The World Bank Group today made several announcements in line with its ongoing support to help developing countries address climate change and adapt to its mounting impacts. These include:
Germany, the UK, and Austria are the first donors to a Green Recovery Initiative, which aims to help countries build a low-carbon, climate-resilient recovery from COVID-19. Funding will be provided through a new flagship World Bank trust fund, the Climate Support Facility which was launched today with an initial investment of $52 million from the German Federal Ministry of Economic Cooperation and Development, the UK’s Foreign, Commonwealth and Development Office, and the Austrian Federal Ministry of Finance.
IFC has launched a new initiative, Scaling Up Climate Finance through the Financial Sector, which will help, through investment and advice from IFC, financial institutions in four countries to mobilize financing for private sector climate mitigation and adaptation projects. The goal is to increase climate lending to 30 percent of these institutions’ portfolio by 2030, while reducing coal exposure. The program will partner with the World Bank and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) to develop conducive regulatory frameworks and create an appropriate market and policy environment for climate lending and climate risk management. The initiative aims to align financial-sector strategies with the implementation of these countries’ Nationally Determined Contributions (NDCs) under the Paris Agreement, which will require vast amounts of capital. The first phase, funded by Germany’s Federal Ministry of the Environment, Nature Conservation and Nuclear Safety, will be launched in Egypt, Mexico, the Philippines, and South Africa.
The World Bank’s new Climate Emissions Reduction Facility (CERF), an umbrella fund for climate finance, will be the Bank’s first trust fund providing operational liquidity at scale for low-carbon development projects. Over a 10-year period, the facility will disburse results-based climate finance, helping developing countries shape low-carbon development pathways and encouraging donors to increase funding to achieve scale.
The World Bank – as trustee of the Forest Carbon Partnership Facility – has now signed landmark Emission Reductions Payment Agreements with governments in eight countries; Chile, Costa Rica, Côte d’Ivoire, Democratic Republic of Congo, Ghana, Indonesia, Mozambique, Vietnam. These will unlock over $450 million for efforts to lower carbon emissions from deforestation and forest degradation through 2025. The Agreements incentivize sustainable land management at scale and help to connect countries with other sources of climate financing. Emission reductions programs create new opportunities to conserve and regenerate forest landscapes and biodiversity. The total portfolio of programs is expected to result in 160 million tons of emission reductions which is the equivalent of taking 34.5 million cars off the road for a year.
With Canada, the World Bank announces the launch of the Canada-World Bank Clean Energy and Forests Climate Facility to help accelerate the clean energy transition in Asia and small island developing states as well as boost support for forests and sustainable land use. CAD$400 million in loans will co-finance climate action in World Bank projects, and an additional CAD$10 million in grant contributions will help mainstream gender considerations into renewable energy investments in small island developing states.
The $8.3 billion Climate Investment Funds, a premier source of global climate finance whose secretariat is housed within the World Bank, has set a $5 billion fundraising target for new investment programs in key impact areas. This will include an Industry Program to incentivize targeted industries to accelerate their decarbonization with SEK 300 million recently announced by the Swedish government. It will also include a COVID-19 Technical Assistance Response Initiative, funded by three European governments, to support the development of a robust enabling environment that will ensure a green recovery coming out of the pandemic.
To boost green businesses in Africa, the Compact-with-Africa Green Businesses multi-donor trust fund has been set up, with an initial capitalization of $24 million (€20 million) from Germany’s International Climate Initiative (IKI) of the Ministry for Environment, Nature Conservation and Nuclear Safety (BMU). The new fund will provide capacity building to green small and medium-sized businesses in specific countries and design blended finance instruments, including to support private sector investments in locally led low-carbon innovations.