To inform this process, NewClimate, Germanwatch and the World Resources Institute have written a series of memos containing principles and recommendations for robust guidance. According to the proposed timetable, the MDMs will not fully implement their Paris approach until 2023 or 2024, eight years after their initial commitment. While the development and implementation of the Paris orientation assessment process takes time, this timetable does not reflect the urgency of the task at hand. In addition, the frameworks developed by the MDBs to assess alignment will initially apply only to new direct investment financing. MdBs will not evaluate their existing portfolios. They will not begin until 2021 or 2022 with the evaluation of loans financed by funds and policies for alignment. With the exception of the European Investment Bank, the MDBs have not yet announced a date to finance only oriented projects.2 Although they are implementing their approach to the Paris orientation of new projects, most MDBs have not committed to making the Paris orientation of a project a determining factor for project approval. Instead, the assessment of the Paris orientation is only an additional contribution to the project approval process and MDBs can approve projects that prove to be non-aligned. Even within the European Investment Bank, “projects of common interest” are financed independently of their Paris orientation. ↩ 2016, MDBs1 has pledged to align their financial flows with the objectives of the Paris Agreement. This requires MDBs to ensure that all of its activities advance low-carbon, climate-resistant development trajectories, or at least do not undermine these goals.
At COP25 in December 2019, MDBs provided an update on their progress in alignment. While their first steps are promising, significant gaps and questions remain unresolved. The MDBs have committed to reporting the alignment status of all investments, even if the evaluations are inconclusive. MDBs also indicated that they will report on a number of things, including impact indicators under each element, risk scenario methods and risk management processes as part of their reporting package. However, MDMs have not yet disclosed the exact metrics on which they will report or their reporting schedule. Moreover, it is not clear that the various banks will take a common approach to reporting. To allay these fears, the MDMs are developing a specific approach that focuses on six elements identified as key areas for alignment with the objectives of the Paris Agreement. It`s a construction approach. The MDB`s Paris-oriented approach amounts to six “building blocks.” You will find a more detailed discussion about the different building blocks in our memos.
The MDMs outlined a framework for assessing alignment with the Paris climate change goals. Under the proposed framework, MDBs will first examine potential investments using positive and negative lists. For investments that are not on both lists, MDBs propose to define more specific evaluation criteria. MDBs exclude projects that are incompatible with national climate policies, including national contributions and long-term strategies. The Paris Agreement sets out the ambitious task of aligning all financial flows with its objectives in order to avoid the worst effects of warming. Multilateral development banks (MDBs) play an important role in achieving this goal. Its development mandates, technical know-how and climate finance track record mean that MDMs can be at the forefront of helping developing countries avoid intensive fossil fuel development trajectories, developing the standards and investment criteria needed to assess the alignment of investments with the paris agreement`s objectives and helping to mobilize a greater volume of climate finance.