Emerging markets risk falling further behind in the global sustainability transition as they face a $3.7 trillion annual environmental, social and governance (ESG) financing gap, a new report by Dun & Bradstreet (D&B) has said.

The report titled, ‘ESG Funding in Emerging Markets’, examines how data, regulation and financial innovation could accelerate sustainable capital flows across South Asia, the Middle East and Africa.

The global data and business intelligence firm said the shortfall represents the annual funding required for developing economies to meet the UN Sustainable Development Goals (SDGs) by 2030, highlighting a widening divide between developed and emerging markets in accessing sustainable capital.

“ESG finance has grown into a $3 trillion global market, with investment flows accelerating as governments, corporates and institutions commit to climate and social impact targets,” the report noted.

It added that an estimated $1.6 million flows into sustainable funds every minute, and that by 2025, one in three investment dollars worldwide will be ESG-linked.

“But despite this momentum, the vast majority of capital continues to flow into developed markets, leaving emerging economies at the margins of the sustainability transition,” it said.

D&B attributed this imbalance to structural constraints. It noted that although emerging markets generate 60 per cent of global GDP and account for 75 per cent of global emissions, they remain disadvantaged by higher capital costs, limited long-term financing, weak disclosure standards and fragmented regulation – factors that heighten investor risk perception and restrict cross-border ESG flows.

Africa remains the smallest participant in the global green bond market, accounting for less than 1 per cent of total issuances in 2023. Europe continues to dominate, supported by stringent disclosure rules, carbon-pricing frameworks and strong institutional demand.

Despite the gap, pockets of progress are emerging. For one, Saudi Arabia is using its Green Financing Framework to channel capital toward low-carbon projects aligned with Vision 2030.

Thailand issued Asia’s first sovereign sustainability-linked bond in 2024, while South Africa’s Just Energy Transition Partnership is backed by $5.1 billion in EU commitments to support its coal-to-renewables shift.

However, D&B noted that the positive signals remain small compared to the scale of global needs. The report identifies regulatory alignment as the most decisive factor for unlocking ESG capital.

China, India, Singapore and South Africa are moving toward mandatory ESG reporting, anti-greenwashing rules for funds and national taxonomies – steps that reduce information gaps and strengthen investor confidence, it said.

The report added that Nigeria, by contrast, remains at an early stage with voluntary reporting frameworks and broad sustainable-finance guidelines.

Analysts warned that without stronger enforcement and aligned standards, Nigerian corporates and financial institutions risk missing out on the growing pool of sustainability-linked capital needed to meet the country’s climate and development ambitions.

D&B recommended coordinated taxonomies, blended-finance structures to de-risk early projects, stronger ESG data systems and deeper engagement from domestic banks and corporates.