JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS CLIMATE FINANCE

Transcription

1 2016 JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS CLIMATE FINANCE

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3 2016 JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS CLIMATE FINANCE This report was written by a group of multilateral development banks (MDBs), composed of the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank Group (IDBG) and the World Bank Group (WBG). The findings, interpretations and conclusions expressed in this work do not necessarily reflect the official views of the MDBs Boards of Executive Directors, or the governments they represent.

4 Cataloging-in-Publication data provided by the Inter-American Development Bank Felipe Herrera Library Joint report on multilateral development banks' climate finance / Inter-American Development Bank, Inter-American Investment Corporation, African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank, World Bank. p. cm. Includes bibliographic references. 1. Climatic changes-economic aspects. 2. Economic development-environmental aspects. I. Inter-American Development Bank. Climate Change Division. II. Inter-American Investment Corporation. III. African Development Bank. IV. Asian Development Bank. V. European Bank for Reconstruction and Development.VI. European Investment Bank. VII. World Bank. IDB-CP-65

5 TABLE OF CONTENTS 2 Abbreviations and acronyms 3 Preface 4 Executive summary 6 1. Overview of MDB climate finance tracking methodologies Climate adaptation finance Climate mitigation finance Climate co-finance 8 2. MDB climate finance, Total MDB climate finance, MDB climate finance by type of recipient or borrower MDB climate finance by type of instrument MDB climate finance by region MDB adaptation finance, MDB mitigation finance, Climate co-finance, ANNEX A: Definitions and clarifications 20 ANNEX B: Joint Methodology for Tracking Climate Adaptation Finance 27 ANNEX C: Joint Methodology for Tracking Climate Mitigation Finance 33 ANNEX D: Finance with dual adaptation and mitigation benefits 34 ANNEX E: Instrument types 35 ANNEX F: Geographical coverage of the report ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AfDB African Development Bank CCF climate co-finance CIF Climate Investment Funds CO 2 carbon dioxide EBRD European Bank for Reconstruction and Development EIB European Investment Bank EU European Union euro FY fiscal year GCF Green Climate Fund GEF Global Environment Facility GHG greenhouse gas IDB Inter-American Development Bank IDBG Inter-American Development Bank Group, composed of the IDB and IIC IDFC International Development Finance Club IFC International Finance Corporation IIC Inter-American Investment Corporation MDBs multilateral development banks MIGA Multilateral Investment Guarantee Agency NAMAs Nationally Appropriate Mitigation Actions NDCs Nationally Determined Contributions UNFCCC United Nations Framework Convention on Climate Change US$ United States dollar WB World Bank, composed of the International Bank for Reconstruction and Development, and the International Development Association WBG World Bank Group, composed of the WB, IFC and MIGA Joint Report on Multilateral Development Banks Climate Finance

6 PREFACE The Joint Report on Multilateral Development Banks Climate Finance is a collaborative effort to make MDB climate finance figures in developing countries and emerging economies public on an annual basis, together with a clear explanation of the joint methodologies for tracking this climate finance. This 2016 edition was prepared by the European Bank for Reconstruction and Development, together with MDB partners the African Development Bank, the Asian Development Bank, the European Investment Bank, the Inter-American Development Bank Group and the World Bank Group. Since the first Joint Report, for 2011, the basis of the reporting has been a climate change finance tracking methodology developed as a joint exercise by the MDB climate finance tracking group. The methodology has been gradually updated and detailed. This work has included introducing an approach to reporting on climate co-finance along with MDB climate finance. In recent years, these MDBs have aligned their principles for tracking climate mitigation activities with those of the International Development Finance Club (IDFC), agreed on initial principles for tracking adaptation finance and taken the next steps to harmonise their approaches to tracking adaptation finance. In future, stakeholders should promote these Common Principles as their starting point and ensure that all differences in reporting are dealt with transparently. The Paris Agreement of December 2015 further directs how the methodology of climate finance tracking might be developed. For instance, article 2.1c calls for making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development. To address future challenges, in 2016 the joint MDB climate finance tracking group formalised the coordination of two existing work streams to further enhance tracking methodologies for (i) climate change mitigation and (ii) climate change adaptation, taking account of the Paris Agreement. These work streams are coordinated by the European Investment Bank and the Inter-American Development Bank, respectively. The methodology used in this Joint Report contains a number of incremental improvements and clarifications compared with the 2015 edition. Download this report at: Joint Report on Multilateral Development Banks Climate Finance 3

