MDBs' annual climate finance passes $61 billion

 Climate financing by seven of the world’s largest multilateral development banks (MDBs) totaled $61.6 billion in 2019, with $41.5 billion (67 per cent) in low- and middle-income economies, according to the 2019 joint report on Multilateral Development Banks’ Climate Finance.

In addition to its traditional focus on low- and middle-income countries, the 2019 report expands the scope of reporting for the first time to all countries of operations. Some $46.6 billion, or 76 per cent of total financing for the year, was devoted to climate change mitigation investments that aim to reduce harmful greenhouse gas emissions and slow down global warming.

The remaining $15 billion, or 24 per cent, was invested in adaptation efforts to help countries build resilience to the mounting impacts of climate change, including worsening droughts and more extreme weather events from extreme flooding to rising sea levels.

The report combines data from the Asian Development Bank (ADB), the African Development Bank, the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank Group, the World Bank (WB) Group and – for the first time – the Islamic Development Bank, which joined the working group in October 2017. In 2019, the Asian Infrastructure Investment Bank (AIIB) also joined MDB working groups, and its data is presented separately in the report.

Additional climate funds channeled through MDBs – such as from the Climate Investment Funds, the Global Environment Facility Trust Fund, the Global Energy Efficiency and Renewable Energy Fund, the European Union’s Funds for Climate Action, and the Green Climate Fund – also play an important role in boosting MDB climate financing. In 2019, the MDBs reported a further $102.7 billion in net climate cofinancing from public and private sources. This raised the total climate activity financed by MDBs in 2019 to $164.3 billion.

“The growing flow of MDB climate finance shows our joint resolve to take on climate change and, in the face of the coronavirus disease (Covid-19) pandemic, it is more important than ever to ‘build back better’ in a low carbon and climate resilient way,” said the director general of ADB's Sustainable Development and Climate Change Department Woochong Um. “The report shows that climate finance provided by and through the MDBs is providing increasing support for these needed transitions.”

In 2019, ADB committed almost $7.1 billion in climate finance (more than $5.5 billion for mitigation and $1.5 billion for adaptation). This included $705 million from external resources, including multilateral climate funds. Further, ADB mobilized $8.8 billion of climate cofinancing.

The report shows that the MDBs are on track to deliver on their increased climate finance commitments. In 2019, the MDBs committed their global annual climate financing to reach $65 billion by 2025 – with $50 billion for low- and middle-income countries – and that MDB adaptation finance would double to $18 billion by 2025. The MDBs have reported on climate finance since 2011, based on a jointly developed methodology for climate finance tracking.

The 2019 Joint Report on Multilateral Development Banks’ Climate Finance is published in the midst of the Covid-19 pandemic, which has caused significant social and economic disruption, temporarily reducing global carbon emissions to 2006 levels.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members, 49 from the region.

