MULTILATERAL DEVELOPMENT BANKS AND CLIMATE FINANCE

The Paris Agreement aims to hold the increase in the global average temperature to well below 2 degrees C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 degrees C above pre-industrial levels. Its signatories also seek to increase the ability of countries to adapt to the adverse impacts of climate change and foster climate resilience. To implement these objectives and finance the transition to a low-carbon world, the Paris Agreement calls for ensuring that finance flows are consistent with a pathway toward climate-resilient development and low GHG emissions. Multilateral development banks have commitments to facilitate the transition to a low-carbon economy, to avoid or reduce project-related GHG emissions and to increase support to renewable forms of energy. Multilateral Development Banks (MDBs) have a critical role to play in helping countries meet the temperature goal laid out in the Paris Agreement. MDBs are major finance providers to developing countries. MDBs also directly or indirectly mobilize additional finance by acting as lead investors and attracting others to invest alongside them. MDBs do not only have impact through their direct investments and mobilization of additional finance, but they also set standards that are often followed by other financial institutions, companies, and governments through the projects they invest in and the policies they apply. Many of the banks also conduct policy research, offer technical assistance, and provide policy-based finance, all of which can have a significant positive impact on policies, laws, and institutions in countries where they operate. This report focuses on the following development banks: the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank (IADB), and the World Bank Group (including IBRD, IDA and IFC). This article presents conclusions on the engagement of MDBs in the climate finance and mobilisation of private funds for the purposes of climate finance and delivers key recommendations for necessary changes of the climate finance in the future.