As climate change intensifies and economic uncertainties mount, robust social protection systems have become essential for resilience and inclusive development. A new report by the Economic and Social Commission for Asia and the Pacific (ESCAP) underscores the critical need to address financing gaps to strengthen these systems and safeguard vulnerable populations.
Far from being a mere expense, social protection is an investment in people that yields significant socioeconomic returns. Research highlights its role as an economic stabilizer, particularly evident during the COVID-19 pandemic when cash assistance programs and unemployment benefits supported incomes and stabilized aggregate demand. Such measures demonstrate how social protection systems enhance resilience and foster social cohesion during crises.
Despite its proven benefits, countries in Asia and the Pacific allocate only 8.2% of their GDP to social protection, compared to the global average of 12.9%. ESCAP’s Social Outlook 2024 warns that without increased spending, poverty in the region is likely to rise due to challenges like climate change, uneven digital progress, and demographic shifts.
Diverse Financing Sources: Key to Bridging the Gap
To close financing gaps, countries must explore diverse funding options, including:
Tax Reforms: Shifting from regressive taxes to progressive measures like taxing higher incomes or wealth, as Brazil proposed at the recent G20 summit.
Contributory Schemes: Expanding social insurance programs to enhance risk-sharing and support for vulnerable populations.
Reallocating Subsidies: Redirecting funds from less impactful areas, such as fossil fuel subsidies, toward social protection and climate initiatives. Examples include Indonesia and Iran’s successful energy subsidy reforms.
Innovative Financing for Social and Climate Resilience
Innovative financial tools like green and social bonds offer promising avenues for funding social protection. These instruments attract investments in projects that align with both social and environmental goals, bridging the gap between social protection and climate action.
Additionally, integrating social protection with climate financing mechanisms such as disaster risk reduction frameworks, multilateral climate funds, and insurance alliances can support vulnerable populations during climate-related shocks.
Political Will and Public Support: The Cornerstones of Success
The sustainability of social protection systems hinges on strong political leadership and widespread public support. Governments must foster a culture of social justice and inclusivity, presenting social protection as a public good that benefits all citizens. By prioritizing these systems and aligning them with fiscal policies, leaders can ensure long-term resilience and development.
Strengthening social protection financing is not only a moral obligation but also an economic necessity in an era of climate challenges. By leveraging traditional and innovative financing mechanisms, countries can build resilient systems that safeguard their most vulnerable populations while fostering sustainable growth.
For a more inclusive and equitable future, governments must act decisively to expand social protection and align it with climate resilience strategies.