Ambitious alignment with the Paris Agreement in public development banks

17 April 2024 - Climate Brief - By : Laura SABOGAL / Anja GEBEL / Luis ZAMARIOLI SANTOS / Claire ESCHALIER / Sarah BENDAHOU / Hanna FEKETE / Imogen OUTLAW

At the Spring Meetings, during an event with senior climate representatives from Multilateral Development Banks, I4CE, E3G, Germanwatch and NewClimate Institute officially launched a common position paper on what ambitous Paris alignment means for public development banks. This paper summarises years of research on Paris alignment to shed light on best practice and hopefully support decision makers in taking and implementing credible climate commitments. 


What does it mean to become aligned with the Paris Agreement ?

Public development banks (PDBs), development and climate change

The climate crisis and the lack of articulation between climate and development threaten to slow down and even revert hard-won sustainable development gains, affecting the ability of PDBs to accomplish their development mandate. Alignment of PDBs with the Paris Agreement allows development action to support the climate transformation, while ensuring that equity issues and development benefits are enhanced. When PDBs align with the Paris Agreement, they support their main shareholders – governments – to achieve climate adaptation and mitigation commitments in a fair and just manner that underpins these countries’ social contracts. To ensure their positive contribution to climate transformation and development, PDBs must leverage climate opportunities, systematically address greenhouse gas (GHG) emissions, and improve resilience against climate impacts, whilst managing financial risks – physical and transition – associated with climate change.


Supporting a system’s transformation

Alignment with the Paris Agreement implies an organisation-wide effort to facilitate the transformation of the broader national systems towards a low-emission and climate-resilient economy. In terms of mitigation of climate change, this means to not only to avoid or reduce immediate emissions from operations, but to fund the activities that contribute to positive and longer-term transformation of a sector or a value chain. Some high GHG-emitting sectors and activities might need special attention in this process. ‘Transition finance’ can support shifting away from these polluting business modelsand enable real economy transitions. In terms of climate resilience, while for Paris alignment all activities should be proofed against physical climate risks and prevent maladaptation, a higher ambition approach should also focus on triggering positive system-wide transformations (on communities, regions, sectors, etc.). This requires PDBs to think about their investments in a systematic way to identify such opportunities at every level of engagement, thus ensuring that they inform country dialogue process and programmatic work. Finally, all PDBs’ operations should be at least bound to the minimum principle of ‘doing no harm’ whilst ideally seeking to apply a principle of “doing good beyond do no harm” to promote positive transformations and identifying co-benefits. Doing no harm implies not supporting activities and assets that are inconsistent with global sectoral shifts and individual countries’ low-emission and climate-resilient development pathways. This may work as a filter either to avoid funding inconsistent activities or to ensure that credible strategies are in place to support the transition of assets, beneficiaries, and counterparties.


A dynamic process

Ultimately, Paris alignment should not serve a static function of stamping PDBs’ activities as aligned, but rather work as a dynamic and evolving process to promote internal and systemic change.



To learn more
  • 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.  

  • 03/08/2024 Foreword of the week
    Fossil fuel phase-out: Development banks need to play a bigger role

    A couple of months ago, COP28 called for the acceleration of efforts “towards the phase-down of unabated coal power”. Limiting temperature rise to 1.5°C requires stopping the construction of new coal power plants, that’s for sure. But it also requires retiring existing plants before the end of their lifetimes, which can be more challenging. Public development banks (PDBs) are well-positioned to help overcome barriers to coal phase-out and support countries with the transition to decarbonised electricity systems. A growing number of these banks are exploring strategies to accelerate the early retirement of coal plants. Yet these efforts may carry risks of unintended adverse impacts.

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