The World Bank Group currently provides an average of $10.3 billion a year in direct financing for climate action. In October 2015, President Kim announced that WBG climate financing could increase from the current 21 percent of its portfolio to 28 percent 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.
The WBG, along with the other MDBs, plays a key role in mobilizing financing for climate mitigation and adaptation. In fact, over 2011-14, the multilateral development banks (MDBs) collectively committed over $100 billion, or an average of $26.5 billion a year, for the purpose of addressing climate mitigation and adaptation in developing and emerging economies.
The WBG and other leading development financial institutions agreed in 2015, prior to COP21, on common principles for tracking mitigation and adaptation finance. This agreement will help boost trust about finance flows, and transparency about climate finance.
The WBG also helps countries access other sources of climate financing through the Global Environment Facility, the Climate Investment Funds, various carbon funds, and the Montreal Protocol. Since 2011, the WBG has committed $52 billion to more than 900 climate-related projects. In FY15 alone, the Institution made 188 climate change-related investments in 59 countries.
Overall, the financing required for an orderly transition to low carbon, resilient, growing economies can be counted in the trillions, not billions. According to the International Energy Agency, the world needs $1 trillion a year to 2050 to finance a low-emissions transition.
The public sector alone cannot meet climate finance needs. The private sector will therefore have a critical role to play. In this regard, the WBG has demonstrated innovative ways to mobilize additional resources by working with partners and significantly leveraging private sector funding.
The private-sector arm of the WBG, the International Finance Corporation (IFC), started tracking the climate-smart components of its investments and advisory services in 2005. Since then, it has provided about $13 billion in long-term financing for renewable power, energy efficiency, sustainable agriculture, green buildings and private sector adaptation to climate change.
In FY15, 22 percent of the IFC’s long-term financing was climate-smart, exceeding its publically stated target of 20 percent. The IFC’s climate-related long-term investments for FY15 from its own account were $2.3 billion, covering 103 climate investment projects in 31 countries, with a record core mobilization of $2.2 billion. In FY15 alone, the IFC’s climate-related investment and advisory projects were expected to reduce GHG emissions by 9.6 million metric tons annually, the equivalent of taking more than 2 million passenger vehicles off the road.
In FY15, the IFC invested $893 million in renewable energy, of which $234 million was in wind and $367 million in solar.
Some examples include:
- In Jordan, through an investment of $79.66 million and the mobilization of an additional $107 million, the IFC helped fund the construction of seven solar PV projects that will boost renewables use and transform the country’s energy sector. The project is the largest private-sector led solar initiative in the Middle East and North Africa.
- In late 2014, the IFC completed a $300 million financing package to Penonome wind power plant in Panama, the largest wind farm in Central America. The 337.5 megawatt power plant is expected to generate roughly the equivalent of 5 percent of Panama’s total energy demand and cut about 400,000 tons of carbon emissions per year, the equivalent of taking 84,000 cars off the road.
- In China, IFC financing helped China Wind Power Group develop its 201-MW Xiehe plant in Gansu province, China’s first wind power deal financed entirely through international bank syndication.
During fiscal year 2015, MIGA, the Multilateral Investment Guarantee Agency, issued $1 billion in guarantees for climate-smart projects. The World Bank and the IFC are among the world's largest issuers of green bonds with $8.6 billion issued by the World Bank (IBRD) and $3.8 billion issued by the IFC Treasury.
- IBRD bond impact: a Mexican project to improve forest management is expected to reduce deforestation and forest degradation in 1.6 million hectares of forest – an area larger than the U.S. state of Connecticut.
- IBRD bond impact: two industrial energy-efficiency projects in China are estimated to lead to a reduction in carbon emissions equal to removing 2.7 million passenger cars from the road each year, according to a formula used by the U.S. Environmental Protection Agency.
- In Honduras, proceeds helped fund three solar power plants, demonstrating the viability and bankability of utility-scale solar power in the country, contributing to the reduction of expensive imports of fuel oil, reducing average generation costs and increasing power sector competitiveness.
Last Updated: Mar 29, 2016