Enhancing climate change resilience: Does development aid and governance mitigate climate change vulnerability in the Asia-Pacific?

The Asia-Pacific developing countries continue to bear the brunt of climate change. Adapting and building resilience against climate risks demand significant financial resources and an efficient governance system. However, financial and institutional constraints limit the ability of the Asia-Pacific developing countries to adapt and build resilience against climate change risk. Currently, there are insufficient studies to evaluate the impact of governance, as an adaptive capacity, and development aid (foreign aid) on climate change vulnerability, focusing on the Asia-Pacific developing countries. This study, therefore, assesses the role of governance and foreign aid on climate change vulnerability, relying on panel data from 37 Asia-Pacific developing countries from 1995 to 2022. Our empirical analysis, based on the panel-corrected standard error model, shows that foreign aid is significantly associated with climate change vulnerability reduction. Also, governance variables such as the control corruption index, political stability index and voice and accountability index significantly worsen climate change vulnerability, while the government effectiveness index and regulatory quality index are significantly associated with climate change vulnerability reduction. The analysis showed that the impact of foreign aid on climate change vulnerability depends on governance in the Asia-Pacific developing countries, and in most cases, governance weakens the influence of foreign aid on lowering climate change vulnerability. These findings remain robust when endogeneity and distributional heterogeneity are addressed with alternative estimation techniques. These findings highlight that reducing climate change risk requires significant support from development aid donors as well as policies to strengthen governance in the region.