A look into ADB's future climate change work

The Asian Development Bank is finalizing its climate change operational framework for the period 2017-2030.

Part of the framework informs how the bank will meet its target of raising $6 billion in climate financing by 2020, and how the multilateral institution plans to support its member countries in meeting their nationally determined contributions or climate pledges under the Paris Agreement on climate change.

The goal is to flesh out the details of countries’ climate pledges, convert them into investment plans and clearly articulate their financing requirements, said Preety Bhandari, adviser and head of ADB’s climate change coordination and disaster risk management unit.

The bank will be looking at lessons generated from the first phase of the framework’s implementation and see where it can make improvements or adjustments in terms of countries’ plans and ADB’s role.

The framework reflects the bank’s increasing focus on climate change work for the past couple of years. In 2016, the bank’s climate financing portfolio jumped almost $1 billion to $3.7 billion from 2015.

“On the adaptation side, I can say it is largely driven by the consciousness that we have built in the organization,” Bhandari told Devex. “All our [climate adaptation] projects need to go through a climate risk screening, and the projects which are high or medium risk to future climate impacts have to go through an assessment of what could be the possibilities of design change, structural changes, and what would be the associated financing required.”

On climate mitigation, the bank has put in place an estimated target of investing $2 billion annually in clean energy projects. Demand for electricity in Asia is expected to increase by more than 70 percent through 2035, but many countries in the region are still very dependent on coal to fuel their energy needs. One of the bank’s challenges is getting governments to shift their investments toward cleaner forms of energy.

Some of ADB’s biggest focus areas are in the transport sector, projects linked to urban development and coastal communities, and agriculture.

“Let’s not forget that agriculture is still the mainstay for a large proportion of the population in our region, so to what extent can we have climate-resilient agriculture or climate-smart agriculture projects is something we are also looking at very, very closely,” said the climate change adviser.

Co-financing, an important part of the strategy

Despite its increasing financing portfolio for climate change projects, ADB still falls short of Asia Pacific’s climate finance needs, which is estimated to cost $200 billion annually for climate mitigation. An additional $40 billion annually is needed for climate adaptation projects, including climate proofing infrastructure against extreme weather events, such as ports that could be damaged in the event of storm surges, and bridges under threat of rising sea levels.

Thus, part of the bank’s strategy is helping member countries access the different multilateral funds available for climate finance, such as the Global Environment Facility, the Climate Investment Funds, and the Green Climate Fund.

“Co-financing is an important part of the strategy that we are deploying,” Bhandari said. The “CIFs have been an important part of providing concessional financing for projects in developing countries, and with GCF, we’ve had approvals for two projects.”

The bank was able to secure grant financing from GCF for an urban water supply and wastewater management project in Fiji. The amount, $31 million, will cover a third of the $222 million project meant to ensure the population’s access to clean water in Fiji’s greater Suva region amid the threat of rising sea levels, which could lead to salt water seeping through water supplies.

In Dec. 2016, ADB also received another grant worth $17 million in total, for a program meant to assist seven Pacific Island countries in transitioning toward renewable energy sources such as hydropower, solar and wind energy. Part of the grant is for capacity building and in paving the way for more private power producers to invest in renewable energy.

The above financing was made possible because of ADB’s accreditation to GCF, the first multilateral bank to do so. But Bhandari said meeting the criteria of multilateral funds is an “extra piece of work.” GCF, for example, has six investment criteria, which include demonstrating the impact of the project on the ground, and identifying other core benefits of the project and how it is contributing to sustainable development.

“They may sound very easy in terms of meeting the investment criteria, but how you prepare that project proposal is an enrolled exercise,” said Bhandari. “To what extent institutions in country are equipped to provide such an input is where you need [to be] building capacity.”

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