Funding Boost for Climate Action

World Bank Group President Jim Yong Kim yesterday announced a major increase in the Bank Group’s financing to help countries combat climate change by building low carbon and resilient development.

The Bank’s President has announced the institution will increase its climate financing to potentially $29 billion a year by 2020, with the support of its members.

The announcement came at a special meeting of finance ministers from around the globe, hosted by France and Peru, on the sidelines of the Annual Meetings of the World Bank Group-IMF in Lima, Peru.

And it comes just about two months before this year’s COP21 conference in Paris, the international climate talks. In Paris, countries are expected to agree on negotiated text to work on financing issues, including the 2009 Copenhagen commitment for $100 billion a year for developing countries by 2020.

The Lima meeting, the first and last meeting of finance ministers ahead of Paris, saw real progress towards meeting that goal with all multilateral development banks making commitments on financing.  

Ahead of Paris, countries have been lodging their national plans to tackle climate change – with the plans officially called the Intended Nationally determined Contributions (INDCs). Those national plans spell out countries’ efforts to bring down greenhouse gas emissions and adapt to a rapidly changing climate.

And they clearly signal developing countries’ need for more resources to help address the challenges of climate change.

To date, about 21 percent of the Bank Group’s funding is climate related. Under the plans, that could rise to 28 percent in 2020, representing a one third increase in climate financing. Today, the Bank Group’s average direct financing for climate totals about $10.3 billion. So if current financing capacity is maintained, this would mean an increase to $16 billion in 2020.

The Bank Group also plans to continue current levels of leveraging private co-financing for climate related projects. At current levels, that could mean up to another $13 billion a year in 2020. So with the leveraging and direct financing together that represents an estimated $29 billion.

The investments will boost support for renewable energy and energy efficiency, climate-smart transport solutions, resilient cities, the restoration of degraded forests and landscapes, enhanced water security, and agricultural practices.

In making his announcement, the Bank President called the financing of climate action a “collective challenge….we all know that country needs for ending extreme poverty and boosting shared prosperity and combatting climate change are enormous.”

Together he said everyone had to find ways to respond to the expected rising demand.

Ahead of the Paris talks, the Bank Group has called on leaders to show real political ambition, saying the meeting represents a critical opportunity to galvanize political will for urgent action. 

“We need a strong Paris agreement with a financial package. We believe there is a credible pathway to provide developing countries with $100 billion a year promised in climate financing by 2020,” said the Bank Group’s Vice President and Special Envoy for Climate Change, Rachel Kyte. “Much of that $100 billion is already flowing with the multilateral development banks – including the World Bank Group – playing a key role.”

“The Bank Group’s commitment to be an even stronger actor and conduit of climate finance, together with similar commitment made by every other President of every other regional development bank, shows that the multilateral development banks over the next five to six years will continue to be an extremely important part of the solution for low carbon growth and resilient development,” she said.

As a group, the multilateral development banks contribute 40 percent of the $57 in climate flows and mobilized private finance, according to the OECD. The OECD says the Bank Group provides over 40 percent of the contributions by the MDBs.