The World Bank Group has announced a big increase in financing for climate to help meet rising demand from countries to tackle climate change.
The Bank Group’s President Jim Yong Kim announced the institution could increase climate financing up to $29 billion annually by 2020, with the support of its members.
The announcement came at the Bank Group’s annual meetings in Lima, Peru.
The President pledged a one third increase in direct funding for climate work, which would take financing from an average of $10.3 billion a year to $16 billion in 2020, if current financing levels are maintained. That’s a one third increase, with direct funding for climate rising from 21% a year to 28% a year.
At the same time, the Bank Group plans to continue current levels of leveraging co-financing for climate-related projects. At current financing levels, that could mean up to another $13 billion a year in 2020. The direct financing and leveraged co-financing together represent an estimated $29 billion.
To help build trust ahead of the international climate change talks in Paris in December, the Bank Group and other leading development finance institutions have taken an important step forward in tracking more consistently the flows of finance to help countries deal with the effects of climate change. This year saw the multilateral development banks and the international development finance club agree on common principles for tracking mitigation and adaptation finance. The agreements pave the way for greater transparency in financial flows and will hopefully help underpin greater commitment in Paris.
Overall the financing required for an orderly transition to growing, low carbon and resilient economies can be counted in the trillions, not billions. According to the International Energy Agency, the world needs $1 trillion a year between 2012 and 2050 to finance a low-emissions transition.
The public sector cannot meet the climate finance needs alone. The private sector will have a critical role to play.
The World Bank Group’s focus on climate change has resulted in significant financing to support low-emissions and resilient development and significantly leveraging private sector funding. Some recent highlights include:
- The private sector arm of the World Bank Group, 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, IFC’s total climate-related investments were $2.3 billion, covering 103 climate investment projects in 31 countries. It mobilized a record $2.2 billion from other investors, reflecting a growing appreciation that clean energy, resource efficiency and climate change adaptation represent areas of opportunity. As a result, $4.5 billion was invested through IFC’s direct involvement.
- In FY15 alone, IFC invested $893 million in renewable energy, of which $234 million was in wind and $367 million was in solar.
- IFC invested Sunergise International Limited, a company that supplies solar rooftop energy in the Pacific. IFC’s investment will allow Sunergise to expand solar installations across the Pacific region, including to the Solomon Islands and Papua New Guinea, where businesses lack a stable and affordable power supply, helping them access less expensive, cleaner power with no up-front investment required.
- In China IFC financing helped China WindPower 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 (IBRD) and the IFC are among the world’s largest issuers of green bonds.
- In FY15, IBRD issued 35 green bonds totaling $2.3 billion, taking the cumulative amount issued (from 2008 to date) to more than 100 green bonds worth approximately $8.5 billion in 18 currencies.
- IBRD bond impact - A Mexican project to improve forest management is expected 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 reduce 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 FY15, IFC issued 18 green bonds in the cumulative amount of $352 million, taking IFC’s total green bond issuance to $3.8 billion.
- In Honduras, proceeds helped fund three solar power plants, to demonstrate the viability and bankability of utility-scale solar power in the country, contribute to the reduction of expensive imports of fuel oil, reduce average generation costs and increase competitiveness of the power sector.
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.
The Bank Group’s is committed to tackling climate change. It is integral to its mission of eliminating extreme poverty and boosting shared prosperity. In just FY15 alone, the Bank Group made 188 climate change-related investments in 59 countries, ranging from helping farmers adapt to a changing climate to spurring the private sector in new investments in renewable energy.
Last Updated: Oct 23, 2015