7 EXECUTIVE SUMMARY This sixth edition of the Joint Report on Multilateral Development Banks Climate Finance provides an overview of financing committed by the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank Group (IDBG), and the World Bank Group (WBG), to climate change mitigation and adaptation projects and activities in The MDBs have reported jointly on climate finance since 2011, with the first edition, published in 2012, reporting figures for Collectively, the banks have committed over US$ 158 billion in climate finance during the past six years in developing countries and emerging economies. Figure 1 shows the reported climate finance commitments from Figure 1: Reported MDB climate finance commitments, (in US$ million) US$ million 30,000 25,000 20,000 15,000 10,000 5, ,014 10,662 2,170 5,637 3,729 1,639 3,177 26,846 12,678 1,870 3,663 3,131 2,220 3,284 23,803 9,426 1,220 5,224 3,460 1,205 3,268 28,345 11,787 2,461 5,214 4,111 1,916 2,856 25,096 10,722 1,744 5,137 3,217 1,359 2,917 27,441 11,494 2,689 4,266 3,495 1,061 4, WBG IDBG EIB EBRD AfDB ADB Notes: 1. In the years the numbers for WBG only included IFC and WB, and IFC included short-term finance (such as trade finance). In 2015 and 2016, IFC short-term finance has not been included. MIGA finance has been included since EIB climate finance figures (in this and in all previous editions of the Joint Report on MDBs Climate Finance) are restricted to developing and emerging economies in transition. In the years this excluded the EU-15. For 2016 the data is for the EU-12 (see Annex F), thereby excluding a number of EU Member States (including the Czech Republic and Malta), where the EIB is also active. In 2016, the numbers for the EBRD and EIB also include Greece. 3. IDBG numbers in the MDB joint reports include activity of the IIC only since IDBG corporate reports provide information for the corresponding year of approval by the respective Board of Executive Directors. 4. Numbers in the tables and figures in this report may not add up to the totals shown, due to rounding. The data and statistics presented in this year s report result from the uniform application of the methodologies developed by the MDBs for their portfolios. In this report, the term MDB climate finance refers to the financial resources (own account and MDB-managed external resources) committed by MDBs to development operations and components thereof, which deliver climate change mitigation and adaptation activities in developing and emerging economies. Collectively, the MDBs committed US$ 27,441 million in climate finance in 2016 US$ 21,217 million or 77 per cent of this total for mitigation finance and US$ 6,224 million or 23 per cent of this total for adaptation finance. The net total climate co-finance committed during 2016 alongside MDB resources was US$ 37,879 million. When combined with the MDB climate finance, the year s total climate finance is US$ 65,320 million. This is the second edition of the Joint Report on MDBs Climate Finance to include climate co-finance Joint Report on Multilateral Development Banks Climate Finance

8 Figure 2: Total MDB climate finance and net climate co-finance, 2016 (in US$ million) 100% 80% 60% 27,441 37,879 7,236 15,652 Private Public 40% 20% 0% 20,205 MDB climate finance 22,227 Climate co-finance MDBs track and report climate finance in a granular manner. In other words, the climate finance reported covers only those components and/or subcomponents or elements/proportions of projects that directly contribute to or promote adaptation and/ or mitigation. The banks calculate adaptation finance using the Joint MDB Methodology for Tracking Climate Change Adaptation Finance. This Methodology is based on a context- and location-specific approach and captures the amounts associated with activities directly linked to climate change vulnerability. Mitigation finance is calculated in accordance with the Joint MDB Methodology for Tracking Climate Mitigation Finance, which is based on a list of activities that have been classified according to type and are compatible with low-emission pathways. The MDBs methodologies for climate finance tracking align with the Common Principles for Climate Change Mitigation Finance Tracking 1 jointly agreed by the MDBs and by the International Development Finance Club (IDFC) and first published in March The MDBs and the IDFC agreed on the Common Principles for Climate Change Adaptation Finance Tracking 2 in July The organisations have begun taking the next steps to harmonise their approaches in tracking adaptation finance. 1 Common Principles for Climate Change Mitigation Finance Tracking set out in Annex C : mdb_idfc_mitigation_common_principles_en.pdf 2 Common Principles for Climate Change Adaptation Finance Tracking set out in Annex B : Generic-Documents/Common_Principles_for_Climate_Change_Adaptation_Finance_Tracking_-_Version_1 02_July 2015.pdf 2016 Joint Report on Multilateral Development Banks Climate Finance 5

9 1 OVERVIEW OF MDB CLIMATE FINANCE TRACKING METHODOLOGIES In this report, the term MDB climate finance refers to the amounts committed by MDBs to finance climate change mitigation and adaptation activities in development projects. Tracking of MDB climate finance is based on harmonised principles and jointly agreed methodologies, which are detailed in Annexes B and C. Total MDB climate finance includes commitments from the MDBs own account, and from external resources channelled through and managed by the banks. 1.1 CLIMATE ADAPTATION FINANCE Climate change adaptation aims to lower the current and expected risks or vulnerabilities posed by climate change. For a project to be counted towards MDB adaptation finance, it must: a. set out the climate vulnerability context of the project b. make an explicit statement of intent to address climate vulnerability as part of the project, and c. articulate a clear and direct link between the climate vulnerability context and the specific project activities. The MDB methodology for tracking adaptation finance follows a context- and location-specific, conservative and granular approach. It tracks MDB financing only of those components (and/or subcomponents) or elements/proportions of projects that directly contribute to or promote adaptation. It is important to note the following: a. The reported adaptation finance might not capture activities that may contribute significantly to resilience, but cannot always be tracked in quantitative terms (for example, adaptive operational procedures) or may not have associated costs (such as siting assets outside flood-prone areas). b. Climate adaptation finance, as defined by the methodology, is not intended to capture the value of the entire project or investment that may increase resilience as a consequence of specific adaptation activities within the project. 1.2 CLIMATE MITIGATION FINANCE Climate change mitigation promotes efforts to reduce, limit, or sequester greenhouse gas (GHG) emissions to reduce the risk of climate change. However, not all activities that reduce GHGs are eligible to be counted towards MDB mitigation finance. Mitigation finance is based on a list of activities that are compatible with low-emission pathways. The Joint Methodology for Tracking Climate Mitigation Finance recognises the importance of long-term structural changes, such as the shift in energy production to renewable energy technologies, and the modal shift to low-carbon modes of transport. Consequently, both greenfield and brownfield renewable energy projects and modal-shift projects in transport are included. For energy efficiency projects the methodology acknowledges that drawing the boundary between increasing production and reducing emissions per unit of output is difficult. Consequently, greenfield energy efficiency investments are included only in a few cases when they enable prevention of a long-term lockin to high-carbon infrastructure. When considering brownfield energy efficiency investments as climate finance, old technologies must be replaced well before the end of their lifetime with new technologies that are substantially more efficient. Alternatively, new technologies or processes are required to be substantially more efficient than those normally used in greenfield projects. The methodology has some explicit exclusions in certain sectors. Examples are: hydropower plants with high methane emissions from reservoirs that exceed associated GHG reductions from the plant s use of renewable energy; geothermal power plants with high carbon dioxide (CO 2 ) content in the geothermal fluid that cannot be reinjected; or biofuel projects that deplete carbon pools more than they reduce GHG emissions, due to high emissions in production, processing and transportation. The Joint Methodology for Tracking Climate Mitigation Finance is contained in Annex C of this report Joint Report on Multilateral Development Banks Climate Finance

