The conversation around climate finance has continually evolved, with numerous aspects of finance emerging yet remaining unresolved hence the come up of the multilateral development banks(MDBs) as an actor in the space.

The financial architecture was a key discussion point during the first African Climate Summit in Nairobi, which concluded with a Nairobi Declaration; however, the matter has still not been resolved.

Currently, as world leaders convene in Baku for COP29, the question of climate finance is heightened, with scientists, lobbyists, activists, presidents, and vice presidents among others emphasizing its importance.

Interestingly, even multilateral development banks (MDBs) are positioning themselves as the ‘go-to’ option for delivering climate financing. However, as MDBs prepare to play a leading role in the delivery of the new climate finance goal yet to be agreed upon at COP29, research by the international organization Recourse, published at the UN climate summit, reveals surprising facts.

Recourse’s research shows the grim reality faced in the search for climate financing and how it is further rolled out among various organizations in diverse regions globally. Based on an announcement by MDBs in September this year, their global climate finance reached a record high of $125 billion in 2023.

Notably, the combined total from institutions, including the European Investment Bank, is more than double the amount provided in 2019, when MDBs announced their ambition to increase climate volumes over time at the United Nations Secretary-General’s Climate Action Summit.

According to MDBs announcement, $74.7 billion of MDB climate finance were for low- and middle-income economies. Whereby of this sum, 67% – or $50 billion – went to climate change mitigation and $24.7 billion, or 33%, for climate change adaptation. The amount of mobilized private finance for this group of countries stood at $28.5 billion.

Whereas the $50.3 billion were allocated for high-income economies in to mean of this amount, $47.3 billion, or 94%, were for climate change mitigation and the remaining $3 billion or 6% were for climate change adaptation. The amount of mobilized private finance for high-income countries stood at $72.7 billion.

What Does the Recourse Research Reveal?

Recourse, embodying their slogan of ‘making finance accountable to protect people and the planet,’ provides a breakdown of what the climate finance did and where it was allocated on a global scale.

From their analyses, the financing distribution was as follows: countries in Europe received the largest share, at almost half (44%), followed by the Asia-Pacific region receiving less than half of this amount (21%), and then Sub-Saharan Africa (no more than 14%).

According to Petra Kjell Wright, report author and Campaigns Manager at Recourse, it is important that the development banks’ figures are read with great caution, as they also include financing for projects involving fossil fuels, human rights violations, and environmental destruction.

This reality grows more intense when we delve further into the types of projects funded, considering that the Global South, particularly African countries, is most affected by the consequences of climate change.

Most of the climate finance from multilateral development banks was channeled to ‘problematic projects’ that include greenhouse gas-emitting and highly polluting waste-to-energy plants, large-scale hydropower, mining for critical minerals, hydrogen, and ‘captive coal’ for industry—mainly in the form of loans (70%), not grants (4%)—adding to the burden of already debt-distressed countries.

“This raises serious questions about whether the MDBs’ current approach is genuinely helping to address climate change for the most vulnerable people and places,” said Petra.

Examples of this projects include:

• Greater Malé Waste-to-Energy Project in the Maldives is classed as 94-100% climate finance by the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB). In addition to pumping out hazardous fumes and greenhouse gases,(1) the project has caused a net increase of waste as the parliament had to legalise waste importation to feed the plant.
• Antalya Airport Expansion Project in Turkey will double capacity from 40 to 80 million passengers, thus significantly increasing the airport’s carbon emissions. The project received $153m from the AIIB in 2023, classed as 48% climate finance.
• Upper Trishuli-1 Hydropower Project,(2) the third largest of its kind in Nepal, has severely marginalised and displaced local Indigenous peoples, with the worst economic impacts on women, and failed to follow required consultation processes. Financial investment was counted as climate finance by the World Bank, the AIIB and the ADB – all of which claim to seek to boost economic opportunities for women.
• Unique Meghnaghat Gas Power Plant in Bangladesh, set to run for at least 22 years, was counted in part as climate finance by the AIIB despite the long-term carbon lock-in that it represents for one of the world’s most climate-vulnerable countries. 

The ‘Climate Smart Mining for a New Climate Economy’ project in Mongolia has been flagged as highly risky by over 60 civil society organisations, for potential health impacts, local economic losses, water pollution, land grabbing and Indigenous rights violations. The ADB counted its $500,000 investment as 100% climate finance, in line with the MDBs’ method which counts any mining of transition minerals even if it causes grave harms – contrary to the UN call for a “human rights-based approach to climate finance”

What Next as MDBs Assert Their Role “in Shifting Climate Finance Paradigms”

During a presentation event by the multilateral development banks at COP29, themed ‘MDBs’ Progress on Paris Alignment: From Climate Finance to Transformative Climate Action,’ questions arose about the way forward.

The session focused on efforts to align operations with the goals of the Paris Agreement and work on climate finance while also highlighting additional work streams that reinforce MDBs’ transformative impact—such as in-country coordination, measuring results and impacts, policy support, carbon pricing and market mechanisms, and greening financial systems.

However, Zain Moulvi from the Alternative Law Collective (ALC) had a different opinion about MDBs, stating that claims of climate leadership by the multilateral development banks smack of hypocrisy.

“They cannot celebrate clean energy investments while continuing to support projects that harm people and nature. The MDBs should pay the damages owed to communities harmed by their past investments and fund the retirement of their fossil fuel projects,” said Zain.

Sukhgerel Dugersuren from Oyu Tolgoi Watch pointed out that the ADB is using 100% climate finance for what it calls ‘climate-smart’ mining in Mongolia, which threatens our way of life and our precious nature.

Further revealing that the UN has stated that the supply of transition minerals must put human rights and environmental integrity at its center, he emphasized that the development banks must not greenwash our destruction.

Emphasizing the need for transparency, Petra Kjell Wright stated, “At COP29, the development banks are celebrating their role in climate finance, but our research tells a different story—one of fudged figures, debt distress, and finance flowing to the wrong kinds of projects in the wrong places.”

“The banks must put people’s rights and the planet at the heart of their climate finance to truly live up to their commitment to align with the Paris Agreement,” She concluded.