The World Bank Group has scaled up its efforts to support climate-smart investments. It is deploying, leveraging, and mobilizing finance through a set of instruments that address gaps, risks, and barriers to climate-resilient development and mitigation for our clients.
Mobilize additional concessional and innovative finance
A notable success has been the $8-billion Climate Investment Funds (CIF), which are designed to provide scaled-up financing, through the Multilateral Development Banks, to initiate transformational change toward climate-resilient, low-carbon development. The CIF are leveraging approximately $55 billion for climate-resilient, low-carbon development in 48 countries. More than 80 additional countries have expressed interest in the CIF, which is also a powerful bridge into post 2013 financing while the Green Climate Fund is being established. The World Bank continues to actively channel funds to clients under the climate change focal area of the Global Environment Facility. To date, nearly $2 billion has been invested and recent programming reflects adoption of an integrated approach to tackle climate change.
The current (17th) cycle of the International Development Association will see more targeted investments in climate change, indicating the mainstreaming of climate concerns in the largest fund for the poorest countries. As Trustee of the Adaptation Fund, the World Bank sells Certified Emission Reductions to expand the pool of financing available for adaptation.
Broadening the scope and reach of carbon markets
Over a decade ago, the World Bank established the world’s first carbon fund to support the objectives of the Kyoto Protocol and reduce greenhouse gas emissions. To date, $3.8 billion has been raised through 15 carbon funds and facilities. Of that, $3.3 billion is earmarked for carbon purchases and is currently supporting 140 carbon reduction projects in more than 50 developing countries. These projects are responsible for reducing the equivalent of 187 million tons of carbon dioxide emissions to-date.
A new family of carbon funds, facilities, and initiatives is currently being developed by the World Bank and its partners, to help prepare the next generation of carbon finance mechanisms.
Putting capital markets to work
With an expected increase in the intensity and damage caused by natural disasters, the World Bank offers a range of catastrophe-risk financing products and advisory services to countries as part of their broader disaster-risk management strategies. This includes sovereign risk financing for direct budget support that provides varying levels of climate protection such as weather hedges, contingent financing, and catastrophe bonds. Advisory services are provided to facilitate deployment of insurance markets and access to re-insurance markets as well as technical assistance for agricultural insurance.
Drawing from its work with financial markets, the World Bank Group has increased interest in climate change issues through the development of green bonds. The bonds support climate-related projects such as increasing energy efficiency and developing of renewable energy – with $5.3 billion issued by the World Bank Treasury in 61 bonds and 17 currencies, and $3.4 billion by the IFC Treasury, including two $1 billion benchmark offerings in 2013.
Leveraging the private sector
IFC has invested $2.5 billion in renewable energy, energy efficiency, and other climate-smart initiatives in FY13, a 50 percent increase over FY12 and has determined that 20 percent of its long-term financing and 10 percent of its trade and supply chain financing will be climate-smart by FY15.
There has been rapid growth in the use of World Bank Group guarantees to help support climate-friendly investments and mobilize private capital into countries and sectors with a high risk perception. IFC and the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, are working with financial institutions to help strengthen capital and financial markets and reach out to smaller clients. For FY13 MIGA issued $1 billion in guarantees supporting eight projects that contribute to reductions in greenhouse gas emissions.
Building readiness to facilitate access and increase impact
To maximize the impact of climate finance, the World Bank has also been active in strengthening the climate finance readiness of countries. This includes work to establish broad policy and institutional platform, for example through Development Policy Operations, such as in Vietnam, and Climate Change Public Expenditure Reviews, such as in the Philippines.