Financing climate change to grow tourism

Improving sustainable finance approaches and enhancing market alignment with the climate transition is vital

Tourism is among the top economic sectors of the world economy and of global trade. It has demonstrated its resilience with international tourist arrivals recovering 80 per cent of 2019 levels in the first quarter of 2023. The sector contributes significantly to job creation, economic prosperity, inclusive societies and the conservation of culture and nature on which it depends. Its crosscutting nature and sustained growth over the last decades bring immense opportunities for the overall advancement of the 17 Goals of the 2030 Sustainable Development Agenda.

For the Programme of Work 2024-2025, the Secretary-General has adjusted (a) the strategic objectives ensuring leadership for the Organization and the sector in the long run and (b) the programmatic priorities permitting a focus on the pressing issues and the rational use of resources.

Tourism has a demonstrated capacity to create jobs and opportunities for all. While having contributed to 10 per cent of global employment4 and to women, who represent the 54 per cent of all workers in the sector, it still faces imperative challenges such as informality, brain drain, salary gaps, under-staffing, and skills shortage. For these reasons, education in tourism stands as a high priority both for short and long terms, departing from the proven hypothesis that investing in people and their competences links to better job opportunities. It is estimated that 882,000 global tourism jobs per year require vocational training until 2030, indicating that UNWTO is called to provide services to Member States towards these ambitious targets.

Climate change is accelerating. Now more than ever, ambitious and effective global action to address the impacts and future risks of the climate crisis is critical and urgent. Recent momentum behind governments’ climate commitments is encouraging. However, turning increased political ambition on climate emergency into outcomes that ensure a net-zero transition by 2050 remains the major challenge. Climate finance continues to grow, yet at the end of 2019, developed countries remained $20.4 billion short of meeting the goal of mobilising $100 billion a year to support developing countries’ green transitions. A growing number of corporates, financial institutions and institutional investors are also making increasing efforts to assess physical and transition risks, and to publish climate transition plans to achieve net-zero emissions. In turn, financial markets are beginning to integrate climate transition risks and opportunities into investment decision making.

Despite this progress, market participants remain constrained in ways that prevent the needed scaling up of investment to foster an effective and efficient climate transition. There is a lack of progress on globally coordinated carbon pricing. In addition, the Task Force on Climate-related Financial Disclosure (TCFD) has advanced disclosure of climate-related financial information, but data gaps and incomparable metrics continue to hinder portfolio reallocation decisions and effective pricing of capital. Lack of transparency and comparability of environmental, governance and social (ESG) rating methodologies, as well as inconsistent measurement of climate transition factors in environmental pillar scores, further impede portfolio allocations that better align with net-zero pathways.

Addressing these challenges will require a thorough reset of the financial system by incorporating climate risks and opportunities across relevant aspects of central banking, supervision, regulation, and market practices for making investment decisions. This includes identifying policies to address biased incentives, capability gaps and inadequate climate risk disclosure that impede a substantial scaling up of low emissions, resilient investments.

There are significant opportunities to dramatically reduce emissions, shift away from carbon-intensive activities and promote green growth. Financial markets across advanced and developing economies have a critically important role to play in helping to achieve these ambitious climate objectives every step of the way on our path to net zero. Actions by financial authorities and market participants can help strengthen market practices, confidence and integrity by encouraging greater transparency on the current products, practices and tools being used in financial markets, and by supporting the reallocation of capital towards greener alternatives, while discouraging capital flows to carbon intensive projects.

Improving sustainable finance approaches and enhancing market alignment with the climate transition is vital. To support these efforts, this report provides a framework to understand the ways in which financial markets are building capabilities to help facilitate an orderly transition and to allocate capital that helps incentivise companies’ transitions. It also includes recommendations to strengthen the comparability of climate-related metrics used in ESG approaches; to encourage transparency and appropriate labelling of climate transition indices, funds and products; to develop climate transition finance indices and funds; to use climate transition plans that rely on science-based targets; and to develop climate transition finance.