One Goal, Many Pathways – Matching Global Sustainability Ambitions with Local Realities

Introduction

Global efforts towards sustainability have now moved from aspiration to execution. Discussions around net zero, ESG commitments and SDGs have now become measurable objectives such as climate-risk pricing, transition plans, funding resilience, risk quantification, disclosures and capital allocation decisions.

As a result, climate financing is now subject to many commercial considerations that govern conventional finance – including risk, return, affordability, market readiness and investor confidence.

The next phase of sustainable finance will be shaped less by the "sustainability" label and more by commercial realities. Hence, the challenge before us is to address these concerns without letting them dampen the enthusiasm and ambitions of all parties concerned.

Uneven Scaling of Sustainable Finance

Sustainable debt instruments have now become a mainstream segment of the world's capital markets. Climate Bonds Initiative reported cumulative GSS+ instruments worth US$8.1 trillion across 109 countries by the end of 2025, while annual issuance exceeded US$1 trillion for the third consecutive year.

Europe accounted for around 45 percent of aligned annual GSS+ issuance in 2025, while issuances in the Asia Pacific region were about US$305.6 billion. Therefore, while participation is broad, the scale of participation remains uneven.

This is reflective of how sustainable capital favours jurisdictions with strong disclosure systems, strong credit and sovereign ratings, deep local bond markets and predictable policies.

States Struggle to Meet the Financing Gap

In Emerging Markets and Developing Economies (EMDEs), the funding required for sustainability investments is well beyond the affordability of most governments. The United Nations estimates that EMDEs need about US$4 trillion to meet sustainable development priorities. At COP29, parties agreed to a new climate finance goal whereby developed countries would lead the raising of at least US$300 billion per year for EMDEs by 2035, as part of a wider attempt to scale total funds raised to reach US$1.3 trillion per year by 2035.

The International Energy Agency predicts global energy investment will reach about US$3.4 trillion in 2026, of which low-carbon and efficiency-related investments are forecast to be US$2.2 trillion – meaning almost two-thirds of investment will be "greener" investments. While this is very encouraging news, it also estimates that low-carbon energy investments remain stronger in advanced economies and China than elsewhere.

EMDEs rely on sovereign efforts and banks to meet climate investment needs. Unfortunately, the World Bank's Finance and Prosperity 2024 report notes that climate financing accounted for less than 5 percent of portfolios in almost 60 percent of banks domiciled in EMDEs, while 28 percent had no climate financing products on offer, and a further 23 percent were unable to estimate their climate financing contributions due to data deficiencies.

Adaptation financing is critical but remains challenging...

Climate mitigation has consumed most of sustainable finance because mitigation impacts are easy to measure, compare and communicate. Financial quantification of the impact of climate adaptation and building resilience is challenging due to data deficiencies and impact modelling weaknesses. Therefore, investments in climate resilience and adaptive measures are most often undertaken by the public sector, while the benefits are typically distributed across many beneficiaries.

UNEP's Adaptation Gap Report 2025 estimates that developing countries need US$310 billion annually in adaptation investments, while international public adaptation finance flows to developing countries were only US$26 billion in 2023.

Therefore, entities seeking funding for climate adaptation and resilience need to support their cases with robust data, clearer articulation, strong justifications and innovative structuring.

Convergence Through Different Pathways and Timelines

Efforts over several decades by various institutions to harmonise sustainability reporting are truly commendable. These efforts have now brought about several globally accepted standards and reporting methodologies that are used to transparently and consistently compare and benchmark the performance of businesses across industries and jurisdictions. According to the IFRS Foundation, 36 jurisdictions had adopted, were using, or were in the process of introducing ISSB Standards into their reporting regulations.

However, it is important to differentiate between comparability and identical implementation. Countries are at various stages in their understanding of principles and standards, institutional readiness, data availability, capital availability, national priorities and market applicability. Therefore, any effort made to "do no significant harm" should be encouraged and appropriately rewarded.

