In a global context marked by the climate emergency, the role of multilateral development banks (MDBs) appears crucial to address global environmental challenges. Indeed, MDBs are major players in providing the necessary financing to vulnerable countries to reduce their greenhouse gas emissions and adapt to climate change.
The latest joint report on MDB climate finance reveals notable progress, with a record amount of $125 billion deployed in 2023, of which 60% has been allocated to low- and middle-income countries. This positive trend shows that MDBs are stepping up their commitments to climate finance, including with ambitious targets such as increasing climate finance to 50% of the total by 2030, as is the case with the Asian Development Bank (ADB).
Alongside this increase in public investment, the private sector is increasingly being mobilized, with every dollar of public financing now able to leverage $0.38 of private investment. In addition, the MDBs have adopted a Common Approach to Measuring Climate Results, aimed at improving coordination across institutions and ensuring a better match between funding and concrete results achieved.
However, despite these advances, significant gaps persist. Adaptation finance, which is essential for the most vulnerable countries, continues to lag behind mitigation measures, which runs counter to the objectives of the Paris Agreement. Moreover, concessional finance, which is crucial for low-income countries and nations most exposed to climate risks, is in decline, with subsidies falling from 10% in 2022 to just 6.7% in 2023.
Another critical issue is the continued financing of fossil fuel projects by MDBs, which runs counter to their goals of combating climate change and transitioning to clean energy. In addition, the share of climate finance going to the most vulnerable countries, such as Least Developed Countries and Small Island Developing States, is decreasing, undermining vital support for these most exposed populations.
As governments negotiate a new collective climate finance target at COP29, it is imperative that MDBs play a more ambitious role in guiding global climate finance. This requires a rebalancing between adaptation and mitigation efforts, an increase in concessional financing, and a strengthening of collaboration with national and private financial institutions to support large-scale transformative projects..
MDBs have demonstrated their ability to mobilize significant climate finance, but there is now an urgent need for them to address these critical gaps to ensure that their operations are effective, equitable, and aligned with global climate change goals. It is the responsibility of these institutions to play a leading role in the transition to a more sustainable and resilient economy in the face of the climate challenges of the 21st century.