ENHANCING MDB–NDB COOPERATION

This report by Climate Policy Initiative and E3G analyzes the financial interactions and Paris Agreement alignment of Multilateral Development Banks (MDBs) and National Development Banks (NDBs) in emerging markets and developing economies (EMDEs). It identifies a lack of comprehensive documentation on climate finance flows between these institutions and highlights significant divergence in how MDBs and NDBs mainstream climate considerations into their operations. The report provides recommendations to optimize operating models, clarify institutional mandates, and share technical expertise to scale up climate-related on-lending.

• Climate-related financial flows from MDBs to NDBs in EMDEs between 2015 and 2022 totaled approximately USD 7 billion across 55 identified transactions. The majority of these transactions (52) were on-lending arrangements where the NDB was the recipient, while three were co-financing arrangements.
• Most MDB-to-NDB climate finance lacks a specific sectoral focus, often supporting general green investment, infrastructure, or disaster recovery. However, among projects with a determinable sector, energy systems is the largest recipient, totaling USD 2,301 million between 2015 and 2022.
• MDBs generally extend their environmental and social safeguard (ESS) policies and exclusion lists to cover lending through financial intermediaries (including NDBs). NDBs show greater variability in the detail of their policies for intermediary financing, and few have dedicated initiatives to support intermediaries with climate mainstreaming.
• There is a disparity in the institutionalization of energy policies. Four of six sampled MDBs have dedicated energy sector policies and coal exclusion policies. No sampled NDB had a clear energy-specific policy, and only BNDES had a clear fossil fuel exclusion policy, although many NDBs evaluate fossil fuel financing against NDCs.
• MDBs consistently apply climate risk screening across their operations, with five of six sampled MDBs having published processes. NDBs lack consistent public detail on climate risk screening, and some, such as the China Development Bank (CDB), show no public evidence of integrating climate risks into lending activities.
• Three structural factors simultaneously impact MDB-NDB on-lending and Paris alignment: political economy and governance (including shareholder structures), public finance mandates (which can create information asymmetry), and institutional capacity and expertise.
• Operational challenges hindering climate finance flows include currency risks (specifically the lack of local currency financing), insufficient pipelines of bankable projects at the NDB level, and stringent MDB reporting requirements that may exceed NDB capacity.
• The report recommends that MDBs optimize operating models by promoting local currency instruments, standardizing approval processes, and supporting NDBs in developing sectoral pipelines with clear climate criteria.
• To improve institutional capacity, the report suggests leveraging platforms like Finance in Common for best-practice exchange, creating a public searchable database of joint financial engagements, and implementing a phased technical assistance approach to help NDBs develop Paris alignment processes.

APA

AHLGREN, V., SABOGAL, L., CHIN, N., BAGNERA, E., & PINKO, N. (2023). ENHANCING MDB–NDB COOPERATION. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/12/CPI-E3G-Report-Enhancing-MDBNDB-cooperation-3.pdf

Chicago

AHLGREN, VIKTOR, LAURA SABOGAL, NEIL CHIN, ELENA BAGNERA, and NICOLE PINKO. ENHANCING MDB–NDB COOPERATION. Climate Policy Initiative, 2023. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/12/CPI-E3G-Report-Enhancing-MDBNDB-cooperation-3.pdf.

Wikipedia

{{cite report |last1=AHLGREN |first1=VIKTOR |last2=SABOGAL |first2=LAURA |last3=CHIN |first3=NEIL |last4=BAGNERA |first4=ELENA |last5=PINKO |first5=NICOLE |title=ENHANCING MDB–NDB COOPERATION |publisher=Climate Policy Initiative |date=December 2023 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2023/12/CPI-E3G-Report-Enhancing-MDBNDB-cooperation-3.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ahlgren2023enhancing, author = {AHLGREN, VIKTOR and SABOGAL, LAURA and CHIN, NEIL and BAGNERA, ELENA and PINKO, NICOLE}, title = {{ENHANCING MDB–NDB COOPERATION}}, institution = {Climate Policy Initiative}, year = {2023}, month = dec, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2023/12/CPI-E3G-Report-Enhancing-MDBNDB-cooperation-3.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }