Big Shift Global Reaction to Multilateral Development Bank Joint Paris Alignment Statement at COP26

Yesterday afternoon the ten major multilateral development banks (MDBs) published their COP26 statement updating progress towards their joint commitment to Paris Alignment. Though the group of banks first committed in 2017 to a process to align their financial flows with a 1.5degC pathway and later pledged to complete this by 2020, yesterday's statement provided few new details, posed no limits on fossil fuel support, and left timelines unclear.

The group of public banks -- the African Development Bank Group, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank Group, the Islamic Development Bank, the New Development Bank, and the World Bank Group -- indicated each Bank will set their own target dates for full implementation of their frameworks. The announcement left unclear the status of an 'Excluded Expenditures' list detailing projects that are never Paris-aligned. It is unclear whether further details will be included at scheduled joint events at the MDB Pavilion on 3 November and 11 November.

MDBs have directly financed at least USD 45 billion in fossil fuel projects since the Paris Agreement -- including backing an average of USD 6.4 billion per year from 2018-2020 in fossil fuels -- despite their mandates for sustainable development. In addition, research from Urgewald and Recourse show MDBs leverage billions more in support for oil, gas, and coal flows through financial intermediary investments and policy-based lending.

In contrast to yesterday's announcement, 15-20 governments and institutions are expected to launch a joint commitment to end international public finance not just for unabated coal, but also oil and gas on 4 November. Most MDBs have not announced any plans to join. While all MDBs except the AIIB, NDB, and IsDB have policies excluding direct coal finance, all but the EIB allow for finance for gas, which makes up over 80% of MDB fossil fuel support.

Quotes:

"Ending all direct and indirect financing to the supply and use of fossil fuels is the number one litmus test of whether MDBs are serious about supporting sustainable growth for developing countries, energy access, and helping the world reach climate goals. The statement released today sadly falls short of that. We need to see MDBs adopt a whole-of-institution approach to climate, rather than continuing to offer fossil finance loopholes -- loopholes that will end up being sinkholes for MDB clients." Augustine Njamnshi, Coordinator for the African Coalition for Sustainable Energy and Access

"While their Paris Alignment commitment was promising in 2017, after years of stalling the MDBs are now standing in the way of the Paris Agreement rather than aligning with it. They can change this by joining other countries and institutions in ending all fossil fuel finance, greatly increasing support for community-led energy access and just transition, and re-focusing their climate finance to serve the most vulnerable communities rather than private sector profits." Bronwen Tucker, Public Finance Campaign Co-Manager, Oil Change International

"MDBs are not only not delivering on the Paris goals, they're also actively exploiting loopholes to continue financing fossil fuels. The MDBs position is at odds with many countries' climate goals and international pledges to end public finance to fossil fuels. Instead of delaying action, MDBs need to step up and take the lead in leveraging finance away from fossil fuels and into renewables and the energy transition we need fast and at scale." Mahir Ilgaz, Global Campaign Manager at 350.org

"The African Development Bank and MDBs need to prioritize the development and implementation of a fossil fuel finance exclusion policy that will not fund, provide financial services, or capacity support to any coal, gas, or oil project or related infrastructure project that is carbon intensive on the African continent by 2022. At the least, establish an immediate ban on any new fossil fuel projects and publish a roadmap for phasing out all fossil fuel development financing to advance the just transition in line with the Paris Agreement. The policy should guide a managed and equitable phase-out, taking into account principles of equity and justice for those most affected. We need real climate action now." Dean Bhekumuzi Bhebhe - Campaigns Coordinator, African Climate Reality Project

"Significant MDB leverage over private finance comes through policy reforms aimed at attracting investors by making investments more profitable. Any MDB plan that claims to be leveraging private climate finance must include an end to policy reforms that make fossil fuels more profitable, such as tax breaks, Public-Private Partnerships, and higher consumer energy tariffs. Any Paris Alignment approach that does not end fossil-friendly policy reforms continues MDB leveraging of private finance away from climate investments." Heike Mainhardt, Senior Advisor, Urgewald

"MDBs must close coal loopholes in their indirect financing. Too often, finance invested through third parties like banks or private equity funds ends up supporting coal power plants and mines -- projects MDBs would not finance directly. Fossil fuel exclusions must apply to all types of finance -- direct, indirect, budget support and technical assistance." Nezir Sinani, Co-Director, Recourse

"MDBs lack ambition at this COP. Institutional struggles and capacity constraints overshadow their work and hinder progress towards Paris alignment. Details on the alignment of their policy based operations and intermediated investments are still missing. Under their proposed timeline, MDBs will not fully implement their Paris alignment approach until 2023 or 2024 -- seven years after their pledge made in 2017. This does not reflect the urgency of the task, and we call MDBs to join their forces and scale up their efforts towards the Paris climate goals." Dr. Anja Gebel, Policy Advisor for Development Banks and Climate, Germanwatch

"The recently published Delivery Plan on climate finance reiterated the role that MDBs play in mobilising much-needed adaptation and resilience funds to developing countries. But as the $100bn goal is likely to only be reached in 2023, the responsibility of MDBs in ensuring they have energy finance policies that support the development of clean energy and increased energy access for developing countries is even more urgent. We need to see MDBs implement their climate commitments across all instruments, and adopt policies so that MDB budget support doesn't end up promoting fossil fuels, as has happened all too often." Ladd Connell, Bank Information Centre

"The MDB Joint Paris Alignment statement talks of the decommissioning of coal alongside other high-GHG emission systems. The big question is whether the MDBs consider natural gas to be high GHG-emitting or not. Evidence suggests that natural gas is as carbon emitting as coal, because of methane leaks along gas pipelines. So we interpret this statement as signalling an end to the financing of natural gas, which would both release countries from being tied into high carbon infrastructure, and would make space for renewables, enabling alignment with the Paris Agreement." Fran Witt, Senior Advisor, Recourse

"With this statement, MDBs look out of touch with yesterday's COP leaders segment where Mario Draghi called for a stronger and more inspirational role for MDBs. The lack of ambitious commitments and concrete, forward looking targets shows that the MDBs can only agree on the lowest common denominator. We need to urgently scale investment for the energy transition in developing countries to up to $1 trillion per year by 2030 as estimated by the IEA. The MDBs have to pull themselves together: Shift investments from fossil fuels to renewable energy projects now, support a just transition, finance early retirement of coal-fired power stations and ensure a green, fair and equitable recovery from the COVID-19 pandemic." Julian Havers, Programme Lead, E3G

"This statement of 'ambition' by ten MDBs does not contain the words 'oil' and 'gas'. In other words, MDBs are indicating that they will continue to subsidize the oil and gas industry with the concessional public finance that they provide, while failing to directly address economic and social risks, debt, as well as energy access needs. This statement is a travesty of justice." Luisa Galvao, International Policy Campaigner, Friends of the Earth U.S.