Global Financial Stability Report 2023. Chapter 3: Financial Sectors Policies to Unlock Private Climate Finance in EMDEs

The Global Financial Stability Report provides an assessment of the global financial system and markets, and addresses emerging market financing in a global context. It focuses on current market conditions, highlighting systemic issues that could pose a risk to financial stability and sustained market access by emerging market borrowers. This chapter outlines a series of policy recommendations to unlock private climate finance in EMDEs. These include among others: - Carbon pricing can be highly effective in shifting capital flows toward low-carbon investments, but policymakers need to complement it with policies to unlock private climate finance in EMDEs. - Structural policies, specifically those aimed at strengthening macroeconomic fundamentals, deepening financial markets, improving policy predictability, and fostering institutional and governance frameworks, are key to lowering the cost of capital, mobilising domestic financial resources, and improving credit ratings in EMDEs.