Climate Co-Benefits or Climate Finance
What:
Why: Addressing climate change is critical to alleviate poverty and support sustainable development. Climate co-benefits (climate finance) has been an essential metric to measure how much of the Bank¡¯s finance supported climate action.
Who: Virtually all Bank Group clients, both public and private, have financing with climate co-benefits and this has been growing over time.
How: As part of the new Climate Change Action Plan, 35% of total Bank Group financing over the next 5 years will go to support investments in adaptation and mitigation for our clients. This represents a big step up from the 26% that was achieved over the past five years (over $83 billion from 2016-20), especially given the economic development and per capita income levels of clients and the challenging COVID-19 recovery context.
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Where: See for instance, Malawi, Bangladesh, Tunisia, Sierra Leone, Pakistan, Vietnam.
Concessional Finance
What: Concessional finance is below-market-rate finance provided by major financial institutions, such as development banks and multilateral funds, to developing countries to accelerate development objectives.
Why: Concessional finance targets high-impact projects responding to globally significant development challenges ¨C from climate change mitigation and resilience to vaccine deployment, water sanitation and education - that otherwise could not go ahead without specialized financial support
Who: Developing countries that do not have enough of their own capital, nor access to reasonably priced loans.
How: Concessional finance works best when it is used alongside long-term strategic engagement and technical assistance with a country; and, when done well, it can create game changing, sector transforming results.
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Where: See for instance, Egypt; ; Maldives;
Emission Reductions Payment Agreements (ERPA)
What: ERPAs are legally binding contracts that allow one party to deliver carbon credits to another.
Why: The Climate Change Fund Management Unit at the ÐÓ°ÉÂÛ̳ uses ERPAs to support programs that preserve forests, reduce the use of dirty fuels, and increase the uptake of renewable energy.
Who: For the ÐÓ°ÉÂÛ̳, ERPAs generally involve a government or business in a developing country selling carbon credits to the ÐÓ°ÉÂÛ̳¡¯s trust funds.
How: For example, in Mozambique where 43% of the country is covered by natural forests, the Zamb¨¦zia Integrated Landscape Management Program aims to reduce deforestation and forest degradation while improving the lives of rural populations in nine districts. The program will provide results-based payments for emission reductions, with the goal of reducing 10 million tons of carbon emissions by 2024.
Learn More: ERPAs.
Where: See for instance, Ghana, Mozambique, Madagascar.
Green Loans
What:
Why: Green loans can help finance the transition to a low-carbon economy, but developing countries currently account for just $1.6 billion of the estimated $33 billion in outstanding green loans. With climate a strategic pillar of IFC¡¯s work, the institution is committed to growing its climate-related investments, including in green loans.
Who: IFC is the leading provider of green loans among international development banks and has provided green loans in several countries.
How: In 2018, IFC adopted Green Loan Principles specifying that 100% of the proceeds from green loans should be used only for green-eligible activities. IFC works with clients to develop a Green Finance Framework for projects being financed by green loans.
Learn More: Green Loans
Where: See for instance: , ,
Resilience Rating System
What:
Why: Decision-makers and investors need easy-to-process information about the resilience of projects to include in their own decision-making process. The rating system aims to create incentives to integrate climate risk early in project design and thereby build more robust communities, saving lives and money.
Who: The rating system was launched for ÐÓ°ÉÂÛ̳ projects as a pilot program in 2021 and can be adapted for other development banks, governments, local authorities, and the private sector.
How: Projects are appraised and given a rating of A, B or C. The simple rating system is designed to make the results of complex methodology clearly understandable to the non-expert. The assessment can be done at a project¡¯s early stages, enabling teams to make changes that bring their projects to a high rating.
Learn More: Resilience Rating System
Sustainable Development Bonds
What:
Why: The findings of the new report by the drive home the urgency of climate action and also threaten the ÐÓ°ÉÂÛ̳¡¯s goals of reducing poverty and boosting shared prosperity. Sustainable development bonds communicate the positive impact of the ÐÓ°ÉÂÛ̳¡¯s full range of sector and project lending¡ªall of which incorporate climate considerations.
Who: Buyers include big institutional investors such as central banks, pension funds, asset managers and bank treasuries; the ÐÓ°ÉÂÛ̳ may at times issue bonds aimed at individual investors via dedicated networks.
How: ÐÓ°ÉÂÛ̳ Treasury works with banks and investors to raise about US$50-$60 billion per year through issuing hundreds of bonds; the bonds have the highest rating, triple-A, giving investors safety and a financial return while their investments support development in emerging countries
Learn More: Sustainable Development Bonds
Where: See for instance: Botswana, Colombia, , India,
IFC Green Bonds
What:
Why: A lot of financing is needed to address climate change and environmental challenges. Green bonds help channel finance from capital markets and investors to green projects and sustainable development.
Who: IFC is a green bond pioneer in a market that is growing quickly in response to strong demand from investors seeking a platform to engage in good practices while hedging climate risks.
How: IFC¡¯s AAA-rated green bonds program combines an attractive investment proposition with an opportunity to support climate-related projects in developing and emerging economies. IFC also supports green bonds in multiple currencies as well as private sector green bonds to unlock finance for climate-smart projects and support the transition to a green economy.
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Where: ;