Covid-19 is exacerbating the global trade finance gap

The Covid-19 pandemic is a tragic health crisis causing irreversible damage to the global economic and financial system. It is also worsening trade restrictions and reducing trade volumes globally. Coupled with the scarcity of financing in general, and trade financing in specific, coronavirus is causing serious damage to developing economies, according to the global trade body.
The least developed countries (LDCs) are among the hardest hit. Their already fragile economies are facing further challenges, as the value of their exports plummet and their borders are closed to trade and tourism, like most countries worldwide. “Local and foreign investments are drying up,” the World Trade Organisation (WTO) said, adding that small business revenues and orders have been reduced drastically. “The cost of financial transactions is increasing, as working with financial institutions in LDCs is perceived to be riskier than before.”
The issuance of letters of credit and other trade finance instruments is becoming difficult, if available at all, and the appetite of correspondent banking is decreasing each day as the crisis unfolds. Because of this, LDCs are seeing a rapid depletion of their foreign reserves, and their financial institutions are facing a shortage of liquidity. The persistence of this situation could lead LDCs to drift further away from global value chains and to be left out of the international trade system, it added.
Access to trade finance was already an issue prior to the pandemic. The global trade finance gap is estimated at $1.5 trillion and it is mostly impacting small and medium-sized enterprises in developing countries. Over 50 per cent of requests for financial support to trade are rejected.
The actions that were being taken to reduce the global trade finance gap – including policy advancement, technical assistance, capacity building, regulatory reform and increased financing – are more important now than ever before, to ensure that the world’s most vulnerable countries are not further entrenched in economic inequality because of the pandemic.
Multilateral development banks (MDBs) have launched immediate responses and financial support amounting to more than $200 billion for emerging and low-income countries. For instance, the Islamic Development Bank Group has launched an initial 3Rs, as in ‘Respond, Restore, Restart’, for a total $2.3 billion to support Organisation of Islamic Conference (OIC) countries at different stages of the recovery trajectory. More specifically, trade finance is a pivotal component of support to the private sector as acknowledged by the G20 Ministers of Finance and Central Bank Governors at their April 2020 meeting.
In addition the WTO and MDBs committed to support trade finance The International Islamic Trade Finance Cooperation (ITFC) has pledged an initial $300 million response package to support strategic health, food and energy trade flows and further grant elements to build the capacity of medical personnel and laboratories in OIC countries.
In addition to finance itself, technical assistance programmes are enabling LDCs to build their capacity to provide trade finance. For example, a successfully piloted international trade e-learning programme developed by ITFC and the International Chamber of Commerce is now being provided digitally to financial institutions in LDCs, with the support of the Enhanced Integrated Framework (EIF) and several multilateral development banks and major commercial banks. MDBs are also working together to overcome trade finance barriers, including compliance challenges.

UN regional arm explores a new financial landscape for Asia and the Pacific

Mobilising sufficient financing remains a major challenge to effectively pursue the 2030 Agenda for Sustainable Development, underscored high-level delegates at a UN conference today.
Although interest in conventional and innovative financing options is growing among public and private sectors, investments needed to achieve the Sustainable Development Goals (SDGs) continue to remain underfunded.
The Asia-Pacific Conference on Financing for Inclusive and Sustainable Development is co-organised by the United Nations (UN) Economic and Social Commission for Asia and the Pacific (ESCAP) and the Government of Bangladesh, in collaboration with the International Chamber of Commerce-Bangladesh and the Asian Development Bank (ADB).
In her opening address, UN under-secretary-general and executive secretary of ESCAP Armida Salsiah Alisjahbana warned that the region is unlikely to achieve any of the SDGs by 2030 in a ‘business-as-usual’ scenario. “ESCAP has estimated that developing countries in Asia and the Pacific should invest an additional $1.5 trillion per year, or 5 per cent of their combined GDP, to achieve the SDGs by 2030,” Alisjahbana said, adding that ambition is the only option in our region today.
The funding gap for countries in South Asia – including Bangladesh – is even higher as 10 per cent of the GDP. Alisjahbana further emphasised that while mobilising private financing is essential to unlock enough resources for the achievement of the SDGs, the achievement of many of the Goals will still need additional public funding which requires modernising tax systems and improving the efficiency of tax administrations.
Delegates at the conference highlighted that given the considerable financing gaps in Asia and the Pacific, developing countries need to mobilise additional financial resources by increasing domestic resources, partnering with the private sector, and enhancing international development cooperation. Financing the SDGs would also need unprecedented coordination and cooperation between the public and private sectors, facilitated by international development agencies and multilateral development banks (MDBs).
Among other areas, the three-day conference will discuss how to scale up investment and international development cooperation to adequately finance the 2030 Agenda for Sustainable Development in the region. Delegates will also explore how countries can strengthen and diversify financial flows, as well as innovative financing approaches such as taxation, capital markets, non-bank financial schemes, climate finance, small business and supply chain financing, and FinTech solutions.
Speakers at the conference advocated enhancing the financial system at both regional and national levels by addressing the barriers that constrain channelling finance towards sustainable development and leveraging opportunities to increase investment in the SDGs at scale.
The regional conference was inaugurated in Dhaka by President of Bangladesh Md Abdul Hamid. Also present were the minister of Foreign Affairs of Bangladesh Dr AK Abdul Momen, the finance minister of Bangladesh AHM Mustafa Kamal, Private Industry and Investment adviser to the Prime Minister of Bangladesh Salman Fazlur Rahman and ICCB president Mahbubur Rahman.
On the occasion, UN secretary-general António Guterres and former secretary-general of the UN Dr Ban Ki-moon also participated in the conference through their video messages. Over 800 government officials and representatives of international organisations, private sector and civil society are participating in the conference.
The conference provides a multi-stakeholder forum to build consensus and articulate the views of the region on financing for development issues through high-level regional consultations. The conference not only enhances sharing knowledge and best practices among the participants to facilitate SDG funding but also ignites the discussions on new policy and cooperation frameworks at the regional level to facilitate financial resource mobilisation to achieve the 2030 Agenda.

