The World Bank is ramping up its collaboration with multilateral development banks (MDBs) including the IsDB to enhance climate finance efforts in developing countries.
In a joint statement, the MDBs shared that they have identified capital adequacy framework measures which could yield additional lending in the range of US$300–400 billion over the next decade.
The projected growth is premised upon contributions from shareholders and development partners. Collaborating with development partners is expected to provide leverage, expertise and proximity to governments.
“Working together for a common cause, we can bring more experience, expertise, knowledge and, especially, more funding to the massive challenges facing the world today,” Ajay Banga, the president of the World Bank, commented.
In an agreement signed on the 13th October this year, the MDBs committed to boosting collaboration in scaling up financing capacity, enhancing country-level collaboration, strengthening co-financing and catalyzing private sector engagements in addition to climate finance efforts.
The scaling-up of financing capacity will be enabled through financial innovations including portfolio guarantees and hybrid capital while joint mechanisms will be sought to strengthen the mobilization of private capital.
The signatories of the agreement comprise 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 European Investment Bank, the Inter-American Development Bank, the IsDB, the New Development Bank and the World Bank.
2022 marked a good year for climate finance initiatives with MDBs worldwide providing nearly US$100 billion in climate finance, up by US$18 billion from the year prior. Private finance also played a more significant role in climate action, with mobilized global private finance reaching US$69 billion this year from US$41 billion in 2021.
Over the past year, the 10 MDBs have provided a record-breaking US$60.7 billion in financing to support climate action in low- and medium-income economies, the 2022 Joint Report on Multilateral Development Banks’ Climate Finance revealed.
Notably, the report also revealed that while the majority of the climate finance channeled toward high-income countries, at 94%, was for climate change mitigation finance, the funding channeled toward low- and middle-income economies saw climate adaptation efforts take a more substantial share of the funding at 37%.
The joint report also revealed a dichotomy of sources of funding between high- and low- and middle-income economies. High-income economies saw 72% of funding coming from private sources while low- and middle-income economies saw just 35% of their climate finance funding coming from private sources.