Development Banks and Climate

Building of the Asian Development Bank

Public development banks invest around USD 2.7 trillion annually, more than 10 percent of the total annual amount invested by all public and private actors. Civil society organizations criticize that far too much of this money still flows into climate-damaging activities, and that development banks and many of their main shareholders are not doing enough to help countries fight climate change.

In 2015, 2017, and 2018, various multilateral development banks (MDBs) pledged to support the goals of the Paris Agreement and to align their investments accordingly. This entails consistency with limiting global warming to 1.5°C, with increasing resilience to the physical impacts of climate change, and with a socially just transition to resilient and decarbonised economies and societies. Since then, MDBs have made important steps towards this goal, for example publishing a joint methodology for Paris alignment. Qualitative improvements and effective implementation are however vitally important to ensure that MDBs can use their investments to support the urgently needed transformation as quickly and as effectively as possible. Many national development banks are also making efforts to make their investments climate-compatible, with widely varying approaches and progress.

In addition, there are calls for fundamental reforms of the international financial system, including the International Monetary Fund (IMF) and the MDBs, to free financial flows for climate change mitigation, adaptation, and loss and damage at the necessary scale and with respective impact.

The work of Germanwatch on development banks and climate

Germanwatch has been supporting MDBs since 2017 in their efforts to align their investments with the Paris Climate Agreement, together with the NewClimate Institute, the World Resources Institute, and (since January 2023) E3G. We have produced several working papers with recommendations for what the multilateral development banks should consider when designing their frameworks for Paris compatibility.

Aktuelles

Publication
Six Memos on the Multilateral Development Banks’ Paris Alignment Approach
The Paris Agreement sets out the ambitious task of aligning all financial flows with its goals to avoid the worst impacts of warming. Multilateral Development Banks (MDBs) have an important role to play in making this goal a reality. Their development mandates, technical expertise, and track record on climate finance mean that MDBs can lead the way by helping developing countries avoid fossil fuel-intensive development pathways, by developing the necessary standards and investment criteria to assess the alignment of investments with the Paris Agreement’s goals, and by helping to mobilise increased volumes of climate finance.
Publication
A Civil society perspective from: Bangladesh, China, India, Russia & Germany

Three years after the Asian Infrastructure Investment Bank (AIIB) commenced operations, this report analyses the Bank's guidelines and past experience in selected countries (China, India, Bangladesh, Russia). We find that the AIIB’s policies and strategies show a strong narrative of transformational change and sustainability. It is also the fastest-growing MDB in terms of both membership and capital investments. However, looking at investment criteria, the AIIB is not yet setting new standards in terms of Paris-alignment. The bank does also not yet reach international standards with regard to accountability, information disclosure and complaint handling.

Publication
Challenges and Opportunities for Multilateral Development Banks

This working paper by Germanwatch and NewClimate Institute studies how Multilateral Development Banks (MDBs) can operationalize their commitment to align financial flows with the Paris Agreement, focusing on alignment with the Paris temperature goal.