Multilateral Development Banks (MDBs), which have worked together for more than a decade to scale up global climate finance and bring in the private sector in efforts to keep worldwide temperature within the limits set in the Paris Agreement, met at the UN Climate Change Conference COP25 in Madrid to present their progress on their commitments.
Joining efforts, especially among development banks and institutions, is critical to tackle what is a global challenge that will fundamentally affect hundreds of millions more people all around the world at current trends. The MDBs’ joint Paris Alignment approach aims to accelerate and support successful transition to a low-carbon and climate-resilient future by supporting clients to develop appropriate long-term development pathways in line with the goals of the Paris Agreement and aligning financial flows to them.
The Lord Duncan of Springbank, the UK’s Minister for Climate Change, opened the high-level event in Madrid, during which the MDBs presented key principles and criteria of their approach, as well as some methodological guidance, on how to operationalize Paris Alignment. Other high-level representatives from governments, the private sector and civil society organisations also participated. The MDBs approach also emphasises the importance of just transition to those whose livelihoods are most impacted by the transition, as well as creating clarity and coherence in reporting impacts and progress through a transparency framework.
The next phase of the joint work will be to road test the approach and progressively expand its scope in ways that allow each MDB to reflect its unique mandate and operational arrangements.
The Madrid meeting follows a successful six months of cooperation, coordinated by the EBRD in the run-up to the climate summit, which saw a new plan announced in September to increase the global climate action investments the MDBs support each year to US$ 175 billion by2025. This will include €40 billion from the private sector.
Noting this focus on building and strengthening partnerships for greater impact, EBRD Managing Director for Energy Efficiency and Climate Change Josué Tanaka said: “We are united in increasing our collective ambitions to ensure we help our clients meet the common goals of the Paris Agreement.”
The EBRD is a pioneer in climate action in its regions, having signed since 2006 €30 billion in green investments, financed over 1600 green projects and reduced over 100 million tonnes of carbon emissions each year. It is working successfully towards achieving its ambitious Green Economic Transition (GET) target - to raise the proportion of its green finance to 40 per cent of annual new business by 2020 (from about 25 per cent in 2015). The 2019 result is expected to be well above that 40 per cent target, making this the Bank’s “greenest” year ever.
The EBRD views supporting the countries where it works in achieving the objectives of the Paris Agreement as a key priority.
This work is linked to the EBRD’s role in accelerating market responses. September saw the EBRD successfully launch the first ever dedicated climate resilience bond, raising US$ 700 million with demand from 40 investors in 15 countries. The proceeds will be used to finance the Bank’s existing and new climate resilience projects. The EBRD currently has a portfolio of about €7 billion in climate resilience projects, from the Qairokkum hydropower upgrade in Tajikistan to the Saiss water conservation project in Morocco. Climate Resilience bonds and Green Transition Bonds complement a portfolio of capital market instruments developed according to the Green Bonds Principles.
October saw the completion of one of the largest solar parks in the world, with the EBRD its largest financier. Benban, in Egypt’s Aswan desert, covers 37 square km and will generate 1.5 GW, enough to provide renewable energy to more than 1,000,000 homes.
EBRD Green Cities, a €1 billion urban sustainability programme set up in 2016 to improve infrastructure and policy in cities, which account for more than three-quarters of greenhouse gas emissions, now has 35 participants. In October, it received a €87 million contribution from the Green Climate Fund, the largest fund in the world to support the efforts of developing countries to respond to the challenge of climate change, which will support the facility in Albania, Armenia, Georgia, Jordan, North Macedonia, Moldova, Mongolia, Serbia and Tunisia.
The EBRD has more than two decades of experience in financing green investments, with an initial focus on energy efficiency and renewable energy. As well as its own dedicated programmes to promote green investment, the Bank works closely with donors such as Climate Investment Funds, the European Union, the Global Environment Facility, the Green Climate Fund and other bilateral donors to mobilise climate finance for clients.
While Paris Alignment largely focuses on supporting clients, the EBRD is also working to accelerate efforts towards carbon neutrality in its own travels and offices, as well as integrating decarbonisation and climate resilience considerations in its funding and throughout its institutional operational policies.