4 Ways Development Banks Can Better Support the Paris Agreement

Multilateral development banks (MDBs) can play a critical role in limiting climate change and helping communities adapt to its impacts. Since 2011, they have provided nearly $200 billion in finance for climate change mitigation and adaptation(so-called “climate finance”). The World Bank Group’s recent announcement that it will increase its climate-related investments means this number is likely to grow. But while climate finance is important, it makes up less than a quarter of all finance provided by the MDBs. The rest goes to activities that may (or may not) undermine climate goals.

If we are going to have a fighting chance at meeting climate goals, MDBs must make sure not only that their climate finance investments support climate objectives, but also that no other MDB investments undercut them. The banks should transition from what we call a “climate finance paradigm”—based on defining, measuring, and meeting climate finance targets—to a “Paris alignment paradigm” which seeks alignment of entire portfolios with the Paris Agreement. On December 3, 2018, the MDBs pledged to develop a new approach aimed at facilitating this transition.

A report launched at the climate negotiations in Katowice, Poland, outlines four key steps that the MDBs should take as they work towards operationalizing the Paris alignment paradigm. These include: aligning their investments with net-zero CO2 emissions, mainstreaming climate change resilience, supporting and enhancing country climate goals, and ensuring transparency on the Paris alignment of their activities.