A struggling economy will have a severe challenge dealing with climate change disasters when it is already drowning in debt.

Unfortunately, that is precisely what happens to countries like the Philippines, one of the biggest recipients of climate financing that winds up as foreign debt that does little to mitigate climate change damages.

In its latest report titled, "Climate Finance in Asia: Assessing the state of climate finance in one of the world's most climate vulnerable regions," Oxfam called on the global community for better support for countries like the Philippines that are facing a double whammy of being extremely climate-vulnerable while not being prepared enough for the disasters to come.

"We are forced to look rather cynically at the climate financing of the multinational institutions because most of their money is winding up as Asian foreign debt. It's difficult for Asian countries to maintain health and education budgets when they're taking on more debt to pay for climate damage that they did little to cause," said Sunil Acharya, Oxfam's Asia Regional Policy and Campaigns Coordinator.

It added the Philippines is 5th among Asian countries that received the highest amount of climate finance. However, the $7.8 billion received from 2013 to 2020 is mostly from debt instruments. Of the annual average of $972 million worth of climate finance received by the Philippines, more than half, or $528 million, is from concessional debt instruments, while $364 million are from non-concessional debt instruments.

The Oxfam report reveals that some climate finance lenders are counting 'new' fossil fuel projects as "climate-related development finance," for example, Japan's $3 billion contribution to Bangladesh to build the giant Mataburi coal-fired energy plant. Notwithstanding countries' right to develop, the report says, no new fossil fuel project should ever be considered "climate relevant" to justify these funds.

Asia's most significant bilateral climate finance contributors from 2013-20 are Japan ($28.2 billion), Germany ($11.2 billion), France ($6 billion), and the US ($1.1 billion). 70% of Japan's contribution can be considered as "grant equivalent," against only 41% for Germany and 44 percent for France.

Asia's biggest multilateral climate finance providers are the World Bank Group which committed over $30 billion from 2013-20, and the Asian Development Bank ($17.6 billion). However, when factoring in loans, the World Bank Group had a "grant equivalent" spend of just $7.6 billion, while the ADB was just $2.1 billion.

The Asian Infrastructure Investment Bank has a "grant equivalent" of zero — meaning its total $4.1 billion funding came close to market-rate loans, of which more than 80 percent went into big transport and energy projects.

Higher financing by 2025

The report says that developed countries should increase their adaptation funding to each Asian country by 2025 to align with the Glasgow Climate Pact of doubling adaptation finance overall and focusing on providing grants rather than loans. It says that no funds lent at market rates should be counted as climate finance.

"Asia's climate finance providers and governments need to reassess climate finance in a genuinely pro-poor, locally-led, and targeted to help women and girls who are shouldering the bulk of climate risk and harm," Acharya said. "Climate finance must be transparent, easily trackable, and spent in ways in which people most affected can genuinely participate in decision-making processes."

The report also explores the voluntary South-South climate finance flows into Asia, noting that China spent $84 billion in 13 of the 18 Asian countries studied in the same period. The biggest recipients were Pakistan ($31.4 billion), Indonesia ($10.8 billion), Bangladesh ($10.4 billion), and the Philippines ($9.9 billion). The report estimates that more than $35 billion went to "climate-relevant" mitigation objectives.

"Voluntary South-South climate finance flows from China and India are very promising and vital if the Asia region gets the funding it needs to be safer and greener. But the same principles apply – more grants, more targeted at women and girls and local leadership, none to fossil fuels, and more focus on inequality-busting initiatives," Acharya said.

Mitigation measures

Oxfam's call for a global response came following the onslaught of severe tropical storm "Paeng," which affected 2.2 million individuals and displaced half a million of them as of Monday morning.

Around a hundred have already been reported dead, while more than 60 are still missing. The numbers, including damage to property and agriculture, are expected to go up as the reports come in during the next few days.

"The Philippines, like many other Asian countries, ranks high regarding climate vulnerability and low regarding climate readiness, according to our 'Climate Finance in Asia' report. Even though we are working on measures to improve our preparedness, every time we are hit by extreme weather events such as 'Paeng,' we have to deal with further loss, making it even harder to be ready for the climate crisis," Oxfam Pilipinas Country Director Lot Felizco said.

Felizco said the Philippines and other climate-vulnerable countries in Asia continue to grapple with the problem of facing the effects of a climate emergency that more developed countries have caused and benefited from. "This is why we are calling for better and sufficient climate finance that would allow countries like the Philippines to face the effects of climate change adequately."

According to the report, the Philippines ranked 10th among the 18 Asian countries (excluding Singapore, Korea and Japan) regarding vulnerability and preparedness for climate change.

Based on the Notre Dame Global Adaptation Initiative Index, the ranking also shows the Philippines ranking 113 globally out of 182 countries for 2020. This means it is highly vulnerable but is less prepared than countries like Singapore or Japan, which rank 6th and 19th, respectively.

"There is much to be done so countries like the Philippines can catch up with others that are fortunately not as highly vulnerable and at the same time better prepared," Felizco said. "Climate finance and support from players who contribute the most to climate change are important in correcting injustice and saving the lives of millions of people, especially those in the poorest communities and marginalized groups."

UN summit issue

The Climate Finance in Asia report showed that while Asian countries saw an annual 28 percent rise in climate finance to $20.5 billion in 2020, this increase hides problems that are being mirrored across the world and are likely to cause tensions at the UN climate summit in Egypt later this month.

The report is the first to analyze climate finance flows worth $113 billion between 2013-2020 in 18 countries across s Asia. It finds that despite being home to nearly 4 billion people and half the world's population, Asian countries only receive around 25 percent of reported global financial flows each year.

Asian countries need $1.3 trillion annually from now to 2030 to meet their estimated climate needs or $371 billion yearly without factoring in China, and Oxfam says current levels are woefully inadequate. A significant share of these estimated needs must come from international support.

Only a third of Asia's climate finance went to help countries adapt and cope with climate -induced harm, despite Bangladesh, Cambodia, Myanmar, and Afghanistan is among the world's most vulnerable and worst-prepared.

Two-thirds of it went on mitigation initiatives, particularly in the vast Asian transport and energy sectors. Although this split is beginning to shift, it needs to happen much faster.

Most flows into Asia came as loans, often forcing already indebted countries to cut public services to repay. Laos and Myanmar are now at high risk of debt distress. Only 17 percent of bilateral climate finance and 6 percent of multilateral climate finance to Asia came from grants.

Donors almost completely ignored locally-led initiatives — only about 0.5 percent of all climate finance went directly to local Asian communities, civil society organizations, and authorities — giving them less say in governing this money.

"Asia is being devastated by climate-driven disaster after disaster, taking lives and costing billions. Pakistan underwater. China and India baked by 50-degree heatwaves. Bangladeshis leaving farmland made unusable by saltwater. Philippines hit by worsening typhoons," said Sunil Acharya, Oxfam's Asia Regional Policy and Campaigns Coordinator.

In December 2021, when typhoon Odette ravaged the Philippines, it killed more than 400 people. It resulted in $336 million in losses to agricultural goods, $75 million worth of fishing boats and gear, and $565 million in damage to homes, roads, and utility lines.

"This is becoming an irreversible humanitarian crisis across Asia where half the population already live below the poverty line. People are nearing the limits of what they can do to cope," Acharya said.

"They need more help, not debt, and more say in how it happens."