2018 JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS’ CLIMATE FINANCE 2018 JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS’ CLIMATE FINANCE JUNE 2019 This report was prepared by a group of multilateral development banks (MDBs), composed of the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank Group, the Islamic Development Bank and the World Bank Group. The findings, interpretations and conclusions expressed in this work do not necessarily reflect the official views of the MDBs’ Boards of Executive Directors or the governments they represent. CONTENTS 2 Abbreviations and acronyms 3 Preface 4 Executive summary 7 1. Overview of MDB methodologies for tracking climate finance 7 1.1. Finance for adaptation to climate change 7 1.2. Finance for the mitigation of climate change 9 2. MDB climate finance, 2018 9 2.1. Total MDB climate finance 10 2.2. MDB climate finance by type of recipient or borrower 11 2.3. MDB climate finance by type of instrument 15 2.4. MDB climate finance by region 16 3. MDB adaptation finance, 2018 19 4. MDB mitigation finance, 2018 22 5. Climate co-finance, 2018 4 2 ANNEX A. Definitions and clarifications 26 ANNEX B. Joint methodology for tracking climate change adaptation finance 30 ANNEX C. Joint methodology for tracking climate change mitigation finance 38 ANNEX D. Finance that benefits both adaptation and mitigation 40 ANNEX E. Types of instrument 42 ANNEX F. Climate co-finance 43 ANNEX G. Geographical coverage of the report ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank IsDB Islamic Development Bank AfDB African Development Bank IDFC International Development Finance Club CCF climate co-finance IFC International Finance Corporation CIF Climate Investment Funds IDB Invest private sector operational arm of the IDBG CO2 carbon dioxide IDB Lab innovation laboratory of the IDBG EBRD European Bank for Reconstruction and Development MDBs multilateral development banks EIB European Investment Bank MIGA Multilateral Investment Guarantee Agency EU European Union NAMAs Nationally Appropriate Mitigation Actions € euro NDCs Nationally Determined Contributions FY fiscal year UNFCCC  United Nations Framework Convention on GEF Global Environment Facility Climate Change GCF Green Climate Fund US$ United States dollar GHG greenhouse gas WB  World Bank, composed of the International Bank IDB Inter-American Development Bank for Reconstruction and Development, and the IDBG Inter-American Development Bank Group, International Development Association composed of the IDB, IDB Lab and IDB Invest WBG World Bank Group, composed of the WB, IFC and MIGA 2 2018 Joint Report on Multilateral Development Banks’ Climate Finance PREFACE The Joint Report on Multilateral Development Banks’ Climate Finance is an annual collaborative effort to make public MDB climate finance figures for developing and emerging economies, together with a clear explanation of the methodologies for tracking this finance. This 2018 edition was prepared by the European Bank for Reconstruction and Development, together with partners the African Development Bank, the Asian Development Bank, the European Investment Bank, the Inter-American Development Bank Group, the Islamic Development Bank and the World Bank Group. Since the first Joint Report, which covered 2011, the coordination of two work streams. The first stream figures reported for climate finance have been based covers climate change mitigation and is coordinated on a jointly developed MDB tracking methodology, by the European Investment Bank, while the second which has been gradually updated and detailed. addresses climate change adaptation and is From the 2014 report onwards, the methodology has coordinated by the Inter-American Development Bank. included reporting on climate co-finance alongside MDB climate finance. In 2015, the MDBs and the The Paris Agreement's vision of making financial International Development Finance Club (IDFC) flows consistent with low greenhouse gas emissions agreed on a set of Common Principles for finance to and climate-resilient development – Article 2.1(c) mitigate climate change and an initial set of Common of the Agreement – remains important in the Principles for finance to support adaptation to climate MDBs’ work to improve tracking and reporting. change. Their intention was to take a common At COP24 in December 2018 the MDBs reinforced approach to tracking and, in future, to reporting their commitment to combating climate change, climate finance. They are expected to promote the presenting a joint approach that will align their Common Principles as their starting point and to activities with the goals of the Paris Agreement. discuss all differences transparently. At COP24 in This approach goes beyond each MDB’s own climate December 2018 the MDBs and IDFC announced finance targets for 2020 and 2030 and builds on joint work to review and strengthen the Common their sustained contributions to climate finance. Principles for mitigation finance. The organisations It is based on the following six building blocks that also presented a paper about the lessons learned align with the objectives of the Paris Agreement: since 2015 through the application of the Common (1) mitigation goals, (2) adaptation and climate Principles for adaptation finance tracking. resilience operations, (3) accelerated transition to a global green economy through climate finance, The MDBs have continued to address the challenges (4) engagement and support for policy development, and enhance their tracking methodologies, including (5) reporting and (6) alignment of internal activities. through the ongoing work of the joint MDB climate finance tracking group. For these purposes, the joint MDB climate finance tracking group has formalised Download this report at: www.ebrd.com/2018-joint-report-on-mdbs-climate-finance Download the infographic summary at: www.ebrd.com/2018-joint-report-on-mdbs-climate-finance-infographic 2018 Joint Report on Multilateral Development Banks’ Climate Finance 3 EXECUTIVE SUMMARY This eighth edition of the Joint Report on Multilateral Development Banks’ Climate Finance is an overview of climate finance committed in 2018 by the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank Group (IDBG) and the World Bank Group (WBG). In addition, this year’s report summarises information on climate finance tracking from the Islamic Development Bank (IsDB).1 The AfDB, ADB, EBRD, EIB, IDBG and WBG have US$ 237 billion in climate finance during the past reported jointly on climate finance since the first eight years in developing and emerging economies. edition, published in 2012, which reported figures Figure 1 shows the reported commitments to climate for 2011. Collectively, they have committed almost finance from 2011 to 2018. finance commitments, 2011-18 (in US$ billion) Figure 1. Total reported MDB climate finance 45.0 43.1 WBG IDBG 40.0 EIB EBRD 35.2 35.0 AfDB 21.3 ADB 30.0 28.3 27.0 26.8 27.4 13.2 25.1 US$ billion 25.0 23.8 10.7 11.8 11.5 20.0 12.7 9.4 10.7 4.3 5.0 15.0 2.2 2.5 2.7 5.5 1.2 1.7 5.7 1.9 5.6 5.2 4.3 10.0 3.7 5.2 5.1 4.6 3.8 3.7 3.1 4.1 3.5 3.5 3.2 2.3 3.3 5.0 2.2 1.1 1.6 1.2 1.9 1.4 4.4 5.2 4.0 3.2 3.3 3.3 2.9 2.9 0 2011 2012 2013 2014 2015 2016 2017 2018 Notes: In the years 2011-14 the numbers for the WBG included only IFC and WB, and IFC included short-term finance (such as trade finance). 1.  Since 2015 IFC has not included short-term finance when reporting its climate finance figures. MIGA finance has been included since 2015. EIB climate finance figures (in this and in all previous editions of the Joint Report on Multilateral Development Banks’ Climate Finance) are restricted 2.  to developing and emerging economies in transition, and do not include other economies where the EIB supports climate action. The 2018 data includes the “EU-12” (see Annex G), thereby excluding other EU Member States where the EIB is also active. EIB global climate-action own-resource financing was US$ 19.1 billion, representing 30 per cent of total EIB own-resource lending. Table A.G.4 in Annex G includes climate finance figures for EU economies outside of the EU-12 region. Prior to 2016, IDBG figures did not include the private sector activity of the Inter-American Investment Corporation. The Group's figures from the start 3.  of 2016 onwards include all climate finance for public and private borrowers or beneficiaries. EBRD and EIB climate finance figures in this chart are based on the annual average European Central Bank rate. For 2018 the exchange rate used 4.  is €1 = US$ 1.181. 5. Numbers in the tables and figures in this report may not add up to the totals shown, due to rounding. 1 IsDB climate finance commitments are not included in the total MDB climate finance reported for 2018, but are summarised on page 6. 4 2018 Joint Report on Multilateral Development Banks’ Climate Finance The data and statistics presented in this year’s report Collectively, the MDBs committed US$ 43,101 result from uniform application of the methodologies million in climate finance in developing and emerging developed jointly by the MDBs for their portfolios. economies in 2018 — US$ 30,165 million or 70 per In this report, the term “MDB climate finance” cent of this total for climate change mitigation finance refers to the financial resources (own-account and and US$ 12,936 million or 30 per cent for climate MDB-managed external resources) committed by change adaptation finance. The net total climate MDBs to development operations and components co-finance committed during 2018 alongside MDB thereof which enable activities that mitigate climate resources was US$ 68,050 million. When combined change and support adaptation to climate change in with the MDB climate finance, it brings the year’s total developing and emerging economies. See Annex G climate finance to US$ 111,152 million. This is the for further details of the report’s geographic coverage. fourth edition of the Joint Report on MDBs’ Climate Finance to include climate co-finance. finance and net climate Figure 2. Total MDB climate finance co-finance, 2018 climate co-finance, (in US$ 2018 (in billion) US$ billion) 43.1 68.1 100% Private 11.1 Public 80% 28.2 Mitigation 30.2 Adaptation 60% 60.5 40% 32.0 39.9 20% 12.9 7.5 0% MDB climate finance Net climate co-finance Note: See Annex A for the definitions of “private” and “public”. MDBs apply two distinct methodologies – with incremental cost of adaptation activities. In contrast, fundamentally different approaches – to tracking mitigation finance is estimated in accordance with climate change adaptation finance (or “adaptation the joint MDB methodology for tracking climate finance”) and to tracking climate change mitigation mitigation finance, which is based on a list of finance (or “mitigation finance”). Both methodologies, activities in sectors and sub-sectors – according however, track and report climate finance in a to each MDB’s operational practice – that reduce granular manner. In other words, the climate greenhouse gas (GHG) emissions and are compatible finance reported covers only those components with low-emission development. These fundamental and/or subcomponents or elements or proportions differences between the two methodologies result in of projects that directly contribute to or promote figures for mitigation finance and adaptation finance adaptation and/or mitigation. that are not directly comparable. The MDBs estimate adaptation finance using the The MDBs’ methodologies for tracking climate finance joint MDB methodology for tracking climate change align with the Common Principles for Climate Change adaptation finance. This methodology is based Mitigation Finance Tracking2 that the MDBs and on a context- and location-specific approach and the IDFC jointly agreed and first published in March captures the amounts associated with activities 2015. In July 2015 the MDBs and the IDFC agreed directly linked to vulnerability to climate change. an initial set of the Common Principles for Climate MDBs make the best possible efforts to differentiate Adaptation Finance Tracking.3 The organisations between their usual development finance and finance continue to harmonise their approaches to tracking provided with an explicit intent to reduce vulnerability adaptation finance. At COP24 they announced a plan to climate change. Thus, the methodology for to work jointly to review and strengthen the Common tracking adaptation finance attempts to capture the Principles for Climate Mitigation Finance Tracking. 2 T  he Common Principles for Climate Mitigation Finance Tracking are set out in Annex C: https://www.eib.org/attachments/documents/mdb_idfc_mitigation_common_principles_en.pdf 3 The Common Principles for Climate Change Adaptation Finance Tracking are set out in Annex B:  https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/Common_Principles_for_Climate_Change_Adaptation_Finance_ Tracking_-_Version_1__02_July__2015.pdf 2018 Joint Report on Multilateral Development Banks’ Climate Finance 5 The IsDB applied the MDB methodologies for tracking (approximately 42 per cent of approvals in the climate finance (mitigation and adaptation) to its reported sectors), of which US$ 226 million 2018 projects in key sectors (energy, transport, (65 per cent) was for climate change mitigation, agriculture, and water and sanitation). In the years US$ 77 million (22 per cent) was dedicated to ahead, the IsDB will apply the Common Principles climate change adaptation and US$ 47 million in all of its projects as well as the operations of (13 per cent) had dual benefits of mitigation and IsDB Group members the Islamic Corporation for adaptation. The IsDB group will report fully on the the Development of the Private Sector (ICD), the details of its climate financing (modes, regions, International Islamic Trade Finance Corporation sectors, and so on) in future reports as it expands (ITFC) and the Islamic Corporation for Insurance of the application of the joint MDB methodology Investment and Export Credit (ICIEC). In 2018, IsDB consistently in all departments and entities. climate finance was estimated to be US$ 351 million finance, 2018 (in US$ million and percentage) Figure 3. IsDB climate finance, 65% Mitigation finance US$ 226 million 22% Adaptation finance US$ 77 million 13% Dual-benefit projects US$ 47 million Total US$ 351 million 6 2018 Joint Report on Multilateral Development Banks’ Climate Finance 1 OVERVIEW OF MDB METHODOLOGIES FOR TRACKING CLIMATE FINANCE The tracking of MDB climate finance is based Climate adaptation finance, as defined by the b.  on the harmonised principles and jointly agreed methodology, is not intended to capture the value methodologies detailed in Annexes B and C of this of an entire project or investment that may increase report. In this publication, the term “MDB climate resilience as a result of specific adaptation finance” refers to the amounts committed by MDBs activities that take place as part of the project. to finance climate change mitigation and adaptation activities in the development projects they undertake in developing economies and emerging economies in 1.2. FINANCE FOR THE MITIGATION transition. See Table A.G.1 for details of the report’s OF CLIMATE CHANGE geographic coverage. Climate change mitigation reduces, limits, or MDB climate finance includes commitments from sequesters GHG emissions to mitigate climate the MDBs’ own accounts, and from external resources change. However, not all activities that reduce GHGs channelled through and managed by the banks. are eligible to be counted towards MDB mitigation Climate co-finance includes the amount of financial finance, which is based on a list of activities that are resources contributed by external resources alongside compatible with low-emission pathways. MDB climate finance. These may include entities from both the private (commercial) and public The joint methodology for tracking climate change (non-commercial) sectors. mitigation finance recognises the importance of long-term structural changes, such as the shift to renewable energy technologies and the modal shift 1.1. FINANCE FOR ADAPTATION to low-carbon modes of transport. Consequently, the TO CLIMATE CHANGE methodology includes both greenfield and brownfield renewable energy projects as well as modal-shift Climate change adaptation aims to reduce the risks projects in transport. For energy efficiency projects the or vulnerabilities posed by climate change and to methodology acknowledges that drawing a boundary increase resilience. Identification of climate change between increasing production and reducing adaptation finance is the result of a three-step process emissions per unit of output is difficult. Therefore, and thus, for a project to be counted either fully or greenfield energy efficiency investments are included partially towards MDB adaptation finance, it must: only in a few cases where they help to prevent a long-term lock-in to high-carbon infrastructure. a. s  et out the project’s context of vulnerability to For brownfield energy efficiency investments to be climate change considered as climate finance, old technologies must be replaced well before the end of their lifetimes with  ake an explicit statement of intent to address b. m new technologies that are substantially more efficient. this vulnerability as part of the project, and Alternatively, new technologies or processes are required to be substantially more efficient than those articulate a clear and direct link between the c.  normally used in greenfield projects. vulnerability and the specific project activities. The methodology has some explicit exclusions The MDB methodology for tracking climate change in certain sectors. Examples include hydropower adaptation finance follows a context- and location- plants with high methane emissions from reservoirs specific, conservative and granular approach. It that exceed GHG reductions associated with the tracks MDB financing only for those components plant’s renewable energy output; geothermal power and/or subcomponents or elements or proportions plants with a high carbon dioxide (CO2) content in of projects that directly contribute to or promote the geothermal fluid that cannot be reinjected; and adaptation. It is important to note the following: biofuel projects that deplete carbon pools more than they reduce GHG emissions, due to high emissions  he adaptation finance reported might not capture a. T during production, processing and transportation. certain activities that might contribute significantly to resilience, but cannot always be tracked in The joint methodology for tracking climate mitigation quantitative terms (for example, operational finance is contained in Annex C of this report. procedures that support adaptation to climate change) or might not be associated with costs. 