MDBs Pledged to Align Financial Flows with the Paris Agreement. They’re Not There Yet

The briefing argues that while multilateral development banks (MDBs) have made some progress in aligning direct investments with the Paris Agreement, they remain far from fulfilling their overall commitment. Key deficiencies include a lack of standardized fossil fuel exclusion policies, inconsistent greenhouse gas accounting, and a failure to align indirect investments and policy-based loans. The author emphasizes that MDBs must reform their financial instruments and engage in debt relief to ensure developing countries do not sacrifice climate action due to COVID-19 related debt burdens.

• MDBs lack a standardized approach to excluding fossil fuels from their portfolios. While the European Investment Bank and Inter-American Development Bank have formalized exclusion criteria for coal, oil, and gas, the World Bank Group, Asian Development Bank, Asian Infrastructure Investment Bank, and African Development Bank have continued to include emissions-heavy projects due to a lack of formal exclusion criteria.
• Greenhouse gas (GHG) accounting and carbon pricing are inconsistent across MDBs. There is no unified approach to GHG accounting or the application of scope 3 emissions. While the World Bank Group and European Bank for Reconstruction and Development have expanded carbon emissions thresholds, the African Development Bank has no emissions targets despite piloting project-level accounting, and most other banks have not updated GHG policies since 2018.
• Climate finance to UNFCCC-defined developing countries decreased by nearly 5% in 2020 compared to 2019, despite an overall increase in climate finance targets since 2018. This occurs as developed countries are expected to fall short of the $100 billion annual climate finance mobilization goal by approximately $20 billion.
• Indirect investments and policy-based financing remain significant 'blind spots' in Paris alignment. Many MDBs channel funds through financial intermediaries without knowing the specific subprojects, and policy-based loans—often used during the COVID-19 crisis—have sometimes incentivized new fossil fuel investments, as seen in some World Bank Group projects.
• COVID-19 related debt increases threaten climate action in developing countries, where MDBs are major creditors; for instance, the World Bank Group and other multilateral creditors account for 41% of all African debt service. The document argues MDBs must participate in debt relief to prevent countries from cutting climate spending.

APA

World Resources Institute (2021). MDBs Pledged to Align Financial Flows with the Paris Agreement. They’re Not There Yet. https://www.wri.org/technical-perspectives/mdbs-pledged-align-financial-flows-paris-agreement-theyre-not-there-yet

Chicago

World Resources Institute. MDBs Pledged to Align Financial Flows with the Paris Agreement. They’re Not There Yet. 2021. https://www.wri.org/technical-perspectives/mdbs-pledged-align-financial-flows-paris-agreement-theyre-not-there-yet.

Wikipedia

{{cite report |author=World Resources Institute |title=MDBs Pledged to Align Financial Flows with the Paris Agreement. They’re Not There Yet |date=1 November 2021 |url=https://www.wri.org/technical-perspectives/mdbs-pledged-align-financial-flows-paris-agreement-theyre-not-there-yet |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldresourcesinstitute2021mdbs, author = {{World Resources Institute}}, title = {{MDBs Pledged to Align Financial Flows with the Paris Agreement. They’re Not There Yet}}, institution = {World Resources Institute}, year = {2021}, month = nov, url = {https://www.wri.org/technical-perspectives/mdbs-pledged-align-financial-flows-paris-agreement-theyre-not-there-yet}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }