Global green economy booming, but developing countries left behind

The world's transition to sustainable development is accelerating at an unprecedented pace. Businesses and governments invested a record $1.3 trillion annually in climate-friendly initiatives during 2021-2022, nearly doubling from previous levels, according to the Climate Policy Initiative. Yet the benefits remain concentrated in wealthy nations, while developing countries struggle to access the financing and technology needed for transformation.

Technology breakthroughs deliver real results

Remarkable technological advances power the green economy transformation. For instance, Western Digital's Penang facility in Malaysia exemplifies this shift, cutting energy consumption by 41% through automation and intelligent systems, demonstrating how South-East Asian manufacturers can lead in sustainable production. In France, Schneider Electric's facility has utilised digital twin technology to reduce energy use by 25%, material waste by 17%, and carbon emissions by a quarter. Real-time environmental monitoring now enables factories to identify and eliminate waste as it occurs. The technology exists and works, but the challenge is ensuring innovations reach beyond wealthy nations.

Policy architecture takes shape

Several major policy developments are reshaping sustainable investment globally. Europe's Ecodesign for Sustainable Products Regulation, effective July 2024, mandates environmental performance standards across product categories. The EU Emissions Trading System has cumulatively generated over €200 billion, with 2023 seeing a 16.5% reduction in emissions. Asia is building parallel frameworks. The Asean Taxonomy for Sustainable Finance, unveiled in December 2024, creates unified standards across Southeast Asian nations. Malaysia has been particularly proactive, developing its national taxonomy alongside Indonesia, Singapore, the Philippines, and Thailand, to create a coherent regional architecture for green finance. Meanwhile, China, the world's largest emitter, expanded its Emissions Trading System in March 2025 to include steel, cement, and aluminium industries, covering more than 60% of the country's total carbon emissions, according to Climate Action Tracker. Moreover, Africa launched its Continental Circular Economy Action Plan for 2024-2034, which has generated $1.4bil in committed investments across over 30 green projects.

The inequality crisis

While wealthy nations construct elaborate green infrastructure, developing countries face stark funding gaps. Only 15% of global climate finance, which amounts to approximately $190bil annually, flows to emerging markets and developing economies excluding China, according to the World Economic Forum. China represents a unique case, where 98% of its climate finance flows domestically, making it simultaneously the world's largest climate investor and largely self-financed in its transition. Africa illustrates the disparity most starkly. Despite hosting 20% of the world's carbon sinks and accounting for less than 4% of global emissions, the continent receives only 3% of total climate finance. Carbon pricing mechanisms show a similar concentration of 75 carbon pricing instruments worldwide which generated $104bil in 2024, yet most operate in wealthy nations.

Small businesses left behind

Small and medium enterprises (SMEs) account for over 90% of businesses globally and generate 60-70% of industrial emissions, underscoring their essential role. Yet 84% of SMEs report receiving no financial incentive to reduce emissions, according to UN ESCAP. Despite 73% of financial institutions offering green financing products, only 2.8% of SMEs have applied, with 68% citing prohibitively high costs. A $5.7 trillion financing gap affects 40% of formal SMEs globally, according to World Bank data.

The invisible workforce

Perhaps most troubling is the systematic exclusion of informal waste workers. Between 15 and 20 million people worldwide make their living from waste collection and recycling, forming the foundation of global recycling. These workers collect 59% of all plastic materials recycled globally, according to UN Development Programme estimates. China alone has approximately 6 million waste pickers and informal recyclers, the world's largest concentration. Sites like Guiyu process massive volumes of e-waste through informal networks, highlighting both the scale of informal contributions and the environmental and health costs of unregulated recycling. In Jakarta, 37,000 waste pickers recover 25% of the city's waste, weighing 378,000 tonnes annually, which saves the municipality $300,000 monthly while generating over $50mil in economic benefits. Yet these workers remain invisible in climate finance calculations. They lack safety equipment, health coverage, or recognition for their environmental contribution.

Success stories lead the way

Bangladesh's textile sector demonstrates what targeted support achieves. The International Finance Corporation's Partnership for Cleaner Textiles programme has worked with over 450 factories since 2013, saving 35 billion litres of fresh water annually, enough for 1.9 million people, and reducing 723,617 tonnes of carbon emissions yearly, equivalent to removing 160,000 cars from the road. Bangladesh now hosts 202 LEED-certified green factories, the world's highest concentration in the apparel manufacturing industry.

The path forward

The tools and money for global green transition exist. What's missing is distribution. Researchers have identified three urgent priorities, namely standardising environmental metrics for consistent measurement, supporting small enterprise transitions through tailored financing, and protecting workers through just transition frameworks.

The question isn't whether green economy transitions will happen, as market forces and climate reality shall guarantee that they will. The question is whether these transitions will reduce global inequality or deepen it. Current trajectories suggest the latter. Reversing this requires developed nations to move beyond aspirational commitments to actual resource transfers, financial institutions to redesign green products for enterprises that need them most, and governments to recognise and integrate millions already performing environmental work without formal recognition.

The green economy is booming. But unless developing countries, small businesses, and informal workers can participate fully, it risks becoming another mechanism concentrating wealth among those who already have it, while those most vulnerable to climate change remain locked out of the transition meant to protect them.

Professor Dr Chong Shyue Chuan is a Professor cum Director of SME Centre at Tunku Abdul Rahman University of Management and Technology.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the Southeast Asia Research Centre for Humanities (SEARCH) and Tunku Abdul Rahman University of Management and Technology (TAR UMT).

The views expressed here are entirely the writer’s own