10 1.3. CLIMATE CO-FINANCE Total financing of climate activity also includes climate co-finance, that is, the amount of financial resources that external entities contribute. The MDBs are implementing the definitions and recommendations of the MDB Taskforce on Private Investment Catalyzation 3 for tracking the private share of climate co-finance. This methodology focuses on assessing the private finance mobilised by an MDB, on a projectby-project basis, such as private direct mobilisation and private indirect mobilisation. Figure 3: Total activity financing, by type of finance Private co-financing Private indirect mobilisation (including private sponsor contribution) Private direct mobilisation Own account Public co-financing External resources managed by MDB (public) MDB climate finance WP-PUBLIC-cedvp-14p-JointMDBReportingonPrivateInvestmentMobilizationMethodologyReferenceGuide.pdf 2016 Joint Report on Multilateral Development Banks Climate Finance 7

11 2 MDB CLIMATE FINANCE, TOTAL MDB CLIMATE FINANCE, 2016 In 2016, MDBs committed a total of US$ 27,441 million from their own account and funding from external resources channelled through the MDBs to climate finance in developing and emerging economies. Mitigation finance totalled US$ 21,217 million, or 77 per cent, of the total commitments, while adaptation finance represented 23 per cent of total commitments, or US$ 6,224 million. Table 1 shows the adaptation and mitigation finance commitments of each MDB. Table 1: MDB climate finance, 2016 (in US$ million) MDB Adaptation finance Mitigation finance MDB climate finance ADB 1,187 3,250 4,437 AfDB ,061 EBRD 225 3,269 3,495 EIB 290 3,976 4,266 IDBG 580 2,109 2,689 WBG 3,555 7,939 11,494 Total 6,224 21,217 27,441 Note: In certain cases, MDBs finance activities with simultaneous benefits for mitigation and adaptation. In prior years the amount of dual-benefit finance may have merited disaggregation. However, the 2016 figure of US$ 100 million of climate finance with dual benefits is best presented under the subheading of mitigation or adaptation finance (based on the most relevant elements of the project) to simplify reporting. For the EBRD, all dual-benefit finance is included in the adaptation finance commitment reported in Table Joint Report on Multilateral Development Banks Climate Finance

12 Table 2: Total MDB climate finance, climate co-finance and MDB finance, 2016 ADB AfDB EBRD EIB IDBG WBG Total Climate change finance commitment (US$ million) Own account 3, ,288 4,226 2,406 10,852 25,482 MDB-managed external resources ,959 MDB climate finance 4,437 1,061 3,495 4,266 2,689 11,494 27,441 Climate co-finance 5, ,312 14,061 4,596 13,847 43,792 Correction for multiple MDB financing ,525-5,913 Total MDB climate activity finance 9,601 1,693 8,531 17,430 7,250 20,816 65,320 MDB finance (US$ million) MDB operations from MDB own account 17,624 10,640 10,394 19,683 11,619 61, ,235 Total MDB operations 20,503 11,173 12,268 20,180 12,249 64, ,558 Climate finance ratios Climate finance from MDB own account, 21% 9% 32% 21% 21% 18% 19% as a percentage of MDB operations from MDB own account MDB climate finance as a percentage of total 22% 9% 28% 21% 22% 18% 20% MDB operations Notes: 1. MDB climate finance refers to the sum of the climate finance from the MDBs own accounts and the MDB-managed external resources. 2. Total MDB operations refer to the sum of the MDBs own accounts and MDB-managed external resources. 3. EIB climate finance and overall MDB finance figures in all previous editions of the Joint Report on MDBs Climate Finance have been restricted to developing and emerging economies in transition. The figures in previous years reports have therefore excluded the EU-15, where the EIB was also active. For this 2016 report, the figures provided are for the EU-12 (see Annex F), excluding the Czech Republic and Malta, and including Greece (an EU-15 country). In 2016, the EIB s global climate action financing was 19,500 million, representing over 26 per cent of total EIB lending. 4. IDBG Climate Finance includes all approvals loans, grants, technical cooperation, guarantees and equity for public and private sector operations during the reporting year. Such reporting parameters correspond to the IDBG Board of Governors resolution (April 2016) to double climate finance to 30 per cent of combined IDB and IIC approvals by For reference, loan signatures of the IIC (own account plus MDBmanaged external resources) for 2016 totalled US$ 1,439 million of which US$ million (or 27 per cent) is considered to be climate finance according to the joint MDB approach. 5. The World Bank uses the term climate co-benefits for development finance that promotes climate mitigation and/or adaptation according to the MDB climate finance methodology. 6. WBG climate finance (including own-account and managed external resources) for IFC, MIGA, and the World Bank are US$ 2,055 million, US$ 314 million, and US$ 9,125 million, respectively. 7. Gross climate co-finance for IFC, MIGA and WB is US$ 5,020 million, US$ 211 million and US$ 8,615 million, respectively. 8. IFC numbers capture long-term finance own-account commitments only. Total own-account long-term finance commitments in the financial year 2016 (FY16) were US$ 11,117 million. As such, in FY16, IFC reached an 18 per cent commitment level on long-term finance own-account climate commitments (US$ 1,986 million of US$ 11,117 million). Internally, the format used by IFC to report on climate finance is primarily based on ownaccount US$ 2.0 billion and core mobilisation (private direct mobilisation) US$ 1,300 million for a total of US$3,300 million. In FY16 the institution s total commitments, including core mobilisation (private direct mobilisation) and own account, was US$ 18,856 million. As such, climate penetration of IFC s total commitments (own-account and core mobilisation), was 17 per cent (US$ 3,300 million/us$ 18,900 million). Sources of MDB climate finance are split between the MDBs own account and external resources channelled through and managed by the MDBs. External resources include trust-funded operations, such as those funded by bilateral agencies and dedicated climate-finance funds such as the CIF, and climate-related funds under the GEF. As some external resources may already be covered in bilateral reporting, external resources managed by the MDBs are presented separately from the MDBs own account. Total 2016 MDB climate finance from the MDBs own account was US$ 25,482 million and US$ 1,959 million from external resources channelled through the MDBs MDB CLIMATE FINANCE BY TYPE OF RECIPIENT OR BORROWER MDBs report on the nature of first recipients or borrowers 4 of MDB climate finance (those to whom finance will flow directly from the MDBs), differentiating between public and private recipients or borrowers. Total commitment varies significantly between MDBs own accounts and MDB-managed external resources, as illustrated in Table 3. Table 4 shows the split by type of recipient or borrower for the MDBs own accounts and MDB-managed external resources. 4 See Definitions and Clarifications in Annex A for the definition of recipients or borrowers Joint Report on Multilateral Development Banks Climate Finance 9

13 Table 3: MDB climate finance by source of funds and by recipient/borrower type, 2016 (in US$ million) Mitigation finance MDBmanaged external resources Adaptation finance MDBmanaged external resources Recipient/borrower type MDB own account Subtotal MDB own account Subtotal Public recipient/borrower 13,095 1,083 14,178 5, ,027 Private recipient/borrower 6, , Total 19,592 1,625 21,217 5, ,224 Table 4: MDB climate finance from MDB own account and MDB-managed external resources, split by recipient/borrower type, 2016 (in US$ million) Private MDB MDB own account MDB-managed external resources MDB own account MDB-managed external resources ADB , AfDB EBRD 2, EIB ,748 2 IDBG , WBG 2, , Total 6, ,832 1,373 Public 2.3. MDB CLIMATE FINANCE BY TYPE OF INSTRUMENT For the third consecutive year, MDBs reported climate finance by the type of financial instrument, including equity, grants, loans, guarantees and other instruments such as purchase agreements for carbon finance projects. MDBs reported that 73 per cent of total climate finance was committed through investment loans. Figure 4 provides information on the breakdown of total MDB climate finance by instrument type. Figure 4: Total MDB climate finance split by instrument type, 2016 Total US$ 27,441 million 73% 9% 4% 4% 3% 2% 6% Investment loan US$ 19,942 million Policy-based lending US$ 2,416 million Line of credit US$ 1,093 million Grant US$ 1,051 million Equity US$ 714 million Guarantee US$ 546 million Other instruments US$ 1,678 million Notes: 1. Investment loans: loans are transfers for which repayment is required. Investment loans, in particular, finance the creation and rehabilitation of social and economic infrastructure and institutional development. 2. Policy-based lending (PBL) provides rapidly disbursing financing to help a borrower address actual or anticipated requirements for development financing of domestic or external origins. This financing supports a programme of policy and institutional actions for a particular theme or sector of national policy, for instance actions to improve the investment climate for renewable energy. While there is no direct link between lending resources and the cost of policy actions undertaken, the disbursements of PBL are conditional on the borrower s fulfilment of its policy commitments in the lending agreement. 3. Lines of credit: lines of credit provide a guarantee that funds will be made available but no financial asset exists until funds are actually advanced. 4. Grants: transfers made in cash, goods or services for which no repayment is required. Grants are provided for investment support and/or policybased support. 5. Equity: ownership interest in an enterprise that represents a claim on the assets of the entity in proportion to the number and class of shares owned. 6. Guarantees: finance provided by an MDB to cover commercial and/or political risk. 7. Other instruments: other, unspecified types of financial instruments including MDB advisory services that are not covered by one of the other categories, for example if these are not part of an investment loan or financed by external resources Joint Report on Multilateral Development Banks Climate Finance

