97398 2014 JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS’ CLIMATE FINANCE download access: www .worldbank .org/climate/MDBclimatefinance2014 contact information: jointclimatefinancereport2014@worldbank .org 2014 JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS’ CLIMATE FINANCE June 2015 This report was written by a group of Multilateral Development Banks (MDBs), comprised of 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 (IDB), and the International Finance Corporation (IFC) and the World Bank (WB) from the World Bank Group (WBG). The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the MDBs, their Boards of Executive Directors, or the governments they represent. Contents PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 1: MDB CLIMATE FINANCE, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Part A: Total MDB Climate Finance, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Sources of climate finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Nature of recipient—Public and private recipients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Instrument type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Geographical distribution of finance by region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Part B: MDB Climate Finance Commitments, 2011–2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Part C: MDB Adaptation Finance, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Part D: MDB Mitigation Finance, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2: GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Part A: Definitions and Clarifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Part B: Geographical Coverage of the Report and Regional Breakdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Part C: Guidance Section on the Adaptation Finance Tracking Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Part D: Joint MDB Approach for Mitigation Finance Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Annex A. Finance with Dual Adaptation and Mitigation Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Annex B. Instrument Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Annex C. MDB Mitigation Finance Outside the Joint Methodology . . . . . . . . . . . . . . . . . . . . . . . . . 42 PREFACE To stabilize warming at less than 2 degrees Celsius, as the international community agreed in 2009, the world will have to cut greenhouse gas emissions to net zero before 2100. Finance and economic policy that helps shift the world to a cleaner trajectory will be the key to mobilizing that global response. Today, it is increasingly clear that the finance required for a successful, orderly transformation to a growing low-carbon and resilient global economy is counted in the trillions and not billions. The immediate challenge of climate finance is to meet the promise made by developed countries to mobilize USD 100 billion a year by 2020. Meeting this commitment is critical to building trust and confidence around the UN climate negotiations in Paris later this year. The Multilateral Development Banks (MDBs), together with other public development finance institutions, play a strategic role in smartly deploying scarce government resources and leveraging much larger, and longer-term, private investments. This fourth edition of the Joint Report on MDB Climate Finance reveals the important part they play in delivering development and climate action. In 2014, the MDBs committed over USD 28 billion for climate action in developing and emerging economies, bringing total commitments of the past four years to over USD 100 billion. This financing has supported policy changes and investments that provide development, adaptation and mitigation benefits directly to our client countries. It has helped, for example, to improve agriculture and landscape management, made coastal and riverine infrastructure more resilient, improved the efficiency of water use and water management in cities and industries, and supported community-driven adaptation activities. It has ramped up mitigation efforts through energy efficiency, renewable energy and support for lower-carbon transport options. There have increasingly been questions on what gets counted as climate finance. As a group of the MDBs, we have developed a transparent methodology. Over the last year, we have harmonized our principles for tracking climate mitigation finance with the International Development Finance Club (which consists of development banks of national and sub-regional origin) and have started a process for harmonizing approaches for adaptation finance. As MDBs, we are committed to work with clients, other development finance institutions and stakeholders to provide transparent, credible and robust information that demonstrates how climate finance is flowing. We hope that this Joint Report on MDB Climate Finance provides useful information on MDB development finance with climate benefits, and help to guide decision making at the Third International Conference on Financing for Development in Addis Ababa next month, as well as key data for the Paris climate discussions. EXECUTIVE SUMMARY Given the pivotal role of public finance agencies in 23 billion, was dedicated to mitigation; and 18 percent, scaling up climate finance, Multilateral Development or USD 5 billion, to adaptation, as illustrated in Figure A Banks (MDBs) have a major role to play in mainstreaming (a small amount of this finance has dual, adaptation and climate change and in providing finance in an effective, mitigation, benefits—please see Annex 1 for details). Of catalytic manner. Transparent and credible information the total commitments, 91 percent came from MDBs’ on finance flows are essential to demonstrate the own resources, while the remaining 9  percent, or effectiveness of delivering impacts on the ground. USD 2.6  billion, came from external resources such as bilateral or multilateral donors, the Global Environment This is the fourth edition of the Joint Report on MDB Facility (GEF), and the Climate Investment Funds (CIF). Climate Finance. The report covers financing for climate change mitigation and adaptation projects In 2014, MDB climate finance covered a broad geographical and activities, in developing and emerging economies, area: South Asia received the most with 21 percent of total committed by this group of MDBs1 in 2014.2 climate finance commitments, followed by Latin America and the Caribbean with 17 percent; non-EU Europe and This report contains the following new information, not Central Asia with 16 percent; and Sub-Saharan Africa with presented in previous years: 15  percent. Regarding sectoral coverage, 23 percent of • Overview of MDB climate finance from 2011 to 2014; • Information about the financial instruments used by MDBs for climate finance; and MDBs Total Climate Finance in 2014 was USD 28,345 million • Additional thematic regional coverage, including small island states and least developed countries. Adaptation Finance Data is tracked and reported in a granular manner, 18% corresponding only to the financing of those components (and/or subcomponents) or elements/ proportions of projects that directly contribute to (or promote) mitigation and/or adaptation. Adaptation finance is calculated using the MDB methodology, which is based on a context- and location-specific approach. Mitigation finance is also based on the MDB methodology (following an activity typology), and is closely aligned with Common Principles for Climate Mitigation Finance Tracking agreed by the MDBs and by the International Development Finance Club (IDFC) and Mitigation published in March 2015. Finance 82% The MDBs committed over USD 28 billion to projects in developing and emerging economies to address Figure A: Split of MDB Climate Adaptation and climate change in 2014. Eighty-two percent, or over USD Mitigation Finance, 2014 1 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 (IDB), and the International Finance Corporation (IFC) and the World Bank (WB) from the World Bank Group (WBG). 2 Data covers fiscal year 2014. 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. 5 Executive Summary adaptation finance went to “Energy, Transport and Other 27 percent; and “Energy Efficiency,” 22 percent, with the Built Environment and Infrastructure” while 19 percent other categories accounting for the balance. went to “Other Agricultural and Ecological Resources”; 17 percent went to “Crop Production and Food The MDBs have been jointly publishing climate finance Production”; and another 17 percent went to “Coastal and figures for the past four years. Since 2011, the MDBs have Riverine Infrastructure (including built flood protection collectively committed over USD 100 billion to address infrastructure).” Regarding mitigation finance, “Renewable climate change in developing and emerging economies. Energy” comprised 35 percent of the total; “Transport,” Figure B shows the annual numbers per institution. 30,000 30,000 28,345 27,014 26,846 23,803 25,000 25,000 9,229 WB 8,981 11,090 20,000 20,000 IFC 6,757 2,558 IDB 1,681 2,669 15,000 2,170 1,588 2,461 15,000 EIB 1,870 1,220 5,637 5,214 EBRD 10,000 3,663 5,224 10,000 ADB 3,729 3,131 3,460 4,111 5,000 5,000 AfDB 3,177 3,284 3,268 2,856 Total 1,639 2,220 1,205 1,916 0 0 2011 2012 2013 2014 Figure B: Total Climate Financing by MDB, 2011–2014 (USD millions) Note: EIB numbers for all four years are restricted to developing and emerging economies in transition, therefore excludes EU-15 countries where EIB is also active. EIB numbers for 2011 were amended (from that in the 2011 reports) to include EU-13 climate finance numbers, allowing for full geographical comparability among all four years. Introduction The Joint Report on MDB Climate Finance captures The 2014 report includes the following additional a particular context of activities that Multilateral information, not included in previous years, based on Development Banks (MDBs) carry out in developing interest expressed by some groups and the availability and emerging economies. The context is built on the of additional data: premise that development finance is being provided in a world shaped by climate change. This is the fourth year • Overview of MDB climate finance from 2011 to 2014; that MDBs have carried out joint reporting on climate finance.3 • Information about financial instruments used by MDBs for climate finance; The report is based on the joint MDB approach for climate finance tracking and reporting, for which details • Additional thematic regional coverage, including are provided in Section 2. The MDBs have worked small island states and least developed countries.6 consistently to improve this joint approach and refine The joint approach serves as a tool for the MDBs to reporting. This year’s report was coordinated by the consistently measure their financial contribution to World Bank Group and prepared by professional staff climate change in a transparent and harmonized manner. from the following MDBs: African Development Bank The MDBs are also in contact with other stakeholders (AfDB), Asian Development Bank (ADB), European Bank such as the Secretariat of the United Nations for Reconstruction and Development (EBRD), European Framework Convention on Climate Change (UNFCCC) Investment Bank (EIB), Inter-American Development and the Organization for Economic Co-operation and Bank (IDB), and the International Finance Corporate Development (OECD) to discuss commonalities and (IFC) and World Bank (WB) from the World Bank Group differences among climate finance tracking approaches (WBG)—all together referred in the report as the MDBs. with the aim of potential harmonization. In 2015, the MDBs have worked closely with the MDB activities on climate change extend beyond International Development Finance Club (IDFC), a group financial support in many areas, to include, for example, of 22 leading development finance institutions and providing advice on project design and policy dialogue. regional banks around the world, to more closely align Often, technical support to clients on climate change is their approaches on mitigation finance tracking. On small in financial terms, but delivers major impacts for March 31st, 2015, the MDBs and the IDFC jointly published low-emission and climate-resilient development. the Common Principles for Climate Mitigation Finance Tracking,4 consisting of a set of common definitions and Regarding adaptation, MDBs are aware that good guidelines, including the list of activities for tracking adaptation goes beyond purely physical investments. mitigation finance, and agreed to continuously work on In some cases, the project can influence practices and improving data transparency, collection processes and policies beyond its specified activities; however, these comparability of reporting.5 The MDBs and the IDFC benefits are not necessarily tracked as adaptation are also in the process of collaborating on principles for finance. Although this report tracks finance, the MDBs tracking adaptation finance. 3 Mitigation Report 2011: http://www.eib.org/attachments/documents/joint_mdb_report_on_mitigation_finance_2011.pdf (coordinated by the IDB); Adaptation Report 2011: http://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/Joint%20MDB%20Report%20 on%20Adaptation%20Finance%202011.pdf (coordinated by the AfDB); Joint Report 2012: http://www.ebrd.com/downloads/sector/sei/climate- finance-2012.pdf (coordinated by the EBRD); and Joint Report 2013: http://www.eib.org/attachments/documents/joint_report_on_mdb_ climate_finance_2013.pdf (coordinated by the EIB). 4 Retrieve at http://www.worldbank.org/content/dam/Worldbank/document/Climate/common-principles-for-climate-mitigation-finance- tracking.pdf. 5 2014 mitigation finance tracking follows the MDB joint typology (see Part D), as data was collected prior to the publication of these Common Principles. However, MDBs will adhere to the Common Principles in next year’s report. 6 Small island states include the 39 members of AOSIS, excluding developed countries. The 2015 list of least developed countries used by the United Nations Framework Convention on Climate Change (UNFCCC) is used in this report. Both lists are available in Section 2, Part B. 7 Introduction also prioritize support for adaptive management/ joint approach: definitions, geographical coverage, adaptive procedures such as changes in operating and sectoral breakdown. It also contains a guidance or maintenance procedures to make projects more section and provides case studies to illustrate the MDB resilient. The reporting of adaptation finance is limited adaptation and mitigation finance tracking approach. solely to project activities that are clearly linked to Annexes A to C provide additional information and the climate vulnerability context, which is important numbers on A) Finance with dual, adaptation and for distinguishing between a development project mitigation, benefits; B) Financial instruments used contributing to climate change adaptation and a by MDBs for climate finance; and C) MDB mitigation standard “good development” project. finance outside of the Joint Methodology. This report has two main sections. Section 1 contains This report does not cover public or private capital total MDB climate finance numbers for 2014, broken mobilized by MDB climate finance. A parallel group down by adaptation and mitigation and by sector and is working on the development of a harmonized geographic region, as well as MDB climate finance methodology to be used toward that end. since 2011. Section 2 provides explanations on the MDB SECTION 1. MDB CLIMATE FINANCE, 2014 Part A: Total MDB Climate Finance, 2014 Total climate finance provided by the MDBs in 2014 in MDBs Total Climate Finance in 2014 was USD 28,345 million developing and emerging economies was USD 28,345 Adaptation million, including funds from the MDBs’ own resources Finance and funding from external resources channeled through 18% the MDBs.7 Total climate finance is equal to the sum of mitigation, adaptation, and dual benefit finance from the MDBs’ own resources as well as external resources. Mitigation finance totaled USD 23,276 million, or 82 percent, of the total commitments, while adaptation finance represented 18 percent of total commitments, or USD 5,069 million, as illustrated in Figure 1. It is important to note that some components and/or subcomponents or elements within projects contribute to both mitigation and adaptation (thereby delivering dual benefits for both mitigation and adaptation); examples Mitigation include (a) an afforestation project to prevent slope Finance 82% erosion in an area with increased risk of flash floods (project has both mitigation and adaptation benefits); Figure 1: Split of MDB Climate Adaptation and and (b) the incremental cost of adding climate resilience Mitigation Finance, 2014 to a renewable energy project (the whole project has mitigation benefit and the incremental cost of adding climate resilience measures 9,229 9,000 is adaptation). Because this financing is important, 8,000 despite currently making up 7,000 a small percentage of total 6,000 6,122 climate finance, it is reported 5,214 separately when MDB systems 5,000 USDm 4,111 allow.8 The total commitment 4,000 with dual benefits in 2014 was 2,856 3,000 2,558 USD 65 million and is split 1,916 5,083 2,461 evenly between adaptation 2,000 3,882 2,137 1,160 2,352 2,540 3,106 finance and mitigation finance 1,000 in the report, with specific 719 756 230 130 109 18 0 information broken down in ADB AfDB EBRD EIB IDB IFC WB Annex  A. Figure  2 provides the total climate finance Adaptation Finance Mitigation Finance by MDB for 2014, with the breakdown of adaptation and Figure 2: Total Climate Finance Split between Adaptation and Mitigation Finance mitigation finance. by MDB Respectively (USD millions) 7 External resources refers to operations supported by bilateral donors and dedicated climate finance entities such as GEF and CIF, which might also be reported to the OECD Development Assistance Committee by contributor countries. 8 In 2014, ADB, EBRD, IDB, and IFC tracked dual benefits; though some MDBs, such as the ADB and IDB, had no commitments with dual benefits. 9 Section 1. Part A: Total MDB Climate Finance, 2014 Table 1: MDB Resources for Total Climate Finance, 2014 USD Millions Total Climate Total Finance as Adaptation Mitigation Climate a % of MDB MDB Finance Finance Finance MDB Finance/a Finance ADB 719 2,137 2,856 16,196 18% AfDB 756 1,160 1,916 7,000 27% EBRD 230 3,882 4,111 11,448 36% EIB 130 5,083 5,214 22,856 23% IDB 109 2,352 2,461 14,483 17% IFC 18 2,540 2,558 17,495 15% WB 3,106 6,122 9,229 40,843 23% Total 5,069 23,276 28,345 130,321 22% /a MDB finance includes MDB own resources and external resources for all its financing (including non-climate commitments). Note: numbers may not add-up to the exact decimal due to rounding. This is applicable to all tables and graphs in the report. Note 2: EIB climate finance numbers (in this and all previous joint reports on MDB climate finance) are restricted to developing and emerging economies in transition, therefore excludes EU-15 countries where EIB is also active. Note 3: EBRD and WB’s MDB Finance only includes own resources. Note 4: IFC climate finance numbers reported in Table 1 include both long-term and short-term finance. IFC’s publically stated climate target is based on long-term climate finance only, which was 19% of IFC’s total investment business in FY14. Table 1 shows the breakdown per MDB of adaptation, mitigation, External and total climate finance compared to total MDB finance for Resources 9% 2014. Total climate finance as a percentage of total MDB finance was 22 percent and ranged from 12 percent to 36 percent across the MDBs. Sources of climate finance Sources of finance reported by MDBs are split between the MDBs’ own resources and external resources channeled through the MDBs. External resources include trust-funded operations (including bilateral donors and dedicated climate finance funds such as the GEF and the CIF). To prevent double counting (in particular as some external resources may already be covered in bilateral reporting), external resources managed by the MDBs are clearly separated from the MDBs’ own resources. MDB Total 2014 MDB climate finance was USD 25,744 million from Resources 91% MDBs’ own resources and USD 2,601 million in external resources. Figure 3 shows a breakdown of MDBs’ own resources and Figure 3: Share of Total Climate Finance Split external resources channeled through the MDBs for 2014. Figure between MDB Own Resources and External 4 provides a breakdown, by MDB, of climate finance provided by Resources (USD millions) own resources and external resources. 10 Section 1. Part A: Total MDB Climate Finance, 2014 9,000 8,000 8,334 7,000 6,000 5,000 USDm 4,991 4,000 3,948 3,000 2,376 2,074 2,473 2,000 1,548 895 1,000 480 368 163 223 387 719 756 85 0 ADB AfDB EBRD EIB IDB IFC WB MDB Own Resources External Resources Figure 4: Total Climate Finance Split between MDB Own Resources and External Resources by Institution (USD millions) Table 2: MDB Resources for Total Climate Finance and Respective Recipient/Borrower, 2014 USD Millions MDB Own Resources External Resources Private Public Private Public Recipient/ Recipient/ Recipient/ Recipient/ MDB Borrower Borrower Subtotal Borrower Borrower Subtotal Total ADB 504 1,872 2,376 130 350 480 2,856 AfDB 599 949 1,548 70 298 368 1,916 EBRD 2,426 1,522 3,948 61 102 163 4,111 EIB 1,401 3,590 4,991 199 24 223 5,214 IDB 1,071 1,003 2,074 220 167 387 2,461 IFC 2,370 103 2,473 69 16 85 2,558 WB — 8,334 8,334 197 698 895 9,229 Total 8,371 17,373 25,744 946 1,655 2,601 28,345 Note: At the World Bank, no climate finance commitments for 2014 were identified as having a private recipient/borrower from its own resources. Nature of recipient—Public and private recipients share of finance provided toward public and private recipients remains about the same at approximately For the second consecutive year, MDBs have reported two-thirds, as shown in Figures 5 and 6. on the nature of initial recipients/borrowers of MDB climate finance (those to whom finance will directly flow Instrument type from the MDBs), differentiating these between public and private recipients/borrowers.9 While commitment This year, for the first time, MDBs are reporting their volumes vary significantly between MDBs’ own climate finance by financial instrument type, including resources and external resources (Table 2), the relative equity, grants, loans, guarantees, and other instrument types such as purchase agreements for carbon finance 9 For the definition of public and private recipients/borrowers, refer to Section 2, Part A. 11 Section 1. Part A: Total MDB Climate Finance, 2014 MDB Own Resources in 2014 was USD 25,744 millions External Resources in 2014 was USD 2,601 millions Private Private Recipient Recipient 33% 36% Public Public Recipient Recipient 67% 64% Figure 5: Climate Finance Split between Recipient Figure 6: Climate Finance Split between Recipient Type from MDB Own Resources Type from External Resources projects.10 MDBs reported that 83 percent of total climate Equity Others 2% finance in 2014 was committed through loans, 9  percent 1% Grant through grants, 5  percent through guarantees, 2 percent 9% through equity, and 1 percent through other instruments, Guarantee as diagrammed in Figure 7. Figure 8 provides a breakdown 5% of the volumes and shares of total climate finance split by financial instruments per institution. Information on the breakdown between adaptation and mitigation finance per instrument type is provided on Annex B. Out of the USD 28,345 million in climate finance committed in 2014, only the IDB and the World Bank committed resources in the form of policy-based instruments (fast- disbursing financing instruments provided to the national budget in the form of loans or grants together with associated policy dialogue and economic and sector work in support of policy and institutional reforms) totaling USD 713 million, or 2.5  percent of MDB total climate finance. Figure  9 shows the share and nominal commitments per institution. Loan 83% Figure 7: 2014 Total Climate Finance Split by Financial Instrument 10 Equity is defined as “ownership interest in an enterprise that represents a claim on the net assets of the entity in proportion to the number and class of shares owned.” Guarantee is defined as “promise from one entity to assume responsibility for the payment of a financial obligation of another entity if such other entity fails to perform.” 12 Section 1. Part A: Total MDB Climate Finance, 2014 100% 7 212 90% 80% Others Loan 70% 1,375 1,537 6,979 Guarantee 60% Grant 2,203 2,574 5,189 3,823 Equity 50% 40% 12 30% 583 590 20% 55 517 10% 1 1,447 127 383 195 146 81 12 142 24 130 0 ADB AfDB EBRD EIB IDB IFC WB Figure 8: 2014 Climate Finance by MDB, Split by Instrument (USD millions) 100% Geographical distribution of finance by region 90% This report covers climate finance provided by the MDBs in developing and emerging economies only. In 80% 2014, South Asia received 21 percent of total climate finance commitments, followed by Latin America and 70% the Caribbean with 17 percent; non-EU Europe and Central Asia with 16 percent; and Sub-Saharan Africa 60% with 15 percent, as represented in Figure 10. Table 3 2,406 8,570 provides a breakdown of the amount of climate finance USDm 50% per region by adaptation and mitigation. 