastline, including the metropolitan Manila area where about 60 percent of economic activities take place. On the other hand, exposures to transition risk are concentrated in the coal-based power generation sector and the government’s licensing policy to build new power plants.