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Last Updated: JUL 06, 2021
A group of nine multilateral development banks (MDBs) have published a report on Climate Finance 2020. The report reveals that the MDBs provided a total of $66 billion towards green funding in 2020. Of this, $49.945 billion (76%) was assigned for climate change mitigation finance, and $16.1 billion (24%) was allotted for climate change adaptation finance to help entities mitigate the effects of environmental upheavals.

The survey on MDB spending on climate co-finance has been conducted since 2015.

The report drew data from the African Development Bank (AfDB), the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank Group (IDBG), the Islamic Development Bank (IsDB), the New Development Bank (NDB), and the World Bank Group (WBG).

The funding has gone up by 7% from 2019, when seven financial institutions had infused $61.6 billion in climate financing.

Besides MDB funds, the net total climate co-finance assigned during 2020 was $85.08 billion. Together, MDB climate finance and climate co-finance totaled $151.13 billion.

The report further mentioned that 2020 saw $38.01 billion (58%) of total MDB financing go to low and middle-income economies, while $28.03 billion (42%) was reserved for high-income economies.

Out of the total investment of $66 billion, $63.11 billion came from the MDBs’ own accounts and $2.93 billion from external resources channeled through the MDBs. These included Climate Investment Funds, Green Climate Fund, and climate-related funds under the Global Environment Facility, European Union blending facilities, and others.

MDB finance from own accounts and MDB-managed external resources, 2020 (in US$ million)

MDB finance from own accounts and MDB-managed external resources, 2020 (in US$ million)

The survey noted that 76% of total MDB climate finance was pledged through investment loans. In terms of region, MDBs allocated their finances to small island states and least-developed economies.

MDB climate finance by region, 2020

Total MDB climate finance by type of instrument, 2020

MDBs also focused on green solutions in their Covid-19 responses. Installations related to renewable energy were seen in health centers, among other sustainable solutions.

The report states that MDBs provided $0.5 billion to initiatives under mitigation finance, which includes civil work such as rooftop, ground-mounted, and floating solar projects, among others.

The mechanism of monitoring climate change mitigation finance acknowledges the shift to renewable energy technologies and the modal shift to low-carbon modes of transport. The methodology includes both greenfield and brownfield renewable energy projects as well as modal-shift projects in transport. For energy efficiency projects, the methodology acknowledges that drawing a boundary between increasing production and reducing emissions per unit of output is difficult. Consequently, greenfield energy efficiency investments are included only in a few cases where they help to prevent a long-term lock-in to high carbon infrastructure. For brownfield energy efficiency investments to be considered as climate finance, old technologies must be replaced, retrofitted, or retired well before the end of their lifetimes with new technologies that are substantially more efficient, noted the study.

In line with the vision to fund green projects, MDBs have been accelerating financing projects under such initiatives.

To that end, EBRD, for example, noted that green finance would contribute to over 50% of its total annual investment by 2025. In April this year, EBRD and Green Climate Fund pledged to support Armenia’s transition to a low-carbon economy through green financing. The $6 million package will help small-to-medium enterprises invest in climate change mitigation and adaptation technology.

In 2020, ADB had approved a loan of $190 million to upgrade the existing power distribution system in Bengaluru, Karnataka.

Earlier, the World Bank had announced a multi-donor trust fund called the Climate-Smart Mining Facility to realize a lower-carbon future.

Source Link: https://mercomindia.com/climate-financing-by-multilateral-development-banks/