40% In addition to the geographical distribution of climate 30% commitments per region, distribution to small island Investment and states and to least developed countries is shown in TA Table 4. About 14 percent of total climate finance was 20% Policy-based delivered to least developed countries and small island Instruments 10% states combined. (Note: totals cannot be added with the 54 659 regional investment figures in Table 3 since the projects 0 in these categories fall into multiple regions.) IDB WB Figure 9: Share of Investments and Technical Assistance and Policy-based Instruments out of Total Climate Finance from IDB and WB (USD millions) 13 Section 1. Part A: Total MDB Climate Finance, 2014 1RQ(8 (XURSHDQG (8 &HQWUDO$VLD   0LG(DVW DQG1RUWK 6RXWK$VLD $IULFD   /DWLQ$PHULFD 6XE6DKDUDQ (DVW$VLD DQGWKH $IULFD DQGWKH3DFLILF &DULEEHDQ    Figure 10: Percentage of Total Climate Finance by Region Table 3: Total Climate Finance by Region USD Millions Total Adaptation Mitigation Climate By Finance Finance Finance Region % East Asia and the Pacific 678 2,168 2,846 10% EU 13 97 3,300 3,397 12% Latin America and the Caribbean 454 4,228 4,682 17% Middle East and North Africa 167 2,299 2,466 9% Non-EU Europe and Central Asia 625 3,880 4,505 16% South Asia 1,687 4,282 5,970 21% Sub-Saharan Africa 1,351 2,928 4,278 15% Multi-regional 10 191 201 1% Total 5,069 23,276 28,345 100% Table 4: Total Climate Finance to Least Developed Countries and to Small Island States USD Millions Total Adaptation Mitigation Climate Finance Finance Finance Least developed countries and small 1,532 2,450 3,982 island states Out of which:       Least developed countries 1,387 2,290 3,677 Small island states 302 290 592 Note: Small island states include the 39 members of AOSIS, excluding developed countries. The least developed countries reflect the 2015 UNFCCC list in Section 2, Part B. Some countries are in both lists. 14 Section 1. Part B: MDB Climate Finance Commitments, 2011–2014 Part B: MDB Climate Finance Commitments, 2011–2014 The MDBs have reported jointly on climate finance since 2011 and have collectively financed over USD 100 billion in climate actions over the last four years, or an average of USD 26.5 billion per year as charted in Figures 11 and 12, which provides a breakdown of adaptation and mitigation finance. 30,000 28,345 30,000 27,014 26,846 23,803 WB 25,000 25,000 9,229 IFC 8,981 11,090 20,000 6,757 20,000 IDB 1,681 2,558 2,669 EIB USDm 15,000 2,170 1,588 2,461 15,000 1,870 1,220 EBRD 5,637 3,663 5,214 5,224 ADB 10,000 10,000 4,111 AfDB 3,729 3,131 3,460 5,000 5,000 Total 3,177 3,284 3,268 2,856 1,639 2,220 1,205 1,916 0 0 2011 2012 2013 2014 Figure 11: Total Climate Financing by MDB, 2011—2014 (USD millions) Note: EIB numbers for all four years are restricted to developing and emerging economies in transition, therefore excludes EU-15 countries where EIB is also active. EIB numbers for 2011 were also amended (from that in the 2011 reports) to include EU-13 climate finance numbers, allowing for full geographical comparability among all four years. 30,000 27,014 26,846 28,345 23,803 23,276 25,000 22,494 20,890 20,000 18,953 USDm Total Climate Finance 15,000 Total Mitigation Total Adaptation 10,000 5,956 4,520 4,850 5,069 5,000 0 2011 2012 2013 2014 Figure 12: Total MDB Mitigation and Adaptation Finance, 2011–2014 (USD millions) 15 Section 1. Part C: MDB Adaptation Finance, 2014 Part C: MDB Adaptation Finance, 2014 In 2014, MDBs reported a total of USD 5,069 million in adaptation finance. Table 5 shows the total adaptation finance breakdown by MDBs’ own resources and external resources as well as reporting the nature of the recipient/borrower. Figure 13 provides the relative share per MDB of total adaptation finance in 2014, and Figure 14 provides the relative share of MDBs’ own resources and external resources by MDB. Data reported corresponds to the financing of adaptation projects or of those components, sub-components, or elements within projects that provide adaptation benefits (rather than the entire project cost). For MDBs that report dual benefits separately, this section as well as the accompanying tables and figures include the adaptation elements of that dual benefit financing but these are not shown separately. Specific information and data on dual benefit numbers can be found in Annex A. 100% 2 54 261 90% 42 152 ADB 28 14% 80% 9 AfDB 70% 15% WB 60% 61% USDm 50% EBRD 665 129 188 5% 605 2,846 40% EIB 81 3% IDB 30% 2% IFC 20% 9 0% 10% Figure 13: Share of Total Adaptation Finance per MDB, 2014 0 ADB AfDB EBRD EIB IDB IFC WB MDB Own Resources External Resources Figure 14: Share of MDB Own Resources and External Resources Commitments in Adaptation Finance, 2014 (USD millions) Table 5: MDB Resources for Adaptation Finance, 2014 USD Millions MDB Own Resources External Resources Private Public Private Public MDB Recipient Recipient Subtotal Recipient Recipient Subtotal Total ADB — 665 665 — 54 54 719 AfDB — 605 605 — 152 152 756 EBRD 79 109 188 2 40 42 230 EIB 27 101 129 — 2 2 130 IDB 15 66 81 0 28 28 109 IFC 9 — 9 9 1 9 18 WB — 2,846 2,846 — 261 261 3,107 Total 130 4,391 4,521 11 538 548 5,069 16 Section 1. Part C: MDB Adaptation Finance, 2014 Regarding the share of recipients, 97 percent of total adaptation finance by MDBs changes significantly when adaptation finance was committed to public recipients assessed against recipient type, as diagrammed in and 3 percent to private recipients. Due to the differing Figures 15 and 16. nature and clients of the various MDBs, the share of EIB IDB 19% 11% IFC WB Public Private 13% 0% Recipients Recipients ADB 97% 3% 0% AfDB EBRD 0% 57% Figure 15: Share of Total Adaptation Finance to Private Recipients by MDB Private Recipients 3% EBRD 3% EIB 2% IDB 2% AfDB 16% IFC 0% ADB Public 14% Recipients 97% WB 63% Figure 16: Share of Total Adaptation Finance to Public Recipients by MDB 17 Section 1. Part C: MDB Adaptation Finance, 2014 Table 6 shows total adaptation finance by region. combined. Finally, Table 8 reports adaptation finance Adaptation finance for small island states and least by sector grouping (i.e. sector groups where some developed countries is shown in Table 7. About 30 adaptation finance has been reported). Refer to Section percent of MDB adaptation finance was delivered 2, Part C for details on adaptation methodology and to least developed countries and small island states sector grouping for adaptation finance. Table 6: MDB Own Resources and External Resources for Adaptation Finance by Region, 2014 USD Millions MDB Own Resources External Resources Private Public Private Public Recipient Recipient Subtotal Recipient Recipient Subtotal Total East Asia and the 5 635 640 1 38 38 678 Pacific EU 13 17 80 97 0 0 0 97 Latin America and 15 345 360 1 94 95 454 the Caribbean Middle East and 16 125 141 0 26 26 167 North Africa Non-EU Europe and 69 518 586 3 35 38 625 Central Asia South Asia 0 1,599 1,599 3 86 89 1,687 Sub-Saharan Africa 0 1,089 1,089 3 258 261 1,351 Multi-regional 9 1 10 0 0 0 10 Total 130 4,391 4,521 11 538 548 5,069 Table 7: Share of Adaptation Finance of MDBs in Least Developed Countries and Small Island States USD Millions MDB Own Resources External Resources Private Public Private Public Recipient Recipient Subtotal Recipient Recipient Subtotal Total Least developed 0 1,191 1,191 3 337 340 1,531 countries and small island states Out of which:             Least developed 0 1,104 1,104 3 280 283 1,387 countries Small island states 0 218 218 1  84  85 303 Note: Small island states include the 39 members of AOSIS, excluding developed countries. The least developed countries reflect the 2015 UNFCCC list in Section 2, Part B. Some countries are in both lists. 18 Section 1. Part C: MDB Adaptation Finance, 2014 Table 8: MDB Adaptation Finance by Sector Groupings (i.e. sector groups where some adaptation finance has been reported), 2014 Adaptation Adaptation Public Private Finance Climate Recipient Recipient Adaptation Sector Grouping (USD million) Finance (%) (USD million) (USD million) Water & Wastewater Systems 541 11% 540 1 Crop Production and Food Production 853 17% 797 56 Other Agricultural & Ecological Resources 965 19% 965 0 Industry, Extractive Industries, Manufacturing & 238 5% 213 25 Trade Coastal and Riverine Infrastructure (including 847 17% 847 0 built flood protection infrastructure) Energy, Transport, and Other Built Environment 1148 23% 1118 29 and Infrastructure Institutional capacity 236 5% 235 0 Cross Sectors and Other 243 5% 212 31 Grand Total 5069 100% 4928 141 19 Section 1. Part D: MDB Mitigation Finance, 2014 Part D: MDB Mitigation Finance, 2014 The tables and graphs that follow present mitigation finance for 2014. Table 9 reports the total mitigation finance per MDB, differentiating MDBs’ own resources from external resources as well as reporting the nature of the recipient/ borrower. Figure 17 provides the relative share per MDB of total mitigation finance in 2014, and Figure 18 provides the relative share of MDBs’ own resources and external resources by MDB. Mitigation figures reported correspond to the financing of those components and/or subcomponents or elements of projects that provide mitigation benefits (rather than the entire project cost). Refer to Section 2, Part D, for details of mitigation methodology and sectors and subsectors for mitigation finance. For MDBs that report dual benefits separately, this section as well as the accompanying tables and figures include the mitigation elements of that dual benefit financing but these are not shown separately. Specific information and data on dual benefit numbers can be found in Annex A. 100% ADB AfDB 121 222 75 9% 5% 634 90% 359 WB 426 216 26% 80% EBRD 17% 70% IFC 60% 11% USDm EIB 50% 2,465 IDB 1,711 4,862 22% 3,760 5,488 10% 944 1,993 40% Figure 17: Share of Total Mitigation Finance per 30% MDB, 2014 20% 10% 0 ADB AfDB EBRD EIB IDB IFC WB MDB Own Resources External Resources Figure 18: Share of MDB Own Resources and External Resources in Mitigation Finance, 2014 (USD millions) Table 9: MDB Resources for Mitigation Finance, 2014 USD Millions MDB Own Resources External Resources Private Public Private Public MDB Recipient Recipient Subtotal Recipient Recipient Subtotal Total ADB 504 1,206 1,711 130 297 426 2,137 AfDB 599 345 944  70 146 216 1,160 EBRD 2,347 1,414 3,760  59 62 121 3,882 EIB 1,373 3,488 4,862 199 22 222 5,083 IDB 1,056 937 1,993 220 139 359 2,352 IFC 2,361 103 2,465  60 15 75 2,540 WB 0 5,488 5,488 197 437 634 6,122 Total 8,241 12,982 21,223 935 1,118 2,053 23,276 20 Section 1. Part D: MDB Mitigation Finance, 2014 Regarding the share of recipients, 60 percent of total Table 10 shows the total mitigation finance per MDB mitigation finance was committed to public recipients according to region, and Table 11 provides the same and 40 percent to private recipients. Due to the mitigation figures delivered to least developed countries different nature and clients of the various MDBs, the and small island states. About 10 percent of mitigation share of commitments to mitigation finance changes finance was delivered to least developed countries and significantly when assessed against recipient type, as small island states combined. Finally, Table 12 shows evidenced in Figures 19 and 20. mitigation finance per sector. Refer to Section 2, Part D, for details of the mitigation methodology. IDB 14% IFC 27% Public Private EIB Recipients Recipients 17% 60% 40% WB ADB 2% 7% EBRD AfDB 26% 7% Figure 19: Share of Mitigation Finance to Private Recipients by MDB IFC WB 1% 42% IDB Private Public 8% Recipients Recipients 40% 60% ADB EIB 11% 25% EBRD 10% AfDB 3% Figure 20: Share of Mitigation Commitments to Public Recipients by MDB 21 Section 1. Part D: MDB Mitigation Finance, 2014 Table 10: MDB Resources for Mitigation Finance by Region, 2014 USD Millions MDB Own Resources External Resources Private Public Private Public Recipient Recipient Subtotal Recipient Recipient Subtotal Total East Asia and the 606 1,157 1,763 217 188 405 2,168 Pacific EU 13 1,484 1,794 3,278 19 3 22 3,300 Latin America and 2,095 1,647 3,743 298 187 485 4,228 the Caribbean Middle East and 673 1,486 2,159 16 124 140 2,299 North Africa Non-EU Europe and 1,894 1,634 3,528 74 278 352 3,880 Central Asia South Asia 392 3,717 4,109 20 153 173 4,282 Sub-Saharan Africa 917 1,545 2,462 286 180 466 2,928 Multi-regional 180 1 181 4 6 10 191 Total 8,241 12,982 21,223 935 1,118 2,053 23,276 Table 11: Share of Mitigation Finance by MDBs in least developed countries and small island states USD Millions MDB Own Resources External Resources Private Public Private Public Recipient Recipient Subtotal Recipient Recipient Subtotal Total Least developed 194 1,934 2,128 104 219 323 2,451 countries and small island states Out of which:               Least developed 192 1,810 2,002 103 148 251 2,253 countries Small island states 1 225 226 1 63 64 290 Note: Small island states include the 39 members of AOSIS, excluding developed countries. The least developed countries reflect the 2015 UNFCCC list in Section 2, Part B. Some countries are in both lists. 