Devex Invested: As MDBs stop funding gas, will China fill the void?

As major multilateral development banks limit or stop their funding for gas projects to meet climate goals, will China step up to fill the void?

The country was the largest cross-border public funder of coal-powered energy between 2013 and 2018, but last year it made a commitment to stop funding overseas coal plants. Will it see an opportunity to pivot to gas instead? A new paper from Boston University seeks to determine whether this concern is valid.

• Good news for those worried about the environment: China is unlikely to fill the gap in gas as it did with coal, Cecilia Springer, a co-author of the paper, tells me. Why? Most significantly, the structure of the country’s domestic energy system doesn’t create the same push factors that motivated policy banks  — namely the China Development Bank and the Export-Import Bank of China — to support Chinese companies in the coal industry.

• China also has made some policy moves, including green Belt and Road Initiative frameworks, that indicate it might be more likely to focus on renewable energy than gas, says Springer, who is also the assistant director of Boston University’s Global China Initiative.

• The study compares natural gas investments by Chinese policy banks and eight major MDBs from 2008-2021, finding that they committed nearly $112 billion to gas infrastructure projects in that time — with the MDBs financing about $63.7 billion of the total. Lending to these projects peaked in 2016, when MDBs and Chinese policy banks financed more than $16.2 billion. Among the MDBs in the study, the European Investment Bank was the single largest gas lender in that time period; it is also the MDB with the clearest policy to end gas support.

• And now the bad news: While China may not fill the gap, the private sector might. And while a lack of data makes it hard to compare public and private finance in the gas space, the private sector likely plays a large role in gas power capacity, according to Springer. “More research and more attention to what the private sector is doing” are needed, she says.

Recap: The growing tension between energy access and tackling climate change (Pro)

+ As COP 27 approaches: Inside the COP 26 deal to end international fossil fuel financing

Summit sums

At last week’s Summit of the Americas, the U.S. made numerous funding announcements as part of a commitment to “reinvigorate the hemisphere’s regional economic institutions” and “pivot our public institutions and financing mechanisms to leverage far greater levels of private investment,” according to the White House.

Perhaps the most significant news was potential support for a capital increase at the Inter-American Development Bank’s private sector branch, IDB Invest. The move “reaffirms the important role that the IDB Group will continue to play as the partner of choice for Latin America and the Caribbean,” IDB says. Earlier this year, the bank’s governors approved a “roadmap for a capital-increase proposal” for IDB Invest and supported other proposals for institutional reforms.

The U.S. has also announced that it will give $25 million to the Global Concessional Financing Facility, a financial intermediary fund at the World Bank that provides funding to middle-income countries affected by refugee crises, to prioritize support for Latin American nations. The U.S. International Development Finance Corporation has also unveiled five new projects in Latin America worth more than $100 million in total.

Background reading: Power reveals food security, development aid at Summit of the Americas

Following the money

On International Women’s Day in March, U.S. President Joe Biden’s administration announced a $2.6 billion funding request for the U.S. Agency for International Development and the State Department “to advance gender equality and the empowerment of women and girls around the world.” That led to a number of questions, including how the funding would be spent.

My colleague David Ainsworth has the details on what USAID says it plans to do with the funds — the largest-ever gender budget request, which would more than double the funding for such programs if approved by the U.S. Congress.

Read: USAID shares plans for $2.6B gender funding in forecast call (Pro)

+ To keep up to date with global development's latest funding opportunities, in-depth news, and analysis, sign up to Devex Money Matters. Plus, if you haven't yet, sign up to a 15-day free trial of Devex Pro — our premium news subscription.

False advertising

Many companies say they will give a portion of their revenue to various charitable causes, but a recent study finds that they are often vague or outright dishonest about just how much of this money is donated, my colleague Stephanie Beasley writes.

“Cause marketing” campaigns are often opaque, according to the marketing and financial experts who conducted the research. They argue that companies should be more transparent about how they use proceeds intended for charitable purposes.

Read: Companies are fibbing about their charitable giving, study finds

Investments of interest

• The Asian Development Bank has approved up to $4.3 billion to finance a railway project in the Philippines — the bank’s largest infrastructure financing in the Asia and Pacific region.

• IFC is putting up $20 million for one of Armenia’s largest broadband operators. This marks the first time that the World Bank’s private sector wing is stepping into the telecom space in the South Caucasus region.

What we’re reading

Senegal nears completion of ‘bespoke’ vaccine manufacturing facility. [Devex Pro]

How COVID-19 changed Bloomberg Philanthropies’ work. [Devex Pro]

Congo’s oil block sale threatens carbon sinks, forest pact. [Bloomberg]

Unlocking sustainable private sector growth in the Middle East and North Africa. [EIB]