14 2.4. MDB CLIMATE FINANCE BY REGION This report covers climate finance committed by the MDBs in developing and emerging economies only. 5 In addition to the geographical distribution of climate commitments by region as shown in Figure 5, distribution to small island states and to the least developed countries is presented in Table 5. Table 6 shows climate commitments by country income classification, which follows the World Bank definition dated December Figure 5: MDB climate finance by region, 2016 Total US$ 27,441 million 20% 19% 18% 16% 10% 9% 7% 0.5% South Asia US$ 5,556 million East Asia and the Pacific US$ 5,290 million Non-EU Europe and Central Asia US$ 4,885 million Latin America and the Caribbean US$ 4,262 million EU-12 US$ 2,859 million Middle East and North Africa US$ 2,570 million Sub-Saharan Africa US$ 1,889 million Multi-regional US$ 129 million Notes: 1. EIB climate finance figures (in this and in all previous editions of the Joint Report on MDBs Climate Finance) are restricted to developing countries and emerging economies in transition, including the EU-12 (EU-13 excluding the Czech Republic and Malta, and including Greece), and hence exclude a number of EU Member States where the EIB is also active. 2. In 2016, the numbers for the EBRD and EIB also include Greece. Table 5: MDB climate finance to least-developed countries and small island states, 2016 (in US$ million) Mitigation finance Adaptation finance Total Least-developed countries 1,841 1,041 2,882 Small island developing states Least-developed countries and small island states Total 2,066 1,205 3,270 Table 6: MDB climate finance by economies, 2016 (in US$ million) Total MDB finance High income Upper-middle income Lower-middle income Low income Multi-regional or global Mitigation 2,483 9,745 7, ,217 Adaptation 284 1,259 4, ,224 Total climate finance 2,767 11,004 11,852 1, ,441 Total 5 For the purposes of this report, a complete country list, together with the regional and country income groupings are defined in Annex F Joint Report on Multilateral Development Banks Climate Finance 11

15 3 MDB ADAPTATION FINANCE, 2016 In 2016, MDBs reported a total of US$ 6,224 million in commitments for climate adaptation finance. Table 7 presents the 2016 adaptation finance by MDB. The data reported corresponds to the financing of adaptation projects or of those project components, sub-components, or elements, or proportions of projects, which provide adaptation benefits that specifically address climate change vulnerabilities. Total 2016 MDB adaptation finance was US$ 6,224 million, with US$ 5,889 million coming from MDBs own account and US$ 335 million from MDB-managed external resources. Table 7 provides a breakdown of climate adaptation finance committed by the MDBs from their own accounts and from MDB-managed external resources. Figure 6 shows a breakdown by recipient/borrower type. MDBs reported that 78 per cent of total adaptation finance was committed through investment loans. Figure 7 gives a breakdown of MDB adaptation finance by instrument type. Figure 8 shows total adaptation finance by region: the largest proportions of adaptation finance were in East Asia and the Pacific and South Asian regions. Figure 9 reports MDB adaptation finance by sectoral grouping, that is, sector groups for which some adaptation finance has been reported. The sectoral split of regional adaptation finance appears in Figure 10. Table 7: MDB adaptation finance by MDB according to source of funds, 2016 (in US$ million) ADB AfDB EBRD EIB IDBG WBG Total MDB own account 1, ,452 5,889 MDB-managed external resources Total 1, ,555 6,224 Figure 6: MDB adaptation finance by recipient/borrower type and MDB, 2016 (in US$ million) 100% 80% 60% 40% 20% 0% 1, ADB AfDB EBRD EIB IDBG WBG Total MDB 542 3,555 6,027 Private Public Joint Report on Multilateral Development Banks Climate Finance

16 Figure 7: MDB adaptation finance by instrument type, 2016 Total US$ 6,224 million 78% 14% 5% 1% 0.1% 2% Investment loan US$ 4,826 million Policy-based lending US$ 863 million Grant US$ 335 million Line of credit US$ 54 million Equity US$ 3 million Other instruments US$ 143 million Figure 8: MDB adaptation finance by region, 2016 Total US$ 6,224 million 29% 23% 18% 10% 9% 7% 5% 0.4% East Asia and the Pacific US$ 1,791 million South Asia US$ 1,442 million Latin America and the Caribbean US$ 1,091 million Sub-Saharan Africa US$ 592 million Middle East and North Africa US$ 536 million Non-EU Europe and Central Asia US$ 462 million EU-12 US$ 286 million Multi-regional US$ 24 million Figure 9: MDB adaptation finance by sector grouping, 2016 Total US$ 6,224 million 23% 18% 18% 16% 8% 6% 5% 5% 1% 1% Crop and food production US$ 1,417 million Water and wastewater systems US$ 1,129 million Energy, transport and other built environment and infrastructure US$ 1,093 million Coastal and riverine infrastructure US$ 973 million Other agricultural and ecological resources US$ 488 million Institutional capacity support or technical assistance US$ 395 million Cross-cutting sectors US$ 328 million Financial services US$ 308 million Industry, extractive industries, manufacturing and trade US$ 60 million Information and communications technology US$ 34 million 2016 Joint Report on Multilateral Development Banks Climate Finance 13

17 Figure 10: MDB adaptation finance by sector grouping and by region, 2016 US$ million 2,000 1,500 1, East Asia and the Pacific EU-12 Latin America and the Caribbean Middle East and North Africa Non-EU Europe and Central Asia South Asia Sub-Saharan Africa Multi-regional Crop and food production Water and wastewater systems Energy, transport and other built environment and infrastructure Coastal and riverine infrastructure Other agricultural and ecological resources Institutional capacity support or technical assistance Cross-cutting sectors Financial services Industry, extractive industries, manufacturing and trade Information and communications technology Joint Report on Multilateral Development Banks Climate Finance