22 Section 1. Part D: MDB Mitigation Finance, 2014 Table 12: MDB Mitigation Finance for Mitigation, 2014 Total Mitigation Mitigation Public Private Finance Finance Recipient Recipient (USD Mitigation Sector (USD millions) (%) (USD millions) millions) Energy Efficiency 5019 22% 3038 1982 Renewable Energy 8229 35% 4466 3764 Transport 6316 27% 5191 1126 Agriculture, forestry and land use 461 2% 352 109 Waste and wastewater 229 1% 204 25 Cross-sector activities and others 995 4% 599 396 Energy efficiency, renewable energy and other financing through financial intermediaries or similar 2025 9% 250 1775 Total 23276 100% 14100 9176 SECTION 2: GENERAL Part A. Definitions and Clarifications Comparability: In this report the 2011 numbers (when presented) were amended to be comparable to the years 2012- 2014. Therefore the 2011 numbers in this report are different from those reported in the original 2011 Joint MDB reports. This is due to different geographic categories. External resources: Refers to operations supported by bilateral donors and dedicated climate finance entities such as GEF and CIF, which might also be reported to the OECD Development Assistance Committee by contributor countries. Financing instruments: All instruments associated with MDB climate finance are covered, including grants, loans, guarantees, equity, and performance-based instruments. Equity is defined as “ownership interest in an enterprise that represents a claim on the net assets of the entity in proportion to the number and class of shares owned.” Guarantee is defined as “promise from one entity to assume responsibility for the payment of a financial obligation of another entity if such other entity fails to perform.” Granularity: Finance reported covers only those components and/or subcomponents or elements of projects with activities that directly contribute to (or promote) adaptation and/or mitigation. Investments and technical assistance: Related to all vehicles used by MDB clients to support specific investments covering a mix of capital and recurrent expenditures, as well as advisory services and capacity building. Point of reporting: Data corresponds to commitments at the time of Board approval or financial agreement signature and are therefore based on ex ante estimations. All efforts have been taken to prevent double counting. No corrections will be issued in cases where a project’s scope has changed to either increase or decrease climate financing. Policy-based instruments: Fast-disbursing financing instruments provided to the national budget in the form of loans (also referred to as DPLs) or grants together with associated policy dialogue and economic and sector work in support of policy and institutional reforms. Public and private: This is based on the status of the first recipient/borrower of MDB finance. The first recipient/ borrower is to be considered public when at least 50 percent of the recipient is publicly owned.11 Reporting period: Data covers fiscal year 2014. 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. Reporting: Reporting is complete for all fields and tables. A value of 0 in a table means the value is below USD 0.5 million and if the value is shown as ‘-‘, then nothing was reported. As all finance figures are rounded to the nearest USD million or USD hundred thousand, tables calculated by hand may not give the exact result shown as the total figures in the tables. Sources covered: MDBs’ own resources as well as a range of external resources managed by the MDBs. 11 This is recognized as a complicated topic and the status of the first recipient/borrower may not be the same as the final beneficiary/borrower. For example, a loan to a national development bank for energy efficiency in small and medium enterprises is particularly complicated when a public-private partnership exists. 24 Section 2. Part B: Geographical Coverage of the Report and Regional Breakdowns Part B: Geographical Coverage of the Report and Regional Breakdowns Countries included in this list are covered by at least one of the MDBs. Inclusion of countries in Table 13 does not imply any recognition of country names or borders by any of the MDBs in question. Table 13: Countries Covered by at Least One of the MDBs EAST ASIA AND THE PACIFIC Cambodia Marshall Islands Samoa People’s Republic of China Micronesia (Federated States of) Solomon Islands Cook Islands Mongolia Thailand Fiji Myanmar Timor-Leste French Polynesia Nauru Tonga Indonesia Palau Tuvalu Kiribati Papua New Guinea Vanuatu Lao People’s Democratic Republic Philippines Vietnam Malaysia EU 13 Bulgaria Hungary Poland Croatia Latvia Romania Cyprus Lithuania Slovakia Czech Republic Malta Slovenia Estonia LATIN AMERICA AND THE CARIBBEAN Anguilla Dominica Panama Antigua and Barbuda Dominican Republic Paraguay Argentina Ecuador Peru Aruba El Salvador Puerto Rico Bahamas Falkland Islands (Malvinas) Saint-Barthélemy Barbados French Guiana Saint Kitts and Nevis Belize Grenada Saint Lucia Bolivia (Plurinational State of) Guadeloupe Saint Martin (French part) Bonaire, Saint Eustatius and Saba Guatemala Saint Vincent and the Grenadines Brazil Guyana Saint Maarten (Dutch part) British Virgin Islands Haiti Suriname Cayman Islands Honduras Trinidad and Tobago Chile Jamaica Turks and Caicos Islands Colombia Martinique United States Virgin Islands Costa Rica Mexico Uruguay Cuba Montserrat Venezuela (Bolivarian Republic of) Curaçao Nicaragua 25 Section 2. Part B: Geographical Coverage of the Report and Regional Breakdowns MIDDLE EAST AND NORTH AFRICA Algeria Jordan Syria Egypt Lebanon Tunisia Iran (Islamic Republic of) Libya Western Sahara Iraq Morocco Yemen Israel Gaza/West Bank SOUTH ASIA Afghanistan India Pakistan Bangladesh Maldives Sri Lanka Bhutan Nepal NON-EU EUROPE AND CENTRAL ASIA12 Albania Kyrgyz Republic Turkey Armenia Kosovo Tajikistan Azerbaijan Montenegro Turkmenistan Belarus Republic of Moldova Ukraine Bosnia and Herzegovina Russian Federation Uzbekistan Georgia Serbia Kazakhstan The Former Yugoslav Republic of Macedonia SUB-SAHARAN AFRICA Angola Gambia Réunion Benin Ghana Rwanda Botswana Guinea São Tomé and Príncipe Burkina Faso Guinea-Bissau Saint Helena Burundi Kenya Senegal Cameroon Lesotho Seychelles Cape Verde Liberia Sierra Leone Central African Republic Madagascar South Africa Chad Malawi Somalia Comoros Mali South Sudan Congo Mauritania Sudan Côte d’Ivoire Mauritius Swaziland Democratic Republic of the Congo Mayotte Togo Djibouti Mozambique Uganda Equatorial Guinea Namibia United Republic of Tanzania Eritrea Niger Zambia Ethiopia Nigeria Zimbabwe Gabon MULTI-REGIONAL Any operation by an MDB that is implemented across two or more of the regions above, including activities with a global focus. 12 Previously reported “(OTHER) Europe and Central Asia” 26 Section 2. Part C: Guidance Section on the Adaptation Finance Tracking Methodology Least developed countries are defined according to the UNFCCC list:13 Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea Bissau, Haiti, Kiribati, Lao People’s Democratic Republic, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, South Sudan, Sudan, Timor Leste, Togo, Tuvalu, United Republic of Tanzania, Uganda, Vanuatu, Yemen, Zambia Small island states are defined according to the Alliance of Small Island States (AOSIS) list, excluding developed countries: Cape Verde, Antigua and Barbuda, Bahamas, Barbados, Cook Islands, Comoros, Cuba, Dominica, Dominican Republic, Federated States of Micronesia, Fiji, Grenada, Guinea Bissau, Guyana, Haiti, Jamaica, Kiribati, Maldives, Marshall Islands, Mauritius, Nauru, Niue, Papua New Guinea Sao Tome and Principe, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and Grenadines, Samoa, Seychelles, Solomon Islands, Suriname, Timor-Leste, Tonga, Trinidad and Tobago, Tuvalu, Vanuatu. Part C: Guidance Section on the Adaptation Finance Tracking Methodology (1) Background and Guiding Principles The MDB adaptation finance tracking methodology uses a context- and location-specific, conservative and granular approach that is intended to reflect the specific focus of adaptation activities, and reduce the scope for over-reporting of adaptation finance against projects. The approach drills down into the ‘sub-project’ or ‘project element’ level as appropriate, in line with the overall MDB climate finance tracking methodology. It also employs a clear process in order to ensure that project activities address specific climate vulnerabilities identified as being relevant to the project and its context/location. The reported finance, therefore, only captures the amounts associated with specific activities that are identified in the project document and that contribute to overall project outcomes. Likewise, the approach might not always capture and count activities that may significantly contribute to resilience, but cannot always be tracked in quantitative terms, such as some operational procedures that ensure business continuity, or may not have associated costs, for example siting assets outside of future storm surge range. It is important to note that this granular approach is not intended to capture the value of the entire project or investment that may increase resilience as a consequence of specific adaptation and resilient activities within the project (e.g., improved drainage of a section of a newly constructed road to deal with impacts of heavy rainfall or storm surges that then contributes to overall road and investment resilience). (2) Overview of the Adaptation Finance Tracking Methodology This methodology is comprised of the following key steps: • Setting out the climate vulnerability context of the project14 • Making an explicit statement of intent to address climate vulnerability as part of the project • Articulating a clear and direct link between the climate vulnerability context and the specific project activities 13 http://unfccc.int/cooperation_and_support/ldc/items/3097.php 14 Vulnerability is a function of the character, magnitude, and rate of climate change and variation to which a system is exposed, its sensitivity, and its adaptive capacity. 27 Section 2. Part C: Guidance Section on the Adaptation Finance Tracking Methodology Furthermore, when applying the methodology, the reporting of adaptation finance is limited solely to those project activities (i.e., projects, project components or proportions of projects) that are clearly linked to the climate vulnerability context. a. Context of vulnerability to climate variability and change For a project to be considered as one that contributes to adaptation, the context of climate vulnerability must be set out clearly using a robust evidence base. This could take a variety of forms, including use of material from existing analyses and reports, or original, bespoke climate vulnerability assessment analysis carried out as part of the preparation of a project. Examples of good practice in the use of existing analyses or reports include using sources that are authoritative and preferably peer-reviewed, such as academic journals, national communications to the UNFCCC, reports of the Intergovernmental Panel on Climate Change (IPCC) and Strategic Programs for Climate Resilience. Examples of good practice in conducting original, bespoke analysis include using records from trusted sources showing vulnerable communities or ecosystems particularly vulnerable to climate change, as well as recent climate trends including any departures from historic means. These may be combined with climate change projections drawn from a wide range of climate change models, with high and low greenhouse gas (GHG) emissions scenarios, in order to explore the full envelope of projected outcomes and uncertainties. Climate projection uncertainties should be presented and interpreted in a transparent way. The timescale of the projected climate change impacts should match the intended lifespan of the assets, systems or institutions being financed through the project (e.g., time horizon of 2030, 2050, 2080, etc.). b. Statement of purpose or intent The project should set out how it intends to address the context- and location-specific climate change vulnerabilities, as set out in existing analyses, reports or the project’s climate vulnerability assessment. This is important for distinguishing between a development project contributing to climate change adaptation and a standard ‘good development’ project. The methodology is flexible regarding exactly where and how the statement of intent or purpose is documented. As long as the MDB concerned is able to record and track the rationale for each adaptation project or adaptation component of a project linked to the context of climate vulnerability established above, this could be described in the final technical document, Board document, internal memo or other associated project document. c. Clear and direct link between climate vulnerability and project activities In line with the principles of the overall MDB climate finance tracking methodology, only specific project activities that explicitly address climate vulnerabilities identified in the project documentation are reported as climate finance. Where climate change adaptation is incorporated into project activities that also have other objectives, the amount of adaptation finance counted at the project level depends on the project context, location and specific characteristics. It is based on the estimated incremental cost/investment associated with discrete project components or elements of project design that address risk and vulnerabilities under current and future climate change, in comparison with a project design that does not consider such conditions. In the absence of the possibility to estimate incremental cost/ investment directly from project cost information—for example, when using policy instruments/balance sheet lending, equity investments or credit line lending through financial intermediaries—a proportion of the project cost/investment corresponding to adaptation activities may be used to represent the incremental amount. This approach may also be applied to project preparation activities if appropriate, depending on the standard practices of the specific MDB in question. (3) Reporting of Project Activities with Dual Benefits Where the same project, sub-project or project element contributes to both mitigation and adaptation, the MDB’s individual processes will determine what proportion is counted as mitigation or as adaptation, so that the actual financing will not be double counted. Some MDBs are reporting projects where the same components or elements contribute to both mitigation and adaptation as a separate category (Table 14). The MDBs are continuing to work on the best reporting method for such projects. 