2018 Joint Report on Multilateral Development Banks’ Climate Finance 7 There are fundamental differences between the location-specific, and they respond to specific climate tracking methodologies for climate change adaptation vulnerabilities. Therefore, unlike mitigation activities, activities and those for mitigation activities. For it is not possible to produce a standalone “list of mitigation activities, a one-tonne reduction in CO2 adaptation activities” that can be used under all emissions has the same impact regardless of where circumstances. the activities take place. It is therefore possible to define lists of typical activities that are deemed When comparing climate finance data, it is important to support the path to low-carbon development. to understand the differences and similarities. However, adaptation activities are project- and Table 1 summarises the key points in this regard. Table 1. Comparison of methodologies for tracking adaptation and mitigation finance CLIMATE CHANGE ACTIVITY Item Adaptation Mitigation General scope of The activity is typically a component or element of a This is typically a project (or component thereof) qualifying activity project, and in certain circumstances an entire project, that avoids, reduces or sequesters GHG emissions, contributing to resilience (including socio-economic or promotes efforts to achieve these goals. resilience) or adaptation to climate change. Basis for tracking Adaptation finance tracking is incremental or Mitigation finance tracking is either project- or component based; it only takes into account those component-based. activities that specifically address vulnerability to Project-based: The whole project is considered to be climate change. Eligible components are usually parts a mitigation activity, for example, a typical renewable of a larger project, for example, water-saving equipment energy project or a project dedicated to improving the that is part of a larger capital expenditure (CAPEX) energy efficiency of an existing facility. investment in an area vulnerable to increased risk Component-based: Mitigation activity in a project, of drought. such as energy efficiency equipment that is part of a larger CAPEX investment. Granular The adaptation finance methodology intends to A granular approach is used. Climate finance approach to capture only the value of those activities within the methodology intends to capture only the value of the finance tracking project that are aimed at addressing specific climate project or its components that avoid, reduce, limit, vulnerabilities. It is not intended to capture the value of sequester or promote the avoidance, reduction, the entire project that is made more climate resilient as limitation or sequestration of GHG emissions. a consequence of specific adaptation activities within the project. Scale of impact Local, regional, national or global. Global Indicator(s) to Multiple (project- and context-specific) indicators are Ultimately, all mitigation projects can be compared on quantify and needed; the intended outcomes depend on the nature the basis of their direct or indirect reduction of GHGs compare the of the project. (for example, systems for monitoring GHGs that lead to outcomes of better use of energy systems). projects Qualification for Qualification is based on a three-step assessment It is based on a “positive list” of activities that qualify for climate finance process, taking into account the climate change mitigation finance and a set of specific qualification and vulnerability context and the specific project intent to exclusion criteria. reduce climate vulnerabilities. Climate finance Following the three-step assessment process, Following the positive-list approach, climate change tracking climate change adaptation finance for those project mitigation finance for qualifying projects or project components that are clearly linked to the climate components is tracked. vulnerability context and contribute to climate change resilience. See Annexes B and C for a full description of the methodologies and examples of their application to MDB projects in an array of sectors. 8 2018 Joint Report on Multilateral Development Banks’ Climate Finance 2 MDB CLIMATE FINANCE, 2018 2.1. TOTAL MDB CLIMATE FINANCE Mitigation finance totalled US$ 30,165 million, or 70 per cent of the total commitments, while In 2018, MDBs committed a total of US$ 43,101 million adaptation finance was US$ 12,936 million, – from their own account and from external resources or 30 per cent of total commitments. Table 2 shows that were channelled through the MDBs – to climate the adaptation and mitigation finance commitments finance in developing and emerging economies. of each MDB in the economies listed in Table A.G.1. Table 2. Total MDB climate finance, 2018 (in US$ million) MDB Adaptation finance Mitigation finance MDB climate finance ADB 1,286 2,725 4,011 AfDB 1,601 1,671 3,272 EBRD 452 3,374 3,826 EIB 432 5,268 5,700 IDBG 1,274 3,692 4,966 WBG 7,891 13,435 21,326 Total 12,936 30,165 43,101 Note: In certain cases, MDBs finance activities that have simultaneous benefits for mitigation and adaptation. The 2018 figure of US$ 867 million of climate finance with dual benefits is presented under the subheading of mitigation or adaptation finance (based on the most relevant elements of the project) to simplify reporting. Note that the IDBG splits dual benefit equally between adaptation and mitigation finance, while the EBRD and WBG allocate all dual-benefit activities to adaptation finance. See Annex D for more details of dual-benefit finance by MDBs. Table 3. Total MDB climate finance, climate co-finance and MDB finance, 2018 ADB AfDB EBRD EIB IDBG WBG Total Climate change finance commitment (US$ million) Own account 3,585 2,744 3,484 5,386 4,476 20,556 40,230 MDB-managed external resources 426 528 342 314 490 771 2,871 MDB climate finance 4,011 3,272 3,826 5,700 4,966 21,326 43,101 Climate co-finance 4,140 4,375 7,398 23,206 2,328 34,979 76,427 Correction for multiple-MDB financing (43) (375) (1,544) (4,142) (203) (2,070) (8,377) Total MDB climate activity finance 8,108 7,272 9,680 24,764 7,091 54,236 111,152 MDB finance (US$ million) MDB operations from MDB own account 19,532 8,720 11,275 18,105 17,735 63,892 139,259 Total MDB operations 22,611 10,170 13,008 19,620 18,561 66,868 150,837 Climate finance ratios Climate finance from MDB own account, 18% 31% 31% 30% 25% 32% 29% as a percentage of MDB operations from MDB own account MDB climate finance as a percentage 18% 32% 29% 29% 27% 32% 29% of total MDB operations Notes: 1. “MDB climate finance” refers to the sum of the climate finance from the MDBs’ own accounts and the MDB-managed external resources. 2. “Total MDB operations” refers to the sum of the MDBs’ own accounts and MDB-managed external resources. EIB climate finance figures (in this and in all previous editions of the Joint Report on Multilateral Development Banks’ Climate Finance) are restricted 3.  to developing and emerging economies in transition, and do not include other economies where the EIB supports climate action. The 2018 data includes the “EU-12” (see Annex G), thereby excluding other EU Member States where the EIB is also active. EIB global climate-action own-resource financing was US$ 19.1 billion, representing 30 per cent of total EIB own-resource lending. Table A.G.4 in Annex G includes climate finance figures for EU economies outside of the EU-12 region. 4. IDBG climate finance disaggregated by IDB, IDBInvest and IDBLab was US$ 4,161 million, US$ 789 million and US$ 16 million, respectively. WBG climate finance resources (including own account and managed external resources) for IFC, MIGA, and the World Bank were US$ 3,990 million, 5.  US$ 924 million, and US$ 16,412 million, respectively. Note: MIGA’s climate finance figure is US$ 924 million as FY18 figures include own account (US$ 917 million) and externally managed resources (US$ 7 million for PRICO solar in Gaza). IFC numbers capture long-term finance own-account commitments only. Total commitments of own-account long-term finance in the financial year 2018 (FY18) were US$ 11,629 million. As such, in FY18, IFC reached a level of 34 per cent on long-term finance own-account climate commitments (US$ 3,910 million of US$ 11,629 million). 2018 Joint Report on Multilateral Development Banks’ Climate Finance 9 From the 2013 report onwards, MDBs have been reporting their climate finance ratios in terms of total MDB climate finance as a percentage of total MDB operations. finance ratios, 2013-18 Figure 4. Climate finance 2015-18 29% 30% MDB climate finance 25% as a percentage of 21% total MDB operations 19% 20% 18% 20% 10% 0% 2013 2014 2015 2016 2017 2018 Sources of MDB climate finance are split between 2.2. MDB CLIMATE FINANCE the MDBs’ own accounts and the external resources BY TYPE OF RECIPIENT OR BORROWER channelled through and managed by the MDBs. External resources include trust-funded operations, MDBs report on the nature of first recipients such as those funded by bilateral agencies and or borrowers4 of MDB climate finance (those to dedicated climate finance funds such as the whom finance will flow directly from the MDBs), Climate Investment Funds (CIF), Green Climate Fund differentiating between public and private recipients (GCF), and climate-related funds under the Global or borrowers. Total commitment varies significantly Environment Facility (GEF), EU blending facilities and between MDBs’ own accounts and MDB-managed others. As bilateral reporting may already cover some external resources, as Table 4 illustrates. external resources, those managed by the MDBs are Table 5 shows the split by type of recipient or presented separately from the MDBs’ own accounts. borrower for the MDBs’ own accounts and for MDB-managed external resources. Total 2018 MDB climate finance from MDBs’ own accounts was US$ 40,230 million and US$ 2,871 million from external resources was channelled through the MDBs. Table 4. MDB climate finance by source of funds and by type of recipient or borrower, 2018 (in US$ million) Mitigation finance Adaptation finance MDB- MDB- managed managed MDB own external MDB own external Type of recipient or borrower account resources Subtotal account resources Subtotal Public recipient or borrower 18,239 1,488 19,727 11,466 760 12,226 Private recipient or borrower 9,829 610 10,438 696 14 710 Total 28,068 2,097 30,165 12,162 774 12,936 4 See Annex A for the definitions of public and private recipients or borrowers. 10 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table 5. MDB climate finance from MDB own account and MDB-managed external resources, split by type of recipient or borrower, 2018 (in US$ million) Private Public MDB-managed MDB-managed MDB MDB own account external resources MDB own account external resources ADB 814 52 2,771 374 AfDB 911 88 1,833 440 EBRD 1,965 138 1,519 204 EIB 1,332 156 4,053 158 IDBG 675 130 3,801 360 WBG 4,827 59 15,729 712 Total 10,525 624 29,706 2,247 2.3. MDB CLIMATE FINANCE of total climate finance was committed through BY TYPE OF INSTRUMENT investment loans. Figure 5 shows the breakdown of total MDB climate finance by instrument type. For the fifth consecutive year, MDBs reported Table 6 presents types of instrument by MDB. climate finance by the types of financial instrument Table 7 provides examples of the attribution of (see Annex E). MDBs reported that 71 per cent climate finance to various types of instrument. Figure 5. Figure 5. Total MDB climate Total MDB finance split climate finance by type split by of instrument, instrument, 2018 type of (in US$ 2018 (in million) US$ million) 71% Investment loan US$ 30,516 million 8% Policy-based financing US$ 3,307 million 6% Results-based financing US$ 2,487 million Total 5% Grant US$ 2,259 million US$ 43,101 million 4% Guarantee US$ 1,811 million 2% Other instruments US$ 1,042 million 2% Line of credit US$ 847 million 2% Equity US$ 832 million Note: Annex E defines the various types of instrument. Table 6. Type of instrument, by MDB, 2018 (in US$ million) Type of instrument ADB AfDB EBRD EIB IDBG WBG Investment loan 3,433 2,269 2,553 4,980 3,395 13,885 Policy-based financing 37 229 – – 808 2,234 Grant 529 489 177 94 94 876 Guarantee – 105 85 18 118 1,485 Equity – 132 113 327 9 252 Line of credit – 47 520 281 – – Results-based financing 11 – – – – 2,476 Other instruments 2 2 378 – 543 118 Total 4,011 3,272 3,826 5,700 4,966 21,326 Note: Other instruments include advisory services and bonds. Some MDBs report eligible bonds under the category of investment loans. 2018 Joint Report on Multilateral Development Banks’ Climate Finance 11 Table 7. Examples of types of instrument Type of instrument: RESULTS-BASED FINANCING Project focus: Rural development Sectors: Energy, transport and other built environment and infrastructure Brief description of project: Statement of purpose or intent: The affordable rural housing programme (ARHP) will support The ARHP will introduce climate-change risk assessment in the the government’s state affordable rural housing programme site selection. This is designed to identify and avoid sites that may (SARHP). The ARHP will focus on financing rural housing and be at high risk and vulnerable to major threats. In cases where on leveraging institutional improvements in related sectors. there are no alternatives, climate change adaptation measures Under the ARHP, three state-owned banks will provide loans will be put in place to ensure resilience to climate change. to construct at least 29,000 housing units in nine regions Link to project activities: of the country. A preliminary climate change assessment identified that The ARHP encompasses a number of elements that cut across some of the housing sites are likely to be affected by flooding, sectors. For the programme to succeed, it is vital to align landslides and drought. Proposed adaptation measures include incentives and ensure effective coordination between the the following. multiple entities involved in the programme. Results-based financing through the use of disbursement-linked indicators • For areas at risk of flooding: (DLIs) is therefore the most suitable form of lending for the ARHP. – installation of flood barriers on banks – elevation of housing sites and electrical wiring The government and the MDB have selected eight DLIs that will be used to evaluate the achievement of critical project • For areas at risk of landslides: elements, from the targeting and loan application to the –Installation of slope stabilisation structures or protective eventual outcome, as follows: barriers on mountain and high hill slopes • DLI 1: By 2021, at least 29,000 habitable housing units are to • For areas at risk of drought: be constructed in accordance with national quality standards – Installation of large overhead water tanks and deep wells. for rural families that meet the social equity criteria. Calculation of adaptation finance: DLI 2: By 2021, at least 29,000 mortgage loan agreements • Adaptation finance was estimated based on assumptions about are to be executed with the selected beneficiaries, for the the number of sites that are most likely to be affected by the construction of habitable housing units. climate risk, multiplied by the estimated cost of the adaptation • DLI 3: By 2021, the average percentage of women among measures per site. the ARHP homebuyers must increase to at least 30 per cent. • Flooding: US$ 0.60 million DLI 4: By 2021, climate change risk assessments are to be • • Landslides: US$ 4.68 million an integral part of the site-selection process under the ARHP. • Drought: US$ 0.76 million DLI 5: By 2021, the participating state-owned banks • implementing policies and actions are to improve their Total estimated adaptation finance is US$ 6.04 million. collection procedures and governance structures. Type of adaptation finance: DLI 6: By 2021, the governance, financial management • MDB’s own resources and institutional capacity of the state-owned construction company, which will be the ARHP’s construction supervisor, Specific features: are to be strengthened through As part of the ARHP, a government institution will assess a time-bound action plan for accounting, financial reporting, the climate change risk of proposed sites and participate as and for internal and external audits. a member of the site selection commissions, with relevant • DLI 7: By 2021, the procurement action plans for the expertise and support provided by the MDB if required. SARHP and the ARHP are to be fully implemented. As part of the process, potential measures for climate change adaptation will be identified so that they can be incorporated DLI 8: By 2021, the system of programme management • into the design of housing units. and performance monitoring is to be strengthened. (Continued overleaf) Climate vulnerability context: Under the ARHP, site-specific risk-screening based on projected climate change scenarios is not possible as the project sites are located in different agro-ecological zones, and the exact locations of the sites have not yet been finalised. With regard to initial screening of climate risk, it is not possible to determine the level of risk to which the ARHP as a whole would be vulnerable. However, based on initial risk screening at two sites in two regions (one site in the plains and one in mountainous highlands), the ARHP has been classified as low to medium risk, primarily in terms of the temperature and precipitation variables that are likely due to climate change. Some of the project sites in the target locations are most likely to be affected by climate change risks: Mountainsides are likely to be affected by flooding • and/or landslides. • Desert areas are likely to be affected by drought. 