18 4 MDB MITIGATION FINANCE, 2016 In 2016, MDBs reported a total of US$ 21,217 million in commitments in climate mitigation finance. Data reported corresponds to the financing of mitigation projects or of those components, sub-components, or elements, or proportions of projects that provide mitigation benefits (rather than the entire project cost). Figure 11 shows a breakdown by recipient/ borrower type. MDB mitigation finance was US$ 21,217 million in 2016, with US$ 19,592 million from the MDBs own account and US$ 1,625 million from MDB-managed external resources. Table 8 provides a breakdown of climate mitigation finance committed by the MDBs during 2016 from own account and external resources. MDBs reported that 71 per cent of total mitigation finance was committed through investment loans. Figure 12 breaks down MDB mitigation finance by instrument type. Figure 13 shows total mitigation finance by region: the largest proportions of mitigation finance were in Non EU Europe and Central Asia and South Asian regions. Figure 14 reports MDBs mitigation finance by sectoral grouping, that is, sector groups for which some mitigation finance has been reported. The sectoral split of regional mitigation finance is presented in Figure 15. Table 8: MDB mitigation finance by MDB according to source of funds, 2016 (in US$ million) ADB AfDB EBRD EIB IDBG WBG Total MDB own account 2, ,080 3,945 1,869 7,400 19,592 MDB-managed external resources ,625 Total 3, ,269 3,976 2,109 7,939 21,217 Figure 11: MDB mitigation finance by recipient/borrower type and MDB, 2016 (in US$ million) 100% 80% 60% 40% 20% 0% 2, ,288 3, ,220 ADB AfDB EBRD EIB IDBG WBG Total MDB 890 5,659 2,280 14,178 7,039 Private Public Figure 12: MDB mitigation finance split by instrument type, 2016 Total US$ 21,217 million 71% 7% 5% 3% 3% 3% 7% Investment loan US$ 15,116 million Policy-based lending US$ 1,553 million Line of credit US$ 1,039 million Grant US$ 716 million Equity US$ 711 million Guarantee US$ 546 million Other instruments US$ 1,535 million 2016 Joint Report on Multilateral Development Banks Climate Finance 15

19 Figure 13: MDB mitigation finance by region, 2016 Total US$ 21,217 million 21% 19% 16% 15% 12% 10% 6% 0.5% Non-EU Europe and Central Asia US$ 4,423 million South Asia US$ 4,114 million East Asia and the Pacific US$ 3,499 million Latin America and the Caribbean US$ 3,171 million EU-12 US$ 2,572 million Middle East and North Africa US$ 2,035 million Sub-Saharan Africa US$ 1,297 million Multi-regional US$ 105 million Figure 14: MDB mitigation finance by sector type, 2016 Total US$ 21,217 million 29% 22% 19% 15% 9% 3% 2% 1% 0.5% 0.02% Renewable energy US$ 6,194 million Transport US$ 4,667 million Energy efficiency US$ 4,060 million Cross-cutting issues US$ 3,079 million Lower-carbon and efficient energy generation US$ 1,850 million Agriculture, forestry and land-use US$ 697 million Waste and wastewater US$ 418 million Low-carbon technologies US$ 149 million Non-energy GHG reductions US$ 101 million Miscellaneous US$ 3 million Figure 15: MDB mitigation finance by sector grouping and by region, 2016 US$ million 5,000 4,000 3,000 2,000 1,000 Renewable energy Transport Energy efficiency Cross-cutting issues Lower-carbon and efficient energy generation Agriculture, forestry and land-use Waste and wastewater Low-carbon technologies Non-energy GHG reductions Miscellaneous 0 East Asia and the Pacific EU-12 Latin America and the Caribbean Middle East and North Africa Non-EU Europe and Central Asia South Asia Sub-Saharan Africa Multi-regional Joint Report on Multilateral Development Banks Climate Finance

20 5 CLIMATE CO-FINANCE, 2016 From 2015 the MDBs started to report on climate co-financing (CCF) flows in line with the harmonised definitions and indicators that were established to estimate CCF. Tracking of climate co-finance aims to estimate the volume of financial resources invested by public and private external parties alongside MDBs for climate mitigation and adaptation activities. The approach categorises CCF sources of funds as: (i) other MDBs; (ii) IDFC member institutions, including bilateral and multilateral members; (iii) other international public entities such as donor governments; (iv) other domestic public entities such as recipient-country governments; and (v) all private entities (defined as those with at least 50 per cent privately held shares) split by private direct mobilisation and private indirect mobilisation. This level of granularity enables MDBs to present an increasingly nuanced picture of co-finance flows to climate change interventions. In April 2017, MDBs published a reference guide (From Billions to Trillions: Transforming Development Finance) 6 to explain how they calculate and jointly report private investment mobilisation beyond climate finance. The purpose of the methodology is to recognise and measure the private capital mobilised in MDB project activities. The guide outlines the MDBs joint commitment to mobilising increased investment from the private sector and institutional investors. In order to be coherent with this new methodology, the 2016 Joint Report on MDBs Climate Finance has adopted the agreed terminology and Table 9 introduces the terms private direct 7 mobilisation and private indirect 8 mobilisation. Added together, these two forms of mobilisation represent the private share of climate co-finance. Table 9 shows 2016 CCF flows as reported by each institution, segmented by the source of co-financing. These CCF figures are the best estimation of resource flows based on available information at the time of board approval and/or commitment to each project. In some cases, two or more MDBs jointly finance a project, which results in some overlap between the gross co-finance figures reported by the different MDBs. Table 10 shows CCF flows by adaptation and mitigation. In order to avoid double-counting, the last column of Tables 9 and 10 nets out potentially double-counted co-financing by considering only the proportion of co-financing for every project that features co-financing from another MDB. Such CCF figures are also listed in Table 2, alongside each MDB s own climate finance flows WP-PUBLIC-cedvp-14p-JointMDBReportingonPrivateInvestmentMobilizationMethodologyReferenceGuide.pdf 7 Private direct mobilisation is financing from a private entity on commercial terms due to the active and direct involvement of an MDB leading to commitment. Evidence of active and direct involvement includes mandate letters, fees linked to financial commitment or other validated or auditable evidence of an MDB s active and direct role leading to commitments by other private financiers. Private direct mobilisation financing does not include sponsor financing. A sponsor is an entity or individual responsible for the technical and financial success of an activity. 8 Private indirect mobilisation is financing from private entities provided in connection with a specific activity for which an MDB is providing financing, where no MDB is playing an active or direct role that leads to the commitment of the private entity s finance. Private indirect mobilisation includes sponsor financing, if the sponsor qualifies as a private entity Joint Report on Multilateral Development Banks Climate Finance 17

