First-of-its-kind summit to push development banks on climate

BRUSSELS — When the world’s public development banks gather at their first all-hands meeting in Paris this November, it will prove a litmus test of their commitment to combating climate change.

The partly virtual Finance in Common summit on Nov. 10-12, will tackle the recovery from the COVID-19 pandemic. And climate change will play no small role, particularly as banks discuss sustainable ways to rescue the economy.

Audrey Rojkoff, the secretary-general of the summit and deputy-director for strategy, partnerships and communication at the French Development Agency, or AFD, said that the joint declaration will “of course” mention the Paris Agreement on climate change.

“But they are not all ready to align their financial flows with the Paris Agreement,” Rojkoff told Devex, referring to the roughly 450 public development banks who make up 10% of annual global investment.

“So what we are discussing now is, what is the ambition of this joint declaration? To which extent we can make all the public development banks commit to align in the short term to the Paris Agreement or to develop strategies to align in the next couple of years? We are working with think tanks and academics to help achieve that.”

Iskander Erzini Vernoit, a researcher at the E3G think tank, told Devex that the European Investment Bank’s move last year to end all fossil fuel investments by 2022 was an important step.

“The hope is that Finance in Common will be a moment that shows that the broader ecosystem of public finance institutions is following suit, shifting away from fossil fuels,” Vernoit said. “Hopefully it will be a moment where numerous banks and other institutions make commitments akin to that made by EIB.”

The summit will have three deliverables, organizers told Devex last week: a research conference on the role, business model, governance, and impact of public development banks; a showcase of about a dozen new projects from banks in response to the pandemic; and a joint political declaration conveying the banks’ willingness to contribute to a recovery from COVID-19 by deploying sustainable finance.

That final communiqué will inevitably be limited by the need to reach consensus, Vernoit said. So the summit’s success should also be measured by the moves made by individual banks and sub-groups to make concrete pledges such as to phase out fossil fuel.

Given the varying levels of participants’ climate ambition, Rojkoff said there will be additional statements from those wishing to make commitments beyond the joint declaration. “We have some ideas but we are still working on it,” Rojkoff said of those, “notably from Europe,” with more extensive plans.

Civil society organizations want the common declaration to include language on full alignment with the Paris Agreement by 2023, an immediate halt to new fossil fuel investments and a phase-out of existing finance for fossil fuels and related infrastructure by 2022 at the latest, and the internationalization of the European Union’s recently adopted taxonomy on sustainable finance.

Nicolas Vercken, campaigns and advocacy director at Oxfam France, predicted that the narrative of the summit would not be about Europeans saying “there are the bad guys — the Russians, the Saudis, the Chinese, and the Americans — and there are the good guys — us.”

Instead, he told Devex, the message would be that “there is an increasingly convergent community and it’s fantastic that everyone is here for the first time, and that shows our collective engagement for the SDGs, to the 0.7 target etc,” he said, referring to the U.N. aid spending target of 0.7% of development assistance to gross national income.

Rémy Rioux, CEO of AFD and chair of the International Development Finance Club, the institution from which the idea for the summit originated, told Devex last week that the event was about sending “a signal of hope” that there is quality financing available at scale for sustainable investments.

The transition to investing in renewables creates tensions in every country, Rioux said. And “probably one of the places where you feel the most concretely these tensions are the public development banks,” Rioux said.

“They are all searching for the ways to reconcile inequalities with climate, with the needs, of course, of the population, especially in the poorest and emerging markets,” he said, noting that development banks hold enormous power in driving change.

“And that’s why Europe and the others and the multilaterals, we need to help, we need to accompany, we need to strengthen, we need to provide the concessional resources, we need to share the methodologies for sustainable financing with my colleagues from IDFC, with the 450 institutions. If the China Development Bank switches completely or more rapidly than what [would have] happened to renewables, believe me, it will make a huge difference. They are eight times bigger than the World Bank. So that’s what we are talking about.”