Multilateral Development Banks: Stepping into the Climate Breach

As the world grapples with the escalating impacts of climate change, multilateral development banks (MDBs) are stepping up to fill the climate finance gap. In a recent statement, the President of the European Bank for Reconstruction and Development (EBRD), Odile Renaud-Basso, emphasized the crucial role MDBs play in addressing the climate crisis. This article explores the initiatives and progress made by MDBs in combating climate change, with a focus on the EBRD's leadership in this realm.
MDBs have emerged as key players in the global fight against climate change, providing critical funding and technical assistance to low- and middle-income economies. In 2023, MDBs mobilized a record $125 billion for climate action worldwide, with $74.7 billion allocated to low- and middle-income economies. This significant investment reflects MDBs' commitment to supporting vulnerable nations in their transition to low-carbon economies.

The EBRD, in particular, has been at the forefront of MDB climate finance efforts. In its fourth annual Task Force on Climate-Related Financial Disclosures (TCFD) report, the EBRD outlined its progress in mainstreaming climate-related considerations into investment decisions, portfolio management, and overall risk management. The Bank has dedicated itself to continuous advancement in climate finance, ensuring that all new investments and activities are fully Paris-aligned from 1 January 2023.
The EBRD's commitment to climate action is evident in its ambitious targets and initiatives. The Bank aims to align all of its activities with the goals of the Paris Agreement by 2023 and ensure that Green Economy Transition (GET) projects account for at least 50 percent of all new Annual Bank Investment by 2025. To achieve this, the EBRD is calculating financed emissions, assessing the carbon footprint of its investments, and conducting stress tests on high-emitting sectors.

MDBs' climate finance initiatives are not limited to mitigation efforts. In 2023, MDBs allocated $24.7 billion to climate change adaptation, highlighting their commitment to helping vulnerable nations build resilience against climate impacts. This balance between mitigation and adaptation is crucial for addressing the multifaceted challenges posed by climate change.
The New Development Bank (NDB), for instance, has pledged to direct 40% of its total approved financing to projects addressing climate change during its 2022-2026 strategy period. This demonstrates MDBs' collective resolve to tackle the climate crisis head-on and support sustainable development in low- and middle-income economies.
In conclusion, MDBs are playing a pivotal role in the global fight against climate change. Their commitment to providing critical climate finance and technical assistance to vulnerable nations is essential for achieving the Paris Agreement targets. As the EBRD President emphasized, MDBs are stepping into the climate breach, fostering a more sustainable and equitable future for all.