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Readying the Multilateral Development Banks for the Climate Fight

Different climate-financing challenges call for different financing methods, and when it comes to building resilience in the developing world, multilateral development banks must take the lead. But to be effective, they and their shareholders must remove the shackles that have been holding them back.

LONDON – The world is confronting its biggest threat with one arm tied behind its back. Although the increasingly devastating effects of the climate crisis are becoming more apparent with each passing year, multilateral development banks (MDBs) are still playing only a marginal role in the global response. The annual meetings of the World Bank and the International Monetary Fund on October 9-15 are a crucial opportunity to change course.

Recent events in Libya, Pakistan, and the Horn of Africa confirm a hard, tragic truth: climate disasters are now firmly intertwined with development. The global system of AAA-rated MDBs – with the World Bank at its center – should be at the heart of financing climate-change mitigation and adaptation efforts in the developing world. Yet they are not stepping up.

Total MDB lending hovers around $100 billion per year, and, as the recent report of the G20 Independent Expert Group on MDBs points out, net transfer from MDBs to developing countries is currently close to zero, or even turning negative, once debt repayments are factored in. Compare that to the estimate by the Independent High-Level Expert Group on Climate Finance that we need an additional $2.4 trillion per year for climate and development finance.