Assessing Projects’ Paris Alignment
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In 2023, six multilateral development banks (MDBs) reached their self-set dates for aligning 100% of their projects with the Paris Agreement: the European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IDB), African Development Bank (AfDB), Asian Infrastructure Investment Bank (AIIB), and the public sector arm of the World Bank and Asian Development Bank (ADB). Apart from the ADB and AfDB, these banks published individual Paris alignment methodologies detailing the necessary steps to assess whether projects are aligned. The methodologies largely follow the joint MDB principles for Paris alignment that were published by all 10 MDBs on 19 June 2023. Germanwatch assessed the robustness of those methodologies and the joint principles and published a paper citing the methodological approaches’ shortcomings and best practices. The EIB already has been assessing its projects since 2021 and has published adjustments to its Paris Alignment Framework for new projects commenced from January 2024.
Other MDBs have committed to partial alignment. The AfDB has committed to aligning all its operations with building blocks (BBs) 1–3 of the AfDBs’ overall Paris alignment framework (mitigation, adaptation, and climate finance) by December 2023, but has not published individual methodology. The International Finance Corporation (IFC), the World Bank Group’s private sector arm, has committed to aligning 85% of its operations by 1 July 2023, and has not published individual methodology. The joint MDB principles also apply for the banks without individual methodologies (ADB, AfDB, and IFC).
The MDBs indicate they ensure alignment by testing their projects based on the methodologies. To be able to understand or reproduce the results of the project assessments from outside the MDBs, access to the complete documentation is vital, also because the methodologies sometimes leave scope for interpretation on exactly how assessment steps are conducted, using vague terms such as ‘significant GHG emissions’ or ‘lower-carbon alternatives.’ The MDBs categorise some activities as ‘universally aligned’ regarding mitigation goals, such as in generating renewable energy. The other operations undergo a more comprehensive Paris alignment assessment. Transparency is especially important for projects requiring a full Paris alignment assessment because they include potentially misaligned activities, such as ‘[o]perations whose economic feasibility depends on external fossil fuel exploitation, processing, and transport activities’.
Only the IDB and EBRD tend to publish comprehensive annexes with assessment results of state/sovereign projects
Neither the MDB joint methodological principles nor the individual MDB Paris alignment methodologies include a commitment to making the results or the full Paris alignment assessment of operations public. In practice, at least for some projects, most banks publish some form of documentation of results or assessments, though the type of information provided varies greatly among banks.
A Germanwatch review of each of the maximum 60 recently approved projects by banks (ADB, AfDB, AIIB, EBRD, IDB, and World Bank) as of 7 March 2024, and after the alignment dates, revealed that only the IDB public sector arm tends to publish the entire documentation of its Paris alignment assessments – that is, for projects the IDBs’ methodology covers. ‘Technical assistance or short-term financial instruments,’ ‘credit facilities for natural disasters and public health emergencies,’ ‘Special Development Loans,’ and ‘[f]ee-based advisory and knowledge services’ are exempt. Moreover, except for IDB Lab projects, the IDB Group’s Paris alignment methodology starts to be applied at an ‘approved amount greater than US$3 million.’ Notably, the types of projects the Paris alignment testing does not cover make up 77% of IDB investments approved during our review period. The remaining 23% come with either a climate change annex including the entire Paris alignment assessment the IDB conducted (16.5%) or a short one-to-three-paragraph summary of the assessment (6.5%). The IDB indicates that publication of its Paris alignment assessments is required under its Access to Information Policy. However, the IDB’s private sector arm, IDB Invest, does not publish the Paris alignment assessments for its operations.
For sovereign projects, the EBRD also tends to publish quite comprehensive Paris alignment information as part of the Green Annex of respective projects’ board reports. However, it is unclear whether this is also the entire assessment, as with the IDB.
Assessment publications by other MDBs lack consistency and/or detail
Results for the other banks are diverse. Even within the same institution, the MDBs do not provide consistent assessment documentation.
Our review showed a considerable percentage of project documents include no mention of Paris alignment (example projects: P1, P2, and P3). It is, therefore, unclear whether those projects have undergone any assessment and what the results were. This is true for most private or non-sovereign types of projects. In other cases, project documentation includes only a sentence confirming that the project is Paris-aligned without providing details on the actual assessment (example projects: P4, P5, and P6). Publicly available documentation for several projects refers to an annex that is not publicly accessible (example projects: P7, P8, and P9). Sometimes, project documentation mentions the project is aligned, as it was deemed covered by the universally aligned list (example projects: P10, P11, and P12), though many of these cases have no explanation of which category of the list it belongs to and why. The box below shows some patterns and observations on the ADB projects analysed.
Example: Identified patterns and observations on the transparency of ADB projects’ Paris Agreement alignment assessment results
Of 60 recently approved ADB projects (as of 7 March 2024), most (48) were sovereign technical assistance projects under the ADB’s Technical Assistance Special Fund. No information is available for whether those projects are Paris-aligned. Many of those ADB technical assistance projects fall under the ADB’s Operational Priority (OP) 3, ‘Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability.’ Whether the projects need to undergo in-depth Paris alignment assessment might seem irrelevant, as supporting Paris implementation is their primary focus. However, generally, technical assistance can also be non-aligned and, thus, the ADB should at least apply a shorter and simplified version of the joint alignment methodology to all such projects. The documentation of those simplified assessments should be published as part of the ADB Technical Assistance Report documents or in an annex to it.
The other ADB projects analysed fall under the investment categories of ‘ordinary capital resources,’ the Asian Development Fund, or the ADB Ventures Investment Fund. For those projects, the ADB generally provides very limited information on Paris alignment in the publicly available document, ‘Report and Recommendation of the President to the Board of Directors,’ which usually contains a single summary sentence on the Paris alignment assessment results. In those documents, the ADB usually refers to a ‘Paris Agreement Alignment Assessment’ annex, which in all but one case is not publicly disclosed, following the argument that it falls under non-disclosed information per the ADBs’ Access To Information Policy.