Institutions in EMDEs may have transition plans, interim targets and implementation timelines that look very different from those of a developed-market peer because their operating environment and affordability are different.

Forcing strict standards universally can potentially reduce greenwashing, but without the necessary supporting resources, compliance may become unrealistic in some jurisdictions and lead to fewer firms adopting such standards. Conversely, weak standards will encourage a larger number of participants, but at the expense of credibility. Therefore, the market needs a middle path: baselines, targets and implementation roadmaps that are locally grounded, but with clear transition-plan expectations and transparent disclosure of limitations.

How Can Exchanges Contribute?

WFE members transact in instruments of more than 49,000 companies, with an aggregate market capitalisation exceeding US$100 trillion. This client base and global reach offer exchanges a unique opportunity to set and govern transition and mitigation pathways, establish social and governance frameworks, adopt transparent and credible reporting standards, and publish impact data for the benefit of climate investors and investees alike.

WFE's 11th Annual Sustainability Survey is certainly encouraging – among the surveyed exchanges, 82 percent offered sustainability-related products, 68 percent had emissions disclosure requirements, and almost 50 percent were operating with anti-greenwashing measures. Unsurprisingly, the lack of reliable ESG data was highlighted as the biggest barrier to embedding sustainability into exchange operations.

As the basic frameworks, case studies and examples have been established, it's perhaps time to deepen the engagement of exchanges to make climate finance instruments a mainstay through:

• Enhancing sustainable and transition-finance instruments with clear use-of-proceeds and reporting requirements.
• Guiding issuers towards the adoption of global reporting baselines within local contexts.
• Establishing climate data warehouses to reduce the cost of ESG reporting.
• Providing education for verifiers, arrangers and boards of potential listees.
• Driving product innovation around resilience, carbon markets, transition and local-currency climate finance.

The immediate priority for EMDEs is not sophisticated products, but the establishment of simple, localised taxonomies, practical issuer guidance, capacity building around use-of-proceeds, impact monitoring, and kick-starting the market through a few "model" transactions that would serve as templates for future issuers.

The Case for Phased Enforcement

Taking an extreme view of climate transition in the case of EMDEs is counterproductive. Blanket exclusions on financing high-emitting sectors in EMDEs can withhold capital from the very sectors that need investment in decarbonisation.

Investors should take a more contextual and progressive approach when evaluating issuances from EMDEs compared with proposals from more data-rich markets. This necessitates a deeper analysis of the instrument – whether proceeds are linked to genuine and meaningful efforts, the realistic and achievable nature of the proposed transition plan, the issuer's ability to absorb currency, policy and technology shocks, and whether country-specific constraints have been identified and addressed.

Similarly, issuers should acknowledge that access to sustainable capital depends on the quality of disclosures – not simply on "good intentions". Weakly structured transition claims without measurable and meaningful milestones undermine the integrity of the instrument. A credible proposal should articulate the use of proceeds or measurement indices, baselines, governance processes, expected environmental or social outcomes, reporting cycles and external review arrangements. In EMDEs, it should also explain how local constraints – currency, policy, technology, data and socioeconomic affordability – affect transition pathways.

Common Objective, Many Credible Pathways

The foregoing is not a call for lowered climate ambitions, but for a fairer and more equitable distribution of finance across a wider selection of recipients. Being insensitive to the needs of weaker economies will only hinder the global climate transition by making capital inaccessible in the places where it is most needed.

The call, therefore, is to build sustainability frameworks that blend ambition with flexibility. While preserving comparability and presenting credible transition pathways, they should guard against greenwashing but avoid becoming an unbearable compliance burden on smaller markets. They should mobilise private capital while recognising where public finance, guarantees and concessionality are necessary to make projects feasible.

In this context, exchanges can play a pivotal role in helping to translate climate and sustainability goals into credible, commercially viable and globally recognised instruments. In doing so, they can support the world's climate journey from aspiration to reality.

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