12 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table 7. Examples of types of instrument (continued) Type of instrument: POLICY-BASED FINANCING Type of instrument: INVESTMENT IN WORKING CAPITAL Brief description of project: Brief description of project: The project aims to help (i) remove barriers to investment, MDB finance will be used for the construction of a new district trade and entrepreneurship; (ii) move towards a more efficient, heating (DH) boiler plant, based on the use of wood biomass, sustainable and inclusive energy sector; and (iii) promote with a capacity of 49 MW. The project aims to modernise the greater economic and social inclusion through the provision of district heating system and replace heavy fuel oil with biomass budgetary support for implementing a series of policy actions. in heat generation. The project will enable the company to shift Classification: from expensive and polluting heavy fuel oil to a cheaper (1) Category – (2) Sub-category – (3) Eligible activity and less polluting, locally available wood biomass. Classification: (1) 9. Cross-cutting issues (1) Category – (2) Sub-category – (3) Eligible activity  .1. Support for national, regional or local policy through (2) 9 (1) 1. Renewable energy technical assistance or policy-based financing 1.2. Heat production or other renewable energy application (2)   fficient pricing of fuels and electricity; energy sector policies (3) E and regulations leading to climate change mitigation or the Thermal applications of sustainably produced bioenergy (3)  mainstreaming of climate action. in all sectors Type of financial instrument: Type of financial instrument: Policy-based financing An unsecured loan to finance the city's equity stake in a newly Calculation of climate finance, including the basis created district heating company and its working capital (for example, eligible components): Calculation of climate finance, including the basis (for example, eligible components): The MDB provided US$ $500 million in budgetary support for 11 policy actions. Three of these policy actions were eligible to The total cost of the project is €18.6 million. The MDB be assigned as climate mitigation finance as follows: committed an €8 million loan to fund the city's €7.5 million equity stake in a newly created district heating company. The Policy action (a): To contain electricity and gas subsidies, the equity will co-finance construction of the new boiler plant borrower has approved an electricity and gas tariff adjustment and €0.8 million of working capital for the initial purchase of in line with its policy note on reducing energy subsidies to help wood biomass. Of the €8 million, 100 per cent is counted as the sector move to full cost recovery. mitigation finance, based on upgrading the heat generation This policy action is fully credited as climate mitigation finance capacity to renewable sources, which will reduce CO2 emissions as it leads to efficient pricing of fuels and electricity. by 91 per cent. The reduction in concentrations of sulphur and nitrogen oxides in the city’s air during winter will also alleviate Policy action (b): In order to improve the performance of the negative effects on human health and enhance quality of life. state-owned utility through performance contracts and greater accountability, the Board has approved a commercial action Type of climate finance (own account, co-finance): plan to reduce losses and improve the collection of bills, in line MDB’s own resources with the objectives of the utility’s performance contract. The commercial performance action plan includes several (Continued overleaf) measures to reduce technical losses. These measures include the reinforcement of distribution grids, installation of capacitor banks and autoregulators, and management of energy use among major consumers. Due to the reduction in technical losses, 25 per cent of this policy action is classified as climate mitigation finance. Policy action (c): To improve the energy mix, the borrower will scale up and accelerate the implementation of the country’s renewable energy plan through its private-sector-owned renewable energy capacity. This policy action is fully credited as mitigation finance, due to the promotion of renewable energy. Based on the policy actions above, 20.5 per cent of the MDB financing is counted as mitigation finance. Type of climate finance (own account, co-finance): MDB’s own resources 2018 Joint Report on Multilateral Development Banks’ Climate Finance 13 Table 7. Examples of types of instrument (continued) Type of instrument: GUARANTEE: POLITICAL RISK INSURANCE Brief description of project: The project involves supporting the private sector in the establishment and operation of a 15,000 tonne-per-year raisin producing and processing plant. It also aims to support the domestic value chain of raisin production by doubling the country’s processing capacity for the product, while reducing post-harvest food losses by between 10 and 15 per cent or up to 1,500 tonnes of total annual production capacity. In order to achieve this, the project will adopt commercial-grade processing standards that reduce grape losses due to poor post-harvest processing techniques, poor infrastructure and the lack of efficient storage technology. Once fully operational, the project is expected to help avoid annual emissions of up to 3,000 tonnes of CO2 equivalent, for example thanks to better refrigeration during transport and improved storage on site. Classification: (1) Category – (2) Sub-category – (3) Eligible activity (1) 4. Agriculture, aquaculture, forestry, and land-use (2) 4.1. Agriculture (3) Non-CO2 GHG emissions from agricultural practices and technologies Calculation of climate finance, including the basis (for example, eligible components): The total project cost is US$ 9.0 million. The MDB issued guarantees of US$ 7.52 million in total to cover (i) a US$ 5.15 million equity investment for capital expenditure and (ii) a US$ 2.38 million loan guarantee covering working capital loans. Of the total, 100 per cent is counted as mitigation finance, based on the significance of the food losses avoided and the GHG emissions reduced, in the context of the fragile and conflict-affected operating market. Type of climate finance (own resources, co-finance): MDB’s own resources 5 For the purposes of this report, a complete list of economies, together with the income groupings, is available in Annex G. 14 2018 Joint Report on Multilateral Development Banks’ Climate Finance 2.4. MDB CLIMATE FINANCE BY REGION distribution to small island states and to the least- developed economies is presented in Table 8. This report covers climate finance committed by Table 9 shows the distribution of climate the MDBs in developing and emerging economies commitments by income classification, following only.5 In addition to the geographical distribution of the World Bank definition dated June 2018. climate commitments by region as shown in Figure 6, Figure 6. Figure 6. MDB climate finance MDB climate by region, finance by 2018 (in (in US$ region, 2018 million) US$ million) 21% Sub-Saharan Africa US$ 8,957 million 20% Latin America and the Caribbean US$ 8,770 million 16% South Asia US$ 6,958 million Total 12% Non-EU Europe and Central Asia US$ 5,128 million US$ 43,101 million 12% East Asia and the Pacific US$ 5,062 million 10% Middle East and North Africa US$ 4,310 million 8% EU-12 US$ 3,362 million 1.3% Multi-regional US$ 553 million Note: EIB climate finance figures (in this and in all previous editions of the Joint Report on Multilateral Development Banks' Climate Finance) are restricted to developing economies and emerging economies in transition, including the EU-12, and hence exclude a number of EU Member States where the EIB is also active. Table A.G.4 provides information about other countries not included in climate finance figures. Table 8. MDB climate finance to least-developed economies and small island states, 2018 (in US$ million) Mitigation finance Adaptation finance Total Least-developed economies 2,873 2,476 5,349 Small island states 455 708 1,163 Least-developed economies and small island states 59 211 270 Total 3,387 3,396 6,782 Table 9. MDB climate finance by income-classified economy groups, 2018 (in US$ million) Upper-middle Lower-middle Multi-regional Total MDB climate finance High income income income Low income or global Total Mitigation 3,695 11,173 11,282 2,264 1,752 30,165 Adaptation 621 2,941 6,127 2,515 731 12,936 Total 4,317 14,114 17,409 4,779 2,483 43,101 2018 Joint Report on Multilateral Development Banks’ Climate Finance 15 3 MDB ADAPTATION FINANCE, 2018 In 2018, MDBs reported a total of US$ 12,936 million Figure 7 shows a breakdown by type of recipient in commitments for climate change adaptation or borrower. finance, with US$ 12,162 million coming from MDBs’ own accounts and US$ 774 million from MDB- Figure 8 breaks down MDB adaptation finance by the managed external resources. Table 10 presents type of instrument. MDBs reported that 70 per cent the 2018 adaptation figures for each MDB, with a of total adaptation finance was committed through breakdown of climate adaptation finance committed investment loans. by the MDBs from their own accounts and from MDB-managed external resources. The data reported Figure 9 shows total adaptation finance by region. corresponds to the incremental costs of project The largest proportions of adaptation finance were in components, subcomponents, or elements, or the following regions: Sub-Saharan Africa, South Asia, proportions of projects, which are considered to be and Latin America and the Caribbean. input to an adaptation process and are intended to reduce vulnerability to climate change and build Figure 10 reports MDB adaptation finance by sector resilience to climate change. grouping – that is, sector groups for which some adaptation finance has been reported. The percentages of regional adaptation finance in various sectors are presented in Figure 11. Table 10. MDB adaptation finance by MDB according to source of funds, 2018 (in US$ million) ADB AfDB EBRD EIB IDBG WBG Total MDB own account 1,077 1,280 398 428 1,243 7,736 12,162 MDB-managed external resources 209 321 54 4 31 154 774 Total 1,286 1,601 452 432 1,274 7,891 12,936 finance by type of recipient or borrower and by MDB, 2018 (in US$ million) Figure 7. MDB adaptation finance 100% Public 1,265 1,354 322 311 1,174 7,801 12,226 Private 80% 60% 40% 20% 21 248 129 121 101 90 710 0% ADB AfDB EBRD EIB IDBG WBG Total MDB 16 2018 Joint Report on Multilateral Development Banks’ Climate Finance finance by type of instrument, 2018 (in US$ million) Figure 8. MDB adaptation finance 70% Investment loan US$ 9,076 million 9% Grant US$ 1,150 million 9% Policy-based financing US$ 1,112 million Total 8% Results-based financing US$ 1,028 million US$ 12,936 million 4% Other instruments US$ 463 million 0.4% Line of credit US$ 54 million 0.4% Equity US$ 47 million 0.04% Guarantee US$ 5 million finance by region, 2018 (in US$ million) Figure 9. MDB adaptation finance 30% Sub-Saharan Africa US$ 3,893 million 24% South Asia US$ 3,107 million 15% Latin America and the Caribbean US$ 1,990 million Total 13% East Asia and the Pacific US$ 1,695 million US$ 12,936 million 7% Non-EU Europe and Central Asia US$ 849 million 6% Middle East and North Africa US$ 822 million 4% EU-12 US$ 564 million 0.1% Multi-regional US$ 17 million adaptation finance Figure 10. MDB adaptation by sector finance by sector grouping, grouping, 2018 2018 (in US$ million) (in US$ million) 23% Cross-cutting issues US$ 2,964 million 22% Energy, transport and other built environment and infrastructure US$ 2,824 million Total 18% Water and wastewater systems US$ 2,331 million US$ 12,936 million 17% Crop and food production US$ 2,250 million 13% Other agricultural and ecological resources US$ 1,654 million 5% Institutional capacity support or technical assistance US$ 627 million 1% Coastal and riverine infrastructure US$ 130 million 1% Industry, manufacturing and trade US$ 83 million 1% Financial services US$ 74 million 2018 Joint Report on Multilateral Development Banks’ Climate Finance 17 finance by sector grouping and by region, 2018 (in US$ million) Figure 11. MDB adaptation finance 4,000 Crop and food production Water and wastewater 3,500 systems Energy, transport and 3,000 other built environment and infrastructure Coastal and riverine 2,500 infrastructure US$ million Other agricultural and 2,000 ecological resources Institutional capacity 1,500 support or technical assistance 1,000 Cross-cutting issues Financial services 500 Industry, manufacturing and trade 0 East Asia and the Pacific EU-12 Latin America and the Caribbean Middle East and North Africa Non-EU Europe and Central Asia South Asia Sub-Saharan Africa Multi-regional 18 2018 Joint Report on Multilateral Development Banks’ Climate Finance 4 MDB MITIGATION FINANCE, 2018 In 2018, MDBs reported a total of US$ 30,165 million MDBs reported that 71 per cent of total mitigation in financial commitments to the mitigation of climate finance was committed through investment loans. change, with US$ 28,068 million from the MDBs’ Figure 13 breaks down MDB mitigation finance by own accounts and US$ 2,097 million from MDB- type of instrument. managed external resources. Data reported corresponds to the financing of mitigation projects or Figure 14 shows total mitigation finance by region. of those components, subcomponents, or elements, The largest proportions of mitigation finance were or proportions of projects that provide mitigation in the following regions: Latin America and the benefits (rather than reporting the entire project cost). Caribbean, Sub-Saharan Africa, and Non-EU Europe and Central Asia. Figure 12 shows a breakdown by type of recipient or borrower. Figure 15 reports MDBs’ mitigation finance by sector grouping, that is, sector groups for which some Table 11 provides a breakdown of climate mitigation mitigation finance has been reported. finance committed by the MDBs during 2018 from own-account and external resources. The percentages of regional mitigation finance in various sectors are presented in Figure 16. Table 11. MDB mitigation finance by MDB, according to source of funds, 2018 (in US$ million) ADB AfDB EBRD EIB IDBG WBG Total MDB own account 2,509 1,463 3,086 4,958 3,233 12,819 28,068 MDB-managed external resources 217 207 288 310 459 616 2,097 Total 2,725 1,671 3,374 5,268 3,692 13,435 30,165 finance by type of recipient Figure 12. MDB mitigation finance or borrower recipient or borrower type type and and by by MDB, 2018 (in MDB, 2018 US$ million) (in US$ million) 100% Public 1,881 919 1,400 3,900 2,987 8,639 19,727 Private 80% 60% 40% 20% 845 752 1,974 1,367 704 4,796 10,438 0% ADB AfDB EBRD EIB IDBG WBG Total MDB 2018 Joint Report on Multilateral Development Banks’ Climate Finance 19 finance by type of instrument, 2018 (in US$ million) Figure 13. MDB mitigation finance 71% Investment loan US$ 21,439 million 7% Policy-based financing US$ 2,195 million 6% Guarantee US$ 1,806 million Total 5% Results-based financing US$ 1,459 million US$ 30,165 million 4% Grant US$ 1,109 million 3% Line of credit US$ 793 million 3% Equity US$ 785 million 2% Other instruments US$ 579 million finance by region, Figure 14. MDB mitigation finance 2018 (in region, 2018 US$ million) (in US$ million) 22% Latin America and the Caribbean US$ 6,780 million 17% Sub-Saharan Africa US$ 5,064 million 14% Non-EU Europe and Central Asia US$ 4,280 million Total 13% South Asia US$ 3,851 million US$ 30,165 million 12% Middle East and North Africa US$ 3,489 million 11% East Asia and the Pacific US$ 3,368 million 9% EU-12 US$ 2,798 million 2% Multi-regional US$ 536 million finance by sector grouping, Figure 15. MDB mitigation finance 2018 (in grouping, 2018 US$ million) (in US$ million) 29% Renewable energy US$ 8,653 million 18% Energy efficiency US$ 5,533 million 18% Transport US$ 5,347 million Total 11% Cross-cutting issues US$ 3,216 million US$ 30,165 million 8% Waste and wastewater US$ 2,340 million 8% Agriculture, forestry and land-use US$ 2,325 million 7% Lower-carbon and efficient energy generation US$ 2,142 million 1% Low-carbon technologies US$ 416 million 0.6% Non-energy GHG reductions US$ 179 million 0.04% Miscellaneous US$ 14 million 20 2018 Joint Report on Multilateral Development Banks’ Climate Finance finance by sector grouping and by region, Figure 16. MDB mitigation finance 2018 (in region, 2018 US$ million) (in US$ million) 7,000 Renewable energy Transport 6,000 Energy efficiency Cross-cutting issues Lower-carbon and efficient 5,000 energy generation Agriculture, forestry and land-use US$ million 4,000 Waste and wastewater Low-carbon technologies 3,000 Non-energy GHG reductions Miscellaneous 2,000 1,000 0 East Asia and the Pacific EU-12 Latin America and the Caribbean Middle East and North Africa Non-EU Europe and Central Asia South Asia Sub-Saharan Africa Multi-regional 2018 Joint Report on Multilateral Development Banks’ Climate Finance 21 5 CLIMATE CO-FINANCE, 2018 From 2015 the MDBs began reporting on climate In some cases, two or more MDBs jointly finance a co-financing (CCF) flows, in line with the harmonised project, which results in some overlap between the definitions and indicators that had been established gross co-finance figures reported by the different to estimate CCF. Tracking of climate co-finance aims MDBs. Table 13 shows CCF flows by adaptation and to estimate the volume of financial resources invested mitigation. In order to avoid double-counting, the by public and private external parties alongside MDBs last column of Tables 12 and 13 nets out potentially for climate mitigation and adaptation activities. double-counted co-financing by considering only the proportion of co-financing for every project that This approach categorises CCF sources of funds as: features co-financing from another MDB. Such CCF (i) other MDBs; (ii) IDFC member institutions, figures are also listed in Table 3, alongside each including bilateral and multilateral members; MDB’s own climate finance flows. (iii) other international public entities such as donor governments; (iv) contributions from other domestic In the reference guide, MDBs emphasise the public entities such as recipient-country governments; differences in how various financial instruments, and (v) all private entities (defined as those with at including guarantees, are tracked and reported. least 50 per cent of their shares held privately) split By mitigating the political and commercial risks of by private direct mobilisation and private indirect private and publicly owned investments, guarantees mobilisation. This level of granularity enables MDBs to can facilitate access to capital for climate finance present an increasingly nuanced picture of co-finance activities. This can enhance the mobilisation of flows used for climate change interventions. resources for a specific project or in support of specific government policies. In April 2017, MDBs published a reference guide (From Billions to Trillions: Transforming Development For consistency with the agreed MDB methodology Finance)6 to explain how they calculate and jointly on tracking and reporting mobilised private capital, report private investment mobilisation beyond the tracking and reporting of guarantees as detailed climate finance. The purpose of the methodology is to in the 2018 Joint Report on MDBs’ Climate Finance recognise and measure the private capital mobilised assumes: (i) a distinction in tracking and reporting in MDB project activities. The guide outlines the between “commercial guarantees” and “non- MDBs’ joint commitment to mobilising increased commercial guarantees”;9 and (ii) causality between investment from the private sector and institutional the guarantee and the underlying investment covered investors. The 2018 Joint Report on MDBs’ Climate (in other words, in the absence of the guarantee, the Finance follows the agreed terminology7 and Table underlying investment would be unlikely to occur). 