2015 JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS’ C L I M AT E F I N A N C E http://www.adb.org/documents/joint-report-mdbs-climate-finance-2015 2015 JOINT REPORT ON MULTILATERAL DEVELOPMENT BANKS’ C L I M AT E F I N A N C E AUGUST 2016 This report was written by a group of multilateral development banks (MDBs), composed 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 Group (IDBG), and the World Bank Group (WBG). The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the official views of the MDBs' Boards of Executive Directors, or the governments they represent. TABLE OF CONTENTS PREFACE 4 ABBREVIATIONS AND ACRONYMS 5 EXECUTIVE SUMMARY 6 1 MDBs SCALING UP CLIMATE ACTION COMMITMENTS 7 2 OVERVIEW OF MDB CLIMATE FINANCE TRACKING METHODOLOGIES 8 2.1 Climate Adaptation Finance 8 2.2 Climate Mitigation Finance 8 2.3 Dual Benefit Climate Finance 9 2.4 Climate Co-Financing 9 3 MDB CLIMATE FINANCE, 2015 11 3.1 Total MDB Climate Finance, 2015 11 3.2 MDB Climate Finance by Source 12 3.3 MDB Climate Finance by Recipient/Borrower Type 14 3.4 MDB Climate Finance by Instrument Type 15 3.5 MDB Climate Finance by Region 16 4 MDB ADAPTATION FINANCE, 2015 18 4.1 MDB Climate Adaptation Finance by Source 18 4.2 MDB Climate Adaptation Finance by Recipient/Borrower Type 18 4.3 MDB Climate Adaptation Finance by Instrument Type 19 4.4 MDB Climate Adaptation Finance by Region 19 4.5 MDB Climate Adaptation Finance by Sectoral Grouping 20 5 MDB MITIGATION FINANCE, 2015 22 5.1 MDB Climate Mitigation Finance by Source 22 5.2 MDB Climate Mitigation Finance by Recipient/Borrower Type 22 5.3 MDB Climate Mitigation Finance by Instrument Type 23 5.4 MDB Climate Mitigation Finance by Region 23 5.5 MDB Climate Mitigation Finance by Sector Type 24 6 CLIMATE CO-FINANCE, 2015 26 7 MDB CLIMATE FINANCE: REVIEW AND OUTLOOK 28 ANNEX A: DEFINITIONS AND CLARIFICATIONS 30 ANNEX B: JOINT METHODOLOGY FOR TRACKING CLIMATE ADAPTATION FINANCE 31 ANNEX C: JOINT METHODOLOGY FOR TRACKING CLIMATE MITIGATION FINANCE 39 ANNEX D: JOINT METHODOLOGY FOR TRACKING CLIMATE CO-FINANCE 48 ANNEX E: FINANCE WITH DUAL ADAPTATION AND MITIGATION BENEFITS 49 ANNEX F: INSTRUMENT TYPES 50 ANNEX G: GEOGRAPHICAL COVERAGE OF THE REPORT 51 ANNEX H: MDB CLIMATE FINANCE OUTSIDE THE JOINT METHODOLOGIES 54 PREFACE 2015 marked the convergence of major global climate, development, and disaster risk management milestones which chart a more sustainable global future. These include: the adoption of the Sendai Framework for Disaster Risk Reduction (2015-2030) that aims to achieve substantial reduction of disaster risks and losses; the Addis Ababa Action Agenda, which provides a foundation for implementing the global sustainable development agenda and calls on developed countries to implement their commitments to the goal of mobilizing USD 100 billion of climate finance per year for developing countries by 2020; and the adoption of a set of 17 Sustainable Development Goals that aims to end poverty, protect the planet, and ensure prosperity for all. These milestones have set the tone for how institutions like the multilateral development banks (MDBs)—including the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank Group (IDBG), and the World Bank Group (WBG)— prioritize their actions and operate in their client countries. The Paris Agreement, which was negotiated by representatives of 195 countries and was unanimously adopted in December 2015, is a major breakthrough by the international community in resolving climate change. This is the first climate change agreement that includes commitments by all signatories, in the form of Nationally Determined Contributions. Countries have committed to undertake actions or achieve domestic targets with a view of holding the increase in global average temperature to below 2 degrees Celsius, and pursue efforts to limit it to 1.5 degrees Celsius. Countries also plan to increase their ability to adapt to adverse impacts of climate change, and foster climate change resilience. Many developing countries stress that climate finance is vital to their ability to fully deliver on their contributions and increase their level of ambition over time. For the MDBs, the Paris Agreement becomes the foundation for their contribution to efficient and effective low-carbon and climate-resilient development. Climate finance from a variety of sources plays an important role in mobilizing support for the Paris Agreement. MDBs are one important channel to support adaptation and mitigation actions in developing countries and emerging economies, together with other public development institutions deploying limited public sources of finance, and private sources of finance. All MDBs announced new ambitious multi-year targets in late 2015 to rapidly expand climate finance activities, adding to the momentum leading up to the Paris Agreement. The MDBs are scaling up related activities to strengthen policy, build institutional capacity, provide access to finance, and deliver technical support to client countries and their private sectors. The Paris Agreement notes that a progression beyond previous efforts is needed for finance flows to support a pathway towards climate change resilience and low greenhouse gas emissions development. This report highlights the important role of the MDBs in furthering these goals. In 2015, the MDBs collectively committed more than USD 25 billion in climate finance, and have financed more than USD 131 billion in climate action in aggregate since 2011. As a group, the MDBs have been applying jointly developed methodologies for climate finance accounting, adding transparency to efforts to track global development finance flows that deliver climate co-benefits. In 2015, Common Principles for tracking mitigation and adaptation activities were developed together with the International Development Finance Club (IDFC), and a set of guidelines was established and applied to set a common approach for reporting on climate co-financing flows that are invested alongside MDBs’ climate finance activities. The total climate co-finance committed in 2015 was more than USD 55 billion, giving a total when combined with the MDBs’ climate finance of over USD 80 billion. To enable a successful transition to a low-carbon, climate-resilient global economy as envisaged in the Paris Agreement, massive amounts of climate finance must flow to support countries’ achievement of their Nationally Determined Contributions and other low-carbon and climate resilience activities. This fifth edition of the Joint Report on Multilateral Development Banks’ Climate Finance provides an overview of mitigation and adaptation finance in the context of the MDBs' strengthened commitment to work with clients, other development finance institutions, the private sector, and stakeholders to tackle climate challenge with targeted and innovative finance. 4 2015 Joint Report on Multilateral Development Banks’ Climate Finance ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AfDB African Development Bank CCF climate co-finance CIF Climate Investment Funds CO2 carbon dioxide EBRD European Bank for Reconstruction and Development EIB European Investment Bank EU European Union EUR Euro GEF Global Environment Facility GHG greenhouse gas IDB Inter-American Development Bank IDBG Inter-American Development Bank Group, composed of IDB and IIC IDFC International Development Finance Club IFC International Finance Corporation IIC Inter-American Investment Corporation MW megawatt hour MDBs multilateral development banks MIGA Multilateral Investment Guarantee Agency UNFCCC United Nations Framework Convention on Climate Change USD United States dollar WB World Bank, composed of the International Bank for Reconstruction and Development, and the International Development Association WBG World Bank Group, composed of the WB, IFC and MIGA 2015 Joint Report on Multilateral Development Banks’ Climate Finance 5 EXECUTIVE SUMMARY This fifth edition of the Joint Multilateral Development Banks' Report on Climate Finance reports on financing committed by the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank Group (IDBG), and the World Bank Group (WBG), to climate change mitigation and adaptation projects and activities in 2015. This year's report was coordinated by ADB. The data and statistics presented in this year’s report comply with the methodologies developed by the MDBs and applied uniformly to the MDBs’ portfolios. In this report, the term “MDB climate finance” refers to the financial resources committed by MDBs to development operations and components thereof, which deliver climate change mitigation and adaptation co-benefits in developing and emerging economies. Collectively, the MDBs committed USD 25,096 million in climate finance in 2015—USD 20,072 million for mitigation finance and USD 5,024 million for adaptation finance. Since 2011, the MDBs have financed more than USD 131 billion in climate action in developing and emerging economies. The net total climate co-finance1 committed in 2015 alongside MDB resources was USD 55,749 million. When combined with the MDB climate finance, the total climate finance is USD 80,845 million, as shown in the figure below. This is the first edition of the Joint MDBs' Report on Climate Finance to include climate co-finance. Total MDB Climate Finance and Net Climate Co-Finance Total MDB climate finance USD 25,096 million Climate co-finance USD 55,749 million MDBs track and report climate finance in a granular manner, i.e. climate finance reported covers only those components (and/or subcomponents) or elements/proportions of projects that directly contribute to or promote adaptation and/ or mitigation. Adaptation finance is calculated using the Joint MDB Methodology for Tracking Climate Adaptation Finance, which is based on a context- and location-specific approach and captures the amounts associated with activities directly linked to climate change vulnerability. Mitigation finance is calculated in accordance with the Joint MDB Methodology for Tracking Climate Mitigation Finance, which is based on a list of activities that are compatible with low-emissions pathways. The MDBs’ methodologies for climate finance tracking are aligned with the Common Principles for Climate Mitigation Finance Tracking jointly agreed by the MDBs and by the International Development Finance Club (IDFC) and first published in March 2015, and the Common Principles for Climate Adaptation Finance Tracking jointly agreed in June 2015. MDBs will continue to work with the IDFC to further harmonize climate finance tracking methodologies. The MDBs play a pivotal role in the mobilization of climate finance. This has become particularly important in the wake of the Paris Agreement. All MDBs have set ambitious targets to expand climate finance activities rapidly, and all are scaling up activities to strengthen policy, build institutional capacity, provide access to finance, and deliver technical support to client countries and their private sectors. 1 In 2015, guidelines were established to define a common approach on how to report on climate co-financing flows that are invested alongside each MDB's climate finance activities, and to harmonize definitions and indicators that estimate climate co-financing. 6 2015 Joint Report on Multilateral Development Banks’ Climate Finance 1 MDBs SCALING UP CLIMATE ACTION COMMITMENTS Successful implementation of the Paris Agreement means the realization of net zero emissions from 2050 onwards. The Paris Agreement specifies an objective of “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”.2 Prior to the Paris Conference of Parties, all MDBs announced ambitious targets to rapidly and further expand their climate finance activities. Table 1 contains an overview of these commitments. The MDBs are all working to integrate climate change considerations more systematically across their organizations’ processes and operations. They are also working to increase climate investments by coordinating and scaling up activities to strengthen policy, build institutional capacity, provide access to finance, and deliver technical support to client countries and their private sectors. Sustainable infrastructure investment enables the low-carbon, high-resilience pathways needed to realize climate change objectives. Table 1: Targets Announced by MDBs to Support Climate Action MDB Targets Announced Doubling climate finance to USD 6 billion annually by 2020 (own resources only), of which USD 4 billion ADB is for mitigation and USD 2 billion is for adaptation AfDB Triple climate financing to reach 40 percent of investments by 2020 EBRD 40 percent of EBRD annual business investment by 2020 in green financea Global target of greater than 25 percent of all lending. Increased target of 35 percent of lending in EIB developing countries by 2020 Goal to double climate finance to 30 percent of operational approvals by 2020 to an average USD 4 IDBG billion per annum, and to improve evaluation of climate risks and identify opportunities for resilience and adaptation measures A one-third increase in climate financing, from 21 percent to 28 percent of annual commitments by 2020. If current financing levels are maintained, this would mean an increase to USD 16 billion in 2020. WBG The WBG intends to continue current levels of leveraging co-financing for climate-related projects, that could mean up to an another USD 13 billion a year in 2020. The direct financing and leveraged co- financing together represent potentially an estimated USD 29 billion in 2020. ADB = Asian Development Bank, AfDB = African Development Bank, EBRD = European Bank for Reconstruction and Development, EIB = European Investment Bank, IDBG = Inter-American Development Bank Group, MDB = multilateral development bank, USD = United States dollar, WBG = World Bank Group. a The EBRD’s Green Economy Transition (GET) target of 40% Annual Business Investment by 2020/EUR 18 billion over five years from 2016 refers to all green investments by the EBRD. This is composed of climate finance for both mitigation and adaptation as well as finance for projects with a positive environmental impact e.g. environmental remediation. EBRD does not have separate targets for these categories. Nevertheless, it is expected that the bulk of the finance will be classified as climate finance under the joint MDB approach, in line with the current investment focus of EBRD. MDBs will play a critical role in reducing the costs and risks associated with climate finance investments, and in building capacity of institutions within their countries of operation. MDBs and the resources they manage are only part of the global climate finance landscape, and contribute only a portion of the needs for low-carbon and resilient infrastructure. MDBs will continue to work with other public sources, including governments, bilateral aid agencies, Climate Investment Funds (CIF), EU blended finance facilities, the Global Environment Facility (GEF), and the Green Climate Fund, to provide risk-sharing measures aimed specifically at catalyzing private finance. MDBs will also strengthen capacity within client countries to enable the generation of pipelines of quality climate change projects, and provide efficient access to resources. 2 Article 2.1c, Paris Agreement, FCCC/CP/2015/L.9. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 7 2 OVERVIEW OF MDB CLIMATE FINANCE TRACKING METHODOLOGIES In this report, the term "MDB climate finance" refers to the financial resources committed by MDBs to development activities with climate change mitigation and adaptation co-benefits in developing and emerging economies. It comprises climate adaptation finance, climate mitigation finance, and dual benefit climate finance. Tracking of MDB climate finance is based on harmonized principles and jointly-agreed methodologies, which are presented in Annexes B and C in more detail. Sources of MDB climate finance include commitments from the MDBs' own resources, and from external resources channeled through and are managed by the MDBs. In this report, climate co-finance, i.e. the amount of financial resources contributed by external entities alongside MDB climate finance is reported separately from MDB climate finance. The joint methodology for tracking climate co-finance is presented in Annex D. 2.1 Climate Adaptation Finance Climate adaptation is undertaken to lower the current and expected risks or vulnerabilities posed by climate change. For a project to be counted towards MDB adaptation finance, it must: a. Set out the climate vulnerability context of the project; b. Make an explicit statement of intent to address climate vulnerability as part of the project; and c. Articulate a clear and direct link between the climate vulnerability context and the specific project activities. The MDB adaptation finance tracking methodology follows a context- and location-specific, conservative, and granular approach. It tracks MDB financing only of those components (and/or subcomponents) or elements/proportions of projects that directly contribute to or promote adaptation. The text box below provides an illustrative case. The Joint Methodology for Tracking Climate Adaptation Finance is contained in Annex B of this report. It is important to note the following: a. The reported adaptation finance might not capture activities that may significantly contribute to resilience, but cannot always be tracked in quantitative terms (e.g. adaptive operational procedures) or may not have associated costs (e.g. siting assets outside flood prone areas); b. Climate adaptation finance, as defined by the methodology, is not intended to capture the value of the entire project or investment that may increase resilience as a consequence of specific adaptation 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). 