21 Table 9: Climate co-finance flows by institution and source, 2016 (in US$ million) ADB AfDB EBRD EIB IDBG WBG Total climate co-finance Correction for multiple MDB financing Public co-finance Other MDBs , ,528 2,786 IDFC members ,017 1,127 Other international public , ,620 5,508 Other domestic public 1, , ,071 15,221 12,806 Private mobilisation Private direct mobilisation ,466 3,615 3,615 Private indirect mobilisation 1, , ,264 5,323 13,791 12,037 Total 5, ,312 14,061 4,596 13,847 43,792 37,879 Note: The level of co-financing flows related to the EIB was significantly higher in 2015 compared with This was due to a number of large EU structural programme loans financed in 2015 which are allocated in five-year cycles. Table 10: Climate co-finance flows by institution and thematic focus, 2016 (in US$ million) Correction for ADB AfDB EBRD EIB IDBG WBG Total climate co-finance multiple MDB financing Adaptation , ,933 3,691 Mitigation 4, ,929 13,703 4,448 12,870 39,859 34,188 Total 5, ,312 14,061 4,596 13,847 43,792 37, Joint Report on Multilateral Development Banks Climate Finance

22 A ANNEX A: DEFINITIONS AND CLARIFICATIONS Financing instruments: This report accounts for climate finance through the largest and most relevant development-finance instruments of MDBs, including grants, loans, guarantees, equity, and performancebased instruments. Granularity: MDBs report climate finance by taking only those components and/or subcomponents or elements/proportions of projects with activities that contribute directly to or promote climate change adaptation and/or mitigation. Investments and technical assistance: Refers to vehicles used by MDBs to channel specific investments to finance capital and recurrent expenditures for goods and services, as well as specialised advisory services and capacity-building initiatives. MDB-managed external resources: Refers to operations supported by bilateral institutions through dedicated climate finance entities such as GEF and CIF, or other donor funds such as EU blending facilities, which may also be reported to the Development Assistance Committee of the Organisation for Economic Co-operation and Development by contributor countries. Point of reporting: Data reported in this publication reflects financial commitments at the time of Board approval or financial agreement signature and is therefore based on ex ante estimations. All efforts have been made to prevent double-counting. No revisions will be issued in cases where a project s scope changes later to either increase or decrease climate financing. Private direct mobilisation: Financing from a private entity on commercial terms due to the active and direct involvement of an MDB leading to commitment. Evidence of active and direct involvement includes mandate letters, fees linked to financial commitment or other valid or auditable evidence of an MDB s active and direct role leading to commitments by other private financiers. Private direct mobilisation does not include sponsor financing. Private indirect mobilisation: Financing from private entities supplied in connection with a specific activity for which an MDB is providing financing, where no MDB is playing an active or direct role that leads to the commitment of the private entity s finance. Private indirect mobilisation includes sponsor financing, if the sponsor qualifies as a private entity. Public and private sector operations: This determination is based on the status of the first recipient or borrower of MDB finance. The first recipient or borrower is considered to be public when at least 50 per cent of the stakes or shares of the recipient or borrower are publicly owned. Recipient/borrower: Refers to the first borrower or beneficiary to whom finance will flow directly. The MDBs acknowledge that this classification is neither simple nor straightforward and that the characteristics of the first recipient or borrower may not be the same as those of the final beneficiary or borrower. An example would be a loan to a national development bank (the first recipient) for energy efficiency in small and medium-sized enterprises (the final beneficiary). Operations through publicprivate partnerships add another layer of complexity to this classification. Reporting period: This report s data covers the fiscal year Even though MDBs do not follow the same reporting cycle, data remains comparable across MDBs as all reporting cycles correspond to a 12-month period. Resources covered: MDBs own accounts as well as a range of external resources managed by the MDBs and various sources of co-financing. Values of zero and : Reporting is complete for all fields and tables. A value of 0 in a table means the value is below US$ 0.5 million while a means no amount was reported. As all financial figures are rounded to the nearest US$ million, calculations contained in a table or figure may vary slightly and may not always add up to 100 per cent or to the total shown Joint Report on Multilateral Development Banks Climate Finance 19

