The UN Secretary General’s Climate Summit later this month is an opportunity for world leaders to champion ambitious climate action that will not only cut carbon pollution, but also deliver jobs and economic opportunity. Climate finance has been flowing, but the volume isn't enough yet to meet the challenge.
At the World Bank Group, mobilizing finance from the public and private sectors, especially for the poorest countries, is a priority.
In fiscal year 2014, which ended June 30, our total climate investments increased to almost $11.3 billion, with the World Bank (IBRD/IDA) committing $8.8 billion and the World Bank Group’s private sector arm, the International Finance Corporation (IFC), $2.5 billion.
The bulk of this lending went to climate friendly investments in the energy, transport and agriculture sectors.
At $3.6 billion, FY14 was one of the strongest years on record for renewable energy lending,reflecting growing client demand for large-scale hydro, solar, wind and geothermal energy.
Transport was the second largest recipient of climate investment with over $2.3 billion targeting the sector, including commitments to finance railway projects in China and India.
The agriculture, fishing and forestry sector was third largest overall and the largest recipient of adaptation finance. Some $1.1 billion was committed, with most funding going to flood protection and water projects. The majority of activities were in International Development Association (IDA) countries.
With about $5 billion in climate-related financing in FY14, IDA, the Bank’s fund for the poorest, continued to demonstrate a steady commitment to climate action.
Growing momentum on the ground
There is growing momentum on the ground, where countries around the world are implementing climate-resilient and low-emissions development solutions. Responding to this, in 2014, 20 percent of World Bank Group lending projects are expected to contribute to climate change adaptation, mitigation or both.
In FY14, there were 220 World Bank Group climate investment projects in over 60 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 strong lending in FY14 reflects a continuing demand from developing countries to work with the World Bank Group on climate change. Over the last four years, the World Bank Group has committed $42 billion (World Bank $33.7, IFC $8.3 billion) to climate related activities.
Multilateral development banks leading by example
This demand for climate lending has also been felt by the other large multilateral development banks (African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank).
In the first three years after they began jointly tracking climate finance flows in 2011, the multilateral development banks (including the World Bank Group) delivered nearly US$75 billion (FY11 to FY13) in financing to help developing countries and emerging economies respond to the challenges of climate change.
In a joint statement in advance of the UN Secretary-General’s Climate Summit, the six multilateral development banks reaffirmed their commitment to lead by example and continue to develop and scale-up their lending in support of climate action. Together, they pledged to maintain a strong institutional focus on climate change, leverage additional private sector investment, continue to innovate and promote more robust and transparent climate finance tracking and reporting.
Scaling up resources for climate action
To scale up resources for climate action, the World Bank Group is also demonstrating innovative ways to mobilize and leverage finance and markets.
Climate finance plays a key role here, providing resources to address risks and build readiness. The World Bank Group has successfully facilitated access to a menu of climate finance instruments, as seen by growing commitments to projects from the Global Environment Facility as well as in carbon finance and the Climate Investment Funds (CIF).
With the addition of $652 million in FY14, funding for mitigation from external resources grew close to $3 billion in the past four years. Carbon finance – both readiness support and payments for emission reductions – amounts to roughly $1.2 billion, or 40 percent of the total, followed by CIF representing 28 percent of the total funding for the past four years.
Funding for adaptation from external resources increased in FY14 to $279 million, a record year. Total adaptation finance from external resources in the last four years is close to $850 million.
In addition, IFC has worked to mobilize financing from the private sector to help bridge the climate financing gap through a broad spectrum of financial structures including the IFC Catalyst Fund ($418 million) for clean energy investments, public-private partnerships ($942 million in FY13), blended finance products ($221 million FY10-14) and work in tandem with IBRD to develop a robust, liquid market for green bonds. Since 2008, the World Bank has issued more than $6.4 billion in green bonds in 17 currencies, and the International Finance Corporation has issued $3.6 billion green bonds.