2.2 Climate Mitigation Finance Climate mitigation promotes efforts for the reduction, limitation, or sequestration of greenhouse gas (GHG) emissions to reduce the risk of climate change. The Joint Methodology for Tracking Climate Mitigation 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. However not all activities that reduce GHGs are eligible to be counted towards MDB mitigation finance. For energy efficiency projects 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 prevention of a long-term lock-in to high- carbon infrastructure. When considering brownfield energy efficiency investments as climate finance, old technologies must be replaced well before the end of their lifetime with new technologies that are substantially more efficient. Alternatively, new technologies or processes are required to be substantially more efficient than those normally used in greenfield projects. 8 2015 Joint Report on Multilateral Development Banks’ Climate Finance The methodology has some explicit exclusions in certain sectors. Examples are: hydropower plants with high methane emissions from reservoirs that exceed associated renewable energy GHG reductions; geothermal power plants with high carbon dioxide (CO2) content in the geothermal fluid that cannot be reinjected; or biofuel projects that deplete carbon pools more than they reduce GHG emissions due to high emissions in production, processing and transportation. The methodology is explained using an illustrative example in the text box below. The Joint Methodology for Tracking Climate Mitigation Finance is contained in Annex C of this report. 2.3 Dual Benefit Climate Finance Some components and/or subcomponents or elements/proportions within projects result in both mitigation and adaptation benefits. Examples are: (a) an afforestation project to prevent slope erosion in an area with increased risk of flash floods would also contribute to GHG sequestration; and (b) a renewable energy project that has been made climate-resilient. Financing for these types of projects is reported separately where MDB systems allow. Where systems do not allow separate tracking, the MDBs split the financed amount between mitigation and adaptation. In both cases, there is no double counting. An illustrative example is shown in the text box below. Full details of this year’s climate finance with dual adaptation and mitigation benefits are shown in Annex E. 2.4 Climate Co-Financing In late 2015, the MDB group sought to expand the scope of its climate finance tracking to also estimate co-financing. Climate co-finance is defined as the amount of financial resources contributed by external entities alongside climate finance invested by MDBs. In addition: a. It encompasses financial resource providers that are government or government-affiliated, as well as those that are private; b. It includes all forms of financial instruments, including grants, loans, equity, guarantees, etc.; c. Broader support programs that do not provide resources directly into the financing package for a given project/program are not included in climate co-finance; and d. It is quantifiable and traceable to investment documentation kept by the individual MDB. The joint methodology for tracking climate co-finance is contained in Annex D of this report. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 9 Calculating Climate Adaptation, Mitigation and Dual Benefit Finance Climate Adaptation Finance Climate Mitigation Finance Dual Benefit Climate Finance Project The project is a built environment The project is a 320 megawatt wind The project is an afforestation project Description improvement program and falls farm which will be built along a and is classified as an “Agriculture, under the “Energy, Transport, coastal line. The electricity produced Forestry, and Land Use” mitigation and other Built Environment and will be sold to the local distribution activity. The project is also intended Infrastructure” sector grouping. The utility that services 10 towns. to provide erosion control and slope project aims to strengthen climate stability in response to increased resilience and disaster preparedness The facility is estimated to produce climate risk, and falls under the in vulnerable coastal towns. The total about 800 gigawatt-hours of “Other Agricultural and Ecological project budget is USD 300 million electricity per year and will avoid Resources” sector group based and it has two components: 400,000 tons of carbon dioxide on the MDB methodology for annually. The project supports the adaptation. Therefore, the project is 1. Providing more climate- national renewable energy policy and to deliver the dual benefit of both resilient municipal will increase the share of renewable climate mitigation and adaptation. infrastructure; and energy in the country’s energy mix. Investments in erosion control and 2. Training and capacity building slope stability are considered as for local technical personnel The whole project qualifies as a adaptation finance; the mitigation for improved infrastructure mitigation project, and is classified value comes from rebuilding forests operations and service delivery as a “Renewable Energy/electricity which function as carbon sinks. under a changing climate generation activity" based on the MDB methodology for mitigation. The project was considered 100 An analysis of the impacts of percent climate finance. An MDB climate change on the project Total project cost is USD 900 provided a loan USD 150 million. was carried out to inform the million. An MDB committed a non- design of the project.  The project concessional loan of USD 200 million document explicitly set out the to the private sector developer. climate vulnerabilities within project components 1 and 2, with specific adaptation measures incorporated into the project components, as follows:   Component 1: Climate-resilient construction materials (e.g. more heat-resistant) were procured to replace conventional construction materials, with an additional cost of USD 50 million (which is part of the Component 1 budget);   Component 2: The scope of training and capacity building was adjusted to include climate risk management performance monitoring as part of the ongoing operational and maintenance tasks of the local technical personnel, but there is no separate costing. Calculation The entire project has significant The total project cost of USD 900 The dual benefit climate finance can of MDB development and climate resilience million, covering the installation of be computed in two ways: Climate benefits. However, based on the wind turbine generators and ancillary Finance MDB adaptation finance tracking plant equipment is considered as Accounting Method 1: Split loan methodology, only USD 50 mitigation finance, i.e. 100 percent of equally between adaptation (USD million—the additional expenditure the total MDB financing committed is 75 million) and mitigation (USD incurred in procuring heat resistant reported as climate finance. 75 million). Dual benefit finance construction materials in comparison reporting would be zero. with traditional construction In this case, 100 percent of the total materials—is tracked as adaptation MDB finance committed, or USD Accounting Method 2: The entire finance.    200 million, is reported as mitigation loan amount is reported as dual finance. benefit finance. 10 2015 Joint Report on Multilateral Development Banks’ Climate Finance 3 MDB CLIMATE FINANCE, 2015 3.1 Total MDB Climate Finance, 20153 In 2015, MDBs committed a total of USD 25,096 million from the MDBs’ own resources and funding from external resources channeled through the MDBs to climate finance in developing and emerging economies. Mitigation finance totaled USD 20,072 million, or 80 percent, of the total commitments, while adaptation finance represented 20 percent of total commitments, or USD 5,024 million, as illustrated in Figure 1.4 Table 2 lists the adaptation and mitigation finance commitments of each MDB. Table 2: MDB Climate Finance, 2015 (in USD million) MDB Adaptation FInance Mitigation Finance MDB Climate Finance ADB 356 2,561 2,917 AfDB 396 963 1,359 EBRD 244 2,973 3,217 EIB 365 4,772 5,137 IDBG 270 1,474 1,744 WBG 3,393 7,329 10,722 TOTAL 5,024 20,072 25,096 Notes: 1. For EBRD, all dual benefit finance is included in the adaptation finance commitment reported in this table. 2. For IDBG, all dual benefit finance values were split evenly between adaptation and mitigation commitments. 3. For ADB, AfDB, EIB and WBG, separate adaptation and mitigation finance commitments were reported for dual benefit projects. 4. Through 2014, the IDBG reported climate finance for both public and private sector operations according to year of IDBG Board approval. However, beginning 2015, the IDBG reports climate finance for private operations according to year of financial closure. To avoid double counting, a total of USD 409 million in operations with approval year 2014 (reported in the 2014 Joint Report on Multilateral Development Banks’ Climate Finance) and financial closure in 2015 are netted out of 2015 figures. 5. EIB climate finance figures (in this and in all previous MDBs' Joint Report on Climate Finance) are restricted to developing and emerging economies in transition, and therefore exclude EU-15, Czech Republic, and Malta, where EIB is also active. Figure 1: Total MDB Climate Finance Committed, 2015 2015 Total MDB Climate Finance 20% Adaptation USD 5,024 million USD 25,096 million 80% Mitigation USD 20,072 million Note: Dual benefit finance commitments are included in mitigation and adaptation finance values. 3 Figures and tables throughout this report contain slight variations in values due to rounding. Total climate finance is equal to the sum of mitigation, adaptation, and dual benefit finance. The total commitment with dual benefits in 2015 is 4 USD 128 million. For simplicity, dual benefit figures are distributed across mitigation and adaptation so that total MDB climate finance is equal to the sum of total MDB mitigation finance and total MDB adaptation finance, unless explicitly noted otherwise. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 11 Climate co-finance—i.e. financial resources contributed by external entities alongside climate finance invested by MDBs—committed in 2015 is USD 55,749 million, as reported in Table 3. Climate co-financing is discussed in detail in Section 6. Table 3: MDB Climate Finance, Climate Co-Finance, and MDB Finance, 2015 ADB AfDB EBRD EIB IDBG WBG Total Climate change finance commitment (USD million) Own resources 2,656 1,211 3,009 5,088 1,486 9,997 23,447 MDB-managed external resources 261 148 208 49 258 725 1,649 MDB Climate Finance 2,917 1,359 3,217 5,137 1,744 10,722a 25,096 Climate Co-Finance Gross 5,438 2,083 4,207 32,819b 1,259 20,394c 66,200 Net 4,418 628 2,600 30,731 1,037 16,335 55,749 Total climate finance with net co-financing 7,335 1,987 5,817 35,868 2,781 27,057 80,845 MDB Finance (USD million) MDB Operations from MDB Own Resources 16,428 8,335 10,405 17,290 10,288 55,862 118,608 Total MDB Operations 19,091 8,735 12,612 19,612 10,806 59,776 130,632 Climate Finance Ratios Climate Finance from MDB Own Resources/ 16.2% 14.5% 28.9% 29.4% 14.4% 17.9% 19.8% MDB Operations from MDB Own Resources MDB Climate Finance/Total MDB Operations 15.3% 15.6% 25.5% 26.2% 16.1% 17.9% 19.2% Notes: 1. MDB climate finance refers to the sum of the climate finance from the MDB’s internal resources and the MDB-managed external resources. 2. Total MDB operations refer to the sum of the MDB’s internal resources and MDB-managed external resources. 3. EIB climate finance figures (in this and in all previous MDBs' Joint Report on Climate Finance) are restricted to developing and emerging economies in transition, and therefore exclude EU-15, Czech Republic, and Malta, where EIB is also active. a WBG climate finance (including own resources and managed external resources) for IFC, MIGA, and WB are USD 2,426 million, USD 1,139 million, and USD 7,156 million, respectively. b EIB co-finance is dominated by EU funding, for example through structural funds for climate-related projects. c Gross CCF for IFC, MIGA and WB are USD 10,450 million, USD 2,327 million and USD 7,617 million, respectively. 3.2 MDB Climate Finance by Source Sources of MDB climate finance are split between the MDBs’ own resources and external resources channeled through and managed by the MDBs. External resources include trust-funded operations, including bilateral donors and dedicated climate finance funds such as the CIF, and climate related funds under the GEF. As some external resources may already be covered in bilateral reporting, external resources managed by the MDBs are presented separately from the MDBs' own resources. Total 2015 MDB climate finance from MDBs’ own resources was USD 23,447 million and USD 1,649 million from external resources channeled through the MDBs (Figure 2). Figure 3 provides a breakdown of the climate finance committed by each MDB split between MDB’s own resources and external resources. 12 2015 Joint Report on Multilateral Development Banks’ Climate Finance Figure 2: Share of Total MDB Climate Finance Split between MDB Own Resources and External Resources, 2015 2015 Total MDB Climate Finance 7% External Resources USD 1,649 million USD 25,096 million 93% MDB Own Resources USD 23,447million Figure 3: MDB Climate Finance Split between MDB Own Resources and External Resources, 2015 100% 49 261 148 208 258 725 Share in MDB climate finance 75% External Resource (percent) 50% 2,656 1,211 3,009 5,088 1,486 9,997 MDB Own Resource 25% 0% ADB AfDB EBRD EIB IDBG WBG Note: Numbers on columns are in USD million. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 13 3.3 MDB Climate Finance by Recipient/Borrower Type For the third consecutive year, MDBs have reported on the nature of initial recipients/borrowers5 of MDB climate finance (those to whom finance will flow directly from the MDBs), differentiating between public and private recipients/ borrowers. Total commitment varies significantly between MDBs’ own resources and external resources (Table 4). Figures 4 and 5 show the split by recipient/borrower type for the MDBs own resources, and external resources, respectively. Table 4: Total MDB Climate Finance Split between MDB Own Resources and External Resources, 2015 (in USD million) Mitigation Finance Adaptation Finance Total MDB Climate Finance MDB Own External MDB Own External MDB Own External Subtotal Resources Resources Subtotal Resources Resources Total Resources Resources Public 12,822 829 13,651 4,130 410 4,540 16,952 1,239 18,191 Private 6,029 392 6,421 466 18 484 6,495 410 6,905 Subtotal 18,851 1,221 20,072 4,596 428 5,024 23,447 1,649 25,096 Note: Dual benefit finance commitments are included in the mitigation and adaptation finance values. Figure 4: MDB Climate Finance from MDB Own Resources Split by Recipient/Borrower Type, 2015 6,738 WBG 3,259 1,390 IDBG 96 4,702 Public EIB 386 Private 874 EBRD 2,135 AfDB 1,211 ADB 2,036 620 0 2,000 4,000 6,000 8,000 USD million Note: Numbers beside the bars indicate public/private climate finance values in USD million. 5 See Definitions and Clarifications in Annex A for the definition of recipients/borrowers. 14 2015 Joint Report on Multilateral Development Banks’ Climate Finance Figure 5: MDB Climate Finance from External Resources Split by Recipient/Borrower Type, 2015 WBG 626 99 153 IDBG 105 17 Public EIB 32 Private 78 EBRD 130 131 AfDB 17 235 ADB 26 0 100 200 300 400 500 600 700 USD million Note: Numbers beside the bars indicate public/private climate finance values in USD million. 