28 Section 2. Part C: Guidance Section on the Adaptation Finance Tracking Methodology Table 14: Examples of Potential Adaptation Activities in Some Sectoral Groupings Sectoral Potential Adaptation Activities Grouping Examples of Sectors Potential Impacts in Response Water supply Increased risk of flooding of well Well fields relocated away from floodplains, fields leading to contamination raised well heads Wastewater Increased exposure to damage Protection of wastewater infrastructure Water and infrastructure/ and storm water overload due to from increased flooding Wastewater management coastal flooding and sea-level rise Systems Water resources Reduction in river water levels and Improved catchment management planning management (not flows due to reduced rainfall and regulation of water abstraction included under cross- sector) Crop Production Primary agriculture and Increased variability in crop Investments in R&D of crops that are more and Food food production productivity resilient to climate extremes and change Production/a Agricultural irrigation Increasing drought including Supplemental irrigation, multi-copping seasonal droughts and shorter systems, drip irrigation, levelling and other rainy season approaches and technologies that reduce risk of large crop failures Forestry Increased frequency of forest fires Improved forest fire management and pest/ and pest/disease outbreaks disease outbreak management Other Agricultural Livestock production Decrease in forage quantity or Increased production of fodder crops to and Ecological quality supplement rangeland foraging Resources Fisheries Loss of river fish stocks due to Adoption of sustainable aquaculture changes in water flows and/or techniques to compensate for the reduction increased temperature in local fish supplies Ecosystems/Biodiversity Drought leading to loss of Establishment of core protected areas (including ecosystem- wetlands and livelihoods/ and buffer zones for sustainable use of based flood protection biodiversity biodiversity and water to meet livelihood measures) needs in more extreme droughts Manufacturing Historic specifications for Design of climate-resilient equipment, such equipment inappropriate under as more stable cranes for harbors in cyclone new climate conditions zones Food processing Increased risk of food poisoning Improved refrigeration or other changes Industry, distribution and retail and/or spoilage in food processing and/or distribution that Extractive address more extreme heat Industries, Trade Disruption of national trade due Establishment of alternative trade routes in Manufacturing and to climate-related disasters case of disruption of main route Trade Extractive industries (oil, Shift in zones affected by Increased search for resources and offshore gas, etc.) typhoons/ hurricanes drilling outside hurricane seasons or zones Mining Increased precipitation intensity Improved design and construction of causes floods in open-pit mines tailings Coastal and Increased storm damage along Physical/natural reinforcement of coastline Sea defenses/flood Riverine coastline due to sea level rise and and/or additional coastal structures/ protection barriers Infrastructure increased storm surges vegetation (including built Increased risk of riverine flooding Increased river dredging programs, flood protection River flood protection due to heavier and/or more reinforcement of levees, reestablishment infrastructure)/b measures frequent rainfall events of natural flood plains and vegetation in upstream areas/river banks 29 Section 2. Part C: Guidance Section on the Adaptation Finance Tracking Methodology Sectoral Potential Adaptation Activities Grouping Examples of Sectors Potential Impacts in Response Construction Shift in zones affected by More robust building regulations and typhoons/ hurricanes/storm improved enforcement surges Transport More extreme river flows cause Use of revised codes for infrastructure erosion of embankments and loss design that consider increased frequency/ of bridges severity of extreme events Urban development Increased risk of floods Improved solid waste management and collection, increased capacity and other changes in drainage systems Energy, Transport, Tourism/c Storms disrupt tourist season Diversification of tourist attractions to and other Built encompass inland or low-risk areas Environment and Solid Waste Increased risk of pollution of areas Completion of a climate risk assessment Infrastructure management below landfill sites due to risk of prior to location of landfill sites flood Thermal energy Increased seasonality of rainfall, Investment in thermal power generators generation creating periods of low river flows with minimal cooling water requirements Energy generation Reduction in river flows lead Optimization of hydro-infrastructure design (including renewables) to loss of generation from subject to due diligence based on climate hydroelectric plant and hydrological models Energy transmission and Higher temperatures reduce Investment in embedded renewable distribution distribution efficiency generation to reduce distribution requirements ICT ICT hardware and Damage to key national data Identification of sites at greatest risk and software to beneficiary centers and infrastructure from enhancement of resilience of those sites organizations increased storms or floods and/or services Information technology Lack of sector-relevant, short- Investments in weather and climate services term weather forecast that can reach the end users efficiently Banking Increased strain on banking Creation of infrastructure and “hubs” that sectors as clients experience would support improved business continuity climate impacts and affect during and after extreme weather events Financial Services business continuity Insurance Increased negative effects of Changes in structuring of index-based extreme weather events and insurance products payout Institutional Technical services or Increase in the demand for Provision of finance to SMEs providing Capacity Support other professional professional services, e.g., for relevant services, e.g., engineering of or Technical support climate risk assessment adaptation solutions or insurance Assistance Education Climate change results in Technical capacity building for training the technical syllabus being outdated trainers in water and agri-sectors for high risk sectors Health Changing patterns of diseases Monitoring of changes in disease outbreaks as a result of changing climatic and development of a national response Cross-cutting conditions plan Sectors Cross-sector policy and Rapidly changing policy and Institutional reforms and strengthening regulation regulation regimes due to climate to include climate aspects in policies and change impacts regulations in flexible manner Disaster risk Change in seasonality of hydro- Integration of climate change scenarios into management meteorological disasters disaster risk plans and preparedness /a In previous reports, “Crop production and food production” was part of the “Agricultural and ecological resources” Sectoral Grouping and labeled as “Primary agriculture and food production.” /b Natural flood protection (e.g., mangrove restoration) is normally included under “Ecosystems (including ecosystem-based flood protection measures).” /c Tourism is included in this category as the sector essentially revolves around “built environment” (e.g., hotels, transport facilities). 30 (4) Adaptation Case Studies The following case studies illustrate how the adaptation finance tracking approach has been recently used by MDBs. Project Focus Hydropower Plant Rehabilitation Resilient Crop Development Climate-resilient Municipal Infrastructure Water Resources Management Sector Energy, Transport, and Other Built Agricultural and Ecological Resources Energy, Transport, and other Built environment Water and Wastewater Systems (Water Environment and Infrastructure (Primary agriculture and Infrastructure (Urban development, supply) (Hydropower) and food production) transport) Brief description The project aims to rehabilitate an The investment provides finance to The project aims to strengthen climate resilience The project will improve water security in of project existing hydropower plant to increase a company that develops non-GMO and disaster preparedness in eight vulnerable the target regions in a coastal province its installed capacity to 150 MW, while crops with new traits that increase coastal towns. The project will: (i) provide climate- and ensure a more reliable water supply optimizing power generation and dam plant resilience to weather extremes resilient municipal infrastructure; and (ii) strengthen to about 1.23 million urban and rural safety in the face of increasing climatic and overall yields. The hybrid seeds are institutional capacity, local governance, and inhabitants by integrating urban-rural and hydrological variability. It will also developed taking into account crop knowledge based public awareness, for improved water supply systems and reducing water provide technical support to introduce development models that determine urban planning and service delivery taking into losses. It will also support watershed best international practice on managing best crops and varieties for production consideration climate change and disaster risks. Key management through reforestation, climate risks to hydropower. in specific regions. The financing will infrastructure investments include: (i) drainage; (ii) pollution prevention and water quality allow the company to accelerate the water supply; (iii) sanitation; (iv) cyclone shelters; monitoring, public awareness building and development of a specific seed with and (v) other municipal infrastructure for emergency institutional capacity development. these traits. access roads and bridges, solid waste management, bus terminals, slum improvements, boat landings and markets. Climate The project is located in one of the The project is located in a region that The project is located in a low-lying coastal area The project is located in an area prone Vulnerability most climate-vulnerable regions in is experiencing increased variability in exposed to sea level rise, cyclones, inundation, to both droughts and floods. A climate Context the world, and dependent on glacial rainfall and water runoff, and higher and storm surges. A climate risk and vulnerability change risk and vulnerability assessment hydrology, which is highly sensitive than average temperatures and assessment was undertaken to assess risks to the was undertaken to analyze the climate to climatic variability and climate temperature extremes. Additionally, project resulting from current and future climate impacts on water availability, water change. In particular, hydropower the glacial melt feeding the rivers change. The assessment found that warmer supply, sewer and wastewater treatment operations are extremely vulnerable to is progressively decreasing, with temperatures would result in more frequent and systems of the project. The assessment the impacts of climate change. Climate consequent negative impacts on intense cyclones and storm surges, damaging found that average annual rainfall in the change projections predict impacts, quantity and seasonality of water flows. roads and bridges and rendering existing drainage, project area may vary as much as 900 such as earlier snow melt and shifts in Climate change model projections water supply, and sanitation systems ineffective, as mm to 2,500 mm between a dry and precipitation and surface runoff. This show that these trends will continue well as threatening public health and safety. More wet, year respectively, and that drought directly affects reservoir inflows and and increase in intensity: an increase intense monsoon rainfall, sea-level rise and more and flooding posed potential risks to power generation capacity, as well as in average temperatures of 1.5–2°C intense tropical storms would result in higher risks the project components and required increasing exposure to extreme events, and a decrease of up to 10% in average of flooding. The assessment indicated that, given greater efficiency of water use. Because such as floods. precipitation during the growing the large infrastructure deficits and natural resource of projected declines in precipitation season (A1B scenario, period starting constraints of coastal towns, climate-resilient and runoff, and increasing temperature, in 2030 compared to a 1980–99 infrastructure and disaster preparedness were surface water was projected to decrease baseline; at least 2/3 of models agree required to improve the wellbeing of residents and consistently to the early 2040s. Saltwater with the sign). Average yearly water reduce migration to larger cities. intrusion occurred in freshwater bodies demand deficit in the main waterways and aquifers. Section 2. Part C: Guidance Section on the Adaptation Finance Tracking Methodology is projected to reach –34% for the 2041–2050 period. Currently it is around –9%). As a consequence, the region is suffering from an increased moisture deficit with agricultural areas becoming progressively more arid. Due to the combined effect of increased temperature, moisture deficit and more extreme weather events, agricultural yield projections show a significant decrease in plant productivity. 