- Regarding the climate transition, the stakes for emerging markets are incredibly high.
- According to the United Nations, developing countries face climate change adaptation costs that could reach $300 billion annually by 2030, and $500 billion annually by 2050.
- Take, for example, the Mekong River Delta region in Vietnam: this is just one region where rising sea levels and increased flooding are already displacing communities and disrupting agricultural production, threatening the livelihoods of millions who depend on the region’s rice harvest.
As these nations grapple with mounting climate impacts, their banking sectors face a critical juncture. There are two options: drive the transition to a green economy or risk being overwhelmed by climate-related shocks.
During a panel session titled ‘Green horizons: climate transition for banks in emerging markets’ at the EBRD 2025 Annual Meeting and Business Forum in London, on Thursday 15 May, panellists explored how banks in emerging markets can manoeuvre the climate transition, turning risks into big opportunities for future sustainable growth.
Francis Malige, Managing Director of Financial Institutions at the EBRD, revealed that 99% of nearly 100 partner banks across 32 economies now understand the reality of climate change – a dramatic shift from explaining climate risks to actively tackling them.
“The conversation has shifted dramatically with banks and regulators from explaining that climate change is coming to deciding how we’re going to tackle it,” Malige said. “Our banks see this as their social and business role in communities.”
40% of EBRD’s partner banks have established long-term climate goals, with another 31% planning to set them within the next year. Green financial products are becoming standard, with 59% of banks including them in their offerings and 77% expecting their green asset ratio to grow.
The unique case in emerging markets
In this context, climate transition refers to shifting financial institutions and the wider economic system toward practices that support a low-carbon, climate-resilient economy. To this end, financial institutions could:
- Examine their portfolios and aim to reduce their carbon footprint by decreasing emissions related to their operations, lending, and investment portfolios.
- Control risks related to climate change. This includes physical risks, such as damage from extreme weather, as well as transition risks, such as losses from investments in industries that become obsolete in a low-carbon economy.
- Increase their financing of environmentally sustainable projects and technologies, energy efficiency, and sustainable agriculture.
This is primarily about aligning financial activities with global climate goals similar to the Paris Agreement. The goal is to mitigate climate change and build a sustainable financial system.
Dr Rania A. Al-Mashat, Governor of Egypt at the EBRD and Egypt’s Minister of Planning, Economic Development, and International Cooperation, summarised how this extends to emerging markets in terms of externalities. “From an emerging market, we are more prone to shocks. So you put plans and targets, and then externalities come to push you a little bit in terms of policy.” In many cases, this means tightening monetary policy or adopting more fiscal restraint to manage the impact. Both of these measures directly affect the cost of financing for banks at the national level.
Emerging markets or economies are always more vulnerable to climate change. First, they are heavily dependent on climate-sensitive sectors such as agriculture, fishing, and natural resource extraction. These major economic sectors are directly impacted by changing weather patterns, rising sea levels, and extreme droughts and floods, directly affecting food security and economic stability.
Emerging markets also often have inadequate infrastructure, which includes transportation, water management, and energy systems. These factors make them less resilient to climate-related shocks. For example, poor drainage systems can aggravate flooding, and unreliable power grids can disturb essential services during extreme weather.
Thirdly, emerging economies are exposed geographically because they are in highly vulnerable regions to climate change: look at low-lying coastal areas or arid regions. Limited financial resources can delay their ability to invest in adaptation and mitigation measures, making it hard to build resilience.
Dr Rania went on to say, “The government needs to be committed to climate action, and this we find in the different national strategies, be it Vision 2030. In our case [in Egypt], we have a 2050 climate strategy. We have very clear targets when it comes to our MBCs, and we publish them. So, government commitments to these priorities are important because they are tracking these priorities.
Türkiye’s TSKB, one of the region’s pioneering sustainable finance institutions, has been developing climate evaluation tools since 2004. Meral Murathan, executive vice president at TSKB, emphasised that climate action and economic development are complementary rather than competing priorities.
“We believe they’re all connected. If we create collaboration among these topics, the potential growth of countries will be accelerated,” Murathan said. The bank has established board-level sustainability committees and developed internal SDG mapping tools to assess the impact of individual projects.
Türkiye’s renewable energy capacity has reached 61% of total installed capacity, with utilisation accounting for nearly 50% of electricity production, according to Murathan.
War drives practical climate action
The conflict in Ukraine has created an unexpected catalyst for climate-aligned financing, according to Mikael Björknert, chair of the management board at JSC CB PrivatBank. Despite the country being at war, energy security concerns are naturally driving investments in renewable sources and energy efficiency.
“We don’t know how to ensure the population has enough energy for next winter. We need to start working with things that can help – finding new energy sources and being more energy-efficient,” Björknert said. “It comes naturally into play, and we, as a financial institution help corporates with this.”
PrivatBank established its ESG policy in 2023 and has since developed environmental and social risk management systems, despite being “probably 10 years or 15 years later than many countries,” according to Björknert.
—
The EBRD’s approach combines financing with technical assistance and capacity building. The bank has engaged with nearly 70 partner banks and over 300 financial professionals through its training programmes, addressing the 49% of banks that report lacking internal climate expertise.
Al-Mashat highlighted Egypt’s country platform approach, which has mobilised concessional finance of close to $4 billion through partnerships between the EBRD, World Bank, African Development Bank, and bilateral partners. “The only way to expand horizons is through investments in renewable energy, green hydrogen, and electric vehicles – all expanding investment opportunities, employment, and skills,” she said.
Despite growing commitment, reliable data remains the primary obstacle, with 80% of banks struggling to obtain it. Training emerged as another critical need in audience polling during the panel, reflecting the 49% of banks lacking internal climate expertise.
The EBRD has developed online tools, including a technology selector to help identify advanced equipment and has integrated green finance into its Trade Facilitation Program (TFP). The bank also supports green bond issuances, working with clients to properly segregate assets and avoid greenwashing.
As emerging market banks navigate between immediate pressures and long-term climate commitments, the combination of market forces, regulatory frameworks, and international partnerships appears crucial for accelerating the transition while maintaining financial stability.