Development banks considering $250M joint climate facility

Next week, the heads of the world’s top multilateral development banks are set to discuss creating a joint $250 million facility aimed at improving their public and private sector clients’ climate strategies.

If given the go-ahead, “the Facility is expected to operate between now and 2025 and mobilize up to USD 250 million in grant financing during its first phase,” according to an agenda note seen by Devex. “The Facility will also support the MDBs’ efforts for Paris Alignment and meaningfully supporting countries in achieving the Paris Agreement goals.”

The MDB heads — including, among others, the leaders of the World Bank, European Investment Bank, African Development Bank, and Asian Infrastructure Investment Bank, which currently holds the rotating chair of the meetings — convene a few times each year to compare notes on whatever topics they wish.

Wednesday’s agenda features 45 minutes without any support staff for “a free-flowing informal discussion on any issues that the Heads may wish to raise, including the issue of debt challenges faced by member countries”; 20 minutes on health financing; and 20 minutes on the banks’ climate change ambitions.

Ahead of the United Nations Climate Change Conference and the G20 Venice Conference on Climate, the agenda notes that MDBs are under pressure “to declare a time-bound plan on aligning their financing with the Paris Agreement.” Yet the banks have so far failed to position themselves as a group on climate change, with varying ambitions for what proportion of their investments should be considered green and conceptions of how this is measured.

The proposed facility under consideration Wednesday, formulated by the MDB climate heads working group, is designed to “significantly step-up MDBs’ support to countries and other clients to establish net zero targets and develop long-term low-greenhouse gas and climate-resilient development strategies as a key enabler of enhanced ambition.”

Mark Plant from the Center for Global Development told Devex that a reference to “coordinated upstream engagement on climate action” appeared to be an attempt to translate countries’ climate targets into programs that MDBs can invest in together, including at the level of individual projects.

“You have to have that in place or you are just going to be wasting your money,” Plant said.

U.S. climate envoy John Kerry has called for a significant increase in climate finance this year, with high-income countries under pressure to meet their commitment under the Paris Agreement to provide $100 billion in climate finance annually to low-income countries this decade.

According to the agenda, the heads will discuss whether they “feel comfortable with the Facility proposal as the joint MDB action for 2021 in terms of ambition,” and if so, whether to announce it at the G20 Venice Conference on Climate or U.N. Climate Change Conference.

Plant said the real key to cutting the world’s carbon emissions lies mostly in reductions in the United States, Brazil, India, China, and the European Union — where MDBs play a lesser role.

“You have to think about the role of the MDBs in other countries that want to do climate-correct things that are on a smaller scale,” Plant said. “MDBs are the ones that need to be the link between developing countries, projects, and the financial world, and if some of their money can help facilitate that link then so much the better.”