Climate Finance Overview

«

»

Context
Strategy
Results

The financing required for an orderly transition to a low carbon, climate resilient global economy can be counted in the trillions, not billions.
Over the next 15 years, the world will require about $90 trillion in new infrastructure – most of it in developing and middle-income countries. Making the right choices in favor of infrastructure that is climate resilient and locks in low carbon development is critical and urgent. Action now will avoid huge costs later.
The IEA estimates that limiting the rise in global temperature to below 2 Celsius by the end of the century will require an average of $3.5 trillion a year in energy sector investments until 2050.

Climate action makes good business sense
The IFC estimates that the NDCs of 21 emerging market economies alone represent $23 trillion in investment opportunities. This includes:
$16 trillion in new green buildings in China, Indonesia, the Philippines and Vietnam
$2.6 trillion in sustainable transport in Argentina, Brazil, Colombia and Mexico.
$665 billion in energy efficiency and green buildings in Russia, Serbia, Turkey and Ukraine.
The amount of solar power added worldwide soared by 50 percent in 2016, with 76 gigawatts of new solar PV capacity, compared to 50GW installed the year before.

To unlock these opportunities, we need a greener financial sector that systematically assesses climate risks and opportunities.
Greening the financial sector will require greater transparency about climate risks, factoring climate opportunities and risks into decision making, and expanding the use of approaches such as green bonds, risk management instruments (for example, guarantees), and blended finance.
The World Bank and IFC are among the world’s largest issuers of green bonds. As of April 2017, the World Bank had issued a total of 130 green bonds worth over $10 billion. As of April 2017, IFC had issued 77 green bonds worth $5.8 billion across 12 currencies.

Carbon pricing is one of the strongest policy levers available to shift financing flows. It delivers a triple dividend – it protects the environment, raises revenue, and drives investments to clean technologies.
Currently, some 40 governments and 23 cities, states and regions put a price on carbon pollution, accounting for 13 percent of annual global greenhouse gas emissions. This marks a three-fold increase over the past decade.
Countries and states are seeing the benefits of carbon pricing. For example, Sweden has had a carbon tax in place since 1991; during that time, its GDP has grown 60 percent and CO2 emissions have fallen 25 percent.
Greater cooperation through carbon trading could reduce the cost of mitigation by 32 percent by 2030.
In 2016, governments across the world generated $26 billion in revenues from carbon taxes - an increase by 60 percent over the year before.
The World Bank Group is the convener of the Carbon Pricing Leadership Coalition, which mobilizes political leadership and business support for carbon pricing. The initiative supports analytical work to build the evidence base for carbon pricing to policymakers and to the public.

Concessional climate finance is essential to catalyzing private sector climate investment and introducing new technologies, as well as to boosting resilience and stability.
The $8.3 billion Climate Investment Funds (CIF) have helped 72 developing countries pilot low emission and climate resilient development through country-led programs and investments.
Financing of $917 million from the CIF’s Clean Technology Fund (CTF) is driving global investments in concentrated solar power that are expected to contribute more than a fifth of current global capacity.

Climate-smart finance is critical to fighting poverty and meeting development goals.
Without urgent action to reduce vulnerability, provide access to basic services, and build resilience, climate change impacts could push an additional 100 million people into poverty by 2030.
The impact of extreme natural disasters is equivalent to a $520 billion loss in annual consumption, and forces some 26 million people into poverty each year.

The World Bank Group (WBG) is more committed than ever to helping countries meet the climate challenge.
Between FY2011 and FY2016, the WBG committed $63 billion dollars, an average of more than $10 billion a year, to more than 1,000 climate-related projects that help countries adapt to a changing climate and mitigate the impacts of climate change. In FY2016 alone, the WBG provided $10.4 billion in financing to 177 climate-related projects.
In FY2016, the International Finance Corporation (IFC) made close to $2 billion in climate-related long-term investments from its own account and mobilized an additional $1.3 billion, for a total of $3.3 billion invested in climate-smart projects.
In 2016-17, the WBG undertook renewable energy projects representing 10 gigawatts of generation capacity, which are expected to mobilize $6.5 billion in funding.
During the same period, the WBG approved 10 new operations that will improve the climate resilience of 4.5 million people, in addition to the 38 million people covered through existing operations.

Last Updated: Apr 18, 2017
The WBG has committed to increase climate financing to 28 percent of the Bank Group’s portfolio by 2020, in response to client demand. At current levels of co-financing, that would mean a potential $29 billion a year for climate projects by 2020. Meeting these targets is conditional on sustained aggregate WBG lending volumes, access to concessional finance, and client demand.

The WBG Climate Change Action Plan, adopted in April 2016, lays out concrete steps to meet that commitment. It includes ambitious targets to be met by 2020, including helping client countries add 30 gigawatts of renewable energy, put in place early warning systems for 100 million people, and develop climate-smart agriculture investment plans for at least 40 countries

Under the Action Plan, IFC aims to expand its climate investments from the current $2.2 billion a year to a goal of $3.5 billion a year, and will lead on leveraging an additional $13 billion a year in external financing by 2020.