12 includes “private direct mobilisation” and “private indirect mobilisation”. Added together, these two Table 12 reflects the 2018 CCF flows, including forms of mobilisation represent the private share the direct and indirect mobilisation attributed to of climate co-finance.8 guarantees. The guarantee exposure of each MDB has been shown as “own account” in Table 3. Table 13 shows 2018 CCF flows as reported by each institution, segmented by the source of co-financing. These CCF figures are the best estimate of resource flows based on information available at the time of board approval and/or commitment to each project. 6 http://documents.worldbank.org/curated/en/495061492543870701/pdf/114403-WP-PUBLIC-cedvp-14p-JointMDBReportingonPrivateInvestment MobilizationMethodologyReferenceGuide.pdf 7 See Annex A for definitions of “private direct mobilisation”, “private indirect mobilisation” and “public direct mobilisation”. 8 See Annex F for additional information on co-finance. 9 In the context of this report, non-commercial risk guarantees are defined as insurance or guarantee instruments covering investors and lenders against  perceived political risks including, but not limited to, the risks of transfer restriction (including inconvertibility), expropriation, war and civil disturbance, breach of contract, and failure to honour financial obligations, sovereign or sub-sovereign, and may provide credit enhancement and improve ratings for capital market transactions. Commercial or credit-risk guarantees refer to instruments covering all other risks not included above. 22 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table 12. Climate co-finance flows by MDB and by source, 2018 (in US$ million) Correction Total for multiple climate MDB ADB AfDB EBRD EIB IDBG WBG mobilisation financing Public direct mobilisation – 73 – 73 152 12,680 12,977 12,977 Public co-finance Other MDBs 69 1,382 1,278 2,538 459 2,497 8,223 8,223 IDFC members 55 198 292 2,148 152 1,244 4,089 2,071 Other international public 9 916 109 5,825 234 2,598 9,689 8,820 Other domestic public 1,184 605 388 5,287 – 1,408 8,872 7,766 Total private mobilisation Private direct mobilisation 600 – 182 365 246 4,197 5,590 5,590 Private indirect mobilisation 2,223 1,202 5,151 6,971 1,085 10,354 26,986 22,603 Total 4,140 4,375 7,398 23,206 2,328 34,979 76,427 68,050 Notes: Co-financing figures are current as of 1 April 2018. Fluctuations are expected due to changes in project financing between Board approvals, 1.  loan signatures and execution. 2. IDBG internal processes do not yet capture fully the levels of co-financing in IDBG operations, particularly for private indirect mobilisation. Table 13. Climate co-finance flows by MDB and by thematic focus, 2018 (in US$ million) Correction Total for multiple climate MDB ADB AfDB EBRD EIB IDBG WBG mobilisation financing Adaptation finance 1,222 931 1,103 213 9 4,343 7,822 7,524 Mitigation finance 2,918 3,444 6,295 22,993 2,319 30,636 68,605 60,526 Total 4,140 4,375 7,398 23,206 2,328 34,979 76,427 68,050 2018 Joint Report on Multilateral Development Banks’ Climate Finance 23 A ANNEX A. DEFINITIONS AND CLARIFICATIONS Avoiding double-counting: Where the same Point of reporting: Data reported in this publication project, sub-project or project element contributes reflects financial commitments at the time of Board to mitigation and adaptation, an MDB’s individual approval or financial agreement signature and is processes will determine which proportion is counted therefore based on ex-ante estimations. All efforts as mitigation or as adaptation, so that the actual have been made to prevent double-counting. financing will not be recorded more than once. No revisions will be issued in cases where a project’s Some MDBs are reporting as a separate category any scope changes later to either increase or decrease projects where the same components or elements climate financing. contribute to mitigation and adaptation alike. The MDBs are working on the best method for reporting Private direct mobilisation: Financing from a private projects where the same components or elements entity on commercial terms due to the active and contribute to both mitigation and adaptation. direct involvement of an MDB leading to commitment. Evidence of active and direct involvement includes Conservativeness: Where data is unavailable, mandate letters, fees linked to financial commitment any uncertainty must be overcome by taking a or other valid or auditable evidence of an MDB’s conservative approach, where under-reported rather active and direct role leading to commitments by than over-reported climate finance is preferable. private financiers. Private direct mobilisation does not include sponsor financing. Financing instruments: This report accounts for climate finance through the largest and most relevant Private indirect mobilisation: Financing from private development-finance instruments of MDBs, including entities supplied in connection with a specific activity grants, loans, guarantees, equity, and performance- for which an MDB is providing financing, where no based instruments. MDB is playing an active or direct role that leads to the commitment of the private entity’s finance. Granularity: MDBs report climate finance by taking Private indirect mobilisation includes sponsor only those components and/or subcomponents or financing, if the sponsor qualifies as a private entity. elements or proportions of projects with activities that contribute directly to or promote climate change Public and private sector operations: This adaptation and/or mitigation. determination is based on the status of the first recipient or borrower of MDB finance. The first Investments and technical assistance: Refers to recipient or borrower is considered to be public vehicles that MDBs use to channel specific investments when at least 50 per cent of the stakes or shares to finance capital and recurrent expenditures for goods of the recipient or borrower are publicly owned. and services, as well as to specialised advisory services and capacity-building initiatives. Public direct mobilisation: Financing from a public entity due to the active and direct involvement of an MDB-managed external resources: Refers to MDB leading to commitment. Evidence of active and the volume of operations supported by bilateral direct involvement includes mandate letters or other institutions through dedicated climate finance valid or auditable evidence of an MDB’s active and entities such as the GEF and CIF, or other donor funds direct role. The main difference between an external such as EU blending facilities, which may also be resource under MDB management (ERUM) and reported to the Development Assistance Committee a public direct mobilisation is the disbursement of the Organisation for Economic Co-operation and which under public direct mobilisation goes directly Development by contributor countries. from a public entity to the beneficiary. 24 2018 Joint Report on Multilateral Development Banks’ Climate Finance Recipient or borrower: Refers to the first borrower or beneficiary to whom finance will flow directly. The MDBs acknowledge that this classification is neither simple nor straightforward and that the characteristics of the first recipient or borrower may not be the same as those of the final beneficiary or borrower. An example would be a loan to a national development bank (the first recipient) for energy efficiency in small and medium-sized enterprises (the final beneficiaries). Operations through public- private partnerships (PPPs) add another layer of complexity to this classification. Reporting period: This report’s data covers the fiscal year 2018. Even though MDBs do not follow the same reporting cycle, data remains comparable across MDBs as all reporting cycles correspond to a 12-month period. Resources covered: MDBs’ own accounts as well as a range of external resources managed by the MDBs and various sources of co-financing. Values of zero and “—”: Reporting is complete for all fields and tables. A value of 0 in a table means that the value is below US$ 0.5 million while a “—” means that no amount was reported. As all financial figures are rounded to the nearest US$ million, calculations contained in a table may vary slightly and may not always add up to 100 per cent or to the total shown. 2018 Joint Report on Multilateral Development Banks’ Climate Finance 25 B ANNEX B. JOINT METHODOLOGY FOR TRACKING CLIMATE CHANGE ADAPTATION FINANCE BACKGROUND AND GUIDING PRINCIPLES as an essential part of the sustainability of their investments. With this shared commitment, MDBs Climate resilience and adaptation are intrinsically and the IDFC work together towards improved linked to development. This makes it challenging to definitions and understanding of the different accurately estimate adaptation finance elements approaches and principles for climate change in development operations. In response to this adaptation finance tracking. challenge, the joint MDB Working Group on Climate Finance Tracking applies a common adaptation Consequently, in July 2015 these institutions agreed finance tracking methodology to identify those on the Common Principles for Climate Change specific adaptation activities within the development Adaptation Finance Tracking. The Principles establish operations of MDBs or, in other words, those the parameters with which to identify – and estimate differentiating elements of development operations, the volume of – adaptation finance in MDB and IDFC that are carried out in response to perceived or operations. They also form the basis for further joint expected climate change impacts. The methodology work to increase the comparability of reported figures applies a context-specific, location-specific and on climate adaptation finance and to harmonise granular approach, and estimations are made key concepts related to reporting guidelines and conservatively to reduce scope for over-reporting of processes. MDBs and the IDFC are currently adaptation finance. developing additional metrics to identify and report on climate resilience in their development operations. The MDB adaptation finance tracking methodology considers the sub-project level or project-element level to be appropriate. The joint MDB approach APPLICATION OF THE ADAPTATION FINANCE also seeks to identify the links between adaptation TRACKING METHODOLOGY activities and the project’s explicit intent to reduce vulnerability to climate change. Thus, the volume of The MDB methodology on adaptation finance tracking MDB-reported adaptation finance is an estimation features the following three key steps: of total project finance for specific project activities which contribute to overall project outcomes in the setting out the climate change vulnerability context 1.  process of adapting to climate change. of the project It is important to note that the MDB’s estimated making an explicit statement of intent of the project 2.  climate finance may not express the full value to reduce climate change vulnerability, and of project finance that contributes to climate resilience. For instance, the granular approach articulating a clear and direct link between specific 3.  would capture financing for improved drainage of a project activities and the project’s objective to newly constructed road to withstand heavy rainfall or reduce vulnerability to climate change. storm surges that in turn contributes to overall road and investment resilience. The granular approach does not capture the value of the entire project The identification and estimation of adaptation or investment that may increase resilience due to finance is limited solely to those project activities specific adaptation activities within the project. (that is, projects, project components, or elements or In addition, some activities without associated proportions of projects) that are clearly linked to the incremental costs, such as operational procedures climate change vulnerability context. to ensure business continuity or the practice of siting assets outside the range of a future storm surge, may not be tracked in quantitative terms. Step 1. Context of vulnerability to climate change For a project to be considered as contributing MDB METHODOLOGY AND to adaptation, the context of climate change MDB-IDFC COMMON PRINCIPLES vulnerability must first be set out clearly using a robust evidence base. Project documents may refer to MDBs and the International Development Finance existing analyses and reports or to original, bespoke Club (IDFC) are fully committed to promoting assessments of climate change vulnerability, such and supporting climate-resilient development as those carried out as part of project preparation. 26 2018 Joint Report on Multilateral Development Banks’ Climate Finance Good practice in the use of existing analyses or Where climate change adaptation activities are reports includes citing authoritative, preferably planned in projects that have additional objectives, peer-reviewed sources, such as academic journals, adaptation finance tracking takes into account the national communications to the UNFCCC, Nationally estimated incremental cost or investment associated Determined Contributions (NDCs), reports of the with such discrete project components – or Intergovernmental Panel on Climate Change, elements of project design – that address risks and or strategic programmes for climate resilience. vulnerabilities under conditions of current and future climate change, and compares these with a project Good practice in conducting original, bespoke analysis design that does not consider such conditions. entails the use of records from trusted sources, which document the vulnerability of communities, When it is not possible to estimate incremental physical assets or ecosystems to climate change as cost or investment directly from project budgets well as the use of recent climate trends including – for example, when using policy instruments any departures from historic means. These may be or balance-sheet lending, equity investments or combined with climate change projections drawn from credit-line lending through financial intermediaries a range of climate change models, with high and low – a proportion of the project cost or investment greenhouse gas emission scenarios, to explore the corresponding to adaptation activities may be full array of projected outcomes and uncertainties. used to represent the incremental amount. Climate projection uncertainties should be presented and interpreted in a transparent way. The timescale of Table 1 in Annex B of the 2016 Joint Report on projected climate change impacts should match the Multilateral Development Bank’s Climate Finance10 intended lifespan of the assets, systems or institutions provides a list of examples illustrating sector- and being financed through the project (for example, subsector-specific adaptation activities in which a time horizon of 2030, 2050, 2080, and so on). MDB adaptation finance may be identified. The list is not meant to be exhaustive, nor is it intended for application as a positive list. It is for illustrative Step 2. Statement of purpose or intent purposes only. Any adaptation finance that is identified needs to be substantiated through the application of Once a project’s context of vulnerability to climate the three-step process described above. change has been established, the project should set out the explicit intention to address the context- For an illustration of how the MDB adaptation finance and location-specific climate change vulnerabilities tracking methodology is applied to development in response to the project’s climate vulnerability operations, see the projects that are summarised in assessment. This is an important step to distinguish this report. between a development project contributing to climate change adaptation and a standard development project. ADAPTATION FINANCE TRACKING AMONG DEVELOPMENT FINANCE INSTITUTIONS The methodology is flexible about the location and form of this statement of intent in the document, A growing number of institutions and initiatives work as long as the MDB is able to record and track the on the methodologies for tracking climate adaptation rationale for each adaptation element linked to the finance and make increasing efforts to harmonise climate-change vulnerability context described. MDB these approaches. The MDB-IDFC Common Principles projects with adaptation finance usually state – in result from such joint work. These institutions final technical documents, documents for Board continue their efforts for greater harmonisation, approval, internal memos or other associated project comparability and transparency of their reported documents – the intention to reduce vulnerability. climate finance. In addition, the OECD, which designed and applies the OECD-DAC Rio Markers, recommends the MDB methodology‘s three-step Step 3. Clear and direct link between climate change approach to climate adaptation finance tracking as vulnerability and project activities a “best practice”. The OECD’s efforts have resulted in improved guidance for tracking bilateral official In line with the principles of the overall MDB climate development assistance (ODA) targeting climate finance tracking methodology, adaptation finance change adaptation. estimations consider only the finance allocated to specific project activities that are clearly linked to the project’s climate change vulnerability context. 