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Report

Banking on reform aligning development banks with the Paris climate agreement

In this report, E3G assesses the progress of six Multilateral Development Banks (MDBs): the African Development Bank (AfDB), the Asian Development Bank (AsDB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank (IADB) and the World Bank Group (WBG) in aligning their financial flows with the UN’s Paris Agreement on climate change.

Key points

The assessment is based on a conceptual framework for “transformational change” developed by E3G:

Relying on the four different thematic areas identified in the final report of the Task force on Climate-related Financial Disclosures: Governance, Strategy, Risk and Operational Management, E3G developed sixteen criteria to evaluate the progress made by each of these 6 MDBs towards transformational change:

Governance

1) Standalone climate strategy and integration of climate in overarching strategy
2) Integration of climate mitigation and resilience in key sectoral strategies
3) Integration of climate change into country work
4) Level of transparency and promotion of citizen rights

Strategy

5) Energy efficiency strategy, standards and investment
6) Commitment on forests and land use
7) Policies to restrict finance to fossil fuels including exploration
8) Energy access and fuel poverty

Risk and Operational Management

9) Greenhouse gas accounting at project and portfolio level
10) Integration of climate risk screening and assessment
11) Internal carbon pricing
12) Green-Brown energy ratio and scaling up climate investment in all sectors

Transformational initiatives

13) Technical assistance for implementing Paris goals
14) Promotion of green finance
15) Innovative instruments, mechanisms and tools
16) Institutional leadership and information sharing

Throughout the report, E3G analyses the diversity of approaches and practices and highlights specific case studies of “good practices”.

E3G concludes that “none of these institutions has been shown to be transformational across the four different areas”, and provides a number of individual and common recommendations to move forward. Recommendations include that MDBs:

  • “should begin tracking and self-reporting on their alignment with the Paris Agreement.”
  • “should do more to share learning with one another on best practices and pool data to inform collective progress” and that they have the possibility to play a key role by providing assisting and collaborating with other actors of the financial community.
  • “should seek to provide relevant technical assistance on green finance for regulators including finance ministries and central banks as well as local and national financial institutions. This should include putting in place robust policies and incentives to build capacity of other institutions to carry out environmental screening and ‘green’ their investments. In addition, MDBs should seek to create investment vehicles and financial structures that maximize private sector leverage with climate finance.”