Multilateral development banks provide $28b in climate finance
The worlds six large multilateral development banks (MDBs) delivered over $28 billion in financing last year to help developing countries and emerging economies mitigate and adapt to the challenges of climate change. The latest figures bring total collective commitments of the past four years to more than $100 billion, says a press release.
In 2014, the six banks together provided over $23 billion dedicated to mitigation efforts and $5 billion for adaptation work, according to the fourth joint report on MDB Climate Finance.
The report reveals the important part the MDBs play in delivering development finance in a world shaped by climate change. It was prepared by the African Development Bank, the Asian Development Bank (ADB), the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, and the World Bank Group.
Mobilizing the $100 billion plus per year by 2020 that developing countries urgently need to address climate change is critical to a meaningful agreement at the upcoming climate negotiations in Paris, said Bindu N. Lohani, ADBs Vice-President for Knowledge Management and Sustainable Development. As well as direct assistance from MDBs, this also means leveraging private sector finance and tapping non-traditional sources such as pension funds and sovereign wealth funds.
The recent merger of ADBs concessional and ordinary lending windows, which will increase ADBs annual operations by 50 per cent to around $20 billion, will free up additional funds for climate-related and other development assistance, notably in poorer countries in the region.
Of the total commitments in 2014, 91 per cent came from MDBs own resources, while the remaining 9 per cent, or $2.6 billion, came from external resources, including bilateral or multilateral donors, the Global Environment Facility, and the Climate Investment Funds.
Among the regions, South Asia received the largest share of total funding, at 21 per cent. Latin America and the Caribbean, non-EU Europe and Central Asia, Sub-Saharan Africa, and East Asia and the Pacific received 17 per cent, 16 per cent, 15 per cent, and 10 per cent respectively.
About one-third (36 per cent) of the total in adaptation funding went into agriculture and ecological resource projects, and 40 per cent went into projects involving infrastructure (including flood protection), energy, and the built environment. Renewable energy was the most common mitigation project, drawing 35 per cent of the funding. Energy efficiency accounted for 22 per cent. The banks also invested heavily in sustainable transport, at 27 per cent of the total.
The 2014 report is based on a joint MDB approach for climate finance tracking and reporting that counts only the project components directly providing mitigation or adaptation co-benefits.
Knowing where the money is flowing is critical for reaching areas of opportunity and need, because what gets measured gets managed. The MDBs have harmonised their principles for tracking climate mitigation finance with members of the International Development Finance Club, and have started a similar process for adaptation finance. The MDBs, together with other public development finance institutions, play a strategic role in smartly deploying scarce government resources and leveraging much larger, and longer-term, private investments.
It is increasingly clear that the finance required for a successful, orderly transformation to a low-carbon and resilient global economy is counted in the trillions and not billions. The immediate challenge of climate finance, while we build the policy framework that will drive investment of the trillions, is to meet the promise made by developed countries to mobilise $100 billion a year by 2020.
With their ability to catalyse public and private funds, the report shows how the MDBs have successfully attracted and deployed climate financing to support low-carbon resilient growth in developing countries and emerging economies.
The report provides key data on climate finance flows and is expected to inform discussions at the Third International Conference on Financing for Development in Addis Ababa next month, and the UN climate change negotiations (COP21) in Paris at the end of the year.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members 48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.