MDBs announce joint framework to combat climate change

Multilateral Development Banks (MDBs) today announced a joint framework for aligning their activities with the goals of the Paris Agreement, reinforcing their commitment to combat climate change.
In a joint declaration, the MDBs committed to working together in six key areas considered central to meeting the goals of the agreement, which aims to limit the increase in global temperatures to well below 2°C, pursuing efforts for 1.5°C.
The declaration was issued at the start of the 24th Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP24) in Katowice, Poland.
"The global development agenda is at a pivotal point," the joint declaration reads. "There is international consensus on the urgent need to ensure that policy engagements and financial flows are consistent with a pathway towards low greenhouse gas emissions and climate-resilient development."
The MDBs and the International Development Finance Club (IDFC) had already pledged in December 2017 to align financial flows with the objectives of the Paris Agreement.
"To realise this vision, we are working together to develop a dedicated approach," the joint MDB declaration adds.
The MDBs plan to break their joint approach down into practical work on six core Paris Alignment areas – the building blocks – including: aligning their operations against mitigation and climate-resilience goals; ramping up climate finance; capacity building support for countries and other clients; plus an emphasis on climate reporting.
This approach builds on the ongoing MDB contribution to climate finance, which, in 2017, amounted to $35 billion to tackle climate change in developing and emerging economies, while mobilising an additional $52 billion from private and public sector sources.
The MDBs will report back to next year’s COP25 gathering on their progress under the six building blocks.
The nine MDBs includes the African Development Bank Group, the Asian Development Bank, the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank Group, the Islamic Development Bank, the New Development Bank, and the World Bank Group (World Bank, IFC, MIGA).

Multilateral banks reaffirm pledge to support resilient, sustainable infrastructure

