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FEATURE STORY

World Bank Lending Doubles on Adaptation

November 15, 2012

World Bank lending has doubled on adaptation in FY2012 to $4.6 billion and $7.1 billion for mitigation measures.

STORY HIGHLIGHTS
  • Almost $4.6 billion of the World Bank 2012 lending, or twice the 2011 amount, is expected to contribute to adaptation and over $7.1 billion to mitigation.
  • In FY2012, 40 percent of World Bank lending projects is expected to contribute to climate change adaptation, mitigation or both
  • To scale up resources for climate action, the World Bank is also demonstrating innovative ways to mobilize and leverage finance and markets.

Almost $4.6 billion of the World Bank 2012 lending, or twice the 2011 amount, is expected to contribute to adaptation and over $7.1 billion to mitigation. Developing countries want the World Bank to work with them on climate change. Our approach is changing rapidly to keep up with demand on climate financing.

The International Development Association (IDA), the World Bank’s fund for the poorest, saw an impressive growth in climate-related financing. In the 16th Replenishment cycle, climate change is one of its special themes (pdf). Adaptation support in IDA grew to $2.3 billion in 2012 (up 61% from 2011) and to $2.3 billion for mitigation (up 161% from 2011). Over the same period, lending of the International Bank for Reconstruction and Development (IBRD) that contributes to adaptation saw a major increase, rising 158% from 2011 to $2.2 billion, while the share of mitigation financing in IBRD lending remained the same as in 2011 (23%).

There is incredible momentum on the ground, where countries all around the world are implementing climate-resilient and low-emissions development solutions. Responding to this, in 2012, 40% of World Bank lending projects (nearly doubling over the share in 2011) is expected to contribute to climate change adaptation, mitigation or both. Over 2011 and 2012, close to 200 projects could help address climate change.

Two sectors comprise the bulk of support on adaption in 2012– Water, Sanitation and Flood Protection, as well as Agriculture, Fishing and Forestry. With respectively $1.33 billion and $1.32 billion, they account for nearly 60% of adaptation support in 2012. These funds are used in projects that help integrate climate resilience with disaster risk reduction, help cities cope with climate change, or foster social resilience and community driven development.

At $3.22 billion, clean energy continues to account for the largest share of mitigation support in 2012. Energy and Mining is the sector with the largest share of own commitments that contribute to mitigation, and this share is increasing (79% in 2012 up from 71% in 2011).

To scale up resources for climate action, the World Bank is also demonstrating innovative ways to mobilize and leverage finance and markets. Climate finance plays a key role here, providing resources to address risks and build readiness. The World Bank has successfully facilitated access to a menu of climate finance instruments, as seen by growing commitments to projects from the Global Environment Facility as well as the Climate Investment Funds (CIF). In 2012, resources from the CIF for Bank-implemented projects have tripled to $107 million for adaptation and grown ten-fold for mitigation (at $559 million). Readiness support for market instruments (through the Forest Carbon Partnership Facility and the Partnership for Market Readiness) is also increasing, reflecting interests by countries for performance-based solutions for mitigation.

Note: As the same activity can provide both adaptation and mitigation co-benefits, the financing for adaptation and mitigation should not be added together to prevent double counting. Years are fiscal years, which cover the twelve month period from July 1st to June 30 of the following year. For example, Fiscal Year 2011 goes from July 1, 2010 to June 30, 2011.

  1. IBRD: International Bank for Reconstruction and Development, IDA: International Development Association
  2. GEF: Global Environment Facility, LDCF: Least Developed Countries Fund, SCCF: Special Climate Change Fund
  3. CIF: Climate Investment Funds
  4. includes net payments for emission reductions and readiness grants under the Forest Carbon Partnership Facility and the Partnership for Market Readiness
  5. includes Special Financing and large (>$5 million) Recipient-Executed activities (excluding CIF projects)

Regional breakdown (pdf) of climate-related lending in projects implemented by the World Bank.

The World Bank is working with partners to facilitate global progress on monitoring climate flows.  Notably the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the International Finance Corporation, and the World Bank have recently harmonized their approach for climate finance tracking and reporting.  Last year these institutions have collectively provided more than $18.5 billion in mitigation finance (pdf) and above $4 billion in adaptation finance (pdf). It is about 20% of climate finance flows to developing countries in 2011, following the recent update of the Climate Finance Landscape by the Climate Policy Initiative. In addition, almost all MDBs and a few other IFIs have now agreed on a harmonized framework for greenhouse gas accounting (pdf).   Together with a more accurate picture of climate flows to developing countries, it will also enable improved measurement of their impacts.

What is tracked at the World Bank?

Financing that contributes to climate change adaptation and mitigation.

  • Commitments are counted at time fo approval. Complementary efforts are underway to measure impacts of Bank operations (for example, GHG accounting to be piloted in select sectors in 2013).
  • High-granularity assessment. For example, if only $10 million of a $100 million power project tackles energy efficiency, then only $10 million will be recorded as contributing to mitigation.
  • Conservative approach. No climate change co-benefits will be accounted for if the impact of an activity is unclear.