Financing climate change is an important part of the World Bank Group's business. Our focus has resulted in significant financing flowing to support low-emissions and resilient development. For example, mitigation support for the world's poorest countries through the Bank's IDA reached $2.3 billion during fiscal year 2013, while the IFC's mitigation financing increased 50 percent to $2.5 billion. Read More »
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:
World Bank’s fund for the poorest countries, International Development Association (IDA) maintained a steady commitment to climate action: mitigation support in IDA remained around $2.3 billion in FY13 (about the same level as in FY12) while adaptation support decreased to $2.1 billion (down 12 percent from FY12, but still 42 percent up from FY11 level).
Sub-Saharan Africa had the highest climate-related lending commitments among regions: World Bank lending with adaptation co-benefits in Africa totaled $1.3 billion in FY13 (second is South East Asia at $600 million), standing at 18 percent of the region’s approvals – or twice as much as in the other regions. Lending with mitigation co-benefits in the region grew for the third consecutive year, reaching $1.4 billion (East Asia and Pacific comes next at $1.3 billion.)
The World Bank’s arm for private sector funding, International Finance Corporation (IFC), committed $2.5 billion to financing mitigation projects in FY13, a 50-percent increase over FY12
In recognition of the urgent global issue of climate change, and in response to growing demands from country clients and private sector, the World Bank Group has scaled up its efforts to support climate-smart investments. The World Bank Group 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, 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 emphasize the importance of generating lessons and knowledge on climate finance. The CIF are leveraging approximately US$50 billion for climate-resilient, low-carbon development in 48 countries and transforming policy, institutions, and markets. All CIF pledges have been allocated, and over 70 additional countries have expressed interest in the CIF, an indication of growing demand for climate-smart development, which is also a powerful bridge into post 2013 financing while the Green Climate Fund (GCF) is being established.
The World Bank continues to actively channel 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 including, scaled up support for renewable energy development and energy efficiency promotion, a focus on cities and urban landscapes, including the built environment and sustainable transport, climate smart agriculture, and promotion of market readiness.
The current (17th) cycle of the International Development Association (IDA) 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 (CERs) to expand the pool of financing available for adaptation.
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 has increased interest in climate change issues through the development of green bonds. IBRD and the International Finance Corporation (IFC), the private sector arm of the World Bank, are also the world's largest issuers of green bonds, which support climate-related projects such as increasing energy efficiency and developing of renewable energy - with $4.5 billion issued by the World Bank Treasury in 60 bonds and 17 currencies, and $3.4 billion by the IFC Treasury, including two $1 billion benchmark offerings in 2013. Forty five of IBRD’s climate-related projects in 17 countries are supported by green bonds so far. Green bonds are now part of the funding programs of most MDBs and the number of interested investors continues to grow.
Leveraging the private sector
IFC has led the World Bank Group’s efforts to accelerate the development and deployment of new climate technologies and innovations in clean energy technology IFC committed $2.5 billion to financing mitigation projects 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.
Last Updated: Sep 25, 2013
Carbon Finance: Since 2000, $3.4 billion has been raised through the World Bank’s 15 carbon funds and facilities to support over 150 projects in 65 developing countries, including more than $500 million in contributions and pledges in FY 2013 alone. These projects are responsible for reducing the equivalent of over 181 million tons of carbon dioxide emissions.
Forest Carbon Partnership Facility (FCPF): Total investments of $750 million to the FCPF financed REDD+ readiness activities in 44 countries that represented more than half of forest areas in the tropics and sub-tropics, and piloted performance based payments for emission reductions from REDD+ programs at scale.
BioCarbon Fund: A total of $90 million in investments (payments for emission reductions) committed by the BioCarbon Fund since 2004 is restoring 150,000 hectares of degraded lands, reducing deforestation on 350,000 hectares, sequestering 15 million tons of CO2 and avoiding the release of 5 million tons of CO2 (over 20 years).
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. To date, seven of those countries have been allocated implementation funding -- totaling $27 million - to pursue various market-based activities, including cap and trade and carbon tax initiatives. The remaining 11 countries will present funding proposals over the course of the next 18 months.
Climate Investment Funds: A total of $8 billion has been pledged for 48 countries, leveraging about $55 billion in investments. 200 projects are in the CIF pipeline, out of which 66 have been approved for CIF funding and are either at an advanced stage of project development or are under implementation.
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)