Working together, ten multilateral development banks have agreed joint processes to align their activities with the Paris Climate Agreement on tackling climate change.
Joint methodological principles have been agreed following significant collective effort and provide a harmonised approach and clear guidance on how new financing operations are assessed for alignment with the Paris Agreement’s climate goals.
The MDBs’ joint approach aims to accelerate and support the urgent transition to a low-carbon and climate-resilient future by supporting clients in preparing investments that are in line with the objectives of the Paris Agreement. A consistent approach was developed to help those working with the banks understand how decisions are made, with many countries and large projects benefiting from investments by multiple MDBs.
To ensure a consistent approach to implementation, in 2018 MDBs developed a framework with six building blocks – alignment with mitigation goals, adaptation and climate-resilient operations, accelerated contribution to the transition through climate finance, engagement and policy development support, reporting and alignment of internal activities. The joint methodological principles published this week present the MDB Paris Alignment methodology for building blocks one (mitigation) and two (adaptation and climate resilience).
The 2018 joint MDB framework has already helped to inform some of the banks own operational frameworks, such as the European Investment Bank’s 2020-2025 Climate Bank Roadmap. Applying this framework, all new EIB Group operations have been aligned with the goals and principles of the Paris Agreement since the start of 2021.
The ten banks
MDBs working together on the development of the joint methodological principles are:
- The African Development Bank
- Asian Development Bank
- Asian Infrastructure Investment Bank
- Council of Europe Development Bank
- European Bank for Reconstruction and Development
- European Investment Bank
- Inter-American Development Bank Group
- Islamic Development Bank
- New Development Bank
- World Bank Group.
These banks represent the largest financial investment capability of any group of organisations in the world besides national governments. Their role in financing climate compliant infrastructure around the world is significant, often providing finance that could not be raised by other sources in developing nations in particular.
New methodologies avoid battle over compliance
The new methodologies have been published and provide clear instruction on how to arrive at alignment, including criteria for investment lending in which all criteria must be met to qualify as compliant. This may prove to be a vital step for transitioning projects towards compliance because the universal adoption across the world’s largest multilateral development banks means non-compliant projects have fewer options for financing.
The criteria span diverse sectors and includes specific considerations. For example, compliant projects can include roads with low traffic volumes providing access to communities which currently do not have all-weather access (for example, connecting farmers to markets or providing access to a rural school, hospital, or better social benefits) – but the same project would be non-compliant if it carries a risk of deforestation.
At the same time, some projects have been agreed to be universally non-compliant in all circumstances and should not be supported – such as the mining of thermal coal or electricity generation from coal.
The published methodologies can be found here: