Multilateral Development Banks Pledge A Whopping $120 Billion In Climate Finance At COP29

The amount these MDBs have resolved to raise at COP29 will go into supporting poor countries to reduce their greenhouse gas emissions and transition from fossil fuel to renewable energy.

At COP29 in Baku, Azerbaijan, Multilateral Development Banks (MDB) pledged to raise US $120 billion by the end of the decade to help poor countries tackle climate crises. According to the Paris Agreement, at COP29, the attendees will be negotiating the ‘New Collective Quantified Goal.’ Climate finance is the goal of the conference and over the next two weeks, the countries in attendance, public sector representatives, international financial institutions, and the private sector are going to be deliberating over the perils and hurdles of the climate crisis.

The MDB group, includes the World Bank, the European Investment Bank, and the Inter-American Development Bank. The amount these MDBs have resolved to raise will go into supporting poor countries to reduce their greenhouse gas emissions and transition from their reliance on fossil fuel to renewable energy. India and a few African nations had estimated that they would require trillions of dollars annually in order to facilitate this transition.

World Bank President Ajay Banga has maintained that these global financial institutions do not have such large sums to offer, and neither is it their primary responsibility to do so. In an interview with Bloomberg, Banga stated that “MDBs cannot be the ones that source the trillions, we don’t have it on our balance sheets.”

The targeted US $120 billion in climate finance is a significant jump from the previous years, where the MDBs raised US $75 billion in 2023 and US $60.9 billion in 2022. The money is set to be divided to tackle various problems; for example, US $42 billion will be set aside to help countries adapt to the impacts of extreme weather, which is a 70% increase over the 2023 number.

However, in order for these banks to meet their goals, the country shareholders must invest more capital towards this cause. Both, developed and developing countries must show more ambition to ensure we are equipped to deal with the rapidly changing climate and the hazards associated with it. While pushing for their countries to contribute more, the MDBs have also said that they would try to mobilise US $65 billion from the private sector as well for the same cause. The private sector is also becoming more involved in combating climate change as they are realising the dangers at stake.

As a new climate emergency looms over us with every passing year, international financial bodies have seemed to grasp the intensity of the situation. The MDB’s statement was also signed and supported by The African Development Bank Group, the Asian Development Bank, the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development, the Islamic Development Bank, etc.

This decision of these banks is a welcome step, as it is the poorer countries that often struggle to receive MDB finances, while wealthier countries have the advantage of accessing cheap debt far more easily. The United Nations Environment Programme (UNEP) had estimated that the annual adaptation gap ranges between US $187 billion to US $359 billion, and while this 120 billion is a significantly lower figure, MDBs are only one part of the broader climate finance architecture.

The heads of state from some of the most influential and largest economies have abstained from attending this year’s COP29 conference. This is a severe blow to the developing world which is paying the price for the environmental negligence of the developed countries. With Donald Trump’s triumphant return as the US President, uncertainties have arisen regarding the future of the goals of the Paris Agreement, of which Trump has incidentally threatened to pull out.

However, the World Bank and IMF (International Monetary Fund) heads have assured that they would continue to work with Trump to provide financial assistance to countries affected by climate adversities.