It could reduce Asia-Pacific’s gross domestic product by 17% in 2070, ADB says.
3 min
Countries in Asia-Pacific will need to spend big to adapt to climate change. But the cost of inaction could be higher, according to a new report by the Asian Development Bank.
Left unchecked, climate change could punch a 17%-sized hole in the region’s economic growth over the next decades, the Manila-based bank said Thursday.
“The window to stay within the 1.5°C target of the Paris Agreement is rapidly closing,” the ADB said.
The international treaty aims to limit the average rise in global temperatures to that threshold, beyond which experts expect climate change to have increasingly disastrous consequences. In the nine years since the agreement was adopted, inaction has put that goal nearly out of reach, the multilateral bank said.
With greenhouse-gas emissions reaching record highs, nations need to dramatically increase—and immediately start delivering—efforts to get on track for 1.5°C, a United Nations Environment Programme report said last week. Failure to do so will lead to debilitating impacts to economies, the report said.
Asia-Pacific’s position in the climate crisis is a tricky one: it’s both home to some of the most vulnerable economies and a major polluter, contributing over 50% of global GHG emissions.
If emissions breach critical levels, ADB estimates climate change could reduce Asia-Pacific’s gross domestic product by 17% in 2070. Rising sea levels threaten coastal assets and populations, while heat waves would sap labor supply and productivity, and climate-dependent sectors like agriculture, forestry, and fisheries face shocks that will stifle output.
Estimates from the Deloitte Economics Institute calculate that about 75% of Asia-Pacific’s GDP is at high risk of climate disruption. This stands to affect at least half of the world’s labor force, which is in the region and in vulnerable industries. Climate inaction could lead to regional economic losses of about $96 trillion by 2070, the institute said in a report.
Asian countries have made strides toward decarbonising, but just maintaining policies implemented so far will lead to dangerous levels of global warming, the ADB said.
Taking the right type of action won’t come cheap. Estimates for Asia vary widely, in part due to different geographical definitions, but consensus is that funding is well below where it needs to be.
The ADB report estimates Asia-Pacific needs to invest anywhere from $102 billion to $431 billion annually to adapt to climate change. That far exceeds the $34 billion committed over 2021-2022.
Globally, the U.N. calculates the net-zero transition needs $0.9 trillion to $2.1 trillion a year between 2021 and 2050. That “is substantial but manageable in the broader context of the close-to-US$110 trillion global economy and financial markets.”
It remains technically possible to get on a 1.5°C pathway, as solutions like solar and wind power hold promise for fast, sweeping emissions cuts, the U.N. report said.
Getting back on track could be a big boost for Asia-Pacific economies.
The region is well-placed to benefit from the energy transition, the ADB said. It has massive potential for renewable-energy generation and can produce some of the world’s cheapest renewable electricity, it said. Advantages like fast-growing economies, a large workforce and strong manufacturing base equip Asia to develop the technologies needed for global decarbonisation.
That presents a wealth of opportunities for investors.
If governments formulate consistent policies and build climate-oriented financial systems, that can draw the private capital that’s key to plugging the funding gap, ADB said.
Policy uncertainty over could deter investment, particularly in the case of a change of political administrations. Investors hold more sustainable assets when countries adopt climate laws, and misaligned policies reduce incentives for private investors, ADB said.
That is particularly relevant in a year that has seen elections across Asia, including in India, Indonesia and Japan. The upcoming presidential election in the U.S. is in especially sharp focus as the outcome has implications for climate-change efforts.
That’s because of the U.S.’s role as a key player in green innovation and international cooperation on climate commitments and financing, as well as a major trading partner, said ADB principal economist Shu Tian.
Policy uncertainty from a key player can significantly affect the international climate agenda, she said.
“The U.S.’s stance on climate action influences the low-carbon transition through market mechanisms, affecting consumers, suppliers, and investors,” she said. “This, in turn, could impact climate investments across the [APAC] region.”
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Strong family financial planning can help reduce taxes and support younger generations. From intrafamily loans and asset gifts to inheritance disclaimers, strategic cooperation can create meaningful financial benefits—when families have the trust and structure to make it work.
4 min
Happy is the family whose members—parents, grandparents and grown children—trust each other enough to cooperate on shared goals, especially financial ones. When that is truly the case, Uncle Sam’s tax rules can help as well.
This matters especially now that mortgage rates are above 7%, and many families are looking for ways to help younger members. If the elders have resources and are confident younger ones can cooperate, a family loan could make homeownership possible while providing the elders with a useful income stream.
Other strategies can actually lower taxes, such as when funding 529 plans or Roth IRAs, or when someone inherits a traditional IRA with required withdrawals larger than they will need.
Here are three strategies useful for functional families.
It is perfectly legal for families to lend money to a relative for a down payment or even a private mortgage.
But it is important not to cut corners, says Ryan McKeown, a CPA with Modern Wealth Enhancement in Minnesota. If the loan is for a down payment, be honest with the mortgage provider and have a formal agreement. The lender owes tax on the interest payments received.
If the loan is for a private mortgage, both sides should have legal representation with a formal written agreement, including payment terms. The lender owes tax on the interest, and the borrower often can deduct it if he or she itemizes.
To avoid IRS trouble, the interest rate shouldn’t be lower than the agency’s Applicable Federal Rate at the time of the loan. Currently that is about 5% for loans longer than nine years; about 4.5% for loans three to nine years; and about 4% for loans three years or less. Currently, traditional mortgage rates are generally above 7%.
In addition, the lender could use the $19,000 annual gift-tax exemption (described below) to forgive some or all of the interest or principal annually. If both lenders and borrowers are married, that is up to $76,000 a year. There is no tax for the borrower on such forgiveness, because it is from a gift.
If you’re going this route, McKeown advises against having a fixed plan to forgive the debt. Instead, do it in one-off letters specifying the amount—and keep careful records. Otherwise the IRS might try to treat the loan as a taxable gift.
Powerful tax-saving moves for families often use gift-tax provisions. Under current law, anyone can give anyone else up to $19,000 of assets annually, free of gift tax. That means a married couple with three grandchildren could give them a total of $114,000 in 2026.
The gifts can be cash or other assets, like stock. For noncash gifts, the cost basis—which is the starting point for measuring taxable gain after a sale—“carries over” to the recipient. So if someone buys $1,000 of stock and gives it away when it is worth $5,000, the recipient’s cost basis is $1,000. If the recipient later sells the shares for $8,000, the taxable gain is $7,000.
Here’s an example showing how gifts could save a family taxes. Grandma is a widow of modest means, while her child and spouse have prospered. The couple has two children, and they want to contribute $5,000 to a 529 college-savings plan for each—but they need to sell stock to do it. Their tax rate on the sale would be 18.8%, and they would need to sell about $11,000 of stock.
However, Grandma’s federal tax rate on the stock sale is 0%. If the couple gives $10,000 of shares to Grandma, she could sell them, pay no tax, and fund the grandchildren’s 529 plans. This saves about $1,000 of tax.
These moves are legal, and they could be used in other ways, such as to help a young person fund a Roth IRA.
But trust among family members is essential: Under the law, givers can’t put conditions on a gift. Grandma could use her stock proceeds to take a cruise, but she makes 529 contributions instead.
Mark Sellner, a retired tax attorney and CPA living in Sarasota, Fla., uses this strategy. His children sell stock he gives them and fund 529 plans for his grandchildren.
The family’s tax savings aren’t huge, but he likes other benefits. The sales by his children don’t boost his adjusted gross income, which in turn could raise his Medicare Irmaa premiums or his 3.8% surtax on net investment income.
Sellner doesn’t worry about his children using the funds for another purpose.
“There can’t be any strings attached to gifts. Of course, it is up to us to decide whether to make them in the future,” he says.
Two caveats: The “kiddie tax” applies to most children under age 24, and it is levied at the parents’ rate on investment income above $2,700 in 2026. Consider this before making gifts to a young person.
Investors who give away stock also forgo the step-up, an important provision that exempts assets held at death from capital-gains tax.
Sellner knows he’s losing a step-up, but says, “The children could use a little more now. Why should they wait 20 years to get it?”
A disclaimer is a highly useful strategy in which one heir renounces an inheritance in favor of another heir. Assuming family members cooperate, this can save taxes.
Here’s one example. Dad died and had a large traditional IRA that he left to Mom. She has enough assets and income to cover her expenses, and she lives in a state with a stiff estate tax. The inherited IRA would put her estate over the threshold.
Also surviving are three young-adult children. If Mom disclaims all or part of Dad’s IRA within nine months of his death, that amount could go directly to the children. They will have 10 years to empty the account, and the family as a whole will likely save estate and income taxes.
Disclaimers have many key details, especially regarding beneficiary documents. Although heirs have great freedom in choosing what assets to disclaim, the rules about who gets disclaimed property are rigid. It is best if the original owner names tiers of heirs so that if one disclaims, the next recipient is clear.