3.4 MDB Climate Finance by Instrument Type For the second consecutive year, MDBs are reporting their climate finance by financial instrument type, including equity, grants, loans, guarantees, and other instrument types such as purchase agreements for carbon finance projects. MDBs reported that 75 percent of total climate finance was committed through loans. MDBs also used guarantees and advisory services, albeit comprising a small percentage. Figure 6 provides information on the breakdown of total MDB climate finance by instrument type. Figure 6: Total MDB Climate Finance Split by Instrument Type, 2015 75% Investment loan - USD 18,870 million 5% Policy-based loan/budget support - USD 1,336 million 6% Grant - USD 1,430 million 6% Guarantee - USD 1,455 million 3% Equity - USD 767 million 4% Line of credit - USD 986 million 1% Other instruments - USD 252 million Note: “Other instruments” include advisory services and instruments such as carbon funds, currency and interest rate swaps, and other derivative instruments. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 15 Out of the USD 25,096 million in MDB climate finance committed in 2015, ADB, AfDB, IDBG and WBG committed resources in the form of policy-based instruments totaling USD 1,336 million or 5 percent of the total MDB climate finance. Figure 7 shows the share and commitments to policy-based loans per institution. Policy-based instruments are 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. For example, one of the policy- based loans made in 2015 is for a country in East Asia and the Pacific to address the country’s longstanding air pollution problem in one of its provinces. The policy-based loan supports the provincial government in making fundamental reforms in its energy and socioeconomic policies and establishing a solid basis for incremental reforms and investments in improving air quality and public health. These include policy actions to switch from coal to cleaner energy, promote public transport in urban areas, and increase use of biomass for energy in rural areas. It will also develop a monitoring and analysis system and help strengthen environmental regulatory enforcement. Figure 7: Share of Policy-Based Instruments in MDB Climate Finance, 2015 100% Share in total MDB climate finance 75% Other investments (percent) and assistance 50% 2,468 1,296 1,215 10,427 Policy-based loan/ budget support 25% 449 63 529 295 0% ADB AfDB IDBG WBG Notes: 1. Numbers on columns are in USD million. 2. “Other investments and assistance” refer to the aggregation of all instrument types, apart from policy-based loan/budget support. 3. EBRD and EIB do not provide policy-based loans/budget support instruments. 3.5 MDB Climate Finance by Region This report covers climate finance committed by the MDBs in developing and emerging economies only.6 Twenty percent of total climate finance was committed to recipients/borrowers located in Non-EU Europe and Central Asia, 18 percent was committed in South Asia, 15 percent in Latin America and the Caribbean, 14 percent in East Asia and the Pacific7, 13 percent in the EU 118, 9 percent in Sub-Saharan Africa, 9 percent in the Middle East and North Africa, and Multi-Regional commitments accounted for 2 percent of the total, as represented in Figure 8. In addition to the geographical distribution of climate commitments per region, distribution to small island states and to least developed countries is shown in Table 5. About 15 percent and 2 percent of total climate finance was committed to least developed countries and small island states, respectively.9 6 For the purposes of this report, the regional groupings are defined in Annex G. 7 East Asia and the Pacific include countries in East Asia, Southeast Asia, and the Pacific islands. 8 For 2015 reporting, the MDBs agreed to report the climate finance for EU 11 only instead of EU 13. EU 11 is composed of EU 13 countries less the Czech Republic and Malta. 9 The list of small island states used in this report includes the 39 members of Alliance of Small Island States, excluding developed countries. The list of least developed countries used in this report reflects the roster in the UNFCCC website (http://unfccc.int/cooperation_and_support/ldc/ items/3097.php). Nine countries are included in both least developed countries and small island states lists. These are Comoros, Guinea Bissau, Haiti, Kiribati, Sao Tome and Principe, Solomon Islands, Timor-Leste, Tuvalu, and Vanuatu. 16 2015 Joint Report on Multilateral Development Banks’ Climate Finance Figure 8: Total MDB Climate Finance by Region, 2015 14% East Asia and the Pacific - USD 3,460 million 13% EU 11 - USD 3,217 million 15% Latin America and the Caribbean - USD 3,737 million 9% Middle East and North Africa - USD 2,189 million 19% South Asia - USD 4,677 million 20% Non-EU Europe and Central Asia - USD 5,033 million 9% Sub-Saharan Africa - USD 2,206 million 2% Multi-Regional - USD 577 million Notes: 1. East Asia and the Pacific includes countries in East Asia, Southeast Asia, and the Pacific islands. 2. For 2015 reporting, the MDBs agreed to report the climate finance for EU 11 only instead of EU 13. EU 11 is composed of EU 13 countries less the Czech Republic and Malta, for consistency with MDB reporting on finance for Sustainable Development. 3. Percentages may not add up to 100 percent because of rounding. Table 5: Total MDB Climate Finance to Least Developed Countries and Small Island States, 2015 (in USD million) Adaptation Finance Mitigation Finance Total Least developed countries 1,556 2,211 3,767 Small island states 269 254 523 2015 Joint Report on Multilateral Development Banks’ Climate Finance 17 4 MDB ADAPTATION FINANCE, 2015 In 2015, MDBs reported a total of USD 5,024 million in commitments in climate adaptation finance. Table 6 presents the 2015 adaptation finance split by MDB. Data reported corresponds to the financing of adaptation projects or of those project components, sub-components, or elements, or proportions of projects that provide adaptation benefits that specifically address climate change vulnerabilities (rather than the entire project cost). For MDBs that report dual benefit finance, this section as well as the accompanying tables and figures include the adaptation component of that dual benefit financing. Specific information and data on dual benefit numbers can be found in Annex E. 4.1 MDB Adaptation Finance by Source Total 2015 MDB adaptation finance was USD 5,024 million, with USD 4,596 million from MDBs’ own resources and USD 428 million from external resources. Table 6 provides a breakdown of the climate adaptation finance committed by the MDBs by own resources and external resources. Table 6: MDB Adaptation Finance by MDB according to Source of Funds, 2015 (in USD million) ADB AfDB EBRD EIB IDBG WBG Total MDB Own Resources 283 305 234 365 194 3,215 4,596 External Resources 73 91 10 0 76 178 428 Total 356 396 244 365 270 3,393 5,024 4.2 MDB Adaptation Finance by Recipient/Borrower Type Regarding the distribution of adaptation finance to recipients/borrowers, 90 percent of total adaptation finance was committed to public recipients/borrowers and 10 percent to private recipients/borrowers. Due to the differing nature and clients of the various MDBs, the share of adaptation finance varies across the MDBs when assessed against recipient/borrower type, as shown in Figure 9. Figure 9: MDB Adaptation Finance by Recipient/Borrower Type and MDB, 2015 100% 6 6 373 484 Share in MDB adaptation finance 99 75% (percent) 356 390 365 264 3,020 4,540 Private 50% Public 145 25% 0% ADB AfDB EBRD EIB IDBG WBG Total MDB Note: Numbers on the columns are in USD million. 18 2015 Joint Report on Multilateral Development Banks’ Climate Finance 4.3 MDB Adaptation Finance by Instrument Type MDBs reported that 71 percent of total adaptation finance in 2015 was committed through investment loans, 13 percent through grants, 7 percent through guarantees, and 6 percent through policy-based loans/budget support. Lines of credit, and other instruments such as equity investments, and advisory services made up only a very small proportion. Figure 10 provides a breakdown of the volumes and shares of total MDB adaptation finance split by financial instrument. Figure 10: MDB Adaptation Finance Split by Instrument Type, 2015 71% Investment loan - USD 3,531 million 6% Policy-based loan/budget support - USD 308 million 13% Grant - USD 666 million 7% Guarantee - USD 361 million 3% Line of credit - USD 144 million 0.3% Other instruments - USD 14 million Note: “Other instruments” include equity, advisory services, and instruments such as carbon funds, currency and interest rate swaps, and other derivative instruments. 4.4 MDB Adaptation Finance by Region Figure 11 shows total adaptation finance by region. In 2015, the regions which drew the largest proportions of adaptation finance were South Asia with 29 percent, Latin American and the Caribbean with 21 percent, and Sub- Saharan Africa with 19 percent. The regions drawing the least amount of adaptation finance were Non-EU Europe and Central Asia with 6 percent, the EU 11 with 3 percent and Multi-Regional activities receiving 2 percent. MDB adaptation finance for small island states and least developed countries is shown in Table 7. About 6 percent of MDB adaptation finance was committed to least developed countries and 1 percent to small island states. Figure 11: MDB Adaptation Finance by Region, 2015 10% East Asia and the Pacific - USD 494 million 3% EU 11 - USD 160 million 21% Latin America and the Caribbean - USD 1,052 million 10% Middle East and North Africa - USD 498 million 29% South Asia - USD 1,484 million 6% Non-EU Europe and Central Asia - USD 314 million 19% Sub-Saharan Africa - USD 934 million 2% Multi-Regional - USD 88 million Note: The regions are defined in accordance with Annex G of this report. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 19 Table 7: MDB Adaptation Finance in Least Developed Countries and Small Island States, 2015 (in USD million) MDB Own Resources External Resources Total Private Public Subtotal Private Public Subtotal Least developed countries 0 1,399 1,399 5 152 157 1,556 Small island states 0 197 197 2 70 72 269 4.5 MDB Adaptation Finance by Sectoral Grouping Figure 12 reports MDB adaptation finance by sectoral grouping, i.e. sector groups for which some adaptation finance has been reported.10 MDB Adaptation finance was mainly distributed to three sector groupings, namely: water and wastewater systems (27%), energy, transport and other built environment and infrastructure (24%) and crop production and food production (18%). Figure 12: MDB Adaptation Finance by Sector Grouping, 2015 Water and wastewater 27% systems - USD 1,362 million Energy, transport, and other 24% built environment infrastructure - Crop production and food USD 1,230 million 18% production - USD 927 million Financial services - Other agricultural and 2% USD 81 million 4% ecological resources - USD 217 million Institutional capacity support 5% or technical assistance - USD 234 million Industry, extractive industries, 1% manufacturing and trade - USD 29 million Cross-cutting sectors - Coastal and riverine infrastructure 4% USD 215 million 12% (including built flood protection infrastructure) - USD 589 million 3% Multiple - USD 140 million Note: Adaptation finance reported for some projects /project components for which there was not enough data granularity to allow apportioning of the adaptation finance among the sector groups are included in "Multiple". Figure 13 shows the sectoral split of regional adaptation climate finance. A more detailed sectoral breakdown of the adaptation finance in East Asia and the Pacific is shown in Figure 14, as an example of the significant variations within a region in terms of sectoral focus. Adaptation finance for East Asia and the Pacific is roughly evenly distributed across the four largest sectoral groupings: coastal and riverine infrastructure (including built flood protection infrastructure); water and wastewater systems; crop production and food production; and, energy, transport and other built environment and infrastructure. However, when broken down into sub-regions (East Asia11, Southeast Asia12 and Pacific13), quite significant variations in sectoral focus can be observed (Figure 14). Coastal and riverine infrastructure (including built flood protection infrastructure) is the dominant sector grouping in East Asia; 89 percent of climate adaptation finance in Southeast Asia is within the sector groups of crop production and food production, and energy, 10 Refer to Annex B for details on the adaptation methodology and sector grouping for MDB adaptation finance. 11 East Asia comprises People’s Republic of China and Mongolia. 12 Southeast Asia comprises Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Philippines, Thailand, and Vietnam. 13 Pacific Islands comprises Cook Islands, Fiji, French Polynesia, Kiribati, Marshall Islands, Federated States of Micronesia, Nauru, Palau, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga, Tuvalu, and Vanuatu. 20 2015 Joint Report on Multilateral Development Banks’ Climate Finance transport and other built environment; and in the Pacific, the largest sector grouping is in energy, transport and other built environment and infrastructure. Figure 13: MDB Adaptation Finance by Sector Groupings and by Region, 2015 1,500 Multiple Cross-cutting sectors Institutional capacity support or technical assistance Financial services 1,000 USD million Energy, transport, and other built environment infrastructure Coastal and riverine infrastructure (including built flood protection infrastructure) 500 Industry, extractive industries, manufacturing and trade Other agricultural and ecological resources Crop production and food production 0 Water and wastewater systems East EU 11 Latin Middle South Non-EU Sub- Multi- Asia America East and Asia Europe Saharan Regional and the and the North and Africa Pacific Caribbean Africa Central Asia Note: Adaptation finance reported for some projects/project components for which there was not enough data granularity to allow apportioning the adaptation finance among the sector groups are included in "Multiple". Figure 14: Example of Sectoral Variations of MDB Adaptation Finance – East Asia and the Pacific, 2015 200 Cross-cutting sectors 160 Institutional capacity support or technical assistance Energy, transport, and other built environment infrastructure 120 Coastal and riverine infrastructure (including USD million built flood protection infrastructure) Industry, extractive industries, manufacturing and trade 80 Other agricultural and ecological resources Crop production and food production 40 Water and wastewater systems 0 East Asia Southeast Asia Pacific 2015 Joint Report on Multilateral Development Banks’ Climate Finance 21 5 MDB MITIGATION FINANCE, 2015 In 2015, MDBs reported a total of USD 20,072 million in commitments in climate mitigation finance. Data reported corresponds to the financing of mitigation projects or of those components, sub-components, or elements, or proportions of projects that provide mitigation benefits (rather than the entire project cost). For MDBs that report dual benefit finance separately, this section as well as the accompanying tables and figures include the mitigation component of that dual benefit financing. Specific information and data on dual benefit numbers can be found in Annex E. 5.1 MDB Mitigation Finance by Source Total 2015 MDB mitigation finance was USD 20,072 million, with USD 18,851 million from MDBs’ own resources and USD 1,221 million from external resources. Table 8 provides a breakdown of climate mitigation finance committed by the MDBs in 2015 from own resources and external resources. Table 8: MDB Mitigation Finance by MDB according to Source of Funds, 2015 (in USD million) ADB AfDB EBRD EIB IDBG WBG Total MDB Own Resources 2,372 905 2,775 4,723 1,293 6,783 18,851 External Resources 189 58 198 49 181 546 1,221 Total 2,561 963 2,973 4,772 1,474 7,329 20,072 5.2 MDB Mitigation Finance by Recipient/Borrower Type Regarding the share of recipients/borrowers, 68 percent of total mitigation finance was committed to public recipients/ borrowers and 32 percent to private recipients/borrowers. Due to the differing nature and clients of the various MDBs, the share of mitigation finance varies significantly across MDBs when assessed against recipient/borrower type, as shown in Figure 15. Figure 15: MDB Mitigation Finance by Recipient/Borrower Type, 2015 (in USD million) 100% 11 418 195 Share in MDB mitigation finance 646 2,985 6,420 75% 2,165 Private (percent) 50% 952 1,279 Public 25% 1,915 808 4,354 4,344 13,652 0% ADB AfDB EBRD EIB IDBG WBG Total MDB Note: Numbers on columns are in USD million. 