Half of all Multilateral Development Banks’ climate finance goes to Europe. Just 4% is grants. We don’t just need more but better climate finance.
November 15, 2024
Source: African Arguments
At the COP29 climate talks, World Bank President Ajay Banga (middle) committed to increase climate finance available through MDBs for low- and middle-income to $120 billion per year by 2030, much of it through leveraging private sector investment. Credit: Madeleine Race/Recourse.
At the COP29 climate talks, World Bank President Ajay Banga (middle) committed to increase climate finance available through MDBs for low- and middle-income to $120 billion per year by 2030, much of it through leveraging private sector investment. Credit: Madeleine Race/Recourse.
This week, at the COP29 climate talks, the multilateral development banks (MDBs) are patting themselves on the back. Side events, panels, and press releases all celebrate their achievements in aligning their activities with the Paris Agreement and delivering climate finance at record levels – $125 billion in 2023. The MDBs, including the World Bank and the African Development Bank, claim to “drive transformative change” in global climate action. However, a new report by Recourse, supported by 18 organisations and networks, tells a very different story – and raises critical questions about what “climate finance” actually is in the eyes of the MDBs. This comes at a critical moment with a new climate finance goal on the table at COP29.
The report scrutinised the MDBs’ own figures and found a plethora of problems. One of these is a lack of transparency on what is being counted. For example, Oxfam could not verify 40% – that’s $7 billion – of what the World Bank claimed as climate finance for one fiscal year. The Asian Infrastructure Investment Bank (AIIB) declared that they reached their target for 50% of their financing approvals to be for climate finance in 2022, three years early to their 2025 deadline, but failed to make the relevant data public. Meanwhile, the African Development Bank (AfDB) has not published any public record at all of what it counts as climate finance.
The funding is also not flowing to where it is most needed. Almost half of all MDB climate finance for 2023 did not go to the world’s most climate vulnerable countries. Instead, it went to Europe. Sub-Saharan Africa received a fraction – just 14% – and Asia little more – 21%. And despite public finance’s particularly important role in supporting efforts to adapt to climate change impacts, almost 80% of MDB climate finance went to emissions reduction activities (referred to as mitigation).
The financing models are also concerning. Climate Action Network (CAN) International, a network of over 1,900 civil society organisations, calls for climate finance to be delivered as grants, yet just 4% of MDB climate finance in 2023 came in this form. 70% took the form of loans. The Asian Development Bank (ADB) reported an even higher level of loans at 96%, while the AIIB has no proper grant function at all. Disturbingly, this means that climate finance is worsening the debt crisis in many countries and further undermining countries’ ability to deal with climate change.
Besides these critical issues lie a more fundamental problem – the fact there is no agreed definition of what “climate finance” is in practice. In this void, the MDBs have come up with their own principles for what type of projects count as climate finance, but with some significant flaws. The only kinds of projects that are fully excluded are coal and peat projects, as well as those leading to deforestation. However many other initiatives are allowed to be counted as climate finance, subject to some restrictions. This includes false solutions like carbon capture and storage, which is costly and not proven to work at scale, and highly polluting and greenhouse gas intensive waste-to-energy (WTE) incineration projects.
Another problem is that part of a project can be counted as climate finance, even when the rest of the project is highly greenhouse gas intensive. When scrutinising the MDBs’ publicly available documentation, there are some surprising and concerning finds. The AIIB, for example, counted almost half of its $153 million funding for an airport expansion project in Turkey as climate finance, disregarding the fact it will double the airport’s capacity – and in turn, more than double its emissions. The same bank also counted part of a greenfield gas power plant set to run for at least 22 years as climate finance – despite the long-term carbon lock-in that it represents for Bangladesh, one of the world’s most climate-vulnerable countries. There is even evidence an MDB counted funding of a mega LNG project in East Africa as climate finance, according to OECD.
But the Paris Agreement isn’t just about greenhouse gas emissions and environmental destruction – it also calls for human rights obligations to be respected and promoted. Yet the MDB principles for climate finance are void of any requirement to protect and support those most vulnerable, including women and girls. They are completely gender blind. According to the MDBs, they rely instead on their own policies, which differ across the banks. But there is a wide range of evidence showing how these are lacking in numerous respects. For example, the AIIB and the ADB counted their investments in a hydroprower project in Nepal that has severely marginalised and displaced local Indigenous peoples, with women worst impacted, as 100% climate finance. In Mongolia, civil society is protesting a “climate smart” mining project, also counted as 100% climate finance by the ADB, due to the high risks to local communities, including Indigenous peoples.
In the first week of COP29, World Bank President Ajay Banga announced a big commitment to increase climate finance available through MDBs for low- and middle-income countries. He set an annual goal of $120 billion by 2030, much of it through leveraging private sector investment. But before they scale-up the quantity, the banks need to reassess the quality. Ultimately, the MDBs are accountable to the farmers, workers, women, Indigenous peoples, and the most marginalised communities in developing countries. These are the people that their climate finance should serve, whatever the goal agreed by countries here at COP29.
