Progress on climate and social inclusion may come under pressure

Southeast Asia’s traditional development partners are increasingly incorporating greater climate change mitigation and adaptation, gender equality, and disability inclusion objectives into their projects. However, shifting priorities under the Trump administration in the United States threaten to derail this progress.

Climate financing

Despite a donor focus on climate change objectives, clean energy typically only accounts for around 15% of this climate funding. The remainder is focused on a diverse range of climate change mitigation and adaptation initiatives, including forestry management, financial sector projects to increase access to green finance, governance programs to improve disaster resilience, and the building of climate-resilient infrastructure.

Over the past decade, ODF incorporating climate objectives has steadily increased, both in absolute terms and as a share of total ODF. Between 2015 and 2023, climate-related funding grew from $9 billion to $11.5 billion, rising by an average of 6% per year. In 2023, that represented 40% of total ODF to the region. That year, there was a small dip in total climate ODF. This was primarily driven by a reduction in Japanese funding, while that from most other major partners saw an increase.

Most of the growth in climate ODF has come from projects where climate objectives are classified as a “significant” rather than “principal” objective, meaning climate considerations have been integrated into broader development projects instead of being the primary focus of the investment. For example, 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, such as renewable energy generation, have declined.

In 2023, funding for projects with climate as the “principal” objective declined in both absolute and proportional terms, representing just 13% of total climate finance — the second-lowest share in the past decade after 2020, when funding focus was switched towards Covid-19 related support.

The Asian Development Bank (ADB) estimates Southeast Asia requires $210 billion annually for climateresilient and low carbon infrastructure investment.¹ Based on historical patterns, multilateral and bilateral development finance typically account for around 65% of climate finance, implying an expected ODF contribution of $136.5 billion per year — unless private and domestic public investment were to grow dramatically.² However, ODF investment in infrastructure projects with climate goals remains low and fell from $4.5 billion in 2022 to under $4 billion in 2023 — less than 3% of that needed, based on the ADB estimate. While Japan and the ADB have stepped up support for climate-sensitive rail, subway, and urban commuter projects, serious funding gaps remain in water, energy, and communications infrastructure.

Social inclusion financing

This year, for the first time, the Southeast Asia Aid Map online database includes a unique tag and filter to identify projects that integrate disability inclusion as an objective. The methodology is based on the OECD Development Assistance Committee’s disability inclusion marker, and includes estimates for the 77 development partners (out of 106) in the Aid Map database who either do not use the marker or do not report to the Organisation for Economic Co-operation and Development (OECD). On a similar basis, the Southeast Asia Aid Map already includes a tag and filter for projects incorporating gender equality objectives.

The MDBs have led the charge for the integration of disability inclusion and gender equality objectives into their activities. However, over-reliance on the MDBs for this kind of support is now a vulnerability.

The proportion of total ODF to Southeast Asia that integrates disability inclusion targets has risen steadily from 8% ($818 million) in 2015 to 17% ($4.5 billion) in 2023, with more than 70% of that support coming from the MDBs, especially the ADB (54%). The story is the same for gender equality funding. The proportion of total ODF to the region incorporating gender equality objectives hit a record high in 2023 at 45%, or $13 billion, with the MDBs (especially the ADB) the source of more than two-thirds of this funding, followed by major bilateral partners Japan, Germany, and the United States.

The intersection of policy markers across climate, gender equality, and disability inclusion represents a new frontier in ODF provision and measurement. Around 14% of total ODF in 2023 integrated all three policy goals to some extent.

There are storm clouds on the horizon, however. The MDBs are currently the largest source of ODF support for climate, gender equality, and disability inclusion. The United States is the largest and second-largest shareholder at the World Bank and ADB respectively. Pushback against climate and inclusion objectives from the Trump administration and its scepticism towards multilateralism could have major consequences for ODF support for climate action and social inclusion in the region.