Climate and development finance institutions

Options for Public Development Banks. Since the adoption of the Paris Agreement in 2015, several public development banks (PDBs) have responded with structured approaches to align their operations with the Agreement’s expectations (as described in Section 1). However, many PDBs, particularly those in emerging markets and developing economies, are yet to adopt an approach to align with the Paris Agreement (i.e., Paris alignment). As entities whose investment mandates are established by the Parties to the Paris Agreement (i.e., national governments), PDBs have specific obligations derived directly from these Parties’ commitments to act across all policy and regulatory frameworks under their jurisdictions, including for state-owned or state-mandated institutions and agencies. Accordingly, PDBs are expected to operate in a manner that supports the achievement of the Paris goals. More specifically, they are obligated to integrate their activities within the Agreement’s implementation mechanism by providing financial, technical, and capacity building support that is entirely consistent with national low-emission climate-resilient development pathways.

Rethinking how development can be financed to take into account the rising challenges of our time is a fastidious task, especially when thousands of experts, decision makers and practitioners want to leave their print. The outline of the new international financial architecture is being debated again this week, with more questions open for discussion than consensus on the answers. 

Since the Paris Agreement in 2015, significant strides have been made to foster the commitment of countries and financial institutions to address the climate crisis and ensure that climate risks and opportunities are considered in investments. However, with emissions required to peak before 2025, our window of opportunity is rapidly closing to keep +1.5°C within reach. Financial needs to lower greenhouse gas (GHG) emissions and to address adaptation priorities are increasing rapidly in the meantime. Luis Zamarioli Santos and Diana Cárdenas Monar, from I4CE, believe that commitment must urgently translate into action, and action must bring the urgent change the world needs. Both governments and public financial institutions have a central role to play to deliver more and better finance, maximising positive impacts. This blogpost highlights some opportunities to advance in the path for a systemic transformation, involving key stakeholders with a whole-economy approach.