22 2015 Joint Report on Multilateral Development Banks’ Climate Finance 5.3 MDB Mitigation Finance by Instrument Type MDBs reported that 76 percent of total climate mitigation finance in 2015 was committed through investment loans, while the remaining were split among guarantees (6%), policy-based loan/budget support (5%), lines of credit (4%), grants (4%), equity investments (4%), and other instruments (1%), as shown in Figure 16. Figure 16: MDB Mitigation Finance Split by Instrument Type, 2015 76% Investment loan - USD 15,340 million 5% Policy-based loan/budget support - USD 1,027million 4% Grant - USD 765 million 6% Guarantee - USD 1,094 million 4% Equity - USD 761 million 4% Line of credit - USD 842 million 1% Other instruments - USD 243 million Note: “Other instruments” includes advisory services; and instruments such as carbon funds, currency and interest rate swaps, and other derivative instruments. 5.4 MDB Mitigation Finance by Region Figure 17 shows total MDB mitigation finance by region. In 2015, 24 percent of mitigation finance was committed to recipients/borrowers located in Non-EU Europe and Central Asia, 16 percent in South Asia, 15 percent in EU 11, 15 percent in East Asia and the Pacific, 13 percent in Latin America and the Caribbean, 8 percent in the Middle East and North Africa, 6 percent in Sub-Saharan Africa, and 3 percent to Multi-Regional activities. Mitigation finance for small island states and least developed countries is shown in Table 9. About 9 percent of MDB mitigation finance was committed to least developed countries and 1 percent to small island states. Figure 17: MDB Mitigation Finance by Region, 2015 15% East Asia and the Pacific - USD 2,966 million 15% EU 11 - USD 3,057 million 13% Latin America and the Caribbean - USD 2,686 million 8% Middle East and North Africa - USD 1,691 million 16% South Asia - USD 3,193 million 24% Non-EU Europe and Central Asia - USD 4,718 million 6% Sub-Saharan Africa - USD 1,272 million 3% Multi-Regional - USD 489 million 2015 Joint Report on Multilateral Development Banks’ Climate Finance 23 Table 9: MDB Mitigation Finance to Least Developed Countries and to Small Island States, 2015 (in USD million) MDB Own Resources External Resources Total Private Public Subtotal Private Public Subtotal Least developed countries 160 1,914 2,074 46 91 137 2,211 Small island states 58 127 185 29 40 69 254 5.5 MDB Mitigation Finance by Sector Type Figure 18 shows climate mitigation finance by sector. More than half of the MDB mitigation finance went to energy- related sectors (30 percent for renewable energy, 7 percent for lower-carbon and efficient energy generation, and 14 percent energy efficiency). The remaining portions were distributed to the transport sector (26 percent), cross-cutting issues (12 percent), agriculture, forestry and land use (6 percent), water and waste water (3 percent) and other sectors (2 percent). Figure 18: MDB Mitigation Finance by Sector Type, 2015 Renewable energy - 3% Waste and wastewater - USD 510 million 30% USD 6,018 million Transport - Lower carbon and efficient 26% USD 5,283 million 7% energy generation - USD 1,475 million Cross-cutting issues - 12% USD 2,380 million Energy efficiency - 14% USD 2,854 million Other sectors - 2% USD 347 million Agriculture, forestry and land 6% use - USD 1,205 million Note: "Other sectors" include the following: non-energy GHG reductions; low-carbon technologies; miscellaneous; and multiple. Miscellaneous is defined in Annex Table 3 in Annex C. Mitigation finance reported for some projects/project components for which there was not enough data granularity to allow apportioning of the mitigation finance among the sectors are included in "Multiple". Figure 19 shows the sectoral split of mitigation climate finance by region. Figure 20 shows a more detailed breakdown of climate mitigation finance in East Asia and the Pacific to provide more granularity, and to show that there may be significant sectoral variations of climate mitigation finance within a region. Climate mitigation finance in East Asia and the Pacific is roughly evenly split across most project categories, with the two largest categories being transport and renewable energy. However, variation across sub-regions (East Asia14, Southeast Asia15 and Pacific16) can be observed. In Southeast Asia, cross-cutting issues dominate the sectoral split, representing support to regional and national policies and financing instruments/mechanisms, while in the Pacific, 90% of climate mitigation finance is for renewable energy. 14 East Asia comprises People’s Republic of China and Mongolia. 15 Southeast Asia comprises Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Philippines, Thailand, and Vietnam. 16 Pacific Islands comprises of Cook Islands, Fiji, French Polynesia, Kiribati, Marshall Islands, Federated States of Micronesia, Nauru, Palau, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga, Tuvalu, and Vanuatu. 24 2015 Joint Report on Multilateral Development Banks’ Climate Finance Figure 19: MDB Mitigation Finance by Sector and by Region, 2015 5.000 Other Sectors 4,000 Cross-cutting issues Transport 3,000 Waste and wastewater USD million Non-energy GHG reductions Agriculture, forestry and land use 2,000 Energy efficiency Lower carbon and efficient 1,000 energy generation Renewable energy 0 East EU 11 Latin Middle Non-EU South Sub- Multi- Asia America East and Europe Saharan Regional Asia and the and the North and Africa Pacific Caribbean Africa Central Asia Note: "Other sectors" include the following: low-carbon technologies; miscellaneous; and multiple. Miscellaneous is defined in Annex Table 3 in Annex C. Mitigation finance reported for some projects/project components for which there was not enough data granularity to allow apportioning of the mitigation finance among the sectors are included in "Multiple". Figure 20: Example of Sectoral Variations of MDB Mitigation Finance – East Asia and the Pacific, 2015 2,000 Other Sectors 1,600 Cross-cutting issues Transport 1,200 Waste and wastewater USD million Agriculture, forestry and land use 800 Energy efficiency Lower-carbon and efficient energy generation 400 Renewable energy 0 East Asia Southeast Pacific Regional Asia Notes: 1. "Other sectors" include the following: low-carbon technologies; miscellaneous; and multiple. Miscellaneous is defined in Annex Table 3 in Annex C. Mitigation finance reported for some projects/project components for which there was not enough data granularity to allow apportioning of the mitigation finance among the sectors are included in "Multiple". 2. Projects/project components that are implemented in two or more subregions are classified as regional. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 25 6 CLIMATE CO-FINANCE, 2015 In 2015, the MDBs defined a common approach to report climate co-financing (CCF) flows and harmonized definitions and indicators that estimate climate co-financing. This joint effort produced preliminary figures of 2014 CCF, which were presented at the United Nations Climate Change Conference in Paris at the end of 2015. The MDBs are now integrating climate co-finance data into this joint MDB report. Tracking of climate co-finance intends to estimate the volume of financial resources invested by public and private external parties alongside MDBs for climate mitigation and adaptation projects. The approach categorizes CCF sources of funds as: (i) other MDBs; (ii) IDFC member institutions, including bilateral and multilateral members; (iii) other international public entities such as donor governments; (iv) other domestic public entities such as recipient country government contributions; and, (v) all private entities (defined as those with at least 50 percent privately-held shares). This level of granularity enables MDBs to present an increasingly nuanced picture of co-finance flows to climate change interventions. Table 10 presents 2015 CCF flows as reported by each institution, segmented by the source of co-financing. CCF figures shown below are the best estimation of resource flows based on available information at the time of board approval and/or commitment to each project. In some cases, two or more MDBs jointly finance a project, which results in some overlap between the gross co-finance figures reported by the different MDBs. In order to avoid double-counting, the last column of Table 10 nets out potentially double-counted co-financing by considering only the proportion of co- financing for every project which features co-financing from another MDB. Such CCF figures are also presented in Table 3 alongside each MDB’s own climate finance flows. Table 10: Climate Co-Finance Flows by Institution and Source, 2015 (in USD million) Total Total Climate Climate ADB AfDB EBRD EIB IDBGa WBGb Co-Finance Co-Finance (Gross) (Net)c Other MDBs 714 1,036 804 1,129 70 2,006 5,759 0 IDFC Members 541 217 198 1,105 300 1,101 3,462 2,412 Other International Public 257 495 509 22,724 - 5,815 29,799 28,602 Other Domestic Public 2,766 214 13 6,475 870 4,727 15,067 13,794 Private 1,160 121 2,683 1,386 18 6,745 12,113 10,941 Total 5,438 2,083 4,207 32,819d 1,259 20,394 66,200 55,749 Note: Values may not add up to total because of rounding. a IDBG climate co-finance figures do not account for finance in the form of equity. In addition, beginning in 2015 and as explained in a note to Table 3, the IDBG reports climate finance figures for private sector operations based on year of financial closure and no longer year of Board approval. In order to avoid double-counting between 2014 and 2015 reporting, Table 10 discounts USD 1,751 million for operations with financial close in 2015 that were approved by the Board and reported in 2014. The total IDBG 2015 CCF figure is USD 3,010 million. b Includes IFC, MIGA, and WB CCF volumes. Gross CCF for IFC, MIGA and WB are USD 10,450 million, USD 2,327 million and USD 7,617 million, respectively. c Net CCF amount is based on pro-rating the climate finance commitment of the reporting MDB against the climate finance commitment of the co-financing MDB (as reported by the first MDB without review by the second MDB). d EIB co-finance is dominated by EU funding, for example through structural funds for climate-related projects. Capturing co-finance data at the project level affords a greater depth of analysis, including segmenting CCF along thematic lines (i.e. mitigation, adaptation and dual benefit). Mitigation activities account for about 79 percent of all CCF flows, while adaptation activities account for about 20 percent. Table 11 presents the 2015 CCF flows per the thematic conventions used by the MDBs. 26 2015 Joint Report on Multilateral Development Banks’ Climate Finance Table 11: Climate Co-Finance Flows by Institutions and Thematic Focus, 2015 (in USD million) Total Total ADB AfDB EBRD EIB IDBG WBG Climate Climate Co-Finance Co-Finance (Gross) (Net) Adaptation 115 220 17 10,065 59 1,252 11,729 11,188 Mitigation 5,073 1,862 3,153 22,754 1,126 18,898 52,866 43,808 Dual benefit 250 — 1,038 — 73 245 1,605 753 Total 5,438 2,083 4,207 32,819 1,259 20,394 66,200 55,749 Note: Values may not add up to total because of rounding. For 2015 data, the MDBs opted to use the same guiding principles presented alongside the results shared at the Paris Conference of Parties. It is important to note, however, that due to changes in the internal accounting systems of some MDBs, 2014 and 2015 CCF flows are not directly comparable. Looking forward to 2016 and beyond, the MDBs continue their work to enhance the CCF approach. This includes improvements to the integrated data capture process and options to further disaggregate co-finance sources, particularly from private entities. The MDBs will also continue to engage with key external stakeholders on the CCF approach. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 27 7 MDB CLIMATE FINANCE: REVIEW AND OUTLOOK The MDBs have reported jointly on climate finance since 2012, with the first report published in 2012 reporting 2011 figures, and have collectively committed over USD 131 billion in climate actions over the last five years. Figure 21 shows the reported climate finance commitments from 2011 to 2014. Figure 21: Reported MDB Climate Finance Commitments, 2011–2014 30,000 27,014 28,345 26,846 23,803 9,229 8,981 WB 11,090 20,000 6,757 IFC USD million 1,681 2,558 IDB 2,170 2,669 2,461 1,588 EIB 1,870 1,220 5,637 5,214 EBRD 3,663 5,224 10,000 AfDB 3,729 3,131 4,111 3,460 ADB 1,639 2,220 1,205 1,916 3,177 3,284 3,268 2,856 0 2011 2012 2013 2014 Notes: 1. IFC and WB reported climate finance separately from 2011–2014. MIGA climate finance numbes are not included in the reported MDB climate finance numbers from 2011-2014. 2. MDB financing in Euros is affected by the fluctuation in exchange rate. In 2015, the Euro/USD exchange rate dropped by about 18 percent compared to 2014. This exchange rate trend is expected to continue in the next few years. (https://www.ecb.europa.eu/pub/pdf/other/ eurosystemstaffprojections201606.en.pdf?8774facfb96d540891ce434a5ab4394b) Source: 2014 Joint Report on Multilateral Development Banks’ Climate Finance. 2015 climate finance figures reflect changes in reporting parameters of the IDB and the WB Groups, and modifications in EU reporting. Reporting for the WB and IFC has been integrated with contributions from MIGA to be aligned with WBG finance targets. Similarly, the 2015 figures encompass activity of the IDB Group, considering both the IDB and IIC, as compared to previous years when climate finance commitments for IDB only were reported. Also, beginning 2015, IDBG reports climate finance for private sector operations according to year of financial closure, as opposed to prior years when such reporting was based on the year of IDBG Board approval. For IFC, only climate finance for long-term investments were reported in 2015. In previous years, both short-term and long-term investments were included in IFC’s climate finance values. Lastly, climate finance commitments to the Czech Republic and Malta are not included in the 2015 reporting, revising the EU 13 group to the EU 11 group. The 2015 mitigation finance tracking is based on the “List of activities eligible for classification as climate mitigation finance”17 contained in the Common Principles for Climate Mitigation Tracking jointly developed by the MDBs and the IDFC. This is a variant of the MDB Joint Typology, which served as the basis for mitigation finance tracking in previous years. The MDBs are also now tracking climate co-financing. In 2015, guidelines were established to define a common approach on how to report on climate co-financing flows that are invested alongside each MDBs’ climate finance, and to harmonize definitions and indicators that estimate climate co-financing alongside MDB-managed resources for The list is included in Annex C of this report. 17 28 2015 Joint Report on Multilateral Development Banks’ Climate Finance climate projects. MDBs continue to work on improving the approach in tracking co-financing, realizing the critical roles played by the MDBs in catalyzing other investments, particularly those from the private sector. A significant amount of work has also been undertaken to establishing better tracking systems within the MDBs. Harmonized methodologies and better systems enable the MDBs to more transparently and accurately capture the amount of climate finance committed specifically for mitigation and adaptation (i.e. in accordance with the MDBs methodologies which specify that only the components, or proportion of a project directly attributable to mitigation and adaptation activities are included in the climate finance figures). Tracking climate finance flows is increasingly important to promote transparency and accountability concerning climate finance commitments. The MDB group has also been working closely together, sharing experiences, developing common methodologies and building best practices, which include, among others, the following work: a. Harmonized approaches for estimating and reporting GHGs;18 b. Harmonized definitions and reporting on climate co-financing flows in operations, i.e. the amount of public and private co-finance contributed by external entities alongside climate finance invested by MDBs. The MDB group continues to improve its framework and methodology for measuring co-financing.19 c. Harmonized approaches for impact reporting on Green Bonds.20 The MDBs are also working closely with the IDFC21, and in March 2015 agreed on the Common Principles for Tracking Climate Mitigation Finance between the MDBs and IDFC member institutions, as well as increased collaboration on climate adaptation finance tracking. The common mitigation typology is the version used in this 2015 Joint Report22; however both groups will continue to refine this and will discuss approaches for other sectors, such as green buildings, climate-smart cities, among others. The adaptation finance working group, has agreed on four common principles that put in place the groundwork for a more formal common public disclosure process. Discussions on alignment of the adaptation tracking process, and areas of differentiation (sectors and measurement) are ongoing. Leading up to the Paris Agreement, all MDBs made commitments to substantially increase their climate investments by coordinating and scaling up activities, building institutional capacity, providing access to finance, and delivering technical support to client countries and their private sectors to enable effective implementation of their Nationally Determined Contributions. It is expected that the MDBs will play a central role in supporting their clients to generate the pipelines of projects needed to deliver the Paris Agreement outcomes, and in providing risk-sharing measures aimed at catalyzing private finance. The MDBs will assist clients, both at national and sub-national levels, as well as the private sector, in translating the countries' Nationally Determined Contributions into financeable investment plans, programs, and projects. The MDBs are significantly scaling up activities across multiple sectors required for countries' low-carbon and climate- resilient development pathways, through direct investments, advisory services, and by accessing concessional resources for new and innovative approaches towards mobilizing the public and private sectors. In particular, the MDBs are scaling up actions in renewable energy and energy efficiency; low-carbon and climate-resilient cities, regions and industries; low- carbon transport; natural resource efficiency and security for communities and the economy; and climate-smart agriculture and food security. In addition, the MDBs are increasing cooperation to scale up financial resources for low-carbon and resilient investments through improving the planning, preparation, structuring, financing, aggregating and de-risking of public and private investments. 