Leading up to the Spring Meetings: Five priorities for MDBs to deliver on their COP28 ambition

At COP28, ten Multilateral Development Banks (MDBs) released a joint statement committing to scale up #climateaction. This was complemented by commitments from the Climate Vertical Funds (e.g., the Global Environment Facility , Climate Investment Funds , Green Climate Fund and Adaptation Fund to harmonise and streamline how they work with partners, including MDBs.??

Beyond tripling their #climatefinance, the MDBs’ joint statement emphasises their critical role in supporting enabling environments for climate action and private climate investment. To this end, the creation of a Joint MDB Long-term Strategy (LTS) Platform was announced. MDBs committed to harmonise institutional climate metrics and increasingly report on results rather than finance and outputs. Noting the inter-connectedness of climate and other development issues, the MDBs committed to work through country-led co-ordination mechanisms to accelerate just and equitable #energytransition, #adaptation and #resilience.???

MOPAN’s new Insights study, Accelerating Climate Action: Multilateral Development Banks’ Readiness and Performance, delves into MDBs’ readiness to deliver on their joint ambition. We found that MDBs are likely to face challenges in five critical areas as they seek to deliver on the commitments identified in their #COP28 joint statement.?

1. MDBs need to demonstrate how their knowledge and advice strengthen national climate policies.

An enabling policy environment is essential to ramping up the ambition of Nationally Determined Contributions (NDCs) and achieving the Paris Agreement Goals.?However, MDBs’ knowledge and advice are often delivered in a fragmented way. Uptake to inform policy change is rarely demonstrated. Co-ordination with other MDBs, the United Nations and the International Monetary Fund needs to be more systematic.??

Building upon the World Bank’s Country Climate and Development Reports and the Joint LTS Platform, MDBs need to identify how they can work more closely together to take stock of policy changes, institutional capacity and emerging needs. There are opportunities to leverage programmatic approaches and new tools - such as the OECD - OCDE 's Climate Actions and Policies Measurement Framework – to monitor progress in fostering an enabling environment for climate action.??

2. Concessional climate finance needs to be scaled up, allocated more efficiently and positioned for impact.??

Concessional climate finance needs to be scaled up considerably to address an increasingly complex development landscape marked by inequality and fiscal constraints. These funds are often fragmented across trust funds with various processes and requirements. The climate funds each have their own governance and operating models that are not always aligned with the processes and capacities of their partners.?

Access to concessional finance should be streamlined, avoiding transaction costs and channelling funds efficiently to the countries most in need. Concessional funds should create the conditions needed to catalyse investment, particularly for adaptation and challenging sectors such as transport, agriculture and forestry. Greater use of non-grant instruments, including project and portfolio guarantees, would further crowd-in finance and scale results. Beyond this is the need for strong IDA21 and ADF-14 replenishments – some of the most efficient models for channelling concessional?finance.?

3. MDBs need to work more coherently and flexibly to enable private sector climate action.??

The ability to work across the public and private sectors to crowd in investment is at the heart of MDBs’ comparative advantage. However, opportunities are not being leveraged systematically to enable private climate investment through coherent and strategic activities across the public and private sectors.??

MDBs need to work more coherently through “whole-of-institution” approaches between their public and private sector operations to create the right conditions for climate investment. This approach is for instance embedded in European Bank for Reconstruction and Development ( EBRD )'s unique business model focusing on transition, including "green economy transition.” Some MDBs are identifying a single country focal point to oversee engagement across the public and private sector. However, changes are also needed in how MDBs engage with countries, including by ensuring country strategies and engagement reflect a dynamic private sector environment. Enabling and mobilising private capital – including for climate action - should be key measures of #institutionalperformance.?

4. MDBs need to strengthen the results architecture for climate change.??

At COP28, the MDBs committed to harmonise their corporate metrics for climate action and increasingly report on results. To do so, however, MDBs will need to address important gaps in how projects are selected, how results are measured and how country programmes are evaluated.??

Climate finance should reflect projects that have clear and substantial linkages to climate results. One option is to build on tools from private sector operations – such as AIMM, DELTA and TOMS – to prioritise projects that could contribute to transformative climate outcomes. Results should then be monitored during implementation. Country strategies should reflect climate change outcomes in results frameworks. Country-level independent evaluation should be strengthened to demonstrate how MDBs are supporting national climate ambition, policy reform and action over time.??

5. MDBs need to bolster collaboration with development partners to optimise their support to country-led mechanisms such as Just Energy Transition Partnerships.?

Country-led mechanisms, including Just Energy Transition Partnerships (JETPs), are increasingly driving energy transition. The Egypt Nexus for Water, Food and Energy demonstrates how country-led mechanisms can be applied to address adaptation and #resilience in other sectors. JETPs require close co-ordination across MDBs, donors and the UN. However, beyond governments, MDBs’ co-ordination with partners is often not systematic. Resource constraints, lack of harmonised processes and weak institutional incentives work against closer co-ordination and co-financing. Joint monitoring remains the exception rather than the rule.???

Building upon the strong country ownership, MDBs need to hardwire partner collaboration into their processes, recalling shared multilateral principles for aid effectiveness in place for over two decades. MDBs need to keep moving toward more systematic collaboration and co-financing with partners, streamlining and harmonisation of key processes, strengthening and use of country systems and scaling of joint platforms to increase private investment – including streamlined means of channelling blended finance. Transparency is a key enabler of JETPs; working more closely with partners and beneficiaries to assess results is another critical opportunity.??

Climate change is the foremost challenge of our time and MDBs play an essential role in addressing the unfolding #climateemergency. MDB reform is a golden opportunity to accelerate climate action, deliver climate results and secure a more prosperous, equitable and sustainable future. The international community must seize it.???

Dialogue between 世界银行 and its Governors at the upcoming #SpringMeetings is an opportunity to address MOPAN's findings, positioning MDBs to deliver on their joint ambitions at COP28 and building an international climate finance architecture that delivers climate results at scale.??

MOPAN is a network of 22 member countries with a shared concern for promoting the effectiveness of the multilateral system. MOPAN assessments identify the extent to which multilateral organisations are positioned to deliver relevant, inclusive and sustainable development results efficiently, including for climate change.?

This is the second article in a series of three articles from MOPAN on multilateral development banks’ role in climate action following COP28. Read the first article,” Four ways development banks can turn climate finance into climate results,” here.?

All findings here within are derived from MOPAN’s recent Lessons in Multilateral Effectiveness Insights paper, Accelerating Climate Action: Multilateral Development Banks’ Readiness and Performance. The Insights paper builds upon evidence from eight MOPAN assessments of Multilateral Development Banks including: the African Development Bank, the Asian Development Bank (forthcoming), the European Bank for Reconstruction and Development (forthcoming), the Inter-American Development Bank, IDB Invest, the International Financial Corporation, the International Fund for Agricultural Development, and World Bank (IDA/IBRD).?

For more of MOPAN’s work on Multilateral Development Banks, visit mopanonline.org or contact [email protected].?

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