Development banks co-ordinate climate finance in bid to drive global low-carbon transition

Major Multilateral Development Banks (MDBs) have demonstrated a strengthened collaborative commitment to track development flows for climate finance in an attempt to build on the momentum established at last year's Paris Agreement, as highlighted in an annual joint report.

The 2015 joint report on MDB’s climate finance shows that financial institutions including the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the World Bank Group (WBG) and other regional equivalents are working together to catalyse green investment after establishing guidelines to set a common approach for reporting on climate co-financing flows.

The 2015 Common Principles agreement is aimed at increasing transparency through harmonised definitions and indicators that estimate climate co-financing, which could help to mobilise the climate finance needed to forge the transition to a low-carbon economy, as envisaged in the Paris Agreement.

“We are determined to do all we can to maintain the momentum and promise of the historic Paris climate change agreement,” the World Bank’s head of climate John Roome said. “The WBG is determined to deliver on our pledge to increase annual funding for climate work to potentially $29bn annually in 2020.”

‘Growing importance’

The total climate co-finance committed in 2015 alongside MBD resources was more than $55bn, with the report highlighting that a global total of $80bn was mobilised by private sector and governments for clean energy.

The report also reveals that the MDBs committed a total of $25bn in green investment last year. Although this represents a fall from the £28bn provided the previous year, the 2015 climate finances figures reflect changes in reporting parameters of the IDB and the WGB groups aimed at improving transparency.

Since last year’s Paris climate summit all development banks have confirmed plans to radically boost climate funding, ranging from the African Development Bank’s (AfDB) pledge to triple support to the World Bank’s projected $16bn hike by 2020.

Commenting on the report findings, an EBRD official said: “MDBs are generally on track to meet their 2020 climate targets as announced in the second half of 2015. Financing reported in the 2015 report is a result of previous years of work on pipeline development and support for project preparation.

“From 2016 onwards, MDB figures should reflect the growing importance of climate finance for these institutions.”

Climate mitigation

The majority of green investment provided by MDBs in 2015 came from commitments in climate mitigation finance, which reportedly amounted to $20bn.

More than half of the MDB mitigation finance last year went to energy-related sectors, including 30% for renewable energy, 7% for lower-carbon and efficient energy generation and 14% for energy efficiency.

In 2015, 24% of mitigation finance was committed to recipients/borrowers located in Non-EU Europe and Central Asia, while Sub-Saharan Africa received only 6%. About 9% of MDB mitigation finance was committed to least developed countries and 1% to small island states.

Green finance

Since the landmark conference on climate change in Paris, development banks have been made the linchpins of the low-carbon transition to enable countries to cut carbon emissions and adapt to the effects of global warming.

Fortunately, banks are already venturing into green finance markets. HSBC has launched a $1bn green bond portfolio aimed at the renewable energy sector, while Goldman Sachs announced it will leverage $150bn into clean energy financing and investments by 2025.

Speaking exclusively to edie, Dutch multinational banking group ING revealed it was preparing itself for a new era of green finance, which is geared towards complimenting the low-carbon movement and closed-loop operating models.

Last year, the World Bank announced that it would boost funding for poorer nations coping with climate change from 21% to 28% of its budget, while the European Investment Bank (EIB) will increase its climate support from 25% to 35%

By 2020, the World Bank’s efforts should amount to about $29bn a year, nearly a third of the $100bn a year in climate finance promised by rich countries to the poor as part of global climate change agreements.

George Ogleby

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