10 www.ebrd.com/2016-joint-report-on-mdbs-climate-finance.pdf 2018 Joint Report on Multilateral Development Banks’ Climate Finance 27 Table A.B.1. Case studies in tracking adaptation finance Cross-cutting issues: E D U C AT I O N Cross-cutting issues: D I S A S T E R R I S K M A N A G E M E N T Brief description of project: Brief description of project: The project aims to make the secondary education system The project aims to alleviate the impact that a severe or in the client country more effective by supporting curriculum catastrophic natural disaster could have on the country’s upgrades, improvements to assessment and examination finances by increasing the availability, stability and efficiency systems, and the recruitment and training of teachers. It also of contingent financing to address emergencies. In addition, finances improvements to school infrastructure, such as the operation seeks to enhance the country's comprehensive classrooms and water and sanitation facilities, that enhance disaster risk-management programme by fostering student retention. improvements in: (i) governance; (ii) risk identification; Climate vulnerability context: (iii) risk reduction; (iv) preparation for emergency and response; and (v) financial protection and risk transfer. Frequent and recurring climate-related natural disasters in Climate vulnerability context: the client country, such as floods and cyclones, can trigger outbreaks of waterborne diseases, destroy sanitation facilities Disaster risk in the country is considered to be high, mainly due and compromise safe water supplies, compounding health to socioeconomic factors such as the location of communities issues. These disasters pose a risk to water, sanitation and and infrastructure on or near coastal areas. These trends are hygiene interventions in schools that the project supports. likely to worsen due to climate change. With most of its territory Statement of purpose or intent to reduce climate just a few metres above mean sea level, the country is highly vulnerability: vulnerable to sea level rise and to storm surges associated with the increasing intensity of extreme weather events. Likely The project aims to raise awareness of climate change issues impacts include coastal flooding and erosion, mangrove and to mitigate climate change risks to school infrastructure. retreat, decreased productivity of seagrass beds, and saltwater Project activities linked to reducing climate vulnerability: intrusion into small lenses of fresh groundwater. The project supports education and raises awareness of climate Statement of purpose or intent to reduce climate change by incorporating relevant content into the curriculum vulnerability: and instruction. Activities financed include educating children The project seeks to build the resilience of the country to climate about emerging climate change issues such as changing and disaster risks through improved financial risk management patterns of rains and floods, and emergency response training and the satisfactory deployment of the UNDP Comprehensive for teachers to carry out evacuations at the onset of disasters Disaster Risk Management Programme (CDRMP). such as cyclones, floods, and so on. In addition, the project Project activities linked to reducing climate vulnerability: addresses climate change risks to school infrastructure through dedicated operational and maintenance procedures for tube The project provides rapidly disbursed and cost-efficient funds wells and sanitation facilities as well as for classrooms. to the partner country’s government in the event of a severe Type of financial instrument: natural disaster. This contributes to climate change adaptation by increasing resilience to natural disasters. Unlike traditional Investment loan contingent credit, the operation also ties the availability of Estimation of adaptation finance: resources to the satisfactory execution of the CDRMP. In other words, it provides strong incentives for the country to take The total project cost is US$ 2,017 million. The MDB provided preventive action to reduce disaster risks. Through the loan, the a loan of US$ 510 million. Adaptation measures were government commits to achieving significant progress in five estimated to cost US$ 25.33 million. The incremental cost key areas of disaster risk management, which will help increase of climate change adaptation was determined using a its resilience to climate change and natural disasters. proportional approach. Type of financial instrument: Contingent loan Estimation of adaptation finance: Because all resources (US$ 100 million) provided by the operation and made available to the country are intended to strengthen resilience and mitigate the financial and socioeconomic impact of national disasters, the entire loan is considered to be adaptation finance. (Continued overleaf) 28 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table A.B.1. Case studies in tracking adaptation finance (continued) Sector: E N E R G Y, T R A N S P O R T A N D O T H E R B U I LT Sector: A G R I C U LT U R A L A N D E C O LO G I C A L ENVIRONMENT AND INFRASTRUCTURE R E S O U R C E S : I N T E R M E D I AT E D F I N A N C E F O R T H E Brief description of project: TO U R I S M A N D A G R I C U LT U R E S E C TO R S Brief description of project: The project is a large-scale initiative to provide sustainable and comprehensive solutions that transform sub-standard, highly The project aims to promote the adoption of climate resilience vulnerable and highly polluting areas, known as ger (traditional technologies among commercial end-beneficiaries, primarily yurt) areas – which include wooden houses and ger – into in the tourism and agriculture sectors. The overall goal is to affordable, low carbon, climate-resilient and liveable eco-districts. increase the climate resilience and capacity of businesses and Climate vulnerability context: farmers to adapt to climate change. Climate vulnerability context: As a result of harsh winter storms, the rural areas of the country have seen particularly high rates of livestock death. Other The country is among those most vulnerable to climate change, adverse impacts of climate change include a decrease in the due to water scarcity and soil degradation, as well as to the biomass production of grasslands and falling productivity pressures of population growth and urbanisation. The economic in the husbandry sector. The gradual loss of productivity, and social impacts of the crisis in a neighboring country combined with the increased frequency and severity of compound these challenges. For this country, the projected extreme weather events, have caused dramatic rural-to-urban impacts of climate change include: (i) increasing temperatures, migration, concentrated mostly in the capital city. Within the with annual mean temperatures to rise by up to 2.0°C by 2030; city, new migrants settle mostly in ger areas. Leaving behind (ii) a significant increase in the duration of heat waves and a their rural way of life, they move into an urban environment reduction in cold spells; (iii) shifts in precipitation patterns, with that is insufficiently adapted to climate change – susceptible a decrease in total annual precipitation of up to 25 per cent to flooding, without access to piped drinking water, with poor by 2050, leading to more drought days and fewer wet days; sanitation, poor waste management, unpaved roads, and so and (iv) increased water stress, including drought risk, driven on. The migrants have to pay high energy bills – typically, either by temperature increases and higher evapotranspiration, as for coal or unsustainable biomass – and heating methods are well as by decreased precipitation, soil moisture and river inefficient. Greenhouse gas emissions and air pollution loads flows. Higher temperatures, reduced precipitation and higher are thus high, with adverse effects on the population’s health. evapotranspiration will decrease soil moisture and increase Statement of purpose or intent to reduce climate aridity, which will degrade soil and reduce the overall yield vulnerability: of crops. Statement of purpose or intent to reduce climate The project aims to deliver sustainable and comprehensive vulnerability: solutions that transform the sub-standard, climate-vulnerable and heavily polluting settlement areas in the country’s capital The project is expected to help manage the risks associated city into affordable, low-carbon, climate-resilient and liveable with increasing water stress through investment in technologies eco-districts. that promote the efficient use of water, such as efficient Project activities linked to reducing climate vulnerability: greenhouses, drip-irrigation systems and water-recycling systems. The project will also attempt to address the The landscaping and active drainage designs of the project’s increasing risk of soil degradation by investing in sustainable eco-district housing complexes include explicit consideration land management measures, such as near-zero tillage. The of the elements of climate change to which the project is agricultural sector contributes 6 per cent to GDP, primarily sensitive. Here, climate change is defined primarily by changes through wine and citrus production, which are vulnerable to in the frequency and sensitivity of rainfall and wind events, the higher temperatures and more variable rainfall patterns and the effects on local flooding. Updates to the management currently being experienced and projected to continue. of the local reservoir will be incorporated into the project to Project activities linked to reducing climate vulnerability: offset potential changes to annual storage that might result from changes in the availability of surface water and in the The project aims to promote the adoption of climate resilience recharging of groundwater. technologies among commercial end-beneficiaries, primarily Type of financial instrument: in the tourism and agriculture sectors. The overall goal of the project is to increase the resilience and the capacity of Concessional and non-concessional loans from MDB resources, businesses and farmers to adapt to climate change. The plus a loan and a grant from a global fund to be administered or project is expected to support at least six climate resilience managed by the MDB investments, including greenhouses, drip irrigation and water Estimation of adaptation finance: recycling. Investments are expected to deliver a minimum savings of 380,000 m3 of water a year and to reduce soil erosion The project has both adaptation and mitigation components. by more than 30 per cent compared to the baseline value. The full amounts of the loans and grants to the project are considered to be climate finance (both adaptation and Type of financial instrument: mitigation). Adaptation finance is estimated to amount to Investment loan US$ 146.3 million, based on the costs of the relevant adaptation Estimation of adaptation finance: components, representing 64 per cent of the total loan and grant amounts. The MDB resources will cover US$ 55.0 million The MDB provided US$ 90 million for this project, of which of the adaptation finance. The remaining US$ 91.3 million US$ 36 million was reported as adaptation finance on a will be covered by the loan and grant from a global fund to be proportional basis, taking into account the expected climate administered by the MDB. resilience outcomes of increased water availability and reduced soil degradation. 2018 Joint Report on Multilateral Development Banks’ Climate Finance 29 C ANNEX C. JOINT METHODOLOGY FOR TRACKING CLIMATE CHANGE MITIGATION FINANCE The 2018 tracking of mitigation finance is based on 5. Scope: Mitigation activities or projects can the Common Principles for Climate Change Mitigation consist of a standalone project, multiple Finance Tracking,11 referred to in this report as the standalone projects under a larger programme, Common Principles. The Common Principles were a component of a standalone project or a developed by the joint climate finance group of MDBs programme financed through a financial and by the IDFC, based on their experience of the intermediary. For example, a project with topic and with the intention of sharing them with other a total cost of US$ 100 million may have a institutions that are seeking common approaches to US$ 10 million documented component for tracking and reporting. energy efficiency improvement; in this case, only the US$ 10 million would be reported. The Principles consist of a set of common definitions Another example may be a US$ 100 million and guidelines, including a list of activities. However, credit line to a financial intermediary for they do not cover aspects of their implementation, renewable energy and pollution control including quality-control procedures, which remain the investments, where it is foreseen that at least sole responsibility of each institution and/or group. 60 per cent of the resources would flow into The Common Principles reflect the approach that both renewable energy investments; in such a case, groups (MDBs and the IDFC) have been following for only US$ 60 million would be reported. tracking climate change mitigation activities for the past eight years, and are based on the application Mitigation results: Reporting according to this 6.  of harmonised terms. While the MDBs and the IDFC methodology and the Common Principles does continue to report through their respective group- not imply evidence of climate change impacts. based efforts, the joint MDB approach for reporting Moreover, any inclusion of climate change mitigation finance aligns closely with the Common impacts is not a substitute for project-specific Principles, and is based on the following attributes: theoretical and/or quantitative evidence of GHG emission mitigation. Projects seeking to 1. Additionality: Like the Common Principles, demonstrate climate change impacts should this approach is activity-based. It focuses on do so through project-specific data. the type of activity to be executed, and not on its purpose, the origin of the financial resources 7. Eligibility: Climate mitigation promotes efforts or the results. to reduce, limit or sequester GHG emissions to reduce the risk of climate change. Mitigation 2. Timeline: Project reporting is ex-ante project finance is based on a list of activities that are implementation at Board approval or at the time compatible with low-emission pathways.12 of financial commitment. As a consequence, not all activities that reduce GHGs in the short term are eligible to 3. Conservativeness: Where data is unavailable, be counted towards MDB mitigation finance. any uncertainty must be overcome taking a conservative approach, where it is preferable The joint methodology for tracking climate to under-report rather than over-report change mitigation finance recognises the climate finance. importance of long-term structural changes, such as the shift in energy production to 4. Granularity: The tracking only covers mitigation renewable energy technologies, and the activities, which are to be disaggregated from modal shift to low-carbon modes of transport. non-mitigation activities as far as reasonably Consequently, both greenfield and brownfield possible. If such disaggregation is needed and renewable energy and transport modal not possible using project-specific data, a more shift projects are included. For projects that qualitative or experience-based assessment improve the energy and resource efficiency of can be used to identify the proportion of the technologies and processes, the methodology project that covers climate mitigation activities, acknowledges that their impacts in terms of consistent with the principle of conservativeness. reducing GHG emissions may be considered This applies to all categories, but is of particular upstream and/or downstream. However, it significance for energy efficiency projects. also acknowledges that drawing the boundary 11 http://www.worldbank.org/content/dam/Worldbank/document/Climate/common-principles-for-climate-mitigation-finance-tracking.pdf 12 Paris Agreement, December 2015 (FCCC/CP/2-15/L9/Rev.1, Article 2c). 