Catalytic finance in Asia: What’s needed to scale climate finance in 2025 and beyond?

Climate finance in Asia Pacific is at a critical point. While the region hosts over 52% of global energy-related CO2 emissions and 82% of global coal power capacity, it also represents one of the world's greatest opportunities for climate impact at scale.

Our recent Scaling Climate Finance in Asia webinar brought together leading experts to explore how catalytic climate finance can unlock Asia's potential through tailored solutions across three pivotal sectors: agriculture, blue carbon ecosystems, and energy transition.

Palestrantes:

Ivan Tan, Head of Markets and Ecosystem Development, Monetary Authority Singapore (MAS)

Xavi Laguarta, Co-Founder, Mitti Labs

Dr Siti Maryam Yaakub, Senior Director, International Blue Carbon Institute at Conservation International

Louis Booth, Head of APAC, Sylvera

Why Asia Pacific needs catalytic finance now

The numbers right now

The IMF's latest research shows that Asia Pacific requires $1.1 trillion annually for climate mitigation and adaptation needs, yet current investment falls short by approximately $800 billion.

The scale of Asia's climate challenge is matched only by its vulnerability and growth potential:

• Climate impact: Asia Pacific is the most disaster-prone region globally, with Swiss Re estimating a 3.2°C warming scenario could shrink the Asian economy by 26.5% by 2050
• Economic dependence: 63% of Asia-Pacific GDP depends directly or indirectly on nature and ecosystem services
• Growth opportunity: With a median population age of 32 (vs. 40+ in Europe), Asia's population is expected to grow to 5.2 billion by 2050
• Energy demand: Southeast Asia's energy demand alone will grow 4% annually until 2035, representing 25% of global energy demand growth

What is catalytic finance?

Catalytic finance in this case means climate finance that is patient, risk-tolerant, and strategically targeted to de-risk and scale climate solutions. What’s so important is that catalytic finance is used to then mobilize much larger flows of investment at a later stage.

This multiplier effect is crucial. Well-structured blended finance in this way can generate 3-5x leverage from private capital when executed correctly, making every dollar of catalytic investment punch far above its weight.

Agriculture and rice transformation in Asia

Rice is consumed daily by about half the world's population, and accounts for 1.8% of global emissions, equivalent to the greenhouse gas emissions coming from aviation. The agriculture discussion focused on rice's outsized climate impact:

• Scale: 150 million smallholder farmers grow rice across Asia Pacific
• Emissions: Traditional flooding practices create anaerobic conditions producing methane, a potent greenhouse gas
• Water impact: Rice consumes approximately 40% of global freshwater resources
• Geographic concentration: 90% of rice production occurs in Asia 

However, innovative farming practices - such as those introduced by Mitti Labs - can maintain yields while dramatically reducing environmental impact.

Key techniques:

• Alternate wetting and drying: Controlled dry-down events during safe periods (avoiding flowering stage)
• Dry-seeded rice: Eliminates need for field flooding during seeding
• Biomass management: Alternatives to burning leftover rice stubble

Multiple value streams:

• Methane emission reductions
• Water conservation (critical in water-stressed regions like India)
• Maintained or improved crop yields
• Enhanced farmer livelihoods

The financial challenge for rice transformation projects

Despite strong corporate demand for rice carbon credits, scaling faces a critical bottleneck:

With approximately a 12-month gap between starting to engage with a farmer and a credit being issued, project developers face a financial bottleneck. If there were more robust means to finance that period, there’s the potential to scale these projects rapidly.

This highlights where catalytic finance can have immediate impact, bridging these gaps with relatively straightforward financing mechanisms.

Read our AWD explainer article here to find out more about alternate wetting and drying, and how Mitti Labs’ innovative approach is transforming rice cultivation.

Blue carbon and preserving marine climate champions

Firstly, what is blue carbon?

Scientific definition: All carbon captured by marine and coastal ecosystems
Actionable blue carbon: Ecosystems with proven high carbon sequestration that can be measured, managed, and linked to financial incentives

Currently proven actionable ecosystems:

• Mangroves
• Seagrasses
• Salt marshes

Untapped potential of blue carbon:

• Mangrove restoration in Asia Pacific could sequester over 2 million tons of CO2 by 2030
• Seagrass conservation alone could prevent 50 million metric tons of annual CO2 emissions
• Multiple ecosystem services: fisheries, ecotourism, coastal protection, nutrient cycling

The hidden climate value of blue carbon

The real value is in what’s avoided by keeping nature doing what it's already doing. The avoided emissions - which is the hidden climate value of simply just keeping these ecosystems where they are - are the key.

This insight reveals a critical gap in current financing approaches. While restoration projects can access carbon markets, pristine ecosystems performing vital climate functions struggle to attract funding, creating incentives that reward degradation over preservation.

