Multilateral development banks (MDBs) increased their climate finance portfolio by over 24% year-on-year in 2021, according to the 11th edition of the Joint Report on Multilateral Development Banks’ Climate Finance.
“This report sends the encouraging message that, despite the COVID-19 pandemic, multilateral development banks in 2021 have collectively increased their climate finance worldwide to a total of US$82 billion, of which US$51 billion in low- and middle-income countries and US$31 billion in high-income countries, mobilized significant private sector resources and worked with clients around the world,” Ambroise Fayolle, the vice-president of the European Investment Bank, commented.
In the context of the report, climate finance is understood as financial resources committed by MDBs to their operations directed to activities that mitigate climate change and or support the adaptation to climate change.
Mitigation finance is financing that contributes to the avoidance or reduction of greenhouse gas emissions or promotes efforts to achieve these goals while adoption finance is financing that contributes to resilience or the adaptation to climate change.
The joint report was coordinated by the European Investment Bank and combines data from the IsDB, the African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the InterAmerican Development Bank Group, the New Development Bank as well as the World Bank Group.
Key statistics for low- and middle-income economies in 2021
• US$50.67 billion of financing was for low-income and middle-income economies.
• US$33.06 billion, or 65%, was for climate change mitigation finance
• US$17.61 billion, or 35%, was for climate change adaptation finance.
• US$41.12 billion of MDB climate finance was channeled to public recipients and US$10.46 billion for private recipients
• Climate finance investments in low- and middle-income economies were supported by a total of US$43.6 billion in climate co-finance, with 66% in mitigation activities and 34% in adaptation activities, and
• 70% of climate co-finance in low- and middle-income economies came from public sources and 30% from private sources.
It is worth noting that the vast majority (71%) of climate finance issued to low- and middle-income economies was in the form of investment loans, which is a debt instrument. In accordance with the pattern of debt-based financing, mitigation finance for low- and middle-income economies was also dominated by investment loan financing at 76%.
While the figures on investment loan financing for low- and middle-income economies seem considerable, the data for high-income economies show an even larger prominence of investment loan financing. At least 90% of climate financing, adaptation financing and mitigation financing for high-income economies were financed with investment loans with adaptation financing seeing the highest proportion of investment loan financing at 94%.
Another notable trend in the figures is the consistently higher amounts of climate finance channeled toward high-income economies. The IsDB and the African Development Bank were the only MDBs which have channeled climate financing to low- and middle-income economies exclusively in 2021.
The total financing by MDBs in 2021 has surpassed the joint climate finance goals set for 2025 of an expected collective total of US$50 billion for low- and middle-income economies, at least US$65 billion of climate finance distributed globally, a projected doubling of adaptation finance to US$18 billion and private mobilization of US$40 billion.
The MDBs set the High Level MDB Statement on climate finance goals for 2025 in 2019 at the UN Secretary-General’s Climate Action Summit in New York.