31 Project Focus Hydropower Plant Rehabilitation Resilient Crop Development Climate-resilient Municipal Infrastructure Water Resources Management Statement of The project aims to ensure that the The investment is expected to have The outcome of the project is increased climate The project aims to achieve, among Purpose or hydropower facility remains productive a significant resilient development and disaster resilience in coastal towns benefiting other things, climate change adaptation Intent and safe in the face of anticipated impact by increasing agricultural yields, the poor and women. Project outputs include to current and future climate impacts, increasing climatic variability. which will result in increased land-use improved climate-resilient municipal infrastructure and increase the climate resilience of the efficiency, developing seed alternatives and capacity-building support for preparing and project’s targeted sectors. that are adapted to climate extremes responding to climate-related risks and disasters in emerging markets, and creating a non-GMO product that requires fewer regulatory hurdles and thus can benefit smaller markets, including smallholder farmers in IDA countries. Link to The project involved detailed analysis The development of the hybrid, The project includes the following adaptation Based on the findings of the climate Project Activities of climate change scenarios to model which targets the described region, is measures: risk and vulnerability assessment, the projected hydrology up to the year 2100. informed by regional climate data and following adaptation measures were This generated a complete picture of future climate projections, as well as by 1. “Climate-proofed” designs for roads and bridges identified: (i) reducing future water future climate change scenarios, their crop development models. (e.g., raising road level), cyclone shelters (e.g., demand through increased efficiency, implications for water inflow into the raising base level, leaving ground floor open), water improved maintenance and conservation; reservoir, and the facility’s ability to The investment funds are used for supply and sanitation (raising base level, emergency (ii) increasing the availability of raw generate electricity. This information research and development of the power backup), and drainage and flood control water supply through the capture and was used to develop an appropriate specific crop, local field testing, systems (e.g., bigger drainage capacity). storage of excess winter river flows; and investment design for all climate change growing operations and distribution (iii) reducing drought, flooding, sea-level scenarios to optimize power generation activities. 2. Non-structural interventions, such as urban rise and subsidence risks to assets and and dam safety across the full range of planning, community awareness raising, flood infrastructure. The proposed adaptation projected future hydrological conditions. monitoring and mapping, early warning systems measures for the project include using and activating disaster risk management temperature resistant materials during committees. construction, insulating pipes above ground or burying them sufficiently deep 3. Capacity-building support to strengthen the in the ground, increasing water storage ability of municipalities to prepare and respond to capacity, and raising the foundation of climate-related risks and disasters by: (i) reviewing and waterproofing electrical systems. and updating the urban master plans, local The project will also cover capacity building codes, and engineering design standards strengthening for improved watershed to incorporate climate change and disaster- planning and management, training resilient measures; (ii) improving water safety on operation and maintenance, and planning and groundwater monitoring through the preparation of drought and flood development of water safety plans and guidelines; response plans. and (iii) establishing disaster risk management committees in each municipality, and delivering appropriate technical training for the committee Section 2. Part C: Guidance Section on the Adaptation Finance Tracking Methodology members. 32 Project Focus Hydropower Plant Rehabilitation Resilient Crop Development Climate-resilient Municipal Infrastructure Water Resources Management Calculation of The resultant investment design included Total project cost is USD20 million, of The incremental cost of adaptation was estimated Out of the USD100 million project cost, Adaptation a number of specific measures that were which MDB is investing USD10 million. to be USD46.6 million (40% of project budget), USD2 million (2%) was considered climate Finance Based on the project documentations introduced in order to build resilience to with USD36.75 million for civil works, USD1.15 million finance adaptation. The incremental detailing the equity investment, it the identified climate change risks. These for equipment, USD3.46 million for institutional cost of adaptation was estimated taking included the following: is estimated that 86.16% of the total capacity building and awareness raising, and into account only the specific structural is to be used for adaptation related USD5.24 million for contingencies. The incremental measures and material adjustments done I. New suite of turbines to cope with activities described above while the adaptation cost was estimated taking into account for the project to address future climate increased hydrological variability remainder is to be used for commercial only the specific measures incorporated in the risks. expected as a consequence of climate activities not related to adaptation. project design to address future climate risks. change. Therefore, the adaptation finance component, taking a proportion of the II. Dedicated dam safety measures equity, is calculated USD8.62 million to accommodate projected future increases in hydrological variability caused by climate change (i.e. dam monitoring and surveillance equipment). The adaptation finance reported consisted of USD13 million for the new suite of turbines (counted as a single component under a proportional approach deemed to represent the incremental cost), and USD 5 million for the dedicated dam safety measures. Therefore the total adaptation finance reported was USD 18 million out of a total project cost of USD 80 million Type of Loan (MDB Own Resources) Equity (MDB Own Resources) Loan and Grant (External Resources) Loan (MDB Own Resources) Adaptation Loan and grant (External Resources) Finance Loan (MDB Own Resources) Section 2. Part C: Guidance Section on the Adaptation Finance Tracking Methodology 33 Section 2. Part D: Joint MDB Approach for Mitigation Finance Reporting Part D: Joint MDB Approach for Mitigation Finance Reporting (1) Common Principles for Climate Mitigation Tracking The 2014’s mitigation finance tracking is based on the MDB Joint Typology (see (3) below) as data was collected prior to March 31st, 2015, when the MDBs and the IDFC committed to the Common Principles for Climate Mitigation Finance Tracking,15 henceforth referred to as the “Common Principles.” The purpose of the Common Principles is to further align climate finance tracking between these two groups, while providing others with a transparent and credible approach. While the MDBs and the IDFC continue to report through their respective group-based efforts, the Joint MDB Approach for Mitigation Finance Reporting methodology is closely aligned with the Common Principles; however, this does not represent a significant departure in the reporting approach from previous years. As an inherent and important part of improving mitigation finance tracking, the Common Principles will be subject to further revision by the MDBs and the IDFC jointly, based on amassed experience. As a future step, comparability of reporting processes should also be addressed. In this respect, the MDBs and the IDFC are committed to maintaining an open and transparent exchange of information around institutional experience and learning, as well as to jointly discussing potential proposals to improve the Common Principles. To the extent possible, parties will strive to reach consensus around proposed changes or additions to the Principles. In case differences arise, the parties will communicate these in full when reporting on mitigation finance. (2) Joint MDB Approach for Mitigation Finance Reporting The Joint MDB Approach for Mitigation Finance Reporting is, as stated above, closely aligned with the Common Principles for Climate Mitigation Finance Tracking, and is based on the following attributes: a) Additionality: This approach, as well as the Common Principles, are activity-based as they focus on the type of activity to be executed, and not on its purpose, the origin of the financial resources or actual results. b) Timeline: Project reporting is ex-ante project implementation at Board approval or time of financial commitment. c) Conservativeness: Where data is unavailable, any uncertainty must be overcome taking a conservative approach, where under reported rather than over reported climate finance is preferable. d) Granularity: Only mitigation activities that are to be disaggregated from non-mitigation activities as far as reasonably possible are covered. If such disaggregation is needed and not possible using project specific data, a more qualitative/experience based assessment can be used to identify the proportion of the project that covers climate mitigation activities, consistent with the conservativeness principle. This is applicable to all categories, but of particular significance for energy efficiency projects.16 e) Scope: Mitigation activities or projects can consist of a stand-alone project, multiple stand-alone projects under a larger program, a component of a stand-alone project or a program financed through a financial intermediary. For example, a project with a total cost of USD 100 million may have a USD 10 million documented component for energy-efficiency improvement; in this case, only the USD 10 million would be reported. Another example may be a USD 100 million credit line to a financial intermediary for renewable energy and pollution control investments, where it is foreseen that at least 60% of the resources will flow into renewable energy investments; in this case, only USD 60 million would be reported. f) Impact Reporting: Climate finance tracking is independent of GHG accounting and reporting in the absence of a joint GHG methodology. 15 Retrieve at: http://www.worldbank.org/content/dam/Worldbank/document/Climate/common-principles-for-climate-mitigation-finance- tracking.pdf. Also note that MDBs will adhere to the Common Principles in next year’s report. 16 See the table accompanying the following item (2) Typology of Mitigation Activities included in the Joint MDB Mitigation Finance Reporting for specific project type disaggregation issues. 