As part of the Action Plan, the WBG is scaling up financial leverage in operations for resilience and mitigation through improving the preparation of projects and by de-risking private investments.

The WBG is developing new principles for concessional climate finance, including targeting transformational opportunities, using long-term engagements to effect policy and institutional changes, and leveraging private capital wherever possible. New commitments would be focused towards protecting the most vulnerable populations, and actions in countries where there are the greatest opportunities for major emissions reductions.

The WBG has demonstrated innovative ways to mobilize additional resources by working with partners. In special circumstances IFC co-invests donor funds on concessional terms alongside its own commercial funds in high-impact climate projects that would not happen otherwise due to market barriers or high risks. Since FY10 IFC has deployed over $380 million in donor funds to support 48 climate projects, leveraging $1.3 billion of the IFC’s own investment plus $4 billion from other financiers – a leverage ratio of almost 14 times.

Funds and Initiatives

The WBG helps countries access other sources of climate financing such as the Global Environment Facility, the Climate Investment Funds, the Green Climate Fund, the Montreal Protocol, the Global Facility for Disaster Reduction and Recovery (GFDRR), and next-generation carbon funds such as the Pilot Auction Facility (PAF) and the Transformative Carbon Asset Facility (TCAF).

The Forest Carbon Partnership Facility (FCPF) and the BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL) have been essential to laying the groundwork for more sustainable management and governance of the natural assets of partner countries using REDD+ strategies.

Through the Partnership for Market Readiness (PMR), the World Bank is working in countries such as China, India, Morocco and Vietnam to introduce carbon pricing and other instruments to reduce greenhouse gas emissions.

The WBG supports the NDC Partnership, which is designed to mobilize technical and financial support to help countries achieve their NDCs as fast and effectively as possible. Under the Partnership, the WBG has created a support facility that allows countries to access technical, analytical and capacity development assistance to further progress towards their NDCs.

Last Updated: Apr 18, 2017
In Morocco, the Climate Investment Funds (CIF) supported the phased construction of the Noor Concentrated Solar Power plant – the largest of its kind in the world. The first facility of the 3-phase Noor plant became operational in December 2015 and, by 2018, will be on track to generate over 500 megawatts of installed capacity, reduce carbon emissions by 760,000 tons per year, and supply power to 1.1 million Moroccan households.

IFC has supported Jamaica’s first independent wind power, the BMR Wind Farm, through $10 million from the IFC-Canada Climate Change Program and $10 million from the IFC and the Overseas Private Investment Corporation. This financed a 36 megawatt wind farm.

IFC is helping the Philippines increase renewable energy capacity and decrease dependency on imported foreign fossil fuels. IFC’s Sustainable Energy Finance (SEF) program has developed into a full investment platform funded by the Global Environment Facility (GEF) and the CIF’s Clean Technology Fund. With this support, the Bank of the Philippine Islands has been increasing the availability of energy efficiency and renewable energy loans to develop alternative energy solutions throughout the islands.

In Jamaica, CIF funding is helping to improve climate data and information management. The ambition is to make it more accurate, timely, wider in coverage and easier to access and use by coastal communities, particularly farmers and fishermen. The funding contributes to early warning systems, improved equipment and observations – all of which lead to better forecasting

Launched in June 2016, the Pacific Resilience Program—a series of projects to strengthen Pacific Island countries’ resilience to natural disasters and climate change—is funded through $32.29 million in grants and credits from IDA, the Global Environment Facility Special Climate Change Fund; the Pilot Program for Climate Resilience to the Pacific Community, GFDRR, and other partners. The program has benefited 135,000 people in Samoa and Tonga alone, of whom 40 percent are female.

In March 2017, the World Bank approved $47 million to address deforestation in Mozambique, funded primarily through the Forest Investment Program. This project builds on the preparation work supported by the Forest Carbon Partnership Facility since 2013. Some of the key expected results include reduced net greenhouse gas emissions from deforestation; increased number of hectares of natural resources protected and restored; improved forest governance; increased access to finance for agriculture and forest-based production participants; and increased number of rural households with access to land certificates.

The World Bank recently approved $18 million from the BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL) to support a sustainable landscape program that spans Ethiopia’s Oromia region with a population over 30 million people. This is the first grant agreement for the ISFL, which is also designing programs in Colombia and Zambia. The ISFL program in Ethiopia supports actions to achieve the country’s low-carbon, green growth vision, including what is outlined in its Climate Resilient Green Economy strategy that emphasizes land use change, forest, and climate action. It provides investments in sustainable forestry, land use planning at the state and local level, and funding for forest-smart policies, technical training and a state-wide information campaign on how land is used.

Last Updated: Apr 18, 2017