The heads of the leading multilateral development banks (MDBs) meeting at the Global Infrastructure Forum 2018 (GI Forum) today expressed their condolences following the tragic loss of lives and livelihoods in Sulawesi, Indonesia and reaffirmed their commitment to work together to deliver infrastructure that is resilient, inclusive, and sustainable.
The important role of technology in this goal was at the heart of discussions at the GI Forum under the theme "Unlocking Inclusive, Resilient, and Sustainable Technology-driven Infrastructure'. 2018 marks the first time this annual forum is being held outside of the US. Indonesia’s vice president Jusuf Kalla opened the discussion.
The MDBs agreed that their joint efforts should be based around the following priorities:
Increase technical assistance and advisory services for knowledge creation and knowledge transfer; disseminate knowledge through collaborative events that support the delivery of bankable projects; contribute to delivering sustainable infrastructure through the MDB Information Cooperation Platform; mobilise sustainable finance at scale; support sustainable public procurement; and Identify infrastructure and capacity gaps, particularly in least-developed countries, landlocked developing countries, and small island developing states and African countries.
These pledges are included in the MDBs’ Outcome Statement.
The GI Forum gathered private sector investors with representatives from the United Nations and leaders from the African Development Bank, Asian Development Bank, Asian Infrastructure Investment Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, International Finance Corporation, Islamic Development Bank, New Development Bank, and the World Bank.
The forum comprised two opening sessions. The first looked at how technology, such as solar energy systems, blockchain, and big data, can be used to make infrastructure more sustainable. The second discussed how to increase private infrastructure finance.
Other sessions looked at using technology to achieve the crucial but difficult “last mile” of getting services to end users, good practices in scaling up investments in infrastructure, ways of financing the global infrastructure gap, and maximizing innovative climate finance for sustainable infrastructure.
The infrastructure needs across the world are huge. An estimated 1 billion people have no access to electricity while over 660 million people have no access to clean drinking water. These needs must be met if the global community is to meet commitments to the Sustainable Development Goals (SDGs). New technologies and approaches such as smart transport systems and innovative climate finance can help to fill the infrastructure gap. They can also help build infrastructure that can withstand climate change and natural disasters.
A joint report by 13 development banks released in June noted that in 2017, MDBs and development finance institutions mobilised $73.3 billion of long-term private and institutional investor cofinancing for infrastructure such as power, water, transportation, and telecoms. This compared with $68.7 billion mobilised in 2016.

MDBs increase 2016 financing to tackle climate challenge, South Asia gets largest chunk

The world’s six largest multilateral development banks (MDBs) continued to make a strong contribution to the global climate challenge in 2016, increasing their climate financing in developing countries and emerging economies last year to $27.4 billion from $25 billion in 2015.
Of the total, $21.2 billion or 77 per cent was dedicated to climate mitigation finance, with the remaining 23 per cent devoted to climate adaptation.
Combined with additional co-financing from other investors, the total amount of finance mobilised for climate action reached $65.3 billion last year.
The MDBs have reported jointly on climate finance since 2011. Collectively, the banks have committed over $158 billion in climate finance during the past 6 years.
The latest MDB climate finance figures are detailed in the 2016 Joint Report on Multilateral Development Banks’ Climate Finance, combining data from 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 Group, and the World Bank Group.
"ADB acknowledges MDB’s pivotal role in providing climate finance and remains committed to strengthen its collaboration with other MDBs and ultimately to the successful implementation of the Paris Agreement,” ADB vice president for Knowledge Management and Sustainable Development Bambang Susantono said, adding that the ADB has recently approved its Climate Change Operational Framework 2030, which will guide in enhancing resilience and strengthening climate actions in the Asia and Pacific region.
Broken down by region, the largest share of last year’s MDB climate finance went to South Asia, with 20 per cent, followed by East Asia and the Pacific and non-EU Europe and Central Asia, with 19 per cent and 18 per cent, respectively. The Middle East and North Africa, at 9 per cent and Sub-Saharan Africa, at 7 per cent, received the least climate finance.
The MDBs also reported again on climate finance according to financial instrument. The vast majority of finance, or 73 per cent, was provided in the form of investment loans.
The MDBs’ methodologies for climate finance tracking align with the Common Principles for Climate Change Mitigation Finance Tracking, jointly agreed by the MDBs and by the International Development Finance Club (IDFC), and first published in March 2015.
The MDBs and the IDFC agreed on the Common Principles for Climate Adaptation Finance Tracking in July 2015. The MDBs and the IDFC have begun taking the next steps to harmonize their approaches in tracking adaptation finance.
The MDBs are continuing to work to update their joint tracking methodologies for mitigation and adaptation to support the goals of the Paris Agreement, playing a key role in defining the finance flows consistent with a pathway towards low greenhouse gas emissions and climate resilient development.
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, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members, 48 from the region. In 2016, ADB assistance totaled $31.7 billion, including $14 billion in co-financing.