Development Banks Pledge $120 Billion in Climate Finance by 2030
The world’s largest multilateral development banks announced a new goal on Tuesday at the COP29 talks in Azerbaijan to raise $120 billion in annual climate finance for developing nations by the end of the decade.
The pledge highlights the group’s ambition to play a major part in rallying funds to help poorer nations cut emissions and adapt to the fallout from climate change. Still, it’s a small figure compared to the trillions of dollars a year developing nations say they need.
MDBs have argued their capacity to scale climate finance further is dependent on their country shareholders paying more in.
“MDBs can’t be the ones that source the trillions, we don’t have it on our balance sheets,” World Bank President Ajay Banga said in an interview on Bloomberg TV Tuesday. “Our biggest role, aside from our own balance sheet, is in facilitating private sector investment,” he said. To achieve that, the bank is working on streamlining its guarantee provisions, looking to take a first loss in certain projects to help de-risk private investment and also to roll-out local currency financing to help address foreign-exchange risk, Banga said.
The $120 billion target is a significant increase on the $75 billion the group raised in climate finance for developing nations in 2023, and the $60.9 billion they raised in 2022, according to joint annual reporting by the MDBs.
Over the next two weeks in Baku, nearly 200 nations are negotiating a “New Collective Quantified Goal” on climate finance. This is designed to replace rich countries’ existing target to raise $100 billion per year for poor countries to help support their green transition and resilience to increasingly extreme weather events. Current proposals for the new goal reach up to $2 trillion per year, with MDBs expected to play a critical role in both disbursing public finance and mobilizing additional private capital.
The MDB group, which includes the World Bank, the European Investment Bank and the Inter-American Development Bank, says their capacity to further scale up climate finance will depend on the commitment of their country shareholders to contribute more capital. “We therefore continue to advocate for greater ambition among our client members,” the group said in a joint statement.
In 2022, multilaterals mobilized roughly $58 billion in public and private finance — about 50% of total climate finance – according to the OECD, which tracks progress against the $100 billion target. The OECD only counts funds attributable to developed nations, however, so it’s not comparable to the MDB figures, which includes money from developing country shareholders too.
In addition to the $120 billion, MDBs estimate they’ll also help mobilize $65 billion in climate finance from the private sector for developing nations by the end of the decade.
The African Development Bank Group, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the Islamic Development Bank and the New Development Bank also signed the statement.
