Reforming climate finance: unlocking funds from multilateral development banks

This briefing by Zero Carbon Analytics examines the role of multilateral development banks (MDBs) in climate finance, arguing that reforms to their capital adequacy frameworks and the use of under-utilised financial tools could unlock hundreds of billions of dollars in additional funding. It highlights the importance of MDBs in meeting the New Collective Quantified Goal (NCQG) while noting that their current contributions remain a small fraction of the total funding required for global climate action by 2030.

• Multilateral development banks (MDBs) have seen rapid growth in climate finance, with funding increasing nearly 3.3 times between 2012 and 2023. In 2023, MDBs provided approximately USD 125 billion for climate finance, representing a 26% increase from the USD 99.45 billion provided in 2022.
• MDBs currently provide only 8% of the USD 1.26 trillion invested in global climate finance as of 2022, and their contribution is about 1% of the USD 8.6 trillion needed annually by 2030. In 2023, 67% of MDB funding was directed toward climate mitigation and 33% toward adaptation.
• Reforms to capital adequacy frameworks (CAFs) could significantly increase lending headroom without risking financial stability or credit ratings. A G20 expert panel suggests reforms could unlock "hundreds of billions of dollars" in the medium term. Specifically, current CAF implementation could unlock up to USD 357 billion in additional lending over the next decade, while S&P estimates that revised CAF policies could enable an additional USD 500 billion to 1 trillion in investments.
• MDBs are under-utilising high-leverage financial tools such as guarantees and equity. Guarantees attract an average of USD 1.5 in private capital for every USD 1 invested by MDBs—outperforming loans and equities by six times—yet they only account for 4% of total climate finance commitments. Equity finance accounts for only 1.8% of commitments in emerging markets and developing economies.
• MDB finance is expected to be critical for the New Collective Quantified Goal (NCQG) being negotiated for COP29. A G20 expert group recommends channelling USD 260 billion annually through MDBs to meet the goal, with 78% consisting of non-concessional lending. However, experts argue MDB finance should complement rather than replace grant-based finance.

APA

Team, Z. (2024). Reforming climate finance: unlocking funds from multilateral development banks. Zero Carbon Analytics. https://zerocarbon-analytics.org/insights/briefings/reforming-climate-finance-unlocking-funds-from-multilateral-development-banks/

Chicago

Team, ZCA. Reforming climate finance: unlocking funds from multilateral development banks. Zero Carbon Analytics, 2024. https://zerocarbon-analytics.org/insights/briefings/reforming-climate-finance-unlocking-funds-from-multilateral-development-banks/.

Wikipedia

{{cite report |last1=Team |first1=ZCA |title=Reforming climate finance: unlocking funds from multilateral development banks |publisher=Zero Carbon Analytics |date=21 October 2024 |url=https://zerocarbon-analytics.org/insights/briefings/reforming-climate-finance-unlocking-funds-from-multilateral-development-banks/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{team2024reforming, author = {Team, ZCA}, title = {{Reforming climate finance: unlocking funds from multilateral development banks}}, institution = {Zero Carbon Analytics}, year = {2024}, month = oct, url = {https://zerocarbon-analytics.org/insights/briefings/reforming-climate-finance-unlocking-funds-from-multilateral-development-banks/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }