Multilateral Development Banks: Turning the Paris Agreement into reality

07/12/2018
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Multilateral Development Banks: Turning the Paris Agreement into reality

Financial support is a critical element when it comes to achieving the world’s climate goals, such as keeping the raise in temperature to well below 2 degrees. For many developing countries, these goals can only be reached with financial support.

Large-scale investments are needed in energy, transportation, and agricultural systems to ensure that countries can meet the needs of their populations without jeopardising climate stability. More importantly the money must stop flowing to sectors that could exacerbate climate vulnerability such as as new apartment towers in flood-prone coastal zones.

Each year, around $150 billion is invested by Multilateral Development Banks (MDBs) in developing countries and emerging economies. This investment plays a vital role in efforts to shift global financing towards sustainable and inclusive projects in Africa.

Between 2011 and 2015, the African Development Bank provided nearly $12 billion in financing projects that generated climate change mitigation and adaptation benefits. The Bank also influences the financial decisions of others by reducing the risks associated with individual investments, and steering public and private finance towards activities that guarantee the transition to more climate-resilient economies.

Through policy, technical, and research support, MDBs also help shape the rules that guide public and private investment decisions around the world.

“The MDBs cannot do it alone, and certainly not the African Development Bank, and therefore we have established what we call the African Financial Alliance on Climate Change that brings together every player in the financial sector in Africa to align the investments with the Paris Agreement,” says Dr. Anthony Nyong the Director for Climate Change and Green Growth at the African Development Bank.

On 6th December, during the first week of the UN climate change negotiations conference COP24 in Katowice, Poland, a report launched by the World Resources Institute (WRI) outlined four key steps that MDBs should consider as they work towards turning Paris Agreement into a reality.

“MDBs have over the last few years established the climate finance paradigm,” says Leonardo Martinez Diaz, global director, Finance Center at WRI. “With this study we provide them with the necessary building blocks to build on the advantages of the finance paradigm.”

In order to achieve their Paris Goals, WRI recommends development banks to (1) align their investments with net-zero CO2 emissions; (2) mainstream climate change resilience; (3) support and enhance national climate goals; and (4) ensure transparency of the Paris alignment of their activities.

The study has been carried out in 7 countries, but the climate strategies of over 90 countries were reviewed. “The fact is that we are not moving fast enough; we need to move to a different paradigm on climate finance,” concluded Mr. Diaz.

The launch of the report was hosted at the German pavilion with representatives from the European Investment Bank, the African Development Bank and the World Bank Group. All representatives highlighted the importance of aligning MDBs’ investments with Paris Agreement goals.


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