Major differences revealed in rich and poor country climate spending

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$66bn MDB climate financing takes different directions in low and high income countries.

Multilateral Development Banks (MDBs) allocated $66bn of funding to climate finance in 2020 and the way that money was spent varied greatly.

A third of all spending in low-and-middle-income countries went to climate change adaptation, managing the damaging effects of more severe weather like severe heat or floods. That compares to just ten percent in high income countries.

Spending on climate finance was also far more widely dispersed among low and middle income regions. Of the $38bn allocated to them, Sub-Saharan Africa received the highest share of any one region despite being allocated less than 25%. This contrasts with the $28bn allocated to high income countries, almost all of which was spent within the EU region.

Allocations also reflected the very different economic and environmental conditions across countries. MDBs spent almost twice as much on projects to decarbonise transport in high income countries than low-or-middle-income countries. At the same time, while only $89m was allocated to new low carbon technologies in low and middle income countries, the equivalent figure was $3.2bn in high income countries.

A reverse picture is true with sectors like farming. Allocations to help decarbonise agriculture in low and middle income countries received more than $1.5bn, compared to just $86m in high income countries. Renewable energy, however, was a strong focus across all categories of country and is likely to stay that way for the foreseeable future as the world seeks to decarbonise energy.

The one strong similarity across all multilateral development bank spending was that much of it is provided in loans. This accounts for over 80% of all allocations in high income countries and over 60% in low-and-middle-income countries.

Other sources of finance in low-and-middle-income countries included significant levels of policy funding and grants, while in higher income countries lines of credit and equity were more significant.

Read the Joint Report on MDB Climate Finance 2020 here.