Overview

The World Bank Group’s focus on climate change has resulted in significant financing to support low-emissions and resilient development. Some recent highlights include:

  • The World Bank Group provided US$11.8 billion in lending with mitigation and adaptation co-benefits in 2014. Of that total, the World Bank (IBRD/IDA) committed $9.2 billion, and the World Bank Group’s private sector arm, the International Finance Corporation (IFC), invested $2.6 billion in renewable energy, energy efficiency, and other climate-smart initiatives during calendar year 2014. 
  • During fiscal year 2014, MIGA, the Multilateral Investment Guarantee Agency, had an additional $630 million in projects.
  • The World Bank’s fund for the poorest countries, International Development Association (IDA), maintained a steady commitment to climate action, with about $5 billion committed in FY14.
  • In FY14, there were 224 World Bank Group climate investment projects in over 77 countries. For the World Bank, South Asia was the largest recipient of climate-related finance ($3.7 billion), followed by Africa and the East Asia & Pacific region (both around $1.5 billion each). For IFC, 31 percent of investments were in IDA countries, while Africa, Latin America, and Europe exceeded their regional climate targets.
  • The World Bank and the IFC are among the world’s largest issuers of green bonds. To date, the World Bank Treasury has issued more than $8.5 billion in green bonds in 18 currencies since 2008. The IFC has issued $3.7 billion in green bonds.

To adapt to a world 2 degrees Celsius warmer, developing countries will require an estimated $75–100 billion per year over the next 40 years to build resilience to these changes, and mitigation costs are expected to be in the range of $140–175 billion per year by 2030.

Against this backdrop, global financing is not growing fast. Analysis from the Climate Policy Initiative found that global climate finance flows were around $331 billion in 2013, well below what is needed. According to the International Energy Agency, the world needs $1 trillion a year between 2012 and 2050 to finance a low-emissions transition.

 

Last Updated: Jun 01, 2015

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 $57 billion for climate-resilient, low-carbon development in 63 countries. The World Bank also 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. So far, $3.8 billion has been raised through 15 carbon funds and facilities, supporting 145 active projects in 70 client countries. These projects are responsible for reducing the equivalent of 187 million tons of carbon dioxide emissions till 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 hedgescontingent 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 more than $8.3 billion in green bonds issued by the World Bank Treasury in 18 currencies; and more than $3.7 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 FY14, 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.

 

Last Updated: Feb 19, 2015

Examples by instrument

Carbon Finance: Since 2000, $3.8 billion has been raised through the World Bank’s 15 carbon funds and facilities. These include:

  • Forest Carbon Partnership Facility (FCPF): Total investments of $750 million have financed REDD+ readiness activities in 44 countries and piloted performance based payments for emission reductions from REDD+ programs at scale.
  • BioCarbon Fund Tranches 1 and 2: A total of $90 million in investments (payments for emission reductions) have been committed by the BioCarbon Fund since 2004.
  • Partnership for Market Readiness (PMR): $127 million has been pledged from 13 donor countries to the PMR, an initiative that supports capacity building for carbon pricing policies in 18 countries.

Climate Investment Funds has about $8 billion in resources expected to leverage about $57 billion for projects in 63 countries.

World Bank Treasury monetizes Certified Emission Reduction certificates for the UN Adaptation Fund, with close to 15 million CERs sold, raising $188 million to finance adaptation projects in developing countries (as of May 31, 2013)

Multilateral Investment Guarantee Agency (MIGA) Guarantees issued $630 million in guarantees in FY14 supporting four projects that contribute to reductions in greenhouse gas emissions.

IFC Asset Management Company has raised more than $347 million from institutional investors through the Climate Catalyst Fund.

 

Last Updated: Mar 24, 2014


$11.8 billion
was committed to climate investments by the World Bank Group in 2014
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