23 B ANNEX B: JOINT METHODOLOGY FOR TRACKING CLIMATE ADAPTATION FINANCE BACKGROUND AND GUIDING PRINCIPLES The MDB adaptation finance tracking methodology applies a context-specific, location-specific and granular approach. It aims to identify specific adaptation activities within the development operations of MDBs. This conservative approach reduces the scope for over-reporting of adaptation finance to establish the differentiating elements of development operations carried out in response to perceived or expected climate change impacts. MDBs and the International Development Finance Club are fully committed to promoting and supporting climate-resilient development as an essential element of the sustainability of their investments. With this shared commitment, MDBs and the IDFC work together towards improved definitions and understanding of the different approaches and principles for climate change adaptation finance tracking. As a result, in July 2015 these institutions agreed on the Common Principles for Climate Change Adaptation Finance Tracking as an essential first step. The MDB-IDFC Common Principles define the context of adaptation finance in development. They also lay the basis for further joint work that includes increasing the comparability of reported figures on climate adaptation finance and key concepts related to reporting guidelines and processes. Climate resilience and adaptation are intrinsically linked to development. This makes it challenging to identify clearly the adaptation finance elements in development operations. In line with the MDB-IDFC Common Principles and the overall MDB climate finance tracking methodology, the MDB adaptation finance tracking methodology considers the subproject level or project-element level as appropriate. The joint MDB approach also seeks to identify the links between adaptation activities and the project s explicit intent to reduce vulnerability to climate change. Thus the volume of reported adaptation finance is an estimation of total project finance for specific project activities which contribute to overall project outcomes in the process of adapting to climate change. The estimated climate finance according to the MDB approach may not express the full value of project finance that contributes to climate resilience. For instance, the granular approach would capture financing for improved drainage of a newly constructed road to withstand heavy rainfall or storm surges that in turn contributes to overall road and investment resilience. The granular approach does not capture the value of the entire project or investment that may increase resilience due to specific adaptation activities within the project. Other activities may not always be tracked in quantitative terms as they may not have associated incremental costs, for example, some operational procedures to ensure business continuity or the practice of siting assets outside the range of a future storm surge. MDBs are currently developing potential additional metrics to identify and report on climate resilience in their development operations. APPLICATION OF THE ADAPTATION FINANCE TRACKING METHODOLOGY This methodology is applied through the following three key steps: setting out the climate change vulnerability context of the project making an explicit statement of intent to address climate vulnerability, as part of the project articulating a clear and direct link between the climate vulnerability context and specific project activities. Furthermore, when applying the methodology, the reporting of adaptation finance is limited solely to those project activities (that is, projects, project components, or elements or proportions of projects) that are clearly linked to the climate vulnerability context. Annex Table 1 presents the sectoral groupings used to track MDB adaptation finance, while Annex Table 2 presents cases that illustrate how MDBs applied the adaptation finance tracking approach to their recent MDB development operations Joint Report on Multilateral Development Banks Climate Finance

24 Context of vulnerability to climate change For a project to be considered as one that contributes to adaptation, the context of climate vulnerability must be set out clearly using a robust evidence base. Project documents may refer to existing analysis and reports or to original, bespoke assessments of climate vulnerability such as those carried out as part of project preparation. Good practice in the use of existing analyses or reports includes citing authoritative, preferably peer-reviewed sources, such as academic journals, national communications to the UNFCCC, Nationally Determined Contributions (NDCs), reports of the Intergovernmental Panel on Climate Change, or strategic programmes for climate resilience. Good practice in conducting original, bespoke analysis entails the use of records from trusted sources which document the vulnerability of communities or ecosystems to climate change, as well as the use of recent climate trends including any departures from historic means. These may be combined with climate change projections drawn from a range of climate change models, with high and low greenhouse gas (GHG) emission scenarios, to explore the full array of projected outcomes and uncertainties. Climate projection uncertainties should be presented and interpreted in a transparent way. The timescale of the projected climate change impacts should match the intended lifespan of the assets, systems or institutions being financed through the project (for example, a time horizon of 2030, 2050, 2080, and so on). Statement of purpose or intent The project should set out the explicit intention to address the context- and location-specific climate change vulnerabilities in response to the project s climate vulnerability assessment. An explicit objective to reduce climate vulnerability is important, to distinguish between a development project contributing to climate change adaptation and a standard development project. The methodology is flexible about the location and form of this statement of intent in the document, as long as the MDB is able to record and track the rationale for each adaptation element linked to the climate vulnerability context described. MDB projects with adaptation finance usually state the intention to reduce vulnerability in final technical documents, documents for Board approval, internal memos or other associated project documents. Clear and direct link between climate vulnerability and project activities In line with the principles of the overall MDB climate finance tracking methodology, adaptation finance estimations are based on finance allocated to specific project activities which are clearly linked to the project s climate vulnerability context. Where climate change adaptation activities are planned in projects that have additional objectives, the adaptation finance tracking is based on the estimated incremental cost or investment associated with discrete project components or elements of project design that address risk and vulnerabilities under conditions of current and future climate change, in comparison with a project design that does not consider such conditions. When it is not possible to estimate incremental cost or investment directly from project budgets for example, when using policy instruments or balance-sheet lending, equity investments or credit-line lending through financial intermediaries a proportion of the project cost or investment corresponding to adaptation activities may be used to represent the incremental amount. This approach may be applied also to project preparation activities if appropriate, depending on the standard practices of the respective MDB. ADAPTATION FINANCE TRACKING AMONG DEVELOPMENT FINANCE INSTITUTIONS A growing number of institutions and initiatives have been working on the methodologies for tracking climate adaptation finance and are making increasing efforts to harmonise these approaches. The MDB- IDFC Common Principles result from such joint work. These institutions continue their efforts for greater harmonisation, comparability and transparency of their reported climate finance. In addition, the OECD Development Assistance Committee (DAC) and the MDBs have worked jointly to align the OECD-DAC Rio Markers with the MDB methodology to track climate adaptation finance. This effort has resulted in improved guidance for tracking bilateral official development assistance targeting climate change adaptation as of April Joint Report on Multilateral Development Banks Climate Finance 21