18 See http://www.worldbank.org/content/dam/Worldbank/document/IFI_Framework_for_Harmonized_Approach%20to_Greenhouse_Gas_ Accounting.pdf 19 See http://www.ebrd.com/documents/climate-finance/tracking-climate-cofinancing.pdf 20 See http://www.eib.org/attachments/press/20151202-0530-finalrevised-proposal.pdf 21 IDFC brings together 23 leading international, national and sub-regional development banks from across the world. KfW manages the secretariat. See https://www.idfc.org/Who-We-Are/facts-and-figures.aspx for the full listing of members. 22 See Annex C. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 29 ANNEX A: DEFINITIONS AND CLARIFICATIONS Brownfield: 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. Comparability: Figures reported in 2015 are not directly comparable with previous years. For this year’s report, IFC is only reporting climate finance from long-term investments; previously, short-term investments were also included. Reporting for the WB and IFC was combined into the WBG with contributions from MIGA. Further, IDBG has shifted to reporting based on total approvals as well as on financially closed operations. External resources: Refers to operations supported by bilateral donors and dedicated climate finance entities such as GEF and CIF, which may also be reported to the Development Assistance Committee of the Organization for Economic Co-operation and Development by contributor countries. Financing instruments: All instruments associated with MDB climate finance are covered, including grants, loans, guarantees, equity, and performance-based instruments. Granularity: Finance reported covers only those components and/or subcomponents or elements/proportions of projects with activities that directly contribute to or promote adaptation and/or mitigation. Greenfield: 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). 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. Public and private: This is decided by the status of the first recipient/borrower of MDB finance. The first recipient/ borrower is considered public when at least 50 percent of the recipient/borrower is publicly owned. Recipient/Borrower: First borrower/beneficiary to whom finance will flow directly. There is an acknowledgement that this is a complicated topic and that the status of the first recipient/borrower may not be the same as the final beneficiary/borrower. For example: loan to national development bank (first recipient) for energy efficiency in small and medium enterprises (final beneficiary). This particularly becomes more complicated when there is a public-private partnership (PPP). Reporting period: Data covers fiscal year 2015. 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, 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 and various sources or co-financing. 30 2015 Joint Report on Multilateral Development Banks’ Climate Finance ANNEX B: JOINT METHODOLOGY FOR TRACKING CLIMATE ADAPTATION FINANCE 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 the impacts of heavy rainfall or storm surges that then contributes to overall road and investment resilience. Overview of the Adaptation Finance Tracking Methodology This methodology is composed of the following key steps: • Setting out the climate vulnerability context of the project; • 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. Furthermore, when applying the methodology, the reporting of adaptation finance is limited solely to those project activities (i.e. projects, project components or elements/proportions of projects) that are clearly linked to the climate vulnerability context. 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, 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.). 2015 Joint Report on Multilateral Development Banks’ Climate Finance 31 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 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. 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. Harmonization of Tracking of Climate Adaptation Finance A growing number of institutions and initiatives are working towards harmonizing the methodologies for tracking climate adaptation finance. The MDBs and the International Development Finance Club (IDFC) agreed to work jointly towards improved understanding of definitions of the different approaches and principles for climate change adaptation finance tracking. In July 2015, the two groups agreed on a set of outline principles - the Common Principles for Climate Change Adaptation Finance Tracking23 - as an essential and important first step. These define the context of adaptation finance in development and lay the basis for further joint work that includes addressing comparability of the reporting process and relevant process-based concepts and guidelines. In addition, the Organization for Economic Co-operation and Development’s (OECD) Development Assistance Committee (DAC), in close collaboration with the MDBs, has been working to better align its “Rio Markers” with the MDB methodology in its approach to tracking climate adaptation finance. The Rio markers were originally designed to help members in their preparation of National Communications or National Reports to the Rio Conventions, by identifying activities that mainstream the Conventions’ objectives into development co-operation. Initially, there were three Rio markers that have been used­since 1998: biodiversity, climate change mitigation, and desertification. In 2009, an additional marker was created to capture flows for climate change adaptation. The Rio Markers apply a 3-value (“principal”, “significant” or “not targeted”) approach to track the extent to which bilateral development assistance targets adaptation to climate change as an overall activity objective (i.e. descriptive), and assigns a percentage of climate adaptation finance based on the identified adaptation value of the project. In April 2016, the OECD-DAC, with contributions from the MDBs, made available an improved guidance for tracking bilateral official development assistance (ODA) targeting climate change adaptation.24 While the MDB methodology takes a granular approach to track only adaptation activities, the Rio Markers consider the objective of specific projects as it relates to adaptation. Annex Table 1 presents the sectoral groupings used in tracking MDB adaptation finance, while Annex Table 2 presents case studies that illustrate how the adaptation finance tracking approach has been recently used by the MDBs. 23 The Common Principles are contained in http://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/Common_Principles_ for_Climate_Change_Adaptation_Finance_Tracking_-_Version_1__02_July__2015.pdf 24 The guidance is available at http://www.oecd.org/dac/stats/DCD-DAC(2016)3-ADD2-FINAL%20-ENG.pdf 32 2015 Joint Report on Multilateral Development Banks’ Climate Finance Annex Table 1: Examples of Potential Adaptation Activities in Some Sectoral Groupings Sectoral Examples of Sectors Potential impacts Potential Adaptation Activities in grouping Response Increased risk of flooding of well Well fields relocated away from floodplains, Water supply fields leading to contamination raised well heads Water and Wastewater infrastructure/ Increased exposure to damage Protection of wastewater infrastructure from Wastewater management and storm water overload due to increased flooding Systems coastal flooding and sea-level rise Water resources management Reduction in river water levels and Improved catchment management planning (not included under cross- flows due to reduced rainfall and regulation of water abstraction sector) Crop Production Primary agriculture and food Increased variability in crop Investments in research and development and Food production productivity of crops that are more resilient to climate Productiona extremes and change Supplemental irrigation, multi-cropping Increasing drought including systems, drip irrigation, leveling and other Agricultural irrigation seasonal droughts and shorter approaches and technologies that reduce rainy season risk of large crop failures Increased frequency of forest fires Improved forest fire management and pest/ Forestry and pest/disease outbreaks disease outbreak management Other Agricultural Decrease in forage quantity or Increased production of fodder crops to Livestock production and Ecological quality supplement rangeland foraging Resources Loss of river fish stocks due to Adoption of sustainable aquaculture Fisheries changes in water flows and/or techniques to compensate for the reduction increased temperature in local fish supplies Establishment of core protected areas Ecosystems/Biodiversity Drought leading to loss of and buffer zones for sustainable use of (including ecosystem-based wetlands and livelihoods/ biodiversity and water to meet livelihood flood protection measures) biodiversity needs in more extreme droughts Historic specifications for Design of climate-resilient equipment, such Manufacturing equipment inappropriate under as more stable cranes for harbors in cyclone new climate conditions zones Improved refrigeration or other changes Food processing distribution Increased risk of food poisoning in food processing and/or distribution that and retail and/or spoilage address more extreme heat Industry, Extractive Industries, Manufacturing Disruption of national trade due to Establishment of alternative trade routes in Trade and Trade climate-related disasters case of disruption of main route Extractive industries (oil, gas, Shift in zones affected by Increased search for resources and offshore etc.) typhoons/hurricanes drilling outside hurricane seasons or zones Increased precipitation intensity Mining Improved design and construction of tailings causes floods in open-pit mines Annex Table 1 continued on next page 2015 Joint Report on Multilateral Development Banks’ Climate Finance 33 Sectoral Examples of Sectors Potential impacts Potential Adaptation Activities in grouping Response Increased storm damage along Physical/natural reinforcement of coastline Coastal and Sea defenses/flood protection coastline due to sea level rise and and/or additional coastal structures/ Riverine barriers increased storm surges vegetation Infrastructure (including built Increased river dredging programs, Increased risk of riverine flooding flood protection reinforcement of levees, reestablishment River flood protection measures due to heavier and/or more infrastructure)b of natural flood plains and vegetation in frequent rainfall events upstream areas/river banks Shift in zones affected by More robust building regulations and Construction typhoons/hurricanes/storm surges improved enforcement More extreme river flows cause Use of revised codes for infrastructure design Transport erosion of embankments and loss that consider increased frequency/severity of bridges of extreme events Improved solid waste management and Urban development Increased risk of floods collection, increased capacity and other changes in drainage systems Energy, Diversification of tourist attractions to Tourismc Storms disrupt tourist season Transport, and encompass inland or low-risk areas other Built Environment and Increased risk of pollution of areas Completion of a climate risk assessment Infrastructure Solid waste management below landfill sites due to risk of prior to location of landfill sites flood Increased seasonality of rainfall, Investment in thermal power generators Thermal energy generation creating periods of low river flows with minimal cooling water requirements Reduction in river flows lead Optimization of hydro-infrastructure design Energy generation (including to loss of generation from subject to due diligence based on climate renewables) hydroelectric plant and hydrological models Investment in embedded renewable Energy transmission and Higher temperatures reduce generation to reduce distribution distribution distribution efficiency requirements Damage to key national data Identification of sites at greatest risk and ICT hardware and software to Information centers and infrastructure from enhancement of resilience of those sites beneficiary organizations and increased storms or floods and/or services Communications Technology (ICT) Lack of sector-relevant, short-term Investments in weather and climate services Information technology weather forecast that can reach the end users efficiently Increased strain on banking Creation of infrastructure and “hubs” sectors as clients experience that would support improved business Banking climate impacts and affect continuity during and after extreme weather Financial business continuity events Services Increased negative effects of Changes in structuring of index-based Insurance extreme weather events and insurance products payout Annex Table 1 continued on next page 34 2015 Joint Report on Multilateral Development Banks’ Climate Finance Sectoral Examples of Sectors Potential impacts Potential Adaptation Activities in grouping Response Institutional Provision of finance to small and medium Capacity Support Increase in the demand for Technical services or other enterprises providing relevant services, professional services, e.g. for or Technical professional support e.g. engineering of adaptation solutions or climate risk assessment Assistance insurance Climate change results in technical Technical capacity building for training the Education syllabus being outdated for high trainers in water and agri-sectors risk sectors Changing patterns of diseases Monitoring of changes in disease outbreaks Health as a result of changing climatic and development of a national response conditions plan Cross-Cutting Sectors Rapidly changing policy and Institutional reforms and strengthening Cross-sector policy and regulation regimes due to climate to include climate aspects in policies and regulation change impacts regulations in flexible manner Change in seasonality of hydro- Integration of climate change scenarios into Disaster risk management meteorological disasters disaster risk plans and preparedness a Prior to the 2014 Joint Report on Multilateral Banks Climate Finance, “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/Biodiversity (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). 