The World Bank Group 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 World 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.

And as a report released in June shows the Multilateral Development Banks – which include the World Bank Group – delivered more than $28 billion in financing for climate action.

To help build trust ahead of the international climate change talks in Paris in December, the World 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.  

For example:

  • 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.
  • 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

Last Updated: Oct 04, 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.

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. Every 1 CIF dollar is leveraging $8 by others.

  • It’s helping to drive global investments in concentrated solar power – the seven solar parks project in Jordan is set to boost Jordan’s renewable energy use and transform its energy sector, away from expensive, imported fossil fuels. It’s the largest private sector led solar initiative in the Middle East and North Africa.
  • In terms of concentrated solar power, CIF allocations are expected to contribute to more than a quarter of current global capacity. In Thailand, funding from CIF and IFC helped transform the solar market.   
  • In Morocco, the CIF is supporting phased construction of the Noor CSP plant.  It expects to, reduce carbon emissions by 760,000 tons a year, and supply power to 1.1 million by 2018. Low-cost CIF debt helped cut the cost of power production by 25% and will cut the government’s power subsidy.
  • The CIF is also working to break down barriers to geothermal power expansion  by helping to expand markets in countries like Kenya, Indonesia, and Mexico, and supporting some of the first large-scale geothermal projects in Ethiopia, Tanzania, Dominica, Chile, and Armenia.   
  • CIF allocations expected to contribute to projected generation capacity of 3.5 GW, or more than one-quarter of the current global geothermal capacity. For example, Ethiopia is working to tap its estimated 5,000 MW of geothermal power potential.  With CIF support, it’s developing a long-term geothermal energy strategy and investing in the expansion of the Aluto Langano steam field to demonstrate the technical and commercial viability of Ethiopia’s geothermal sector, reduce risk perceptions, and catalyze scaled-up financing in the future.

The World Bank also actively channels funds to clients under the climate change focal area of the Global Environment Facility (GEF). 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.

  • IDA plays a catalytic role in leveraging other resources. For example, the Pacific Resilience Program (PREP) which supports a number of countries and regional organizations to managing climate and disaster risk. PREP seeks to strengthen multi-hazard early warning systems, build resilient investments and reduce risks through investments in public infrastructure and financial protection for countries taking part – which now include Samoa, Tonga, the Republic of Marshall Islands and Vanuatu.

As Trustee of the Adaptation Fund, the World Bank sells Certified Emission Reductions to expand the pool of financing available for adaptation.

For high impact projects, IFC can deploy concessional funding provided by the GEF, the CIF, and governments such as Canada, alongside IFC’s own funds. In FY15, the Blended Climate Finance (BCF) team committed $75 million in concessional funds to seven climate-smart projects, alongside $150 million of IFC funds in projects worth over $650 million.

Over a half of total commitments were in IDA countries. Additionally, in FY15 IFC has provided $7.2 million in funding through Blended Finance to seven advisory projects.

The IFC Catalyst Fund, managed by IFC’s Asset Management Company, has raised more than $418 million from institutional investors and sovereign funds interested in green growth opportunities. [1]

IFC also channels investments through financial intermediaries like commercial banks to support climate-related credit lines and trade finance for small and medium-sized firms. IFC’s Financial Institutions Group (FIG) has supported 125 financial partners through 135 sustainability and climate projects in 35 countries since 1997, providing $3.8 billion in financing. [2]

In July 2015, an important milestone was the first online auction of the Pilot Auction Facility, which auctioned carbon credit price guarantees to companies that cut their methane emissions. 28 companies participated in the auction, which ended after 11 rounds with 12 winners and a clearing price of $2.40 per CER. The auction will raise $2.6 million and allocate 8.8 million tons of put options.

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, $4.36 billion has been raised through 18 carbon funds and initiativessupporting 145 active projects in over 75 client countries. These projects are responsible for reducing the equivalent of 196 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 hedgescontingent financing, and catastrophe bondsAdvisory 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 about $8.5 billion in green bonds issued by the World Bank Treasury in 18 currencies through over 100 green bonds; and $3.8 billion by the IFC Treasury, including two $1 billion benchmark offerings in 2013. 

Leveraging the private sector

There has been rapid growth in the use of World Bank Group guarantees to help support climate-friendly investments and mobilize private capital for 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.

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

[1] The fund gives investors access to IFC’s investment pipeline in selected specialist funds. AMC is a wholly owned subsidiary of IFC that mobilizes capital and manages funds for investment in developing and frontier markets. http://ifcext.ifc.org/ifcext/pressroom/IFCPressRoom.nsf/0/0F16BCACFBC6D5C985257D090067EB45

[2] Commercial banks’ aggregated financing can reach multiple end-borrowers and directly influence the adoption of new climate-smart technologies and processes. Commercial banks can also reach far more small and medium enterprises than IFC can do alone.

Last Updated: Oct 04, 2015

Examples by instrument

Carbon Finance: Since 2000, $4.36 billion has been raised through the World Bank’s 18 carbon funds and initiatives.

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. In FY15 WBG further increased the reach and scope of the private sector readiness for carbon pricing through our Partnership for Market Readiness (PMR) initiative, working with companies such as Royal Dutch Shell, Rio Tinto, and Pacific Gas and Electric (PG&E) to capture experiences of leading businesses preparing for and operating under carbon pricing policies, and share best practices and lessons learned with others.
  • Pilot Auction Facility (PAF): The $50 million joint World Bank- IFC innovative fund for climate mitigation uses auctions to guarantee the price of future carbon credit generated by private sector companies that cut their methane emissions. The fund already has $50 million in contribution from donors, with a goal to raise $100 million.
  • In FY15, the World Bank Group’s Networked Carbon Markets (NCM) initiative launched a global discussion about the post-2020 services and institutions needed for an integrated international carbon market.
  • Climate Investment Funds has over $8 billion in resources, expected to leverage about $57 billion for projects in 63 countries. In 2014, the CIF governing bodies unanimously agreed to extend the mandate of the CIF, to expand CIF financing and activities from 48 to 63 countries, and to reduce funding gaps in on-going operations. This agreement recognizes the need to maintain diversity of financing options, complementarity, and coherence of the CIF with other funding sources.  

New resources will allow expansion of the CIF’s Forest Investment Program, Pilot Program for Climate Resilience, and Scaling Up Renewable Energy in Low Income Countries Program and will bridge funding gaps in the Clean Technology Fund.

  • World Bank Treasury monetizes Certified Emission Reduction (CERs) for the UN Adaptation Fund, with close to 24.5 million CERs sold, raising $194.5 million to finance adaptation projects in developing countries (as of August 31, 2015)
  • Noteworthy was also the work on Chinese Emissions Trading Market. IFC worked with the national policy makers to support the development of the carbon market in China by engaging with local low-carbon pilots, emissions exchanges and banks, and designing new trading products in order to overcome barriers to carbon trading, enhance liquidity, and provide risk management tools.
  • In FY15, the World Bank Group set up the Carbon Pricing Leadership Coalition, building on support shown at last year’s Climate Summit. Consisting of over 75 government, business, and civil society leaders, the CPL Coalition is driving action on the development of carbon pricing policies through high-level public/private dialogue, knowledge sharing, and targeted technical analysis.

Last Updated: Oct 04, 2015

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