At the COP29 climate talks, World Bank President Ajay Banga (middle) committed to increase climate finance available through MDBs for low- and middle-income to $120 billion per year by 2030, much of it through leveraging private sector investment. Credit: Madeleine Race/Recourse.
At the COP29 climate talks, World Bank President Ajay Banga (middle) committed to increase climate finance available through MDBs for low- and middle-income to $120 billion per year by 2030, much of it through leveraging private sector investment. Credit: Madeleine Race/Recourse.
This week, at the COP29 climate talks, the multilateral development banks (MDBs) are patting themselves on the back. Side events, panels, and press releases all celebrate their achievements in aligning their activities with the Paris Agreement and delivering climate finance at record levels – $125 billion in 2023. The MDBs, including the World Bank and the African Development Bank, claim to “drive transformative change” in global climate action. However, a new report by Recourse, supported by 18 organisations and networks, tells a very different story – and raises critical questions about what “climate finance” actually is in the eyes of the MDBs. This comes at a critical moment with a new climate finance goal on the table at COP29.
The report scrutinised the MDBs’ own figures and found a plethora of problems. One of these is a lack of transparency on what is being counted. For example, Oxfam could not verify 40% – that’s $7 billion – of what the World Bank claimed as climate finance for one fiscal year. The Asian Infrastructure Investment Bank (AIIB) declared that they reached their target for 50% of their financing approvals to be for climate finance in 2022, three years early to their 2025 deadline, but failed to make the relevant data public. Meanwhile, the African Development Bank (AfDB) has not published any public record at all of what it counts as climate finance.
The funding is also not flowing to where it is most needed. Almost half of all MDB climate finance for 2023 did not go to the world’s most climate vulnerable countries. Instead, it went to Europe. Sub-Saharan Africa received a fraction – just 14% – and Asia little more – 21%. And despite public finance’s particularly important role in supporting efforts to adapt to climate change impacts, almost 80% of MDB climate finance went to emissions reduction activities (referred to as mitigation).
The financing models are also concerning. Climate Action Network (CAN) International, a network of over 1,900 civil society organisations, calls for climate finance to be delivered as grants, yet just 4% of MDB climate finance in 2023 came in this form. 70% took the form of loans. The Asian Development Bank (ADB) reported an even higher level of loans at 96%, while the AIIB has no proper grant function at all. Disturbingly, this means that climate finance is worsening the debt crisis in many countries and further undermining countries’ ability to deal with climate change.
Besides these critical issues lie a more fundamental problem – the fact there is no agreed definition of what “climate finance” is in practice. In this void, the MDBs have come up with their own principles for what type of projects count as climate finance, but with some significant flaws. The only kinds of projects that are fully excluded are coal and peat projects, as well as those leading to deforestation. However many other initiatives are allowed to be counted as climate finance, subject to some restrictions. This includes false solutions like carbon capture and storage, which is costly and not proven to work at scale, and highly polluting and greenhouse gas intensive waste-to-energy (WTE) incineration projects.
Another problem is that part of a project can be counted as climate finance, even when the rest of the project is highly greenhouse gas intensive. When scrutinising the MDBs’ publicly available documentation, there are some surprising and concerning finds. The AIIB, for example, counted almost half of its $153 million funding for an airport expansion project in Turkey as climate finance, disregarding the fact it will double the airport’s capacity – and in turn, more than double its emissions. The same bank also counted part of a greenfield gas power plant set to run for at least 22 years as climate finance – despite the long-term carbon lock-in that it represents for Bangladesh, one of the world’s most climate-vulnerable countries. There is even evidence an MDB counted funding of a mega LNG project in East Africa as climate finance, according to OECD.
But the Paris Agreement isn’t just about greenhouse gas emissions and environmental destruction – it also calls for human rights obligations to be respected and promoted. Yet the MDB principles for climate finance are void of any requirement to protect and support those most vulnerable, including women and girls. They are completely gender blind. According to the MDBs, they rely instead on their own policies, which differ across the banks. But there is a wide range of evidence showing how these are lacking in numerous respects. For example, the AIIB and the ADB counted their investments in a hydroprower project in Nepal that has severely marginalised and displaced local Indigenous peoples, with women worst impacted, as 100% climate finance. In Mongolia, civil society is protesting a “climate smart” mining project, also counted as 100% climate finance by the ADB, due to the high risks to local communities, including Indigenous peoples.
In the first week of COP29, World Bank President Ajay Banga announced a big commitment to increase climate finance available through MDBs for low- and middle-income countries. He set an annual goal of $120 billion by 2030, much of it through leveraging private sector investment. But before they scale-up the quantity, the banks need to reassess the quality. Ultimately, the MDBs are accountable to the farmers, workers, women, Indigenous peoples, and the most marginalised communities in developing countries. These are the people that their climate finance should serve, whatever the goal agreed by countries here at COP29.
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