Conservation International's Blue Carbon Plus initiative explores new business models that enable sustainable production within conserved ecosystems, creating multiple revenue streams while maintaining climate benefits.

Accelerating energy transition through coal plant retirement

If all the Asian coal plants continue running to the end of their technical lifespan, it’s estimated this will consume around two-thirds of the existing carbon budget for the 1.5 degree scenario. However, transition away from coal is a complex topic in Asia.

Economic barriers:

• Average coal plant age: 15 years (out of 40-50 year lifespan)
• Long-term power purchase agreements with national utilities
• Significant unrecovered capital investments

Social considerations:

• Local communities dependent on coal value chain employment
• Need for reliable baseload power during transition
• Energy access and affordability concerns

Coal transition credits: A breakthrough approach

The MAS TRACTION Transition Credits Coalition

• Concept: Generate carbon credits from emissions reductions when coal plants retire early
• Challenge: Retiring one 1-gigawatt plant 5 years early creates a $70 million economic gap
• Innovation: New revenue streams are making early retirement economically viable
• Progress: 30+ industry participants developing credible, scalable framework

Real-world impact already 

The South Luzon Thermal Energy Corporation pilot project in the Philippines demonstrates potential, advancing plant retirement from 2040 to 2030, which could eliminate 10-25 years of coal emissions through transition credit financing.

Scaling practically: What's needed in the next 2-3 years

Market Development Priorities

Rice transformation projects:

• Market diversification: Develop value mechanisms for water savings alongside carbon credits
• Data infrastructure: Standardize field-level data collection to support AI/ML transparency improvements
• Bridge financing: Create simple financing mechanisms for 12-month development gaps

Blue carbon:

• Methodology innovation: Expand beyond current restoration focus to value ecosystem preservation
• Accessibility: Simplify robust methodologies to enable broader community participation
• Diverse financing: Create mechanisms that value multiple ecosystem services simultaneously

Energy transition:

• Demand signals: Establish advance offtake agreements providing project development confidence
• Pilot success: Demonstrate viable transition credit transactions with positive community impacts
• Policy evolution: Update corporate climate standards to encourage broader decarbonization contributions

Key takeaways for market participants

For project developers

• Plan for scale: Design projects with expansion potential and community buy-in from day one
• Prioritize transparency: Comprehensive data sharing builds trust and accelerates investment 
• Demonstrate viability: Show long-term sustainability beyond initial credit sales

For investors

• Support market infrastructure: Early-stage investment helps build the ecosystem all projects need
• Look beyond carbon: Projects delivering multiple value streams offer more resilient returns
• Value transparency: Projects sharing comprehensive data demonstrate confidence and reduce risk

For corporate buyers

• Act soon: Early purchases signal market direction and help suppliers secure financing
• Portfolio approach: Combine different project types matching emission profiles and impact goals
• Advance commitments: Offtake agreements provide crucial development confidence and finance

Overcoming critical financing challenges

Capital is flowing to early-stage projects. Pre-issuance investment grew 4x to $7.6 billion by 2022, but developers need structured support to access it. Sylvera's Pre-Issuance solution directly addresses the challenges highlighted in our webinar:

For developers, the tailored pre-issuance solution provides:

• Credible validation that builds the investor confidence that is essential to scale
• Delivery timeline clarity that addresses buyer uncertainty about project schedules
• Quality demonstration and transparency that builds trust
• Market access to the growing pool of early-stage climate capital

For investors and buyers, the pre-issuance solution provides:

• Risk assessment enabling confident decisions in complex sectors like rice, blue carbon, and energy transition
• Standardized evaluation reducing due diligence complexity across diverse project types
• Performance monitoring providing ongoing confidence through development phases
• Access to early-stage opportunities across a variety of project types

Read our Pre-Issuance Primer to get all the info you need on investing in early-stage carbon projects.

The path forward in Asia

The region's emissions, vulnerable ecosystems, and growing energy demands create urgent needs, but also huge opportunities for catalytic finance impact.

While each sector faces unique challenges, common themes emerged: the need for patient capital, comprehensive value recognition, and authentic community engagement. Most importantly, the solutions exist and demand is building.

What's needed now is deployment of catalytic finance at the scale and speed Asia's climate transition demands. With the right support mechanisms, the region can unlock its full potential as a climate solution powerhouse.

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Ready to explore early-stage climate investment opportunities? 

Sylvera's Pre-Issuance solution provides the structured assessment and market access tools developers need to secure financing and investors and buyers need to put confidence in their investments. 

Request a demo to see how our Pre-Issuance solution can bridge the gap between promising climate projects and credible investments.