34 Section 2. Part D: Joint MDB Approach for Mitigation Finance Reporting g) Verification: An activity will be classified as related to climate change mitigation if it promotes “efforts to reduce or limit GHG emissions or enhance GHG sequestration.”17 In the absence of a commonly agreed method for GHG analysis among MDBs, mitigation activities considered in this joint approach are assumed to lead to emission reductions, based on past experience and/or on technical analysis. Ongoing efforts to harmonize GHG analysis among MDBs should bring more consistency regarding the identification of many mitigation activities in the long term. h) Mitigation Results: Reporting according to this methodology and the Common Principles does not imply evidence of climate change impacts, and any inclusion of climate change impacts is not a substitute for project-specific theoretical and/or quantitative evidence of GHG emission mitigation. Projects seeking to demonstrate climate change impacts should do so through project-specific data. i) Eligibility: In fossil fuel combustion sectors (transport, and energy production and use), the methodology recognizes the importance of long-term structural changes, such as the energy production shift to renewable energy technologies, and the modal shift to low-carbon modes of transport. Consequently, both greenfield and brownfield renewable energy and transport modal shift projects are included. In energy efficiency, however, the methodology acknowledges that drawing the boundary between increasing production and reducing emissions per unit of output is difficult. Consequently, greenfield energy efficiency investments are included only in a few cases when they enable preventing a long-term lock-in in high carbon infrastructure. In the case of brownfield energy efficiency investments, old technologies are required to be replaced well before the end of their lifetime, and new technologies are substantially more efficient than the replaced technologies. Alternatively, new technologies or processes are required to be substantially more efficient than those normally used in greenfield projects. j) Exclusions: The methodology assumes that care will be taken to identify cases when projects do not mitigate emissions due to their specific circumstances. For example, hydropower plants with high methane emissions from reservoirs exceed associated RE GHG reductions; geothermal power plants with high CO2 content in the geothermal fluid that cannot be reinjected; or biofuel projects that deplete carbon pools more than they reduce GHG emissions, with high emissions in production, processing and transportation. k) Avoiding Double Counting: Where the same project, sub-project or project element contributes to mitigation and adaptation, then the MDB’s individual processes will determine what proportion is counted as mitigation or as adaptation, so that the actual financing will not be recorded more than once. Some MDBs are reporting projects where the same components or elements contribute to both mitigation and adaptation as a separate category. The MDBs are working on the best reporting method for projects where the same components or elements contribute to both mitigation and adaptation. (3) Typology of Mitigation Activities Included in the Joint MDB Mitigation Finance Reporting 1. Demand-side, brownfield energy-efficiency18 1.1. Commercial and residential sectors (buildings) 1.1.1. Energy-efficiency improvement in lighting, appliances and equipment 1.1.2. Substitution of existing heating/cooling systems for buildings by cogeneration plants that generate electricity in addition to providing heating/cooling19 1.1.3. Retrofit of existing buildings: Architectural or building changes that enable the reduction of energy consumption 1.1.4. Waste heat recovery improvements 17 OECD/DAC Climate Markers (September 2011). 18 The general principle for brownfield energy efficiency activities involving the substitution of technologies or processes is that: (i) the old technologies are substituted 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. 19 At substantially higher energy efficiency than separate production. 35 Section 2. Part D: Joint MDB Approach for Mitigation Finance Reporting 1.2. Public services 1.2.1. Energy-efficiency improvement in utilities and public services through the installation of more efficient lighting or equipment 1.2.2. Rehabilitation of district heating systems 1.2.3. Utility heat loss reduction and/or increased waste heat recovery 1.2.4. Improvement in utility-scale energy efficiency through efficient energy use and loss reduction 1.3. Agriculture 1.3.1. Reduction in energy use in traction (e.g., efficient tillage), irrigation and other agricultural processes 1.4. Industry 1.4.1. Industrial energy-efficiency improvements through the installation of more efficient equipment, changes in processes, reduction of heat losses and/or increased waste heat recovery 1.4.2. Installation of cogeneration plants 1.4.3. More efficient facilities and replacement of older facilities (old facilities retired) 2. Demand-side, greenfield energy efficiency20 2.1. Construction of new buildings 2.1.1. Use of highly efficient architectural designs or building techniques that enable the reduction of energy consumption for heating and air conditioning, exceeding available standards and complying with high energy-efficiency certification or rating schemes 3. Supply-side, brownfield energy efficiency 3.1. Transmission and distribution systems 3.1.1. Retrofit of transmission lines or substations to reduce energy use and/or technical losses, excluding capacity expansion 3.1.2. Retrofit of distribution systems to reduce energy use and/or technical losses, excluding capacity expansion 3.1.3. Improving existing systems to facilitate the integration of renewable energy sources into the grid 3.2. Power plants 3.2.1. Renewable energy power plant retrofits 3.2.2. Energy-efficiency improvement in existing thermal power plants 3.2.3. Thermal power plant retrofit or replacement21 to switching from a more GHG-intensive fuel to a different, less GHG-intensive fuel22 3.2.4. Waste heat recovery improvements 4. Renewable Energy 4.1. Electricity generation, greenfield projects 4.1.1. Wind power 4.1.2. Geothermal power 4.1.3. Solar power (concentrated solar power, photovoltaic power) 4.1.4. Biomass or biogas power that does not decrease biomass and soil carbon pools 4.1.5. Ocean power (wave, tidal, ocean currents, salt gradient, etc.) 4.1.6. Hydropower plants only if net emission reductions can be demonstrated 4.2. Transmission systems, greenfield 4.2.1. New transmission systems (lines, substations) or new systems (e.g., new information and communication technology, storage facility, etc.) to facilitate the integration of renewable energy sources into the grid 4.3. Heat production or other renewable energy applications, greenfield or brownfield projects 4.3.1. Solar water heating and other thermal applications of solar power in all sectors 4.3.2. Thermal applications of geothermal power in all sectors 20 The general principle for greenfield activities is that they prevent a long-term lock-in in high-carbon infrastructure (urban, transport and power sector infrastructure). 21 Replacement is included only when the owner of the plant(s) is the same and has contractually agreed to close the old plant(s) with an equivalent capacity (when the new one(s) is commissioned) and to feed the same electricity system. 22 Excluding replacement of coal by coal. 36 Section 2. Part D: Joint MDB Approach for Mitigation Finance Reporting 4.3.3. Thermal applications of sustainably-produced bioenergy in all sectors, including efficient, improved biomass stoves 4.3.4. Wind-driven pumping systems or similar systems 5. Transport 5.1. Vehicle energy efficiency fleet retrofit 5.1.1. Existing vehicles, rail or boat fleet retrofit or replacement (including the use of lower-carbon fuels, electric or hydrogen technologies, etc.) 5.2. Urban transport modal change 5.2.1. Urban mass transit 5.2.2. Non-motorized transport (bicycles and pedestrian mobility) 5.3. Urban development 5.3.1. Integration of transport and urban development planning (dense development, multiple land use, walking communities, transit connectivity, etc.), leading to a reduction in the use of passenger cars 5.3.2. Transport demand management measures to reduce GHG emissions (e.g., speed limits, high- occupancy vehicle lanes, congestion charging/road pricing, parking management, restriction or auctioning of license plates, car-free city areas, low-emission zones)23 5.4. Inter-urban transport and freight transport 5.4.1. Railway transport ensuring a modal shift of freight and/or passenger transport from road to rail (improvement of existing lines or construction of new lines) 5.4.2. Waterways transport ensuring a modal shift of freight and/or passenger transport from road to waterways (improvement of existing infrastructure or construction of new infrastructure) 6. Agriculture, forestry and land use 6.1. Afforestation and reforestation 6.1.1. Afforestation (plantations) on non-forested land 6.1.2. Reforestation on previously forested land 6.2. Reducing emissions from the deforestation or degradation of ecosystems 6.2.1. Biosphere conservation projects (including payments for ecosystem services) 6.3. Sustainable forest management 6.3.1. Forest management activities that increase carbon stocks or reduce the impact of forestry activities 6.4. Agriculture 6.4.1. Agriculture projects that do not deplete and/or improve existing carbon pools (reduction in fertilizer use, rangeland management, collection and use of bagasse, rice husks, or other agricultural waste, low tillage techniques that increase the carbon content of soil, rehabilitation of degraded lands, etc.) 6.5. Livestock 6.5.1. Livestock projects that reduce methane or other GHG emissions (manure management with biodigestors, etc.) 6.6. Biofuels 6.6.1. Production of biofuels (including biodiesel and bioethanol) 7. Waste and wastewater 7.1. Solid waste management that reduces methane emissions (e.g., incineration of waste, landfill gas capture and landfill gas combustion) 7.2. Treatment of wastewater if not a compliance requirement (e.g., performance standard or safeguard) as part of a larger project, including the reduction of methane emissions 7.3. Waste recycling projects that recover or reuse materials and waste as inputs into new products or as a resource 23 General traffic management is not included. This category is for demand management to reduce GHG emissions, assessed on a case-by-case basis. . 37 Section 2. Part D: Joint MDB Approach for Mitigation Finance Reporting 8. Non-energy GHG reductions 8.1. Industrial processes 8.1.1. Reduction of GHG emissions resulting from industrial process improvements and cleaner production (e.g., cement, chemicals) 8.2. Air conditioning and cooling 8.2.1. Retrofit of existing industrial, commercial and residential infrastructure to switch to a cooling agent with lower global warming potential 8.3. Fugitive emissions and carbon capture 8.3.1. Carbon capture and storage projects (including enhanced oil recovery) 8.3.2. Reduction of gas flaring or methane fugitive emissions in the oil and gas industry 8.3.3. Coal mine methane capture 9. Cross-sector activities and others 9.1. Policy and regulation 9.1.1. National mitigation policy/planning/institutions 9.1.2. Energy sector policies and regulations (energy-efficiency standards or certification schemes, energy-efficiency procurement schemes, and renewable energy policies) 9.1.3. Systems for monitoring GHG emissions 9.1.4. Efficient pricing of fuels and electricity (subsidy rationalization, efficient end-user tariffs, and efficient regulations on electricity generation, transmission or distribution) 9.1.5. Education, training, capacity building and awareness raising on climate change mitigation/ sustainable energy/sustainable transport, mitigation research 9.2. Energy audits 9.2.1. Energy audits for energy end-users, including industries, buildings and transport systems 9.3. Supply chain 9.3.1. Improvements in energy efficiency and GHG reductions in existing product supply chains 9.4. Financing instruments 9.4.1. Carbon markets and finance (purchase, sale, trading, financing, guarantee and other technical assistance). Includes all activities related to compliance-grade carbon assets and mechanisms, such as the Clean Development Mechanism, Joint Implementation, Assigned Amount Units, and well- established voluntary carbon standards, like the Verified Carbon Standard or the Gold Standard. 9.4.2. Renewable energy financing through financial intermediaries or similar means24 9.4.3. Energy-efficiency financing through financial intermediaries or similar methods 9.4.4. Other mitigation activity financing through financial intermediaries (only includes typology of above categories: 5. ‘Transport’; 6. ‘Agriculture, forestry and land use’; 7. ‘Waste and wastewater’; and 8. ‘Non-energy GHG reductions’) 9.5. Low-carbon technologies 9.5.1. Research and development of renewable energy or energy-efficiency technologies 9.5.2. Manufacture of renewable energy and energy-efficiency technologies and products 9.6. GHG accounting activities 9.6.1. Any other activity not included in this list for which the results of ex-ante GHG accounting (undertaken according to commonly agreed methodologies) show emission reductions that are higher than a commonly agreed threshold25 24 For example, financing mitigation activities through financial intermediaries includes earmarked lines of credit, lines for microfinance institutions, cooperatives, etc., and are reported as a separate category in Table 12. 