The ADB refers to different paragraphs in its Access to Information Policy as a reason for non-disclosure. Interestingly, the referenced paragraphs in the Policy are not the same for every ADB project. However, why those documents are supposed to fall under those paragraphs is unclear. In most cases, as a reason for non-disclosure, the ADB refers to paragraph 17.1, which states that documents providing information on ADB deliberative and decision-making processes should not be disclosed. The non-disclosure of deliberative documents is understandable for the standpoint of ensuring that ADB actors can freely debate their ideas and perspectives because public disclosure of such information might obstruct the exchange of views. However, it is not plausible why a project’s BB1 and BB2 alignment assessment falls under this category. The Paris alignment assessments are technical documents and not deliberative. While documentation of, for example, a board’s discussion and exchange of views on the Paris alignment assessment results might fall under this category, the documentation of the technical alignment assessment itself does not.
For the rare cases in which the assessment document might contain confidential or sensitive information that should not be disclosed, the document should still be published and only certain sentences containing such confidential/sensitive information could be redacted.
No particular difference in the public availability of the Paris alignment assessment documents for sovereign and non-sovereign projects could be seen among the 60 projects we analysed. MDBs generally tend to have stricter criteria for public disclosure for their non-sovereign/private operations, but for the ADB projects analysed, the Paris alignment assessment annex for all sovereign projects was not made public and the only publicly available one was for a non-sovereign project in China.
Some ADB ‘ordinary capital resources’ projects have a climate change assessment annex that, interestingly, contains some information (such as on climate risk and vulnerability assessment) that would also be part of a project’s Paris alignment assessment. However, even though this annex contains some relevant information, it does not have the same objective and does not cover all areas of BB1 and BB2 alignment set out in the joint MDB methodological principles for Paris alignment.
Reasons for exempting projects from Paris alignment testing often remain unclear
As mentioned, the IDB explains which types of investments its methodology does and does not cover (see above). It also states this is ‘[c]onsistent with practice at other MDBs,’ though, in their methodologies, most other MDBs do not specify which limitations they apply regarding thresholds or types of instruments the assessments cover. Only the EBRD explains that ‘the methodology covers the full suite of financial instruments and financing types the Bank may use,’ including technical cooperation. However, according to a recent methodology update, ‘projects with a financing amount of €5 million or less will be determined to align with the Paris Agreement mitigation goals if not in a high-emitting sector,’ and, thus, will not undergo a specific assessment.
Lack of transparency on Paris alignment assessments reduces accountability
No coherent standard exists among MDBs for publishing Paris alignment assessments including the relevant tests conducted per the methodologies, or for how the assessments will be structured. The methodologies leave ample scope and flexibility for individual staff at the banks to apply them in different ways and use different tools. A lack of transparency in how these assessments are conducted makes any independent assessment of Paris alignment implementation impossible. It also makes informed board oversight more difficult if the assessments are not available to board members, and it reduces MDBs’ accountability. Independent assessments of consistency in Paris alignment testing across operations are also impossible. These factors constitute a missed opportunity for MDBs to establish dialogue with other stakeholders to improve their methodologies and draw important lessons from their implementation. Transparency is pivotal for any form of good governance and accountability. Without transparency, there is no way to prove and improve MDB operations’ Paris alignment.
The MDBs’ Transparency Framework needs to be concretised
The MDBs recognise the importance of transparent reporting in BB5 of their joint alignment approach. In their draft reporting framework presented at COP28, they express the aims of ‘[r]eporting on alignment of MDBs’ activities and financial flows’ and ‘[e]nabling robust reporting within consistent framework.’ They also state that they plan on ‘[r]eporting on an annual basis’ and ‘[r]eporting for new operations, ex-ante on basis of commitment.’ The MDBs indicate that ‘[r]eporting will become more granular and comprehensive, with portfolio considerations where appropriate, over time.’ They also cite a long list of disclosure and reporting standards for consideration in structuring the reporting. Currently, however, it is unclear which indicators will be reported on and whether the reporting for specific indicators will happen at the project or portfolio level. The above analysis shows the MDBs are still far from robust reporting for new operations within a consistent framework.
MDBs should agree on a coherent standard for publishing Paris alignment assessments
As a first step toward transparent reporting, all MDBs should follow the IDB’s example and disclose the full Paris alignment assessment and results. Mere summaries will not have sufficient details to be meaningful. Next to publishing in-depth assessments’ entire documentation, all MDBs should also provide consistent and clear justifications for categorising operations as ‘universally aligned.’ All MDBs, including the IDB, should also specifically commit in their Paris alignment methodologies to publishing the entire assessments.
Additionally, MDBs should disclose relevant information on corporate and private sector operations’ Paris alignment. Though there is sometimes a reasonable need to protect sensitive information, this should not justify disclosing absolutely no information about the assessments of non-sovereign operations.
Moreover, neither the joint principles nor the individual Paris alignment methodologies establish the inclusion of alignment considerations in their operations’ intermediate and final reports and evaluations. This is a missed opportunity for drawing important lessons on how Paris alignment evolves during implementation. All MDBs should commit to including aspects of Paris alignment implementation in their monitoring and evaluation processes of individual operations, and report on this at an aggregate level.
Finally, the methodologies should include provisions for interested stakeholders to provide feedback on individual Paris alignment assessments of operations during a certain period after their publication.
CitationGebel, A., Grimm, J., Dietz, H., 2024, Assessing Projects’ Paris Alignment: How transparent is multilateral development bank reporting? |
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