Exclusive: Development banks search for climate compromise ahead of landmark summit

BRUSSELS — Days before the first-ever summit of the world’s 450 public development banks, organizers are still searching for common ground on the phase out of investments in fossil fuels. The Finance in Common Summit, coordinated by the French Development Agency, was announced by French President Emmanuel Macron in May as a chance to promote a green recovery from the COVID-19 pandemic in line with the Sustainable Development Goals. However, as the Nov. 11 opening draws closer, the ambition of the banks’ joint statement has been dialed down in order to reach consensus between the “global coalition” of lenders. A draft dated Jul. 3, seen by Devex, would have made signatories commit to “develop strategies to align financial flows with the Paris Agreement by COP26” in November 2021. But an Oct. 19 version, also seen by Devex and discussed by the summit’s executive committee last week, would instead commit banks to Paris alignment by striving to “develop, operationalize and scale-up strategies and methodologies of alignment in the perspective of COP26,” as well as supporting “long-term strategies to reach zero net emissions as early as possible in the second half of this century." Xavier Sol, director of the NGO Counter Balance, told Devex that without a deadline for banks to align their investments with the Paris Agreement, any commitments would be “meaningless.” On the energy transition, the Oct. 19 draft would see banks commit “to increase the pace, coverage of and equitable access to investment in renewable energy, energy efficiency and clean technologies,” plus “consider the range of fossil fuel investments in our portfolios, avoid stranded assets, and work towards applying more stringent investment criteria, such as explicit policies to exit from coal financing in the perspective of COP26." In a sign of the questions still hanging over next week’s event, even the World Bank declined to confirm this week whether it backed the language in the Oct. 19 draft. Asked by Devex whether it would sign the joint declaration were it to go through unchanged, a bank spokesperson emailed Wednesday that it is “focused on our operations in the midst of this crisis and on delivering an unprecedented level of support to help countries build a sustainable and resilient recovery from COVID-19. Amid the pandemic, the Bank Group has remained the largest multilateral financier of climate action.” Summit organizers declined to comment on the ongoing negotiations, including whether some banks could opt out of signing the joint declaration. The executive committee will meet on Friday this week to discuss the final text, which is still evolving. Team Europe subtracts ‘additional statement’ The main players in European development have also abandoned plans to collectively commit to greater ambition on sustainable finance at the event. In mid-September, the European Commission privately circulated a three-page “Additional Statement by the Progressive Alliance of PDBs.” Among other things, the draft “Team Europe statement,” seen by Devex, would have involved the commission, the Association of European Development Finance Institutions, European Investment Bank, and European Bank for Reconstruction and Development committing to: • “Align fully to the objectives of the Paris Agreement before 2024”. • “Unlock [XXXX] trillion of investments aligned with the SDGs and the Paris Agreement in the decade to 2030.” • “Stop the funding of new investment projects that are not compatible with sustainable, low-emission, environment- and biodiversity-friendly and resilient development trajectories by 2023.” • “Phase out support to fossil fuels energy projects by the end of 2022.” An EU official authorized to speak to the media told Devex Wednesday that the idea was shelved because of “limited appetite by some” for another side declaration in addition to those already planned at the summit, and a “common understanding” to focus on making the joint declaration “as ambitious as possible bearing in mind the very numerous stakeholders.” “As the [summit] is about launching an inclusive process that over time should grow in ambition of commitments, and as [European DFIs] will have to be the engine of such ambitions, we consider it better to launch the process and not set it in stone,” the official said. That stands in contrast to the account of one of those consulted on the possible Team Europe statement, however, who said the main problem was the commission underestimating the time it would take for even European banks to win sign off on the more ambitious text from their shareholders and national capitals. “It has been quite clear that there has not been sufficient diplomatic weight behind this summit.” --— Laurie van der Burg, senior campaigner, Oil Change International The remaining takeaways from this year’s summit will come from participants such as EIB and EDFI. The latter, an association of 15 European DFIs, will present its members’ commitment to align all new financing with the objectives of the Paris Agreement by 2022 and transition investment portfolios to net-zero greenhouse gas emissions by 2050 at the latest. Meanwhile, EIB, following a board discussion early next week, plans to detail how it will transform itself into the EU’s climate bank on the back of commitments last year to end support for fossil fuels by the end of 2021 and provide €1 trillion in green investments in the decade to 2030. Given the summit’s broad ambitions on climate and the SDGs, some participants warned organizers against trying to cover too many topics in the joint declaration. But NGOs — who are planning a joint declaration of their own — are also angry that the event will not discuss other issues, such as how banks’ activities affect Indigenous people and human rights defenders. Despite a reference in the draft joint declaration to the U.N. guidelines on business and human rights, Siddharth Akali, director at the Coalition for Human Rights in Development, told Devex by email, that the summit “has failed to give these people — who are those worst affected by the intersecting crises of the pandemic, climate change, rising inequality and authoritarianism — the space to meaningfully participate and advance their own development pathways.” The Oct. 19 draft envisages a second event next year to reinforce the “high-level political support” for the new “global coalition” of development banks. Yet some say it is a lack of political will this time around that has prevented organizers from locking in a more ambitious joint declaration. “From our engagement with institutions and ministries it has been quite clear that there has not been sufficient diplomatic weight behind this summit,” Laurie van der Burg, senior campaigner at Oil Change International, told Devex. “If Macron had been more involved, if there would have been more support from the Elyseée, from the ministry of foreign affairs etc., then we would have been able to get to a more ambitious outcome. So that’s definitely a missed opportunity.”