2015 Joint Report on Multilateral Development Banks’ Climate Finance 35 Annex Table 2: Adaptation Finance Tracking Case Studies Project Disaster Risk Management Water Supply Focus Sector Cross-Cutting Water and Wastewater Systems Brief The project outcome is the immediate resumption of The project consists of a new water intake facility, a treatment Description critical economic and social services with disaster-resilient plant, pumping facilities and a transmission pipeline to a of Project infrastructure. To achieve this, targeted infrastructure for reservoir serving an urban center and providing an additional rehabilitation and/or retrofitting include schools, strategic 30 million cubic meters of potable water per year. roads and rural roads, and district-level government buildings damaged by the earthquake and landslides. The project also involves strengthening disaster preparedness and climate change adaptation of communities, and management capacities of relevant government agencies Climate An initial climate change risk assessment indicated that risks The target country is ranked as one of the most water Vulnerability associated to climate change manifested through increased scarce countries in the world, with climate change expected Context to increase the frequency and magnitude of extreme rainfall intensity, and higher probability of landslides and flash temperatures and to result in lower precipitation, according flooding. Higher level of vulnerability to flooding and landslide to the country’s National Communication to UNFCCC. Water risks resulted from cracked and eroded topography, posed a is the most important natural resource that constraints the serious threats to planned infrastructure works. country’s economic development. Even with an enhanced strategy to reduce allocations to irrigated agriculture, to reuse treated wastewater in agriculture and to further apply demand management for households and industries, projections indicate that water demand will continue to outstrip resource capacities by more than 20 percent. According to the United Nations, in 2011, the country was using 99.4 percent of all its available renewable water resources. Statement The project adopted an integrated approach in dealing with The project will improve the resilience of the communities of Purpose the engineering aspects of the “building back better” and to extreme droughts and climate change, as further or Intent overexploitation of the current fragile local groundwater increasing resilience of the infrastructure components of the sources can be avoided. It contributes strongly to country project to both earthquake and climate change. development objectives as defined in the country’s national water strategy and to the EU policy objectives as laid out in the country’s action plan. Link to Engineering design changes included: 1) Treating and conveying 30 million cubic meters per year of Project fresh water from the source to the reservoir which serves the Activities 1) the installation of stronger and more climate-resilient government buildings and schools with pre-stressed, spun city. concrete poles for reinforcement purposes. 2) increase capacity of side drains, cross drains and embankment height for roads and 2) The additional water will supplement the limited potable 3) bridges and bridges' drainage structures designed for water resources available in the administrative division where higher return periods, and more resilient to over topping by city belongs, and where population continues to grow. high floods. Non engineering measures include: 1) improved preparedness for climate variability and change. 2) capacity building of district environmental officers and project staff to also incorporate climate change adaptation. Additional activities that could also be investigated as part of the climate risk management strategy of the project are: 1) increasing invert levels of bridges/culverts to accommodate for high flood levels. 2) reviewing specifications for materials and mixes used for all construction works to increase their resilience to the impacts of increased rainfall, increased flows and fluctuations in temperature variations. Calculation The incremental cost of adaptation was estimated to be USD The adaptation finance is USD 5.6 million or 10 percent of the of 35 million or 17 percent of the total investment, representing MDB loan amount. Adaptation Finance only the cost of the measures integrated in the project design to reduce risks of climate change, and not the cost The project is providing additional water into the country’s river basin, and increases the sources and amounts of water of the disaster risk management measures integrated in the available for the consumption of the particular administrative project design to strengthen resilience to earthquakes. region. Water is currently provided in an intermittent basis and population growth (also due to refugees), which when coupled with climate change (e.g. longer dry spells) means there is a growing trend of vulnerability. As the appropriate amount as a percentage of project cost going toward adaptation is not measurable, and since the project is needed due to the strong population growth, it was felt that a conservative figure (i.e. low) should be used. Type of Concessional loan and technical assistance grant, MDB own Adaptation Loan, MDB own resource resource Finance Annex Table 2 continued on next page 36 2015 Joint Report on Multilateral Development Banks’ Climate Finance Project Water Efficiency Agribusiness Focus Industry, Extractive Industries, Manufacturing and Trade Sector Agricultural and Ecological Resources (Mining) Brief The project will upgrade the facilities and operations of a major La roya, or coffee rust, is a disease affecting coffee plantations Description copper mining facility, including the introduction of highly and significantly reducing their yield. It is estimated that of Project efficient milling and processing equipment. The new plant and over half of coffee plantations in the country are affected modern equipment will reduce water consumption by half, as by the fungus, reducing yields by upwards of 50%. The resulting impacts affect the livelihoods of producers, often well as reduce dust and emissions. small to medium farmers. The disease is primarily driven by meteorological conditions and the changing variability that is influenced by climate change. Climate projections for the future indicate that frequency and severity of coffee rust’s outbursts, if not addressed, will be continuously increasing, further affecting the producers. The MDB project provides viable long-term financing and appropriate risk-mitigation and adaptation actions required for a sustainable coffee farming business. The MDBs' finance enables small and medium-holding farmers to substitute affected plantations with varieties that are resistant to the coffee rust, while supplementary technical assistance aims to improve financial management and sustainable agronomy practices. In addition, MDBs and a regional think tank support scientific research on more adaptable and resistant varieties of coffee. Climate The country’s Second National Communication to the UNFCCC Changes in meteorological conditions are seen as the crucial Vulnerability (2009) identifies increasing water scarcity as a major climate driver of la roya outbursts. Of those, change in temperature and Context change risk. In response, adaptation priorities include action to diurnal temperature range, and change in rainfall distribution improve water efficiency, especially in water-intensive sectors (rather than total rain) are seen as the main drivers. Recent weather observations in the regions experiencing la roya are such as oil and gas exploration. Industrial water use accounts in conformity with these conclusions. Projected changes in for an unusually high proportion (40 percent) of water climate—higher temperatures, particularly night temperatures, abstraction in the country – much of this occurring in the large and more variability in precipitation—indicate that the trend in mining sector. la roya outbursts is likely to continue, as well as the expansion of the area suitable for the spreading of the fungus. Statement At present, this facility – like many mining operations in the Project documentation recognizes the causes of the impacts of Purpose country – is vulnerable to water shortages and disruption and states that the combination of the introduction of rust- or Intent in water supply, including through competition with other resilient coffee varieties in a gradual and sustainable renovation priority water uses such as irrigation. The project will halve the program, along with best management practices, are put in facility’s water consumption through reducing the processing place to address climate impacts and increase resilience. The plant’s water needs and tail dumps, thus contributing to project is expected to benefit small and medium size farmers climate resilience through water conservation in the face of to increase their productivity by approximately three times. projected increases in water stress as a consequence of climate change. Link to Best available acid-free ore processing methods was utilised The investment will be entirely used for the purposes of Project to reduce water consumption and tailing dumps. This was replanting the affected plantations with rust-resilient coffee Activities done in order to drastically reduce water consumption varieties and operational costs directly related to these thereby allowing the facility to continue operating even activities. The investment will be accompanied with advisory services and technical assistance to ensure implementation during periods of water stress and/or competition. of best management practices that will further contribute to the resilience of plantations. The investment would not have been needed now without the climate change-induced la roya acceleration, as the existing trees would have had significant remaining life otherwise. Calculation MDB finances USD 100 million out of the total USD 305 Two MDBs provided USD 12 million each in loans to of million project value or roughly 33 percent. The amount of approximately 500 small and medium size farmers. Additional Adaptation the loan finance dedicated to decrease water consumption finance of USD 6 million was provided by two private Finance and pollution through the additional Best Available sector companies. As all of the MDB finance is allocated to Technology (BAT) processing plant is USD 68 million adaptation activities described above, 100% of MDB finance (flotation plant equipment, paste thickeners, drier drum). or USD 24 million is considered adaptation finance. Thus 33 percent of the amount or USD 22.7 million was recorded as adaptation finance. Type of Adaptation Non-concessional loan, MDB own resource Loan, MDB own resource Finance Annex Table 2 continued on next page 2015 Joint Report on Multilateral Development Banks’ Climate Finance 37 Project Roads Rehabilitation Focus Energy, Transport, and Other Built Environment and Sector Infrastructure Brief The project aims to enhance the connectivity of selected Description national and regional roads and to improve the government’s of Project capacity for road safety and climate resilience. Climate The project aims to address vulnerability to climate change Vulnerability and incorporate climate resilience measures into the technical Context design to help reduce risks of erosion and landslides due to sudden short heavy rainfalls. Assessment of vulnerability was done through available literature reviews and country documents. Statement of The project includes consideration of climate adaptation in Purpose or the design of road works to ensure the construction of proper Intent drainage systems on the roads, therefore increasing their resistance to flooding. Climate resilience is also included at various points throughout the project’s results indicators. Link to One portion (sub-component A3) of the project involves Project civil works specifically identified as necessary to build Activities climate resilience as a result of erosion and landslides on selected locations of the road network. Another portion (sub- component B4) involves institutional and technical assistance to evaluate additional resilience enhancing measures and to prepare guidelines for the road agency to consider resilience in design of road works. Calculation Sub-components A3 and B4 are combined to total the of incremental cost of adaptation for this project, or USD 3.07 Adaptation million, or less than 1% of total project commitment. Finance Note that while the project document lists the exact cost of the sub-component A3 portion of the project, this number is used directly. However, because the project document does not identify the cost of each sub-component within component B, the proportional approach was used to assign 25 percent co-benefits from the overall funding allocated for sub-component B4. Type of Adaptation Loan, MDB own resource Finance 38 2015 Joint Report on Multilateral Development Banks’ Climate Finance ANNEX C: JOINT METHODOLOGY FOR TRACKING CLIMATE MITIGATION FINANCE The 2015 mitigation finance tracking is based on the Common Principles for Climate Mitigation Finance Tracking,25 henceforth referred to as the “Common Principles.” The Common Principles were developed by the joint climate finance group of MDBs and the IDFC, based on their experience on the topic and with the intention to be shared with other institutions that are looking for common approaches for tracking and reporting. The principles consist of a set of common definitions and guidelines, including the list of activities, but do not cover aspects related to their implementation, including quality control procedures which remain the sole responsibility of each institution and/or group. The Common Principles reflect the approach that both groups (MDBs and IDFC) have been following for tracking climate change mitigation activities for the past 5 years, and are based on the application of harmonized terms. While the MDBs and the IDFC continue to report through their respective group-based efforts, the Joint MDB Approach for Mitigation Finance Reporting is closely aligned with the Common Principles, and is based on the following attributes: a) Additionality: This approach, as well as the Common Principles, are activity-based, focusing 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. 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 percent 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. 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.”26 Mitigation activities considered in this joint approach are assumed to make finance flows consistent with a pathway towards low greenhouse gas emissions development27 based on experience and/or technical analysis. 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. 25 http://www.worldbank.org/content/dam/Worldbank/document/Climate/common-principles-for-climate-mitigation-finance-tracking.pdf 26 OECD/DAC Climate Markers (September 2011). 27 Paris Agreement December 2015, (FCCC/CP/2-15/L9/Rev.1, Article 2c). 2015 Joint Report on Multilateral Development Banks’ Climate Finance 39 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 greenfield28 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 renewable energy 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. Annex Table 3 lists the activities eligible to be classified for climate mitigation finance, as agreed by the MDBs and the IDFC. Annex Table 4 shows case studies that illustrate how the MDBs used the mitigation tracking approach recently. 28 The general principle for greenfield activities is that they prevent a long-term lock-in in high-carbon infrastructure. 