Multilateral Development Banks Promise Paris Alignment: but won’t say when they’ll stop funding fossils.
The nine multilateral development banks (MDBs) — which include the World Bank, the Asian Investment Bank, and the Inter-American Development Bank among others — have an outsized influence on the private finance landscape and on countries low carbon development pathways.
As public *development* banks, who are mandated to act in the public good, they should be at the vanguard of the all-important provision of Article 2.1c – “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.”
It seemed they got off to a good start — they first promised to align their financial flows with the Paris Agreement in 2017! But they’re yet to come up with the goods and a timeline ever since. On Tuesday at COP25, ECO waited with baited-breath for another much-anticipated joint announcement, but instead was greeted with a dizzying array of impressively content-free flowcharts, assurances their framework would show “some projects are Paris-aligned and others are not”, and a promise that full implementation won’t happen until 2023-2024. Another smoke and mirrors powerpoint presentation! It seems politics trumped science on this occasion.
If public banks who are literally mandated to do sustainable development want to wait until 2023 to implement a framework that will eventually get their finance aligned with 1.5°C, we hate to think what the plans of the private arm of the financial sector might look like.
ECO has three pieces of advice for the MDBs to get their act together: (a) end support for all fossil fuels by the end of 2020, (b) rapidly scale up investments in renewables and energy access for the communities most impacted by climate change, and (c) report transparently on finance levels and portfolio emissions.
There is still hope. The Santiago Action Plan released by the 51 members of the Coalition of Finance Ministers for Climate Action on Monday highlights MDBs as priority institutions for Article 2.1(c). And just last month the European Investment Bank (EIB) passed a policy to phase out lending to almost all fossil fuel projects after 2021 (even for gas!), with dedicated and robust packages for energy efficiency and just transition. There is no reason whatsoever why the other MDBs can’t follow the EIB’s lead, communicate with their clients that continued investment in any fossil fuels creates a risk of stranded assets, and demonstrate that they are going to support a zero-carbon pathway. And why not also announce plans for major investments in renewables while you’re at it, starting with those who lack access to reliable energy services?