30 2018 Joint Report on Multilateral Development Banks’ Climate Finance between increasing production and reducing  voidance of double-counting: Where the 9. A emissions per unit of output is difficult. same project, sub-project or project element Therefore, investments in greenfield energy contributes to mitigation and adaptation, an and resource efficiency are included only in a MDB’s individual processes will determine few cases when they help prevent a long-term what proportion is counted as mitigation or lock-in to high-carbon infrastructure. as adaptation, so that the actual financing will not be recorded more than once. Some When considering brownfield energy and MDBs are reporting as a separate category resource efficiency investments as climate projects where the same components or finance, old technologies must be replaced elements contribute to both mitigation and well before the end of their lifetimes with adaptation. The MDBs are working on the best new technologies that are substantially more reporting method for projects where the same efficient. Alternatively, new technologies or components or elements contribute to both processes must enable substantially higher mitigation and adaptation. system efficiency compared to those normally used in greenfield projects. Table A.C.1 lists the activities that MDBs have agreed are eligible to be classified as climate mitigation 8. Exclusions: The methodology assumes that finance. The table is based on a previous list that the care will be taken to identify projects that are MDBs and IDFC developed in the Common Principles included in the typology list but do not mitigate for Climate Mitigation Finance Tracking, with a emissions due to their specific circumstances. number of additional clarifications. MDBs apply the Examples of such projects include: hydropower list of eligible activities to financing through all types plants with high methane emissions from of financial instruments. Table A.C.2 provides project reservoirs exceeding GHG reductions case studies to illustrate how MDBs have applied the associated with the plant’s use of renewable mitigation tracking approach recently. energy; geothermal power plants with high CO2 content in the geothermal fluid that cannot be reinjected; or biofuel projects with net high emissions taking into account production, processing and transportation. Table A.C.1. List of activities eligible for classification as climate mitigation finance Category Sub-category Eligible activities 1. RENEWABLE 1.1. Electricity generation Wind power ENERGY Geothermal power (only if net emission reductions can be demonstrated) Solar power (concentrated solar power, photovoltaic power) Biomass or biogas power (only if they result in net reductions in emissions, taking into account production, processing and transportation) Ocean power (wave, tidal, ocean currents, salt gradient, and so on) Hydropower plants (only if net emission reductions can be demonstrated) Renewable energy power plant retrofits 1.2. Heat production or Solar water heating and other thermal applications of solar power in all sectors other renewable energy Thermal applications of geothermal power in all sectors application Wind-driven pumping systems or similar applications Thermal applications of sustainably produced bioenergy in all sectors 1.3. Measures to facilitate New, expanded and improved transmission systems (lines, substations) integration of renewable Storage systems (battery, mechanical, pumped storage) that facilitate integration energy into grids of renewables, or increase renewable energy production New information and communication technology, smart grid and mini grid (Continued overleaf) 2018 Joint Report on Multilateral Development Banks’ Climate Finance 31 Table A.C.1. List of activities eligible for classification as climate mitigation finance (continued) Category Sub-category Eligible activities 2. LOWER- 2.1. Transmission and Retrofit of transmission lines or substations and/or distribution systems to reduce CARBON AND distribution systems energy use and/or technical losses including improving grid stability or reliability EFFICIENT (in the case of capacity expansion, only the portion of the investment that is reducing ENERGY existing losses is included) GENERATION 2.2. Power plants Thermal power plant retrofit to switch from a more GHG-intensive fuel to a different and less GHG-intensive type of fuel13 Conversion of existing fossil-fuel-based power plant to co-generation14 technologies that generate electricity in addition to providing heating or cooling Energy efficiency improvement in existing thermal power plant 3. ENERGY 3.1. Energy efficiency Industrial energy-efficiency improvement though the installation of more efficient EFFICIENCY 15 in industry in existing equipment, changes in processes, reduction of heat losses and/or increased waste- facilities heat recovery and/or resource efficiency16 Installation of co-generation plants that generate electricity in addition to providing heating or cooling Replacement of an older facility (older facility retired) with a more efficient facility 3.2. Energy efficiency Energy efficiency improvement in lighting, appliances and equipment, including improvements in existing energy-management systems. commercial, public and Substitution of existing heating or cooling systems for buildings by co-generation residential buildings plants that generate electricity in addition to providing heating or cooling17 Retrofit of existing buildings: architectural or building changes that enable reduction of energy consumption 3.3. Energy efficiency Energy efficiency improvement in utilities and public services through the installation improvements in the utility of more efficient lighting or equipment sector and public services Rehabilitation of district heating and cooling systems Reduction of heat loss in utilities and/or increased recovery of waste heat Improvement in utility-scale energy efficiency through efficient energy use and loss reduction, or resource efficiency18 improvements 3.4. Vehicle fleet Existing vehicle, rail or boat fleet retrofit or replacement (including the use of lower- energy efficiency and carbon fuels, electric or hydrogen technologies), or new vehicle, rail or boat fleets low-carbon fuels with ultra-low carbon emissions, exceeding available standards. 3.5. Energy efficiency in Use of highly efficient architectural designs, energy-efficient appliances and new commercial, public equipment, and building techniques that reduce the energy consumption of and residential buildings buildings, exceeding available standards and complying with high energy efficiency certification or rating schemes 3.6. Energy audits Energy audits of energy end-users, including industries, buildings and transport systems 4. 4.1. Agriculture Reduction in energy use in traction (such as efficient tillage), irrigation and AGRICULTURE, other agricultural processes AQUACULTURE, Agricultural projects that improve existing carbon pools (such as rangeland FORESTRY AND management, collection and use of bagasse, rice husks or other agricultural waste, LAND-USE reduced tillage techniques that increase carbon content of soil, rehabilitation of degraded lands, peatland restoration, and so on) Reduction of non-CO2 GHG emissions from agricultural practices and technologies (for example, paddy rice production, reduction in fertiliser use) Resource efficiency19 in agricultural processes and supply chains (Continued overleaf) 13 Excluding replacement of coal by coal. 14 In all co-generation projects energy efficiency is required to be substantially higher than separate production of electricity and heat. 15 The general principle for brownfield energy efficiency activities involving the replacement of technologies or processes is that: (i) the old technologies  are replaced well before the end of their lifetime and the new technologies are substantially more efficient; or (ii) new technologies or processes are substantially more efficient than those normally used in greenfield projects. 16 The general principle for resource efficiency activities is that activities are substantially more efficient than the replaced technologies or processes,  noting that efficiencies and avoided emissions may occur upstream or downstream of the project. 17 Refer to footnote 15. 18 Refer to footnote 16. 19 The general principle for resource efficiency activities is that activities are substantially more efficient than the replaced technologies or processes,  noting that efficiencies and avoided emissions may occur upstream or downstream of the project. 32 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table A.C.1. List of activities eligible for classification as climate mitigation finance (continued) Category Sub-category Eligible activities 4. 4.2. Afforestation Afforestation (plantations) and agroforestry on non-forested land AGRICULTURE, and reforestation and Reforestation on previously forested land AQUACULTURE, biosphere conservation FORESTRY Sustainable forest management activities that increase carbon stocks or reduce AND LAND-USE the impact of forestry activities (continued) Biosphere conservation and restoration projects (including payments for ecosystem services) seeking to reduce emissions from the deforestation or degradation of ecosystems 4.3. Livestock Livestock projects that reduce methane or other GHG emissions (for example, manure management with biodigesters, and improved feeding practices to reduce methane emissions) 4.4. Biofuels Production of biofuels, including biodiesel and bioethanol (only if net emission reductions can be demonstrated) 4.5. Aquaculture Reduction in energy use or resource efficiency in aquaculture20 5. NON- 5.1. Fugitive emissions Reduction of gas flaring or methane fugitive emissions in the oil and gas industry ENERGY GHG Coal-mine methane capture REDUCTIONS 5.2. Carbon capture Projects for carbon capture and storage technology that prevent the release of large and storage quantities of CO2 into the atmosphere from fossil fuel use in power generation and process emissions in other industries 5.3. Air conditioning Retrofit of existing industrial, commercial and residential infrastructure to switch and refrigeration to cooling agent with lower potential for global warming 5.4. Industrial processes Reduction in GHG emissions resulting from industrial process improvements and cleaner production (for example, of cement or chemicals), excluding carbon capture and storage 6. WASTE AND 6.1. Wastewater Treatment of wastewater, including wastewater collection networks, that reduces GHG WASTEWATER emissions (only if substantial net GHG emission reductions can be demonstrated) 6.2. Solid waste Waste management projects that capture or combust methane emissions management Waste-to-energy projects Waste collection, recycling and management projects that recover or reuse materials and waste as inputs into new products or as a resource (only if net emission reductions can be demonstrated) 7. TRANSPORT 7.1. Urban transport Urban mass transit modal change21 Non-motorised transport (bicycles and pedestrian mobility) 7.2. Transport-oriented Integration of transport and urban development planning (dense urban development development, multiple land-use, walking communities, transit connectivity, and so on), leading to a reduction in the use of passenger cars Transport and travel demand-management measures dedicated to reducing pollutant emissions, including GHG emissions (such as high-occupancy vehicle lanes, congestion charging or road pricing, parking management, restriction or auctioning of licence plates, car-free city areas, low-emission zones)22 7.3. Inter-urban transport Railway transport ensuring a modal shift of freight and/or passenger transport from road or air to rail (improvement of existing lines or construction of new lines) Waterway transport ensuring a modal shift of freight and/or passenger transport from road or air to waterways (improvement of existing infrastructure or construction of new infrastructure) Bus passenger transport ensuring a modal shift from a higher-carbon mode of public transport 7.4. Infrastructure for Charging stations and other infrastructure for electric vehicles, hydrogen low-carbon and efficient or dedicated biofuel fuelling transport Digital solutions and programmes dedicated to reducing GHG emissions23 (Continued overleaf) 20 Refer to footnote 16. 21 Modal shift includes prevention of future shifts to high-carbon modes. 22 General traffic management is not included. This category is for demand management to reduce GHG emissions, assessed on a case-by-case basis. 23 Dedicated measures can mean that a proportional approach may be used to take account of the fact that reduction of GHG emissions may be one of  several project objectives. 2018 Joint Report on Multilateral Development Banks’ Climate Finance 33 Table A.C.1. List of activities eligible for classification as climate mitigation finance (continued) Category Sub-category Eligible activities 8. LOW- 8.1. Products Projects producing components, equipment or infrastructure dedicated to the CARBON or equipment renewable and energy efficiency sectors, or low-carbon technologies TECHNOLOGIES 8.2. Research Research and development of renewable-energy or energy-efficiency technologies, and development or low-carbon technologies 9. CROSS- 9.1. Support for national, National, sectoral or territorial policies/planning/action plans/planning/ CUTTING regional or local policy, institutions dedicated to mitigation, such as NDCs, NAMAs and plans for scaling ISSUES through technical up renewable energy assistance or policy Energy sector policies and regulations leading to climate change mitigation or the lending mainstreaming of climate action, such as energy efficiency standards or certification schemes; energy-efficiency procurement schemes; renewable energy policies, power market reform specifically designed to enable renewable energy Systems for monitoring the emission of greenhouse gases Efficient pricing of fuels and electricity (such as subsidy rationalisation, efficient end-user tariffs, and efficient regulations on electricity generation, transmission or distribution, and on carbon pricing) Education, training, capacity-building and awareness-raising on climate change mitigation or sustainable energy or sustainable transport; mitigation research Other policy and regulatory activities, including those in non-energy sectors, leading to climate change mitigation or mainstreaming of climate action, such as fiscal incentives for low-carbon vehicles, sustainable afforestation standards 9.2. Carbon finance Carbon markets and finance (purchase, sale, trading, financing and other technical assistance); includes all activities related to compliance-grade carbon assets and mechanisms 9.3. Supply chain Measures in existing supply chains dedicated to improvements in energy efficiency or resource efficiency24 upstream or downstream, leading to an overall reduction in GHG emissions 10. 10.1. Other activities Any other activity if agreed by MDBs may be counted as climate mitigation finance MISCELLANEOUS with net greenhouse-gas when the results of ex-ante GHG accounting (undertaken according to commonly reduction agreed methodologies) show emission reductions that are higher than a commonly agreed threshold, and the project is consistent with a pathway towards development characterised by low GHG emissions 24  he general principle for resource efficiency activities is that activities are substantially more efficient than the replaced technologies or processes, T noting that efficiencies and avoided emissions may occur upstream or downstream of the project. 