Bridging the $1.3 trillion climate finance gap: a pragmatic agenda for emerging markets

Luiz Awazu Pereira da Silva and Fernanda Gimenes propose a sequenced and pragmatic reform agenda to help close the US$1.3 trillion annual climate finance gap for emerging markets and developing economies by 2035. The agenda connects regulatory, institutional and technological reforms across the financial system, showing how each component can lower risk premiums, unlock investment and make climate finance both viable and scalable. It is an old debate in international macroeconomics: global savings do not naturally flow to emerging markets and developing economies (EMDEs), where returns to investment are higher and the need for capital is greater than in advanced economies. EMDEs are constrained by perceived risks, persistent home bias and deep structural asymmetries in the international financial system. This creates a double paradox that has evolved since the global financial crisis.