40 2015 Joint Report on Multilateral Development Banks’ Climate Finance Annex Table 3: List of Activities Eligible for Classification as Climate Mitigation Finance Category Sub-Category Eligible Activities Wind power Geothermal power (only if net emission reductions can be demonstrated) Solar power (concentrated solar power, photovoltaic power) Biomass or biogas power (only if net emission reductions, including 1.1 Electricity generation carbon pool balance, can be demonstrated) Ocean power (wave, tidal, ocean currents, salt gradient, etc.) Hydropower plants (only if net emission reductions can be demonstrated) Renewable energy power plant retrofits 1. Renewable Energy Solar water heating and other thermal applications of solar power in all sectors Thermal applications of geothermal power in all sectors 1.2 Heat production or other renewable energy Wind-driven pumping systems or similar applications application Thermal applications of sustainably/produced bioenergy in all sectors, including efficient, improved biomass stoves New, expanded and improved transmission systems (lines, substations) 1.3 Measures to facilitate integration of renewable Storage systems (battery, mechanical, pumped storage) energy into grids New information and communication technology, smart-grid and mini- grid Retrofit of transmission lines or substations and/or distribution systems 2.1 Transmission and to reduce energy use and/or technical losses including improving grid distribution systems stability/reliability, (only if net emission reductions can be demonstrated)a 2. Lower-Carbon and Efficient Thermal power plant retrofit to fuel switch from a more GHG-intensive fuel Energy to a different and less GHG-intensive fuel typeb Generation 2.2 Power plants Conversion of existing fossil-fuel based power plant to co-generationc technologies that generate electricity in addition to providing heating/ cooling Energy-efficiency improvement in existing thermal power plant Annex Table 3 continued on next page 2015 Joint Report on Multilateral Development Banks’ Climate Finance 41 Category Sub-Category Eligible Activities Industrial energy efficiency improvements though the installation of more efficient equipment, changes in processes, reduction of heat losses and/or increased waste heat recovery 3.1 Energy efficiency in industry in existing facilities Installation of co-generation plants that generate electricity in addition to providing heating/cooling More efficient facility replacement of an older facility (old facility retired) Energy efficiency improvement in lighting, appliances and equipment 3.2 Energy efficiency Substitution of existing heating/cooling systems for buildings by co- improvements in existing generation plants that generate electricity in addition to providing commercial, public and heating/coolingd residential buildings Retrofit of existing buildings: architectural or building changes that enable reduction of energy consumption 3. Energy Efficiency Energy efficiency improvement in utilities and public services through the installation of more efficient lighting or equipment 3.3 Energy efficiency Rehabilitation of district heating and cooling systems improvements in the utility sector and public services Utility heat loss reduction and/or increased waste heat recovery Improvement in utility scale energy efficiency through efficient energy use, and loss reduction 3.4 Vehicle energy efficiency Existing vehicles, rail or boat fleet retrofit or replacement (including the fleet retrofit use of lower-carbon fuels, electric or hydrogen technologies, etc.) Use of highly efficient architectural designs, energy efficient appliances 3.5 Energy efficiency in new and equipment, and building techniques that reduce building energy commercial, public and consumption, exceeding available standards and complying with high residential buildings energy efficiency certification or rating schemes Energy audits to energy end-users, including industries, buildings, and 3.6 Energy audits transport systems Reduction in energy use in traction (e.g. efficient tillage), irrigation, and other agricultural processes Agricultural projects that improve existing carbon pools (e.g. rangeland management, collection and use of bagasse, rice husks, or other 4.1 Agriculture agricultural waste, reduced tillage techniques that increase carbon contents of soil, rehabilitation of degraded lands, peatland restoration, etc.) Reduction of non-CO2 GHG emissions from agricultural practices (e.g. paddy rice production, reduction in fertilizer use) Afforestation (plantations) on non-forested land 4. Agriculture, Forestry and Reforestation on previously forested land Land-Use 4.2 Afforestation and reforestation, and Sustainable forest management activities that increase carbon stocks or biosphere conservation reduce the impact of forestry activities Biosphere conservation projects (including payments for ecosystem services) targeting reducing emissions from the deforestation or degradation of ecosystems Livestock projects that reduce methane or other GHG emissions (manure 4.3 Livestock management with biodigesters, etc.) Production of biofuels, including biodiesel and bioethanol (only if net 4.4 Biofuels emission reductions can be demonstrated) Annex Table 3 continued on next page 42 2015 Joint Report on Multilateral Development Banks’ Climate Finance Category Sub-Category Eligible Activities Reduction of gas flaring or methane fugitive emissions in the oil and gas industry 5.1 Fugitive emissions Coal mine methane capture Projects for carbon capture and storage technology that prevent release of 5. Non-Energy 5.2 Carbon capture and storage large quantities of CO2 into the atmosphere from fossil fuel use in power GHG generation, and process emissions in other industries Reductions 5.3 Air conditioning and Retrofit of existing industrial, commercial and residential infrastructure to refrigeration switch to cooling agent with lower global warming potential Reduction in GHG emissions resulting from industrial process 5.4 Industrial processes improvements and cleaner production (e.g. cement, chemical), excluding carbon capture and storage Treatment of wastewater if not a compliance requirement (e.g. performance standard or safeguard) as part of a larger project that reduces methane emissions (only if net GHG emission reductions can be demonstrated) Waste management projects that capture or combust methane emissions 6. Waste and 6.1 Waste and wastewater Wastewater Waste to energy projects Waste collection, recycling and management projects that recover or reuse materials and waste as inputs into new products or as a resource (only if net emission reductions can be demonstrated) Urban mass transit 7.1 Urban transport modal change Non-motorized transport (bicycles and pedestrian mobility) 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 carse 7.2 Transport oriented urban development 7. Transport Transport demand management measures dedicated 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) 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) 7.3 Inter-urban transport 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) Projects producing components, equipment or infrastructure dedicated 8.1 Products or equipment for the renewable and energy efficiency sectors 8. Low-Carbon Technologies Research and development of renewable energy or energy efficiency 8.2 Research and development technologies Annex Table 3 continued on next page 2015 Joint Report on Multilateral Development Banks’ Climate Finance 43 Category Sub-Category Eligible Activities National, sectoral or territorial mitigation policies/planning/action plan/ planning/institutions Energy sector policies and regulations leading to climate change mitigation or mainstreaming of climate action (energy efficiency standards or certification schemes; energy efficiency procurement schemes; renewable energy policies) 9.1 Support to national, Systems for monitoring the emissions of greenhouse gases regional or local policy, through technical Efficient pricing of fuels and electricity (subsidy rationalization, efficient assistance or policy end-user tariffs, and efficient regulations on electricity generation, lending transmission, or distribution) 9. Cross-Cutting Education, training, capacity building and awareness raising on climate Issues change mitigation/sustainable energy/sustainable transport; mitigation research Other policy and regulatory activities, including those in non-energy sectors, leading to climate change mitigation or mainstreaming of climate action Carbon markets and finance (purchase, sale, trading, financing and other technical assistance). Includes all activities related to compliance-grade carbon assets and mechanisms, such as Clean Development Mechanism, 9.2 Financing instruments Joint Implementation, Assigned Amount Units, as well as well-established voluntary carbon standards like the Verified Carbon Standard or the Gold Standard. Any other activity if agreed by MDBs may be added to the Joint Typology of Mitigation Activities when the results of ex ante GHG accounting 10.1 Other activities with net (undertaken according to commonly agreed methodologies) show 10. Miscellaneous greenhouse gas reduction emission reductions that are higher than a commonly agreed threshold, and is consistent with a pathway towards low greenhouse gas emissions development. a In case of capacity expansion, only the part that is reducing existing losses is included. b Excluding replacement of coal by coal. c In all cogeneration projects it is required that energy efficiency is substantially higher than separate production of electricity and heat. d Ibid e General traffic management is not included. This category is for demand management to reduce GHG emissions, assessed on a case-by-case basis. 44 2015 Joint Report on Multilateral Development Banks’ Climate Finance Annex Table 4: Mitigation Finance Tracking Case Studies Project Focus Grid-Scale Solar Photovoltaics Afforestation for Fragile Lands Sector Renewable Energy Agriculture, Forestry and Land-Use Brief The client company builds, owns and operates multiple The project aims to promote cashew farming through: Description of independent solar power plants. Project • Re-afforestation of cashew plantations (43,000 hectares); • Rehabilitation of existing cashew plantations (8,000 The MDB made its first investment (venture capital) in hectares); and the client company in 2010, when the company had just • Replanting the bare existing areas within the existing old commissioned 2 megawatts (MW) of solar photovoltaic cashew plantations (7,000 hectares). capacity. The project's components are as follows: The MDB support has been provided at a critical stage of Component I. Support to Cashew Value Chain with 3 the client company’s growth trajectory, crowding-in other sub-components: (i) irrigation infrastructure for cashew investors enabling the client company to access the global nurseries and clone gardens; (ii) cashew plantation knowledge and good international practices and broaden rejuvenation and establishment; and (iii) infrastructure for and diversify its sources of funding. cashew processing and marketing. Component II. Capacity Building with 3 sub-components: With the MDB financial and technical support, the (i) training; (ii) technical support; and (iii) matching fund client company has since grown to become one of the Component III. Project Management with 2 sub- leading solar power producers in its country with 240 components: (i) project coordination; and (ii) monitoring MW of installed capacity and another 420 MW under and evaluation. implementation. Statement The project and the company’s individual power projects This project involves carbon sequestration and capture of Activity or are considered as mitigation activities as they will result in by (i) soil sequestration through planting cashew nuts Activities the reduction in energy consumption and greenhouse gas on previously exposed soils, and (ii) carbon sequestration Captured emissions. above ground in cashew trees. by MDB Methodologies Calculation The client company has received USD 45 million in equity The mitigation finance proportion is equal to 30 percent of of Mitigation and debt from the MDB during the period 2010–2015, with the total MDB financing for the project or USD 12.95 million Finance 100 percent of this counted as mitigation finance. out of a total MDB contribution to project cost of USD 45 million. The project is a good sustainable development project but only 30 percent is counted as mitigation finance because of the lower carbon sequestration value of cashew as a perennial crop compared with real forest tree species. Type of The MDB provided venture capital, private equity, non- The MDB provided a non-concessional loan to public entity. Mitigation concessional loans and direct mobilization of additional Finance investors. Furthermore, the MDB made a significant contribution to strengthen the client company’s corporate governance and risk management, in particular in the areas of asset liability gap risk, contingent loss risk, and environmental and social risks. Annex Table 4 continued on next page 2015 Joint Report on Multilateral Development Banks’ Climate Finance 45 Project Focus Energy Policy Energy Efficiency in Industry Sector Cross-Cutting Issues Energy Efficiency Brief This project is the first in a series of programmatic, policy- The project will finance innovative, high impact Description of based loans which, although conceptually-linked, are technologies and process transformations that will improve Project financed independently from each other. energy efficiency and reduce emissions from various plants. This project will also demonstrate for the first time, a direct The project’s general objective is to support the country cooperation with a large state-owned enterprise to support to strengthen and transform its energy matrix, thereby industry-specific measures. contributing to the consolidation of its capital and current accounts by reducing the importation of petroleum The project is composed of two subprojects in separate products and replacing the associated subsidies. The plants: specific objectives of this first programmatic operation a. A scaled up application of a successfully pilot-tested are to support: (i) establishment of conditions for the mercury-free catalyst to produce polyvinyl chloride effective implementation of changes to the energy matrix; (PVC). The subproject is expected to reduce energy (ii) strengthening of the conditions to respond to the consumption and eliminate tons of intentional use demand for electricity services; and, (iii) initiation of country of mercury; and commitments to more significant electric power exchanges b. Retrofit the caustic soda production chain with in the region. the current state-of-the-art technology that will The project's components are as follows: consume 30 percent less energy. Component I. Macroeconomic Stability. This component will address the consistency within the macroeconomic Targeting these two energy-intensive production processes environment, in line with the program’s objectives, and (PVC and caustic soda), the project aims to make a large will provide ongoing monitoring to ensure alignment impact on energy efficiency and emission reductions in with the policy-based loan’s policy matrix. the country’s chemical industry. Mainstreaming industry- Component II. Sustainable Energy Sector. This component specific energy service companies (ESCO) in the project’s will support the preparation of policy commitments and structure will also help remove barriers that have prevented monitoring of actions aimed at reorienting subsidies their participation in energy efficiency retrofits in energy- in the sector, as well as the formulation of the Energy intensive industries. Agenda and information management tools to be used for planning and monitoring sector investments. Component III. Strengthening of the Electricity Subsector. This component will support efforts to fulfill the sector’s efficiency and sustainability targets. In particular, it will support actions designed to reduce the use of fossil fuels for generation and expand generation capacity using renewable energy sources. Statement The three components of the project are considered as Both subprojects are considered as mitigation activities of Activity or mitigation activities as they will result in the reduction in as they are specific energy efficiency components in the Activities fossil fuel consumption and greenhouse gas emissions. industrial process, which will result in the reduction in Captured energy consumption and greenhouse gas emissions. by MDB Methodologies Calculation The MDB will provide a policy loan of USD 500 million, to Out of a total project cost of USD 245.01 million, the MDB of Mitigation fund the entire project, and this entire amount is counted will provide a loan of USD 100 million. The entire MDB loan Finance as mitigation finance. is considered to be climate finance. The incorporation of climate risks in the engineering design of existing facilities and new technologies financed under the project will cost USD 5 million, and considered as adaptation finance. The remaining USD 95 million is considered as mitigation finance. Type of The MDB resource is a non-concessional loan to a public The MDB resource is a non-concessional financial Mitigation entity. The MDB assistance addresses barriers and supports intermediary loan to a public entity. The MDB assistance Finance de-risking of investments. addresses barriers and supports de-risking of investments in potent technologies and process transformations that can improve energy efficiency in industries. Annex Table 4 continued on next page 46 2015 Joint Report on Multilateral Development Banks’ Climate Finance Container Terminal Expansion and New Intermodal Rail Project Focus Energy Efficiency Facility Operational Efficiency to Improve Quality of Heating Sector Transport Services Brief The objective of the project is to contribute to improved Project aims to support the investment program of the port Description of operational efficiency and financial viability as well as to authority and support land freight transport in a more sustainable the quality and reliability of heating services delivered to manner. Project the population through the following components: (a) Support priority investments aimed at optimizing The project’s two main components are as follows: and modernizing the heat distribution network, with 1. Expansion of existing container terminal to reach an annual the objectives of reducing heat losses, improving service capacity of 400 thousand twenty foot equivalent units (TEU) – plus quality, and increasing efficiency and security of supply of the replacement of aging container handling and information heat and hot water to end-user consumers. MDB financing technology (IT) equipment. for this component is USD 33.3 million. 