Editing IPCC:AR6/WGIII/Chapter-14 (section)

==== 14.4.1.2 Multilateral Finance ====

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Multilateral development banks (MDBs) comprise six global development banks: the European Investment Bank, International Fund for Agricultural Development, International Investment Bank, New Development Bank, OPEC Fund for International Development, and the World Bank Group; six regional development banks: the African Development Bank, Asian Development Bank, Asian Infrastructure Investment Bank, European Bank for Reconstruction and Development, Inter-American Development Bank, and the Islamic Development Bank; and 13 sub-regional development banks: the Arab Bank for Economic Development in Africa, Arab Fund for Economic and Social Development, Black Sea Trade and Development Bank, Caribbean Development Bank, Central American Bank for Economic Integration, Development Bank of the Central African States, Development Bank of Latin America, East African Development Bank, Eastern and Southern African Trade and Development Bank, Economic Cooperation Organization Trade and Development Bank, Economic Community of West African States Bank for Investment and Development, Eurasian Development Bank, and the West African Development Bank. Together they play a key role in international cooperation at the global, regional and sub-regional levels because of their growing mandates and proximity to policymakers ( [[#Engen--2018|Engen and Prizzon 2018]] ). For many, climate change is a growing priority and for some, because of the needs of the regions or sub-regions in which they operate, climate change is embedded in many of their operations.

In 2015, 20 representative MDBs and members of the International Development Finance Club unveiled five voluntary principles to mainstream climate action in their investments: commitment to climate strategies, managing climate risks, promoting climate smart objectives, improving climate performance and accounting for their own actions ( [[#World%20Bank--2015a|World Bank 2015a]] ; [[#Institute%20for%20Climate%20Economics--2017|Institute for Climate Economics 2017]] ). The members subscribing to these principles had grown to 44 as of January 2020. Arguably, it is only through closer linkages between climate and development that significant inroads can be made in addressing climate change. MDBs can play a major role through the totality of their portfolios ( [[#Larsen--2018|Larsen et al. 2018]] ).

The MDBs as a cohort have been collaborating and coordinating in reporting on climate financing following a commitment made in 2012 at the UN Conference on Sustainable Development in Rio de Janeiro ( [[#Inter-American%20Development%20Bank--2012|Inter-American Development Bank 2012]] ). This has engendered other forms of collaboration among the MDBs, including, commitments to: collectively total at least USD65 billion annually by 2025 in climate finance, with USD50 billion for low- and middle-income economies; to mobilise a further USD40 billion annually by 2025 from private sector investors, including through the increased provision of technical assistance, use of guarantees, and other de-risking instruments; to help clients deliver on the goals of the Paris Agreement; to build a transparency framework on the impact of MDBs’ activities; and to enable clients to move away from fossil fuels ( [[#Asian%20Development%20Bank--2019|Asian Development Bank 2019]] ). While the share of MDBs in direct climate financing is small, their role in influencing national development banks and local financial institutions, and leveraging and crowding in private investments in financing sustainable infrastructure, is widely recognised ( [[#NCE--2016|NCE 2016]] ). However, with this recognition there is also an exhortation to do more to align with the goals of the Paris Agreement, including a comprehensive examination of their portfolios beyond investments that directly support climate action to also enabling the long-term net zero GHG emissions trajectory ( [[#Larsen--2018|Larsen et al. 2018]] ; [[#Cochran--2019|Cochran and Pauthier 2019]] ). Further, a recent assessment has shown that MDBs perform relatively better in mobilising other public finance than private co-financing ( [[#Thwaites--2020|Thwaites 2020]] ). In addition, the banks have launched or are members of significant initiatives such as the Climate and Clean Air Coalition to reduce emissions of shortlived climate pollutants, the Carbon Pricing Leadership Coalition, the Coalition for Climate Resilient Investment and the Coalition of Finance Ministers for Climate Action. These help to spur action at different levels, from economic analysis to carbon financing, and convenors of finance and development ministers for climate action, with leadership of many of these initiatives led by the World Bank.

The multilateral climate funds also have a role in the international climate finance architecture. This includes, as mentioned in [[#14.3.2.8|Section 14.3.2.8]] , those established under the UNFCCC’s financial mechanism, its operating entities, the Global Environment Facility (GEF), which also manages two special funds, the Special Climate Change Fund and the Least Developed Countries Fund; and the Green Climate Fund (GCF), also an operating entity of the financial mechanism which in 2015, was given a special role in supporting the Paris Agreement. The GCF aims to provide funding at scale, balanced between mitigation and adaptation, using various financial instruments including grants, loans, equity, guarantees or others to activities that are aligned with the priorities of the countries compatible with the principle of country ownership ( [[#GCF--2011|GCF 2011]] ). The GCF faces many challenges. While some see the GCF as an opportunity to transform and rationalise what is now a complex and fragmented climate finance architecture with insufficient resources and overlapping remits ( [[#Nakhooda--2014|Nakhooda et al. 2014]] ), others see it as an opportunity to address the frequent tensions which arise between mitigation-focused transformation and national priorities of countries. This tension is at the heart of the principle of country ownership and the need for transformational change ( [[#Winkler--2016|Winkler and Dubash 2016]] ). Leveraging private funds and investments by the public sector and taking risks to unlock climate action are also expressed strategic aims of the GCF.

The UN system is also supporting climate action through much-needed technical assistance and capacity building, which is complementary to the financial flows insofar as it enables countries with relevant tools and methodologies to assess their needs, develop national climate finance roadmaps, establish relevant institutional mechanisms to receive support and track it, enhance readiness to access financing, and include climate action across relevant national financial planning and budgeting processes ( [[#UN--2017a|UN 2017a]] ). The United Nations Development Programme (UNDP) is the largest implementer of climate action among the UN Agencies, with others, such as the Food and Agriculture Organization (FAO), United Nations Environment Programme (UNEP), United Nations Industrial Development Organisation (UNIDO), and United Nations Office for South-South Cooperation (UNOSSC), providing relevant support.

The current architecture of climate finance is one that is primarily based on north-south, developed-developing country dichotomies. The Paris Agreement, however, has clearly recognised the role of climate finance flows across developing countries, thereby enhancing the scope of international cooperation ( [[#Voigt--2016b|Voigt and Ferreira 2016b]] ). Estimates of such flows, though, are not readily available. According to one estimate in 2020 the flows among non-OECD countries were of the order of USD29 billion ( [[#CPI--2021|CPI 2021]] ).

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