34 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table A.C.2. Case studies in tracking mitigation finance Project focus: WATER SUPPLY AND SEWERAGE SYSTEM Sector: Water Brief description of project: Classification (as in Annex C, Table A.C.1): (1) Category – (2) Sub-Category – and (3) Eligible activity: The project will improve water supply and sewerage systems by making essential improvements, such as repairs, upgrades (1) 1. Renewable energy and new supply and treatment infrastructure, to existing (2) 1.1. Electricity generation networks. The project will make these systems more reliable, sustainable and climate-resilient through an integrated Solar power (concentrated solar power, photovoltaic power) (3)  approach that adopts lessons learned and introduces (1) 3. Energy efficiency good practices in infrastructure design, procurement and construction. The investments will improve service delivery 3.3. Energy efficiency improvements in the utility sector (2)  and managerial capacity at the level of local urban bodies. and public services The following are the key project outputs: Improvement in utility-scale energy efficiency through (3)  efficient energy use, and loss reduction or resource • Climate-resilient sewage collection, treatment and efficiency improvements drainage systems. This output includes (i) new sewage treatment plants (STPs), including one STP with a 2 MW solar Type of financial instrument: photovoltaic (PV) system installed to power its operations; The MDB provided an investment loan. The project will also be (ii) rehabilitation of an STP; (iii) expansion of piped sewage- supported by a grant from MDB-administered funding. collection systems; and (iv) construction of a piped underground sewage-collection system. Calculation of mitigation finance, including basis (for example, eligible components): • Water supply systems in a least five cities, with improved smart features. This includes (i) smart water-supply Project components considered in the estimation of climate distribution systems that reduce the percentage of water from mitigation finance include: which the provider derives no revenue and provide a regular sewage collection systems using closed-conduit transport • water supply; (ii) transmission systems; (iii) pumping stations; preventing the release of sewer gases into the atmosphere and (iv) water storage reservoirs. STPs based on advanced technology that allow: greenhouse • Strengthening of institutional capacity, public awareness • gas capture in wastewater, sludge treatment and disposal; and urban governance. This includes (i) establishing a wastewater reuse that lowers water demand and new state-level unit for the improvement of urban data and consequently the use of energy for pumping; and the use governance; (ii) a new project design and management of solar PV systems to power STP operation centre; (iii) implementing (a) a state-wide performance-based urban governance improvement programme to enhance transmission from a centralised sustainable source of water • revenue, financial management, administration, service supply that avoids the conventional decentralised use of delivery, gender mainstreaming, wastewater reuse and fecal energy for groundwater pumping sludge management, and (b) public awareness campaigns on distribution system improvements that will lower wastage • water conservation, sanitation and hygiene. of water pumped by utility energy (for example, the integration The project has dual benefits, as it includes adaptation of smart water-management and monitoring tools). components. The total climate change mitigation finance in this project is US$ 225 million. The MDB loan will cover US$ 98.6 million of the mitigation finance, while the MDB-administered grant will finance the PV system component of one of the STPs (US$ 2 million). Type of mitigation finance (own resources, co-finance): Investment loan (MDB resource) Grant (MDB-administered or managed) (Continued overleaf) 2018 Joint Report on Multilateral Development Banks’ Climate Finance 35 Table A.C.2. Case studies in tracking mitigation finance (continued) Project focus: RENEWABLE ENERGY SECTOR Project focus: INTERMEDIATED LENDING FOR DEVELOPMENT LOW-CARBON TRANSPORT Sector: Renewable energy Sector: Transport Brief description of project: Brief description of project: The project will help develop a 40.5 MW distributed renewable- Intermediated loan to a financial intermediary specialised energy system using solar photovoltaic and wind power with in leasing. The funds are intended for use by multiple end- advanced battery storage technology and energy management beneficiaries, in line with the borrower’s current business systems to supply clean, reliable electricity to a geographically orientation and the growing demand for activities that qualify scattered local town in the western portion of the beneficiary as climate action, in particular the leasing of cleaner public country. The town relies on high-cost and highly carbon-intensive transport. A contractually defined “climate window” was electricity imports from neighboring countries. The project will negotiated in the form of a commitment to dedicate a minimum also showcase a 500 kW thermal shallow-ground heat-pump of 70 per cent of the loan amount to such activities. system, which will supply pollutant-free space heating in public The review of the initial pipeline and business plan has indicated buildings. This system could be scaled up in the future and, that the borrower will finance zero-carbon or low-carbon transport ultimately, help mitigate local air pollution in winter. modes, including municipal bike-sharing schemes, electric or Classification (as in Annex C, Table A.C.1): hydrogen public buses, electric passenger cars and vans for (1) Category – (2) Sub-Category – and (3) Eligible activity: commercial use, as well as investments in railway infrastructure (1) 1. Renewable energy that support a modal shift away from road transport. Classification (as in Annex C, Table A.C.1):  .1. Electricity generation (2) 1 (1) Category – (2) Sub-Category – and (3) Eligible activity: 1.2. Heat production or other renewable energy application 1.3. Measures to facilitate integration of renewable energy (1) 7. Transport into grids (2) 7.1. Urban transport modal change  ind power; solar power; thermal applications of (3) W Urban mass transit, non-motorised transport (bicycles and (3)  geothermal power in all sectors; and storage systems pedestrian mobility) (battery, mechanical, pumped storage) that facilitate the integration of renewables or increase the production of and renewable energy (1) 7. Transport Type of financial instrument: (2) 7.3. Inter-urban transport The MDB provided an investment loan. The project will also be supported by a grant from MDB-administered funding. Railway transport ensuring a model shift of freight and/ (3)  or passenger transport from road to rail (improvement of Calculation of mitigation finance, including basis existing lines or construction (for example, eligible components): of new lines) The full amount of the loan (US$ 4 million) and grants Type of financial instrument: (US$ 20.6 million) provided to this project was reported as mitigation finance. All of the project components were classified Line of credit as “renewable energy”, based on the MDB’s list of activities Calculation of mitigation finance, including basis eligible for classification as climate mitigation finance. (for example, eligible components): Type of mitigation finance (own resources, co-finance): The MDB will provide a €180 million line of credit to the Investment loan (MDB resource) financial intermediary to fund loans to eligible beneficiaries. The finance contract with the borrower includes a contractual Grant (MDB-administered or managed) undertaking to allocate a minimum of 70 per cent of the overall line of credit to investments eligible for classification as “climate action”, as defined in the climate action eligibility list annexed to the side letter to the contract. The eligible categories depend on the pipeline review and business plan of the borrower as described above. Of the €126 million climate window, 100 per cent is counted as climate mitigation. Type of mitigation finance (own resources, co-finance): MDB’s own resources Specific features: The case study is part of a wider initiative to create climate windows within the MDB’s intermediated loans in a more systematic way, in order to increase the volume of intermediated lending that can be classified as “climate action”. (Continued overleaf) 36 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table A.C.2. Case studies in tracking mitigation finance (continued) Project focus: RENEWABLE ENERGY AND ENERGY EFFICIENCY Sector: Infrastructure Brief description of project: The MDB committed €20 million to a €100 million infrastructure fund. The proceeds will make equity infrastructure investments. The fund will address the scarcity of infrastructure equity funding in the region and promote the private financing of crucial infrastructure in the transport, energy efficiency and renewable energy sectors. Classification (as in Annex C, Table A.C.1): (1) Category – (2) Sub-Category – and (3) Eligible activity: (1) 1. Renewable energy (2) 1.1. Electricity generation (3) Biomass or biogas power Type of financial instrument: Equity fund Calculation of mitigation finance, including basis (for example, eligible components): The MDB provided an equity investment of up to €20 million to the infrastructure fund. The fund targets (among others) investments in climate change mitigation projects such as renewable energy generation and energy efficiency. Other infrastructure projects to be financed by the fund may also feature resource efficiency components. Of the total finance, 35 per cent was counted conservatively as mitigation finance, based on a strong pipeline of climate change mitigation projects, such as electricity generation from biomass, solar and wind power projects, and efficient-street-lighting projects, all of which are expected to deliver significant emission savings. Type of mitigation finance (own resources, co-finance): MDB’s own resources Specific features: The fund will set a green financing target of 40 per cent and incorporate green considerations into its investment, asset management, and reporting and disclosure policies. The fund will set an example for the private equity industry by piloting the latest voluntary UN Principles for Responsible Investment guidelines on investment and reporting (which are aligned with the Task Force on Climate-related Financial Disclosures) for asset managers and infrastructure investors. 2018 Joint Report on Multilateral Development Banks’ Climate Finance 37 D ANNEX D. FINANCE THAT BENEFITS BOTH ADAPTATION AND MITIGATION The MDBs identify some components and/or both mitigation and adaptation as a separate category subcomponents, or elements or proportions of (see Table A.D.1). The MDBs continue to work on the projects, which help to reduce GHG emissions while best reporting method for such projects. also reducing climate vulnerability, thereby delivering dual benefits of mitigation and adaptation. Where For 2018, the EBRD, IDBG and WBG have tracked the same project, sub-project or project element dual-benefit figures separately according to their contributes to both mitigation and adaptation, the internal systems. The other MDBs have split the MDB’s individual processes will determine which financed amount between mitigation and adaptation. proportions to count as mitigation or as adaptation In both cases, there is no double counting. Table A.D.2 so that the actual financing will not be double- includes more detail on the instrument types used in counted. Some MDBs report projects where the same adaptation, mitigation and dual-benefit finance. components or elements or proportions contribute to Table A.D.1. MDB adaptation, mitigation and dual-benefit climate finance (in US$ million) MDB Adaptation finance Mitigation finance Dual-benefit finance Total ADB 1,286 2,725 – 4,011 AfDB 1,601 1,671 – 3,272 EBRD 180 3,374 272 3,826 EIB 432 5,268 – 5,700 IDBG 991 3,408 567 4,966 WBG 7,863 13,435 28 21,326 Total 12,353 29,882 867 43,101 Note: Numbers may not add up due to rounding. Table A.D.2. MDB adaptation, mitigation and dual-benefit climate finance (in US$ million) Instrument type Adaptation finance Mitigation finance Dual-benefit finance Total Investment loan 8,795 21,360 361 30,516 Policy-based financing 928 2,010 369 3,307 Grant 1,128 1,109 22 2,259 Guarantee 5 1,806 – 1,811 Equity 47 785 – 832 Line of credit 8 793 46 847 Results-based financing 1,028 1,459 – 2,487 Other 414 559 69 1,042 Total 12,353 29,882 867 43,101 Note: Numbers may not add up due to rounding. 38 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table A.D.3. Example of a dual-benefit project Project focus: URBAN PLANNING Sector: Cross-cutting issues Brief description of project: Rapid population growth and sprawling low-density growth of cities pose serious challenges to the country's social and economic well-being. The urban population has doubled over the past forty years and now stands at 80 per cent of the country's total population. In addition, fragmented, low-density urbanisation occupies seven times more land than it did forty years ago. This creates a greater need for motorised transport and longer commutes, which increase GHG emissions and reduce productivity. Robust studies consistently find a negative correlation between city density and energy consumption and the use of transport. In tandem, the most vulnerable groups in cities lack basic services and live far from city centres, often along riverbanks and unstable ravines that are at high risk from extreme events such as droughts, floods and storms exacerbated by climate change. In the past 35 years, 80 per cent of the country's disasters were caused by extreme hydro- meteorological events. The objective of this US$ 600 million policy-based loan is to strengthen a new, sustainable model of land-use management and urban development, which includes policies to promote compact growth patterns consistent with low-emission, climate- resilient development. The General Law on Human Settlements, Land-use Management, and Urban Development (Nov 2016) links ecological planning and urban development through land-use management – a new concept in the country’s legal framework. The Law includes disaster prevention and risk reduction in human settlements as a cross-cutting matter and requires comprehensive disaster risk-management strategies. It requires patterns of mobility and transport to improve urban quality of life and cut emissions through reduced travel, optimised public transport and more non-motorised mobility. The Law also prioritises the creation, maintenance and restoration of public space to create public goods, increase air quality, reduce CO2 emissions and deter the expansion of informal settlements. Classification: Institutional capacity support or technical assistance Calculation of mitigation and adaptation finance: The country's policy commitments in this policy-based financing programme are actions that make it possible to increase urban resilience, optimise land-use and promote better mobility, among other sustainability considerations. The commitments are followed by specific implementation measures. Thus, policy commitments that are deemed to serve mitigation and adaptation purposes simultaneously account for 62 per cent (US$ 372 million) of the total number of policy commitments adopted as a condition of disbursement of the loan programme. With a legal framework in place and specific policy commitments, subsequent urban investments by the public and private sectors would enable further positive outcomes in line with climate-sensitive development. Type of financial instrument: Policy-based financing Type of finance: Fast-disbursing fiscal support 2018 Joint Report on Multilateral Development Banks’ Climate Finance 39 E ANNEX E. TYPES OF INSTRUMENT The types of financial instrument containing climate of debt instruments and support financial finance as reported for 2018 include those listed sector projects (including those of capital below. In all cases, a granular approach is applied market investments and trade financiers when tracking climate finance. and non-financial-sector business activities corresponding to activities across sectors. Advisory services: MDB advisory services a)  include advising national and local governments Investment loans: Loans are transfers for f)  on a variety of topics, for instance how to which repayment is required. improve their investment climate and strengthen basic infrastructure. The MDB tracks and reports Investment loans can be used for any the costs of managing advisory programmes, development activity that has the overall which may consist of staff time, studies, and objective of promoting sustainable social and/or training with clients. Similar to investments, economic development, in line with the MDBs’ some programmes are 100 per cent climate- mandates. Proceeds used for activities included related and some have a climate component in the joint MDB methodology for tracking tracked in the overall programme budget. climate finance count as climate finance. b) Equity: Ownership interest in an enterprise i. Refinancing: Refinancing is the replacement of that represents a claim on the assets of the an existing debt obligation with another debt entity in proportion to the number and class obligation under different terms. of shares owned. Refinancing can be classified as climate c) Grants: Transfers made in cash, goods or finance subject to the following terms: services for which no repayment is required. Grants are provided for investment support, Refinancing of assets that have reached • policy-based support and/or technical financial closure for the entire term of the assistance and advice. project or that have passed the break-even point, provided that the client commits d) Bond: A type of bond, the issuance of which to originating new climate deals for that is done by a client and supported by an MDB, amount within the next 24 months. where the proceeds are applied exclusively to financing or re-financing, in part or in full, new Refinancing of assets where financial • and/or existing climate projects. closure has not yet taken place, or the project has not yet been fully constructed Only the percentage of proceeds that are and is not yet operational. used for activities included in the joint MDB methodology for tracking climate finance count Bringing in additional long-term funds • as climate finance. to replace short-term bridge loans or strengthening the financial terms of the e) Guarantees: Guarantees are instruments climate-related asset through long-term provided by an MDB to cover commercial and loans with better terms than those of non-commercial risk. previous loans (for example, they correct a mismatch of maturity, adjust the costs of Guarantees support private sector investments, asset construction, reduce exchange rate commercial borrowing by sovereign or state- impact, replace expensive debt, and so on) owned enterprises, and/or commercial borrowing by the sovereign for budget financing Refinancing climate finance projects that • and to support reform programmes. Guarantees have already been constructed or are are extended for eligible projects that enable already operational but have not passed the financing partners to transfer certain risks break-even point (for example, recently built that they cannot easily absorb or manage on solar projects). The break-even conditions their own. Guarantees cover a wide variety are confirmed by the investment team. 40 2018 Joint Report on Multilateral Development Banks’ Climate Finance Working capital: Working capital is finance ii.  provided for operational expenditures. Working capital is considered to be climate finance if leads to, enables or supports the implementation and operation of activities included in the joint MDB methodology for tracking climate finance. Lines of credit: Lines of credit provide a g)  guarantee that funds will be made available but no financial asset exists until funds have been advanced. Climate finance is the proportion of the credit line that is committed to activities defined as eligible in the MDBs' climate finance tracking methodologies. Policy-based financing (PBF): Financing h)  for a public borrower that helps the borrower to address actual or anticipated requirements for development finance of domestic or external origins. Policy-based financing supports a programme of policy and institutional actions for a particular theme or sector of national policy. While it does not use the cost estimation approach for each policy action, disbursements of PBF are conditional on the borrower fulfilling their policy commitments in the lending agreement. The proportion of this public financing that is reported as climate finance is the same as the proportion of the climate-related "prior actions" agreed in order to allow the policy-based financing to proceed. For example, if one in three prior actions are climate-related, one third of the resulting policy-based financing would be counted as climate finance. Results-based financing (RBF): Results-based i)  financing directly links the disbursement of funds to measurable results in a government- owned programme. RBF aims to increase accountability and incentives for delivering and sustaining results, improve the effectiveness and efficiency of government-owned sector programmes, promote institutional development and enhance the effectiveness of development. Proceeds used for activities included in the joint MDB methodology for tracking climate finance count as climate finance. 2018 Joint Report on Multilateral Development Banks’ Climate Finance 41 F ANNEX F. CLIMATE CO-FINANCE Total financing of climate activity includes climate mobilisation for tracking the private share of climate co-finance, that is, the amount of financial resources co-finance. This methodology focuses on assessing that external entities contribute. The MDBs are the private finance mobilised by an MDB, on a project- implementing the definitions and recommendations by-project basis, such as private direct mobilisation of the MDB taskforce on private investment and private indirect mobilisation.25 A.F.1. Total Figure A.F.1. Totalactivity activityfinancing, financing,by bytype offinance typeof finance Private indirect Private direct MDB own account External Public co-finance mobilisation mobilisation resources managed by MDB Private co-financing MDB climate finance 25 http://documents.worldbank.org/curated/en/495061492543870701/pdf/114403-WP-PUBLIC-cedvp-14p-JointMDBReportingonPrivateInvestment MobilizationMethodologyReferenceGuide.pdf 42 2018 Joint Report on Multilateral Development Banks’ Climate Finance G ANNEX G. GEOGRAPHICAL COVERAGE OF THE REPORT The inclusion of economies in Annex G, and terms opinion by the MDBs or their members concerning the and names used in this report to refer to geographical status of any country, territory, grouping and unit, or or other territories, political and economic groupings delimitation of its borders, or sovereignty. and units, do not constitute and should not be construed as constituting an express or implied Economy-level information on MDB climate finance position, endorsement, acceptance or expression of for 2015-18 is available in Table A.G.4. Table A.G.1. List of economies covered by at least one of the MDBs and taken into account for climate finance data presented in this report26 EAST ASIA AND THE PACIFIC Cambodia Laos Nauru Thailand China Malaysia Palau Timor-Leste Cook Islands Marshall Islands Papua New Guinea Tonga Fiji Micronesia Philippines Tuvalu Indonesia Mongolia Samoa Vanuatu Kiribati Myanmar Solomon Islands Vietnam EU-12 Bulgaria Estonia Latvia Romania Croatia Greece Lithuania Slovak Republic Cyprus Hungary Poland Slovenia LATIN AMERICA AND THE CARIBBEAN Anguilla Colombia Haiti Saint Kitts and Nevis Antigua and Barbuda Costa Rica Honduras Saint Lucia Argentina Dominica Jamaica Saint Vincent and the Grenadines Bahamas Dominican Republic Mexico Suriname Barbados Ecuador Montserrat Trinidad and Tobago Belize El Salvador Nicaragua Uruguay Bolivia Grenada Panama Venezuela Bonaire, Saint Eustatius Guadeloupe Paraguay and Saba Brazil Guatemala Peru Chile Guyana Saint-Barthélemy MIDDLE EAST AND NORTH AFRICA Algeria Israel Morocco Tunisia Bahrain Jordan Oman United Arab Emirates Egypt Kuwait Qatar Western Sahara Iran Lebanon Saudi Arabia Yemen Iraq Libya Syria West Bank and Gaza (Continued overleaf) 26 The list of EU countries shown here for which data is presented in this report excludes other EU countries where the EIB supports climate action. 2018 Joint Report on Multilateral Development Banks’ Climate Finance 43 Table A.G.1. List of economies covered by at least one of the MDBs and taken into account for climate finance data presented in this report26 (continued) SOUTH ASIA Afghanistan Bhutan Maldives Pakistan Bangladesh India Nepal Sri Lanka NON-EU EUROPE AND CENTRAL ASIA 27 Albania Georgia Montenegro Turkey Armenia Kazakhstan North Macedonia Turkmenistan Azerbaijan Kyrgyz Republic Russia Ukraine Belarus Kosovo Serbia Uzbekistan Bosnia and Herzegovina Moldova Tajikistan SUB-SAHARAN AFRICA Angola Djibouti Madagascar Saint Helena Benin Equatorial Guinea Malawi Senegal Botswana Eritrea Mali Seychelles Burkina Faso Eswatini Mauritania Sierra Leone Burundi Ethiopia Mauritius South Africa Cameroon Gabon Mayotte Somalia Cape Verde Gambia Mozambique South Sudan Central African Republic Ghana Namibia Sudan Chad Guinea Niger Tanzania Comoros Guinea-Bissau Nigeria Togo Congo Kenya Réunion Uganda Côte d’Ivoire Lesotho Rwanda Zambia Democratic Republic Liberia São Tomé and Príncipe Zimbabwe of the Congo Multi-regional refers to MDB operations implemented across two or more of the regions above, including activities with a global scope. 44 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table A.G.2. Economies categorised as least-developed economies, or small island states, or both LEAST-DEVELOPED ECONOMY Afghanistan Democratic Republic Madagascar Sierra Leone of the Congo Angola Djibouti Malawi Somalia Bangladesh Equatorial Guinea Mali South Sudan Benin Eritrea Mauritania Sudan Bhutan Ethiopia Mozambique Tanzania Burkina Faso Gambia Myanmar Togo Burundi Guinea Nepal Uganda Cambodia Laos Niger Yemen Central African Republic Lesotho Rwanda Zambia Chad Liberia Senegal SMALL ISLAND STATE American Samoa Cuba Mauritius Saint Lucia Anguilla Dominica Micronesia Saint Vincent and the Grenadines Antigua and Barbuda Dominican Republic Montserrat Samoa Aruba Fiji Nauru Seychelles Bahamas Grenada New Caledonia Suriname Barbados Guyana Niue Tonga Belize Jamaica Palau Trinidad and Tobago Cape Verde Maldives Papua New Guinea Cayman Islands Marshall Islands Puerto Rico Cook Islands Martinique Saint Kitts and Nevis BOTH LEAST-DEVELOPED ECONOMY AND SMALL ISLAND STATE Comoros Kiribati Timor-Leste Guinea Bissau São Tomé and Príncipe Tuvalu Haiti Solomon Islands Vanuatu Least-developed economies are defined according to the UNFCCC list28 and small island states are defined according to the Alliance of Small Island States (AOSIS) list, excluding developed economies. Note that some least-developed economies are also small island states, as shown in Table A.G.2. 28 http://unfccc.int/cooperation_and_support/ldc/items/3097.php 2018 Joint Report on Multilateral Development Banks’ Climate Finance 45 Table A.G.3. Economies categorised in accordance with the World Bank groupings list dated June 2018 HIGH INCOME Andorra Denmark Liechtenstein Saudi Arabia Antigua and Barbuda Estonia Lithuania Seychelles Argentina Faroe Islands Luxembourg Singapore Aruba Finland Macao China Sint Maarten (Dutch part) Australia France Malta Slovak Republic Austria French Polynesia Monaco Slovenia Bahamas Germany Netherlands South Korea Bahrain Gibraltar New Caledonia Spain Barbados Greece New Zealand Sweden Belgium Greenland Northern Mariana Islands Switzerland Bermuda Guam Norway Taipei China British Virgin Islands Hong Kong China Oman Trinidad and Tobago Brunei Darussalam Hungary Palau Turks and Caicos Islands Canada Iceland Panama United Arab Emirates Cayman Islands Ireland Poland United Kingdom Channel Islands Isle of Man Portugal United States of America Chile Israel Puerto Rico Uruguay Croatia Italy Qatar Virgin Islands (USA) Curaçao Japan Saint Kitts and Nevis Cyprus Kuwait Saint Martin (French part) Czech Republic Latvia San Marino UPPER-MIDDLE INCOME Albania Cuba Kazakhstan Romania Algeria Dominica Lebanon Russia American Samoa Dominican Republic Libya Saint Lucia Armenia Ecuador Malaysia Saint Vincent and the Grenadines Azerbaijan Equatorial Guinea Maldives Samoa Belarus Fiji Marshall Islands Serbia Belize Gabon Mauritius South Africa Bosnia and Herzegovina Grenada Mexico Suriname Botswana Guatemala Montenegro Thailand Brazil Guyana Namibia Tonga Bulgaria Iran Nauru Turkey China Iraq North Macedonia Turkmenistan Colombia Jamaica Paraguay Tuvalu Costa Rica Jordan Peru Venezuela (Continued overleaf) 46 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table A.G.3. Economies categorised in accordance with the World Bank groupings list dated June 2018 (continued) LOWER-MIDDLE INCOME Angola Eswatini Mauritania Solomon Islands Bangladesh Georgia Micronesia Sri Lanka Bhutan Ghana Moldova Sudan Bolivia Honduras Mongolia Timor-Leste Cape Verde India Morocco Tunisia Cambodia Indonesia Myanmar Ukraine Cameroon Kenya Nicaragua Uzbekistan Congo Kiribati Nigeria Vanuatu Côte d’Ivoire Kosovo Pakistan Vietnam Djibouti Kyrgyz Republic Papua New Guinea West Bank and Gaza Egypt Laos Philippines Zambia El Salvador Lesotho São Tomé and Príncipe LOW INCOME Afghanistan Ethiopia Mozambique Syria Benin Gambia Nepal Tajikistan Burkina Faso Guinea Niger Tanzania Burundi Guinea-Bissau North Korea Togo Central African Republic Haiti Rwanda Uganda Chad Liberia Senegal Yemen Comoros Madagascar Sierra Leone Zimbabwe Democratic Republic Malawi Somalia of the Congo Eritrea Mali South Sudan 2018 Joint Report on Multilateral Development Banks’ Climate Finance 47 Table A.G.4. Climate finance by economy, for 2015, 2016, 2017 and 2018 (in US$ million) The list below includes economies that received climate finance in 2015, 2016, 2017 and 2018. Some economies may not appear on this list even though they are covered by one or more of the MDBs. Those economies where the EIB is active that are outside of the geographical coverage of the report are marked with a *. Economies 2015 2016 2017 2018 Total Economies 2015 2016 2017 2018 Total Afghanistan – 173 147 144 464 Costa Rica 200 0 5 4 209 Albania 110 174 15 111 410 Côte d’Ivoire 5 73 296 346 720 Algeria 1 – – 0 1 Croatia 174 16 68 311 569 Angola – 15 72 43 130 Cyprus 22 27 46 34 129 Anguilla – – – 0 – Czech 91 11 144 59 305 Republic* Antigua and – – – 0 – Barbuda Democratic 10 153 128 6 297 Republic of Argentina 314 508 2,276 1,434 4,532 the Congo Armenia 108 45 132 45 330 Denmark* 115 2 151 175 442 Azerbaijan 16 171 250 20 457 Djibouti – 2 0 41 43 Austria* 1,101 1,188 852 344 3,484 Dominica – – – 39 39 Bahamas 1 1 44 100 146 Dominican 1 137 3 509 650 Bahrain – – – 0 – Republic Bangladesh 899 1,315 200 1,296 3,710 Ecuador 582 325 27 792 1,726 Barbados 1 5 0 0 6 Egypt 511 693 1,585 1,597 4,386 Belarus 43 49 7 241 340 El Salvador – 0 29 52 81 Belgium* 427 1,351 689 697 3,164 Equatorial – – – 0 – Guinea Belize 51 4 20 2 77 Eritrea – – 7 0 7 Benin 21 3 44 126 194 Estonia 47 89 5 8 149 Bhutan 2 17 7 4 30 Eswatini 3 31 – 58 92 Bolivia 405 373 321 363 1,462 Ethiopia 79 206 192 1,154 1,631 Bosnia and 27 95 101 110 333 Herzegovina Fiji 53 31 15 0 99 Botswana – – 143 0 143 Finland* 420 1,357 639 942 3,359 Brazil 548 914 766 1,473 3,701 France* 4,185 3,124 4,461 2,673 14,443 Bulgaria 58 156 112 137 463 Gabon – 43 24 95 162 Burkina Faso 9 7 166 130 312 Gambia – 5 9 53 67 Burundi 25 22 28 27 102 Georgia 109 187 88 110 494 Cambodia 46 85 86 117 334 Germany* 1,669 2,390 1,768 1,868 7,695 Cameroon 2 17 329 186 534 Ghana 32 72 81 63 248 Cape Verde 1 – 15 0 16 Greece* 216 91 673 225 1,205 Central African 7 – 10 23 40 Grenada – – 1 12 13 Republic Guadeloupe – – – 0 – Chad 6 – – 41 47 Guatemala 0 3 22 31 56 Chile 119 153 208 7 487 Guinea – 7 17 64 88 China 1,091 2,349 2,305 2,019 7,764 Guinea- 10 – 3 12 25 Colombia 182 904 747 719 2,552 Bissau Comoros 5 – 4 0 9 Guyana 1 7 2 15 25 Congo – 25 2 58 85 Haiti 41 4 143 234 422 Cook Islands – 4 12 0 16 (Continued overleaf) 29  ver time, the geographical coverage of the Joint Report on Multilateral Development Banks’ Climate Finance has changed as the economic status of O certain economies has altered and/or they have been included or excluded from the operations of various MDBs. Those economies (such as Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom) have always been economies where the EIB operates, but have not appeared in all past editions of the report. To increase the transparency of total MDB climate finance, the list in Table A.G.4 includes total climate finance from all MDBs, including for all economies where the EIB operates. 48 2018 Joint Report on Multilateral Development Banks’ Climate Finance Table A.G.4. Climate finance by economy, for 2015, 2016, 2017 and 2018 (in US$ million) (continued) Economies 2015 2016 2017 2018 Total Economies 2015 2016 2017 2018 Total Honduras 253 44 46 99 442 Netherlands* 630 465 367 913 2,375 Hungary 497 155 31 155 838 Nicaragua 207 49 235 56 547 Iceland* – 189 – – 189 Niger 12 163 47 29 251 India 1,948 3,017 2,678 3,703 11,346 Nigeria 1 102 34 1,155 1,292 Indonesia 674 578 873 773 2,898 North 27 14 8 18 67 Macedonia Iran – – – 0 – Norway* 0 6 347 74 428 Iraq 8 610 321 446 1,385 Oman – – – 0 – Ireland* 188 219 148 221 775 Pakistan 1,161 673 1,018 1,305 4,157 Israel 160 – – 0 160 Palau – – – 2 2 Italy* 2,593 2,437 2,492 1,964 9,486 Panama 112 25 350 171 658 Jamaica 21 57 52 290 420 Papua New 36 6 127 8 177 Jordan 238 412 517 272 1,439 Guinea Kazakhstan 438 521 389 260 1,608 Paraguay 4 4 51 294 353 Kenya 260 159 581 1,161 2,161 Peru 85 309 306 201 901 Kiribati – 11 – 2 13 Philippines 657 638 167 505 1,967 Kosovo 74 56 31 48 209 Poland 1,189 1,806 1,562 1,286 5,843 Kuwait – – – 0 – Puerto Rico – – – 0 – Kyrgyz 73 179 55 118 425 Qatar – – – 0 – Republic Réunion – – – 0 – Laos 106 13 40 109 268 Romania 249 196 887 768 2,100 Latvia 247 2 86 0 335 Russia 55 0 0 0 55 Lebanon 303 27 82 581 993 Rwanda 63 57 203 217 540 Lesotho – 11 5 15 31 Saint Helena – – – 0 – Liberia 3 68 26 4 101 Saint Kitts – – – 0 – Libya – – – 0 – and Nevis Lithuania 183 215 95 157 650 Saint Lucia – – 2 35 37 Saint Vincent – – 9 0 9 Luxembourg* 60 3 0 – 63 and the Madagascar – 37 131 89 257 Grenadines Malawi 58 1 210 218 487 Samoa 22 – 4 5 31 Malaysia – – – 0 – São Tomé 4 6 11 0 21 and Príncipe Maldives 5 35 19 2 61 Saudi Arabia – – – 0 – Mali 0 9 104 94 207 Senegal 41 16 679 272 1,008 Marshall 2 1 21 32 56 Islands Serbia 100 143 290 621 1,154 Mauritania – 6 – 11 17 Seychelles 25 – – 2 27 Mauritius 9 – – 1 10 Sierra Leone 0 10 2 51 63 Slovak 302 87 53 281 723 Mayotte – – – 0 – Republic Mexico 330 277 1,211 1,193 3,011 Slovenia 154 18 47 1 220 Micronesia – – – 0 0 Solomon – 10 36 10 56 Moldova 45 106 110 7 268 Islands Mongolia 13 44 150 356 563 Somalia – 8 – 1 9 Montenegro 62 1 68 25 156 South Africa 55 59 103 544 761 Montserrat – – – 0 – South Sudan – 1 39 0 40 Morocco 914 729 668 1,057 3,368 Spain* 1,973 560 1,876 1,526 5,934 Sri Lanka 84 212 574 72 942 Mozambique 111 51 55 224 441 Sudan 5 – 13 41 59 Myanmar 81 107 212 178 578 Suriname 1 8 26 32 67 Namibia – – 58 46 104 Sweden* 557 417 1,431 1,038 3,442 Nauru – – 3 62 65 Switzerland* – 6 – – 6 Nepal 567 111 204 435 1,317 (Continued overleaf) 2018 Joint Report on Multilateral Development Banks’ Climate Finance 49 Table A.G.4. Climate finance by economy, for 2015, 2016, 2017 and 2018 (in US$ million) (continued) Economies 2015 2016 2017 2018 Total Economies 2015 2016 2017 2018 Total Syria – – – 0 – Venezuela 0 – – 0 – Tajikistan 149 34 232 192 607 Vietnam 385 1,211 862 210 2,668 Tanzania 243 138 549 198 1,128 West Bank 5 1 2 15 23 Thailand 176 91 130 533 930 and Gaza Timor-Leste – 5 9 2 16 Western – – – 0 – Sahara Togo – – 6 42 48 Yemen – – – 78 78 Tonga 15 8 1 14 38 Zambia 68 20 140 113 341 Trinidad and 1 1 – 0 2 Tobago Zimbabwe 12 18 24 0 54 Tunisia 19 96 387 265 767 Global 169 77 – 0 246 Turkey 2,582 2,135 1,790 1,450 7,957 Multi-regional 147 52 193 339 731 Turkmenistan 1 1 6 5 13 Regional 1,427 409 1,436 2,143 5,415 Tuvalu 7 3 1 10 21 Regional – – – – 228 228 EU countries* Uganda 124 15 166 621 926 Notes: Ukraine 940 865 833 519 3,157 n 2015 climate finance figures for the Czech Republic were 1. I reported under the EU-12. United Arab – – – 0 –  limate finance for figures Greece were reported under the EU-12 2. C Emirates starting from the 2016 report. United 4,010 3,272 376 255 7,914  IB total climate finance in countries of operation not included 3. E Kingdom* within the geographical scope of the Joint Report on Multilateral Development Banks' Climate Finance was US$ 18.2 billion in Uruguay 139 100 113 143 495 2015, US$ 17.1 billion in 2016, US$ 15 billion in 2017 and Uzbekistan 61 55 270 1,162 1,548 US$ 13.7 billion in 2018. Thus, EIB global own-resource climate finance in these years was US$ 23 billion in 2015, US$ 21.6 billion Vanuatu 23 51 17 0 91 in 2016, US$ 21.9 billion in 2017 and US$ 19.1 billion in 2018. 50 2018 Joint Report on Multilateral Development Banks’ Climate Finance NOTES 2018 Joint Report on Multilateral Development Banks’ Climate Finance 51 NOTES 52 2018 Joint Report on Multilateral Development Banks’ Climate Finance European Bank for Reconstruction and Development One Exchange Square London EC2A 2JN United Kingdom www.ebrd.com