Climate and development finance institutions

9 October 2015 - Climate Report - Special issues - By : Ian COCHRAN, Phd

Climate and development finance institutions: linking climate finance, development finance and the transition to low-carbon, climate-resilient economic models

Paper one in I4CE’s research project on the standards, tools and metrics to support the mainstreaming of ‘Low-Carbon Climate-Resilient’ growth pathways into activites of development finance institutions.

Abstract
Development finance institutions (DFIs) are in a position to be key actors in aligning development and the 2° challenge. One of the principal challenges t oday is to scale-up the financial flows to the trillions of dollars per year necessary to achieve the 2°C lo ng-term objectives. Achieving this transition to a low-carbon, climate resilient (LCCR) economic model requires the integration or ‘mainstreaming’ of climate issues as a prism through which all investment decisions should be made. This paper presents an overview of the opportunities and challenges of linking a LCCR transition with the objectives of development finance. It first presents the two-fold challenge of climate change and development for
countries around the world. Second, the paper explores the role of development finance institutions and their support for the transition to a low-carbon, climate-resilient economic model. Finally, it examines a necessary paradigm shift to integrate climate and development objectives to establish a ‘LCCR development model’ able to simultaneously tackling development priorities and needs for resilient, low-carbon growth. This will necessitate a move from focusing on a ‘siloed’ vision of climate finance to a means of aligning activities across the economy with the LCCR objectives to ensure that the majority of investments are coherent with this long-term transition.

The research project under which this paper was elaborated received financial support from Caisse des Dépots and Agence Française de Développement during its first phase. The research presented in this publication was carried out by I4CE on an independent basis. CDC group and AFD are not liable under any circumstances for the content of this publication.

Climate and development finance institutions

To learn more

04/25/2024
I4CE’s recommendations to the European Banking Authority on prudential transition plans

The European Banking Authority (EBA) is clarifying how the banks should frame their “transition plan” as required by the EU prudential regulation. The transition plan is the bank’s strategic roadmap to prepare for the transition to a sustainable economy as framed by the jurisdictions they operate in, including an EU climate-neutral economy. It has been introduced in several EU regulatory frameworks, including as a disclosure requirement arising from the CSRD. The prudential framework and the EBA are focusing on a specific angle: how the banks plan to manage their financial risks related to the transition. EBA’s framing of these plans will be key to determine whether the banks will manage their financial risks consistently with the broader need of financing the transition to a low-carbon economy.
04/19/2024 Foreword of the week
World bank and IMF Spring Meetings: How can the reformed institutions play a leading role in funding the transition?

Rethinking how development can be financed to take into account the rising challenges of our time is a fastidious task, especially when thousands of experts, decision makers and practitioners want to leave their print. The outline of the new international financial architecture is being debated again this week, with more questions open for discussion than consensus on the answers.
04/19/2024 Blog post
More and better finance: maximising positive climate impacts for a timely transition

Since the Paris Agreement in 2015, significant strides have been made to foster the commitment of countries and financial institutions to address the climate crisis and ensure that climate risks and opportunities are considered in investments. However, with emissions required to peak before 2025, our window of opportunity is rapidly closing to keep +1.5°C within reach. Financial needs to lower greenhouse gas (GHG) emissions and to address adaptation priorities are increasing rapidly in the meantime. Luis Zamarioli Santos and Diana Cárdenas Monar, from I4CE, believe that commitment must urgently translate into action, and action must bring the urgent change the world needs. Both governments and public financial institutions have a central role to play to deliver more and better finance, maximising positive impacts. This blogpost highlights some opportunities to advance in the path for a systemic transformation, involving key stakeholders with a whole-economy approach.

Climate and development finance institutions

Climate and development finance institutions: linking climate finance, development finance and the transition to low-carbon, climate-resilient economic models

I4CE’s recommendations to the European Banking Authority on prudential transition plans

World bank and IMF Spring Meetings: How can the reformed institutions play a leading role in funding the transition?

More and better finance: maximising positive climate impacts for a timely transition