25 For this year’s report, nothing was reported under this category 38 (4) Mitigation Case Studies The following table shows case studies that illustrate how the mitigation finance tracking approach has been recently used by the MDBs. Brownfield Energy Forest Management and Biomass Project Focus Increase Wind Generation Efficiency Non-Motorized Transport Electricity Generation Financial Intermediation Sector Renewable Energy—Wind Industrial energy-efficiency Non-motorized transport Forest management activities that Other mitigation financing Power (4.1.1) improvements through the (bicycles and pedestrian increase carbon stocks or reduce through financial intermediaries installation of more efficient mobility) (5.2.2) the impact of forestry activities (only projects that call under the equipment, changes in (6.3.1) above categories 5. Transport; processes, reduction of heat 6. Agriculture, forestry, and land losses and/or increased Biomass or biogas power that does use; 7. Waste and wastewater; and waste heat recovery (1.4.1) not decrease biomass and soil 8. Non-energy GHG reductions) carbon pools (4.1.4) (9.4.4) Brief Description The project comprises the The project involves The project’s objective is to The project consists of the design, The project is an equity investment of Project development, construction both energy efficiency promote sustainable urban development, construction and in an agroforestry Fund which aims and operation of 10 wind improvements and development through three operations of a greenfield pulp to invest in agroforestry projects in power plants, the multiple production increases in the subcomponents: production facility, with an annual semi-arid regions. The Fund targets sub-projects totalling ready mix concrete industry. production capacity of 1.5 million investments in manageable scale approximately 320MW of The expected, total project Environmental reclamation (i)  tons, alongside associated forest (3,000 — 15,000 ha) agroforestry installed capacity. The capital cost is USD100 million and of degraded areas along the plantations, infrastructure and projects, combining sustainable expenditures required to will comprise of: banks of rivers and streams logistics. The project has 3 main forestry activities (timber, industrial implement the project totals Improvement of urban mobility (ii)  objectives: tree crops or fruit trees) with approximately USD900 Multiple energy efficiency (i)  Strengthening of the local (iii)  agricultural activities. The projects million. The developer has interventions and government’s fiscal and urban Increase pulp production (i)  supported will use best practice secured power purchase increased waste heat management capacity (non-climate change planting techniques and the benefits agreements in a blend of recovery (WHR) in an component) of the agroforestry approach to 20 year regulated market existing cement facility Reduce the company´s (ii)  improve soil fertility and work contracts and medium- for a total cost of USD25 net carbon footprint by against deforestation. The fund term free market contracts. million incorporating best available targets projects located in reduced- The wind power plants The addition of two new (ii)  environmental practices and fertility savannahs or eroded, are expected to become ready mix concrete plants technologies compacted and damaged lands. The operational over the next 24 to the existing facility Generation of renewable energy (iii)  Fund will take controlling stake in Section 2. Part D: Joint MDB Approach for Mitigation Finance Reporting months. Total MDB finance. 8–12 projects with financial stakes Working capital. ranging from 8-12 million euros. Statement Each wind power plant Only the sub-component The improvement of urban mobility The Project will reduce greenhouse The total MDB equity contribution of Activity can be considered a sub- (i) is considered mitigation seeks to improve mobility by gas emissions through reforestation- to the Fund (USD 11.9 million) is or Activities component and all sub- as other sub-components eliminating critical points of heavy related carbon sequestration and classified as mitigation. Captured by MDB components are classified are not included as part of traffic congestion. At the same renewable energy generation. It will Methodologies as climate finance mitigation the joint MDB typology: (ii) time it will promote more intensive contribute to carbon sequestration under the MDB typology. Sub-component is solely a bicycle use by expanding the city’s via a forestry base of over 106 Furthermore, 100% of production expansions in bicycle path network at least 24 in thousand FSC-certified planted each sub-component and the form of new, greenfield different parts of the city. hectares, as well as more than 94 associated financing is plants; (iii) General capital thousand hectares of native forests classified as mitigation. needs are not associated that will be preserved in compliance with any mitigation impacts. with environmental regulations. Additionally, the biomass facilities will generate electricity that would make the project 100% energy self- sufficient. 39 Brownfield Energy Forest Management and Biomass Project Focus Increase Wind Generation Efficiency Non-Motorized Transport Electricity Generation Financial Intermediation Calculation Total project cost will be Total Project cost will be The total project cost is US $42.9 The MDB will provide a loan to Fund targets capitalization of of Mitigation approximately USD900 approximately US$110 million. million. The MDB will provide a the developer for US $300 million USD119m. The MDB will contribute Finance million. The MDB will provide The MDB will provide a loan for US $21.45 million (50%), (9%), co-lenders 69.7% and 21.3% 10% of the fund targeted capital = a loan to the developer for loan to the developer for and the local counterpart the other equity. For reporting purposes, the USD 11.9m. USD200 million to support US$30 million to support the 50%. For reporting purposes, the MDB will report 33.33% associated the execution of all sub- execution of all sub-projects. MDB will only report 9% associated with renewable energy and 33.33% Total project cost = US $119 million projects, and will report For reporting purposes, MDB with the bicycle networks as associated with agriculture, forestry (10% is climate mitigation finance) the loan as climate change will only report 25% of loan climate change mitigation finance. and land use. mitigation finance as all as climate change mitigation Total MDB financing = US $11.9 of the sub-components finance (USD25 million/ Total project cost = US $42.90 Total project cost =US $3,265 million million (10% of total project and and 100% of each sub- USD100 million) for sub- million (9% is climate mitigation (67% climate mitigation finance) 100% climate mitigation finance) component is captured by component (i). finance) the MDB methodology. Total project cost = USD900 Total project cost = US$100 Total project mitigation finance = Total project mitigation finance = US Total MDB climate finance reported: million (100% climate million (25% climate US $3.86 (42.90 million x 9%) $2,187 million (3.265 million x 67%) US $11.9 million (US $11.9 x 100%) mitigation finance) mitigation finance) contribution Total MDB financing = US $21.45 Total MDB financing = US $300 Total MDB financing = Total project mitigation (50% of total project) million (9% of total project) USD200 million (22% of total finance = US$25 million project and 100% climate (subcomponent (i) for WHR Total MDB climate finance Total MDB climate finance reported: mitigation finance) private and other brownfield EE) reported: US $200 million (US$2.187 x 9%) sector developer US $1.93 million Total MDB climate finance = (US $3.86 x 50%) Total MDB climate finance USD30 million reported: USD200 million Total MDB climate finance reported = US $7.5 million (USD 30 million x 25%) Type of MDB resource is a non- MDB resource is a loan to a MDB resource is a loan to a public MDB resource is a loan to a private MDB resource is an equity Mitigation concessional loan to a private sector developer. entity. sector developer. contribution to a private equity fund Finance private sector developer. Section 2. Part D: Joint MDB Approach for Mitigation Finance Reporting 40 Section 2. Part D: Joint MDB Approach for Mitigation Finance Reporting (5) Mapping Mitigation Sectors against the Mitigation Typology Table 15: Mitigation Sector Definition Sector Label Mapped Sections of the Typology Energy efficiency Sections 1-3 of the typology Renewable energy Section 4 of the typology Transport Section 5 of the typology Agriculture, forestry and land use Section 6 of the typology Waste and wastewater Section 7 of the typology Cross-sector activities and others Sections 8–9 of the typology (only 9.4.1) Mitigation Activities through Financial Section 9.4.2, 9.4.3 and 9.4.4 of the typology Intermediaries ANNEXES Annex A. Finance with Dual Adaptation and Mitigation Benefits MDBs recognize that some components and/ Table A1: Total Adaptation, Mitigation and Dual-Benefit Climate or subcomponents, or elements within projects, Finance (USD millions) contribute to both mitigation and adaptation (thereby delivering dual benefits of both USD Millions mitigation and adaptation). Because this financing Multilateral Dual Total is important, albeit currently a small volume of Development Adaptation Mitigation Benefit Climate climate finance, it is reported separately where Bank Finance Finance Finance Finance MDB systems allow. ADB 719 2,137 — 2,856 For 2014, the ADB, EBRD, IDB and IFC have AfDB 756 1,160 0 1,916 tracked dual benefit figures separately according EBRD 197 3,849 65 4,111 to their internal systems. The other MDBs have EIB 130 5,083 — 5,214 split the financed amount between mitigation and adaptation. In both cases, there is no double IDB 109 2,352 0 2,461 counting. IFC 8 2,540 0 2,558 WB 3,107 6,122 — 9,229 Grand Total 5,036 23,243 65 28,345 Table A2: Illustrative Examples of Different Accounting Approaches for Dual-Benefit Finance Project Afforestation and Erosion Control Sector Forestry Climate vulnerability The project is an afforestation project (mitigation category 6.1.1). context and intent to The project is also intended to provide erosion control and slope stability in response to address climate change increased climate risk, based on MDB methodology for adaptation. Therefore, it aims to impacts deliver the dual benefit of both climate mitigation and adaptation. The project was considered 100% climate finance (MDB loan USD 150 million). Accounting Method 1 Accounting Method 2 Loan split 50/50 between adaptation The entire loan amount was reported (USD 75 million) and mitigation (USD 75 separately as finance with dual adaptation million) and included, within the concerned and mitigation benefits. MDBs, adaptation and mitigation figures, The entire loan amount would be reported respectively, and reported in the relevant in Table 10. adaptation and mitigation tables. Nothing would be reported in Table 10. 42 Annexes Annex B. Instrument Types Table B1: Instrument Types for Adaptation, Mitigation and Dual-Benefit Climate Finance Table B1 includes more detail on instrument types used in USD Million adaptation, mitigation and dual-benefit climate finance. Dual Adaptation Mitigation Benefit Instrument Type Finance Finance Finance Equity 9 609 0 Annex C. MDB Mitigation Finance Grant 860 1,655 0 Outside the Joint Methodology Guarantee 0 1,312 0 Loan 4,169 19,448 65 The joint mitigation methodology is a list of mitigation activities at the intersection of what all MDBs consider Other 0 219 0 mitigation. However, some MDBs consider additional Total 5,037 23,243 65 activities not covered by the joint approach as mitigation, for their own reporting purposes. For 2014, ADB, IFC, and World Bank reported different figures according to their internal mitigation finance tracking approach. The IDB has an internal methodology, which covers climate change, sustainable energy, and environmental sustainability, and is therefore not directly comparable to the figures reported under the joint MDB approach.26 Table C1 shows the amounts the other MDBs counted outside the joint approach according to their own internal methodologies and differences from the MDB joint approach. Table C1: Mitigation Finance Showing Differences from the MDB Joint Methodology MDB Resources External Resources Investment Investment and Technical and Technical Assistance Policy-based Assistance Policy-based MDB Public Private Instruments Public Private Instruments Total ADB mitigation finance as per its 1,405 564 — 297 203 — 2,468 internal methodology ADB mitigation finance as per 1,206 504 — 297 130 — 2,137 MDB methodology Difference/a 198 59 — 0 73 — 331 IFC mitigation finance as per its 103 2,368 0 10 61 4.51 2,547 internal methodology IFC mitigation finance as per MDB 103 2,361 0 10 61 4.51 2,540 methodology Difference — 7 — — — — 7 WB mitigation finance as per its 5,536 — 408 383 197 54 6,578 internal methodology WB mitigation finance as per 5,081 — 408 583 197 54 6,122 MDB methodology Difference 455 — 0 — 0 455 Note: “Difference” includes, for example, wider interpretation of energy-efficiency projects and mitigation transport projects. 26 The IDB has an internal methodology to quantify how it meets its third lending target under its 9th General Capital Increase, which incorporates projects related to mitigation and adaptation, sustainable energy and environmental sustainability. Under this methodology, the IDB has reported USD 4.4 billion. This figure is not comparable to the MDB numbers because the IDB internal methodology: (a) accounts exclusively for loans; (b) counts the full loan amount, rather than only the climate components; (c) includes sustainable energy and environmental sustainability; and (d) follows different classification criteria.