Activating Multilateral Development Banks for Climate Action

The formulation of a long-term strategy (LTS) is a complex and resource-intense process. It requires technical knowhow and extensive stakeholder engagement – areas in which multilateral development banks (MDBs)* have considerable and unique strengths. Crucially, it also requires significant funding to finance transition activities and build country capacity. In addition to global reach and in-country presence, MDBs also can mobilize financing by linking climate policy to investments.

Recognizing their unique position and strengths, a joint MDB LTS facility was announced at COP 28 in Dubai in late 2023. The CSF hosts this critical collaborative effort and provides secretariat support and coordination.

Logos of current list of MDBs

*The current list of MDB's include: Asia Development Bank, Asian Infrastructure Investment Bank, African Development bank Group, Council of Europe Development Bank, European Bank for reconstruction and Development, European Investment Bank, Inter-American Development Bank, Islamic Development Bank, New Development Bank, World Bank Group

Why are ambitious climate commitments and long-term strategies so important to client countries?

There are economic and wider benefits of ambitious climate action when country development along a net zero and climate-resilient pathway is consistent with countries’ national development goals. Low emission and resilient development helps minimize future warming and adverse climate impacts; it leads to lower long-term costs in many sectors and offers large co-benefits, such as reduced health care costs and increased environmental services. Paris-aligned development pathways are thus about protecting and improving economic competitiveness and resilience in an increasingly uncertain world, and actively creating opportunities to introduce and scale technologies and innovation that can lead to greater prosperity and value creation for all.

Objectives and Ambition

The MDB LTS Program aims to support more than 100 country-led LTSs, including 20 in the initial phase, and is powered by three key objectives:

  1. Strengthen the countries capacities to formulate and operationalize national and sub-national LTSs
  2. Bolster practical implementation of LTSs by strengthening NDCs and developing and implementing effective foundational climate action.
  3. Foster coordination, knowledge exchange and monitoring and reporting of progress by establishing a platform for MDBs and development partners.

What is the collective benefit of MDBs working in such a partnership?

We as MDBs are:

  • Uniquely positioned to support client countries at national and sub-national levels in the formulation and delivery of LTSs and LTS-related activities (such as low-emissions pathways and climate resilience plans) because of their global reach and in-country presence.
  • Have the ability to accelerate and mobilize finance by linking climate policy to investments, and have extensive experience in stakeholder engagement, capacity building and the technical know-how, required to support developing countries in formulating LTSs.
  • Often present in the same countries and supporting the same clients, which provides opportunities for MDB collaboration in supporting LTSs. The joint MDB LTS-P thus builds on existing MDB in-country coordination and provides a basis for wider Country platform approaches.

 

In addition, the program will help: 

  • Enable rapid deployment and coordination of LTS support for countries in need
  • Foster increased climate ambition and impact on the ground
  • Help MDBs access financial resource to support LTS formulation
  • Establish synergies with long-term transformation and action (e.g. NDC Partnership’s
    LT-LEDS Thematic Call)

 

All MDBs have now operationalized Paris alignment, which means that every investment is reviewed for its consistency with the Paris alignment of a country and client. LTSs provide clear market signals and help determine the investments and policies required for their client countries to transition to net zero and resilient economies. They also help to inform MDB lending and policy support to countries and design financial instruments and technical assistance that can involve the broader market and both public and private sectors to contribute towards achieving national climate and development goals. 

By articulating the long-term vision and transition pathways that countries are committed to, LTSs also cues the private sector to invest in sustainable business models and technologies, shepherding private finance. Lastly, the LTS formulation process is designed to facilitate conversations among different governmental ministries, stakeholders, MDBs and other development partners to develop a common vision and narrative for the future. These engagements can help align and facilitate parties on the pathway to net zero and climate resilient implementation.

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