2. Construction of a new intermodal rail facility (b) Support the Government’s decision to streamline operation and corporate structure of the dominant heating supplier, including closing down of the operation of a combined heat and power plant. The plant is inefficient and is being utilized beyond its designed life. To ensure a smooth closing, the component will support: alternative heat distribution connection and construction of new pumping stations in the service area; development of a social impact mitigation plan; and carrying out an environmental audit for the service area. MDB is financing for this component is USD 5.6 million. (c) Provide technical and financial support for project management. MDB financing for this component is USD 1.6 million. Statement Mitigation co- benefits were identified for the financing The two components are captured differently: of Activity or aimed at supporting investments geared to optimize and 1. The terminal has a general upgrade of equipment and pavement modernize the heat distribution network. and an expansion of yard area and additional equipment Activities Captured requirements. Additionally the IT system will be upgraded. The Financing for the project management and technical terminal has a rail connection which is separately being upgraded by MDB assistance sub- component was pro-rated for mitigation by the rail authority; the upgrade is aimed to increase rail traffic Methodologies co- benefits. by 50%. For component 1, a granular approach is taken to capture lower carbon modes where modal shift has been demonstrated away from road. Since road container traffic at the terminal is projected to increase at a slower pace than rail and coastal vessel traffic, the modal share approach is deemed to be a conservative estimate of project costs associated with the lower carbon modes. 2. The intermodal terminal is a new facility dedicated to transfer containerised truck traffic onto rail. It is situated on an existing rail line. A small bulk facility has existed for some time and the port authority will now build a new intermodal terminal for containerised freight transfer to rail. Modal shift has been demonstrated in the traffic models for this facility aiming to handle 120 thousand TEU in the first phase of the development program. Calculation Total MDB project finance is USD 40.5 million. Mitigation aspects (modal shift) were assigned as follows: of Mitigation Mitigation finance for each project component is As the container handling equipment aspects were of end of life computed as follows. equipment, or related to capacity expansion, energy efficiency Finance aspects were not counted and the project was assessed for (a) 100 percent of MDB finance in the district heating mitigation on a modal shift basis (i.e. lower carbon modes of rail system (USD 33.3 million) is counted as mitigation and coastal shipping). Forty five (45) percent of component 1 finance. was calculated as mitigation based on the projected proportion of container traffic leaving from/arriving at the port by rail in (b) MDB finance for the new generation facility that comparison with road once the upgrade of the overall port is would replace the old combined heat and power facility completed (35%) and projected proportion of container traffic was not counted as mitigation finance. leaving from/arriving at the port by coastal vessels (10%). (c) Using pro-rating, 86 percent of the MDB finance for Mitigation aspects /modal shift were assigned to 100% of the project management sub component (USD 1.4 component 2 as the entire project assures a modal shift from road million) was identified as mitigation finance. to rail. Total project cost = USD 137 million Total MDB mitigation finance for the project therefore Total climate finance reported: USD 79.2 million amounts to USD 34.7 million. (Total climate finance estimated as 45% of investment costs of Component 1 [USD 105 million] plus 100% of investment costs of component 2.[USD 31.95 million] ) (Adaptation elements were additionally estimated in this project but are not recorded here) Type of The MDB provided a non-concessional loan to a public Mitigation The MDB provided a subsidised loan to client port authority. Finance entity. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 47 ANNEX D: JOINT METHODOLOGY FOR TRACKING CLIMATE CO-FINANCE Definitions and Clarifications Climate co-finance (CCF) is defined as the amount of financial resources contributed by external entities alongside climate finance committed by MDBs. In addition: 1. It encompasses financial resource providers that are government or government-affiliated, as well as those that are private; 2. It includes all forms of financial instruments, including grants, loans, equity, guarantees, etc.; 3. Broader support programs that do not provide resources directly into the financing package for a given project/ program are not included; 4. It is quantifiable and traceable to investment documentation kept by the individual MDB. Guiding principles governing the reporting of CCF include the following: Causality: CCF does not imply a causal relationship as to who catalyzed whom in a particular investment, but rather measures the amount of co-financing invested alongside contributions made by MDBs. Climate finance attribution: total co-financing for each project is pro-rated for the same climate component percentage as the data set used for the 2015 Joint Report on MDB’s Climate Finance, resulting in CCF. Conservativeness principle: Following the Joint Report on MDB’s Climate Finance guidelines, CCF follows the conservativeness principle that “Where data is unavailable, any uncertainty must be overcome taking a conservative approach, where under reported rather than over reported climate finance is preferable.” When the co-financing cannot be explicitly tracked, MDBs do not estimate indirect financing but simply report it at known levels, which may be zero. For instance, while MDBs know that credit lines to financial intermediaries trigger additional investments, no co-finance is reported if investment volumes were not explicitly identified in advance. Source of data: Aligned with the data set from MDBs in the Joint Report on MDB’s Climate Finance, data is sourced from information available to the Board of Directors of the relevant MDB at the time of project approval by the Board. No corrections are issued where a project’s scope has changed to either increase or decrease in total financing. CCF therefore represents ex ante project conditions. For the most part, Board Documentation provides enough information to accurately determine whether the source of financing is a public or a private entity. In cases where sufficient information is not available, MDBs use expert judgment and best available project categorization to attribute the financing to public or private sources. Public and private sources: CCF is segmented into public and private sources, based primarily on the shareholding structure of the external institution providing the co-financing. Public source co-financing nominally includes other development finance institutions. However, to the extent possible, the contributions made by other members of the reporting initiative are removed from the public source co-financing figures reported by each institution. Double counting: CCF does not double count co-finance reported by different MDBs from the same source (including from other MDBs themselves as well as external entities), and as such aggregated co-finance reported subtracts or “nets out” resources already reported. In cases where multiple investments are placed in the same project, CCF does not double count the same co-finance between different years. Once co-finance is reported for one year, it cannot be counted in the next year if additional MDB finance is placed without additional co-finance. In order to avoid double- counting, MDBs either group all investments under the first year of reporting, or split the co-finance over a number of years, depending on the type of project and available information. 48 2015 Joint Report on Multilateral Development Banks’ Climate Finance ANNEX E: FINANCE WITH DUAL ADAPTATION AND MITIGATION BENEFITS The MDBs recognize that some components and/or sub-components or elements/proportions within projects contribute to both mitigation and adaptation, thereby delivering dual benefits of both mitigation and adaptation. 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/proportions contribute to both mitigation and adaptation as a separate category (Annex Table 5). The MDBs are continuing to work on the best reporting method for such projects. For 2015, EBRD, ADB and IDBG have tracked dual benefit figures separately according to their internal systems. The other MDBs have split the financed amount between mitigation and adaptation. In both cases, there is no double counting. Annex Table 6 includes more detail on the instrument types used in adaptation, mitigation and dual benefit finance. Annex Table 5: MDB Adaptation, Mitigation and Dual Benefit Climate Finance (in USD million) MDB Adaptation Mitigation Dual Benefit Total Finance Finance Finance ADB 356 2,561 — 2,917 AfDB 396 963 — 1,359 EBRD 117 2,973 127 3,217 EIB 365 4,772 — 5,137 IDBG 269 1,474 1 1,744 WBG 3,393 7,329 — 10,722 TOTAL 4,896 20,072 128 25,096 Note: Numbers may not add up because of rounding. Annex Table 6: MDB Adaptation, Mitigation and Dual Benefit Climate Finance, Split by Instrument (in USD million) Instrument Type Adaptation Mitigation Dual Benefit Total Finance Finance Finance Investment loan 3,426 15,340 105 18,871 Policy-based loan/ 308 1,027 0 1,335 budget support Grant 665 764 1 1,430 Guarantee 361 1,094 0 1,455 Equity 6 761 0 767 Line of credit 124 842 20 986 Advisory services 4 121 0 125 Other 2 123 2 127 Total 4,896 20,072 128 25,096 Note: Numbers may not add up because of rounding. 2015 Joint Report on Multilateral Development Banks’ Climate Finance 49 ANNEX F: INSTRUMENT TYPES The types of financial instruments used in this year's reporting include the following: a) Investment loans: Loans are transfers for which repayment is required.29 Investment loans, in particular, finance the creation and rehabilitation of social and economic infrastructure and institutional development.30 b) Policy-based loans: Loans that provide flexible support for institutional and policy reforms on the sector or subsector level, through fast-disbursing funds.31 c) Budget support: A method of financing a partner country's budget through a transfer of resources from an external financing agency to the partner government’s national treasury. The funds thus transferred are managed in accordance with the recipient’s budgetary procedures.32 d) Grants: Transfers made in cash, goods or services for which no repayment is required.33 Grants are provided for investment support and/or policy-based support.34 e) Guarantees: A commercial and/or political risk assumed by an MDB. f ) Equity: Ownership interest in an enterprise that represents a claim on the assets of the entity in proportion to the number and class of shares owned. g) Lines of credit: Lines of credit provide a guarantee that funds will be made available but no financial asset exists until funds are actually advanced.35 h) Advisory services: MDB advisory services work includes advising national and local governments on how to improve their investment climate and strengthen basic infrastructure. The MDB tracks and reports the costs of managing advisory programs, which may consist of staff time, studies, and training with clients. Similar to investments, some programs are 100 percent climate-related and some have a climate component tracked in the overall program budget. In the case of IFC,36 for simplicity’s sake, the Joint Report records all climate finance flows through IFC’s advisory services as “external resources managed by IFC” and because of the difficulties in collecting data and defining the boundary of IFC’s impact, advisory services is not included in the IFC climate co-finance analysis. 29 OECD, 2006, DAC Guidelines and Reference Series Applying Strategic Environmental Assessment: Good Practice Guidance for Development Co- operation, OECD, Paris. 30 http://www.iadb.org/en/about-us/idb-financing/investment-loans,6056.html 31 http://www.iadb.org/en/about-us/idb-financing/policy-based-loans-pbls,6057.html 32 OECD. 2005. Harmonizing Donor Practice for Effective Aid Delivery: Volume 2; Budget Support, Sector-Wide Approaches and Capacity Development in Public Financial Management. DAC Guidelines and Reference Series 33 See footnote 31. 34 http://www.adb.org/sites/default/files/institutional-document/33458/files/glossary-sovereign-nonsovereign-operations.pdf 35 See footnote 31. 36 IFC climate finance is included in the climate finance reported by WBG. 50 2015 Joint Report on Multilateral Development Banks’ Climate Finance ANNEX G: GEOGRAPHICAL COVERAGE OF THE REPORT Countries included in this list are covered by at least one of the MDBs. Inclusion of countries in Annex Table 7 does not imply any recognition of country names or borders by any of the MDBs. Annex Table 7. 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 11 Bulgaria Hungary Romania Croatia Latvia Slovakia Cyprus Lithuania Slovenia Estonia Poland LATIN AMERICA AND THE CARIBBEAN Anguilla Curaçao Nicaragua Antigua and Barbuda Dominica Panama Argentina Dominican Republic Paraguay Aruba Ecuador Peru Bahamas El Salvador 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 Uruguay Costa Rica Mexico Venezuela (Bolivarian Republic of ) Cuba Montserrat 2015 Joint Report on Multilateral Development Banks’ Climate Finance 51 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 ASIAa Albania Kyrgyz Republic Turkey Armenia Kosovo Tajikistan Azerbaijan Montenegro Turkmenistan Belarus Republic of Moldova Ukraine Bosnia and Herzegovina Russian Federation Uzbekistan Georgia Serbi 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. a Reported as "(OTHER) Europe and Central Asia" in the 2011 and 2012 reports. 52 2015 Joint Report on Multilateral Development Banks’ Climate Finance Least developed countries are defined according to the UNFCCC list37 and small island states are defined according to the Alliance of Small Island States (AOSIS) list, excluding developed countries. Note that some least developed countries are also small island states, as shown in Annex Table 8. Annex Table 8: Countries Categorized as Least Developed Country, Small Island States, or Both Both Least Developed Country Least Developed Country Small Island State and Small Island State Afghanistan Comoros Cape Verde Angola Guinea Bissau Antigua and Barbuda Bangladesh Haiti Bahamas Benin Kiribati Barbados Bhutan Sao Tome and Principe Cook Islands Burkina Faso Solomon Islands Cuba Burundi Timor-Leste Dominica Cambodia Tuvalu Dominican Republic Central African Republic Vanuatu Federated States of Micronesia Chad   Fiji Democratic Republic of Congo   Grenada Djibouti   Guyana Equatorial Guinea   Jamaica Eritrea   Maldives Ethiopia   Marshall Islands Gambia   Mauritius Guinea   Nauru Lao People’s Democratic Republic   Niue Lesotho   Papua New Guinea Liberia   Saint Kitts and Nevis Madagascar   Saint Lucia Malawi   Saint Vincent and Grenadines Mali   Samoa Mauritania   Seychelles Mozambique   Suriname Myanmar   Tonga Nepal   Trinidad and Tobago Niger     Rwanda     Senegal     Sierra Leone     Somalia     South Sudan     Sudan     Togo     United Republic of Tanzania     Uganda     Yemen     Zambia     http://unfccc.int/cooperation_and_support/ldc/items/3097.php 37 2015 Joint Report on Multilateral Development Banks’ Climate Finance 53 ANNEX H: MDB CLIMATE FINANCE OUTSIDE THE JOINT METHODOLOGIES The joint methodologies contain lists of activities at the intersection of what all MDBs consider adaptation and mitigation. However, for their own reporting purposes, some MDBs consider additional activities as climate adaptation or mitigation that are: (1) not explicitly covered by one of the methodology sector/groupings/categories; and/or (2) not fully in accordance with the joint approach. For 2015, EBRD reported different figures according to their internal mitigation finance tracking approach as shown in Annex Table 9. Annex Table 9: Climate Finance Showing Differences from the MDB Joint Methodologies (in USD million) MDB Own Resources External Resources Total Public Private Public Private EBRD mitigation finance as per its 874 2,042 75 124 3,114 internal methodology EBRD mitigation finance as per MDB 733 2,042 75 124 2,973 methodology Difference 141 0 0 0 141 54 2015 Joint Report on Multilateral Development Banks’ Climate Finance 56 2015 Joint Report on Multilateral Development Banks’ Climate Finance