Climate financing by multilateral development banks hits new record

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Multilateral Development Banks (MDBs) committed $66 billion in climate finance in 2020 up from $61.6 billion the previous year, a new report released by eight MDBs has revealed. This highlights increasing focus by the financial sector is accelerating the adoption of climate mitigation programmes.

In the past two to three years, large financial institutions have highlighted their concerns on environmental sustainability by either pledging to cease financing of conventional and fossil-fueled energy projects or setting ambitious climate mitigation strategies which include reducing aid to conventional energy projects, increasing funding to renewable energy initiatives or reducing their own carbon emissions.

In the newly published report, 2020 Joint Report on Multilateral Development Banks’ Climate Finance, MDBs tout the role they are playing in helping low-to-medium-income countries fight climate change. The majority of the funding issued by the eight banks, including the African Development Bank (AfDB), the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank Group (IDBG), the Islamic Development Bank (IsDB) and the World Bank Group (WBG), was directed to projects in developing and poor economies. Of the $66 billion in financing issued, 57% was issued to low-and middle-income countries up from $ 41.5 billion in 2019.

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In partnership with other institutions, the MDBs issued up to $85 billion to increase total finance by these banks in climate mitigation to more than $115 billion. The amount of private direct mobilisation stood at $5.9 billion.

Up to $63 billion was sourced from the MDBs’ own pockets and $3 billion from external resources channelled through and managed by MDBs. These included the Climate Investment Funds (CIF), Green Climate Fund (GCF) and climate-related funds under the Global Environment Facility (GEF), EU blending facilities and others.

Of the total funding issued by the MDBs in 2020, 70% went to programmes designed to reduce greenhouse gas emissions. Half of these programmes were in low-and middle-income countries. Nearly $16 billion, 24% of the total climate financing issued, was directed to help countries build resilience to the impacts of climate change including droughts and extreme weather conditions. Up to 83% of this funding was issued to projects in low-and middle-income economies.

In the past six years, the MDBs have jointly committed a total of $257 billion in climate finance, of which $186 billion was directed at low- and middle-income economies.

Increasing funding in climate action programmes will help the MDBs to align activities with carbon emissions reduction goals set at the 2015 Paris Agreement of keeping global warming well below 2°C.

EIB Vice-President Ambroise Fayolle, said:  “To solve the climate crisis, we must mobilise trillions of dollars. Today’s report shows that despite the COVID-19 pandemic, MDBs provided crucial support to countries worldwide to build back better for a greener future. Importantly, MDB climate finance helped leverage important funding from other sources, including from the private sector. At the EIB, we are delighted to report record climate finance for 2020. Despite still much work to do in this area, we saw an important and encouraging step up in our support for climate change adaptation, which in 2020 doubled compared to previous years.”

Find out more about the report.