Multilateral Development Banks Plan Climate Financing for Low, Mid Income Countries

A coalition of leading multilateral development banks (MDBs) unveiled their annual climate financing projections for low- and middle-income countries during the World Leaders Climate Action Summit at COP29 in Baku, Azerbaijan, this week.

The MDBs estimate that, by 2030, their annual collective climate finance contributions for low- and middle-income countries will reach USD 120 billion, including USD 42 billion designated for adaptation. Additionally, they aim to mobilize USD 65 billion annually from the private sector.

For high-income countries, annual financing is expected to total USD 50 billion, with USD 7 billion channeled into adaptation projects, along with plans to mobilize USD 65 billion from private sector investments.

The estimates include contributions from key institutions such as the Asian Development Bank (ADB), World Bank Group, African Development Bank (AfDB), Asian Infrastructure Investment Bank (AIIB), Council of Europe Development Bank (CEB), European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), Inter-American Development Bank Group (IDB), Islamic Development Bank (IsDB), and New Development Bank.

One of the main focuses of the COP29 Presidency’s agenda, "enabling action," is to ensure adequate financing for urgent climate measures.

“Every contribution is welcome, but there is still a clear gap between where we are and where we need to be. We are working closely with the shareholders of international financial institutions at COP29 as we seek to build the foundations of a fair and ambitious new climate finance goal,” COP29 President Mukhtar Babayev stated, addressing the estimates.

He added that the global community must deliver what the world expects, including climate financing that surpasses significantly the existing arrangements and must be adequate to the scale and urgency of the problem.

Babayev revealed that MDBs have already exceeded their 2025 climate finance targets set in 2019, achieving a 25% increase in direct climate finance and doubling climate mobilization efforts over the past year.

UN refers to climate finance as financial flows addressing the causes and consequences of climate change. Unlocking real economy investments for climate action, mitigation and adaptation are set as critical elements of the process.

Every year, the world generates USD100 trillion in GDP. The UN Climate Summit data estimates that if 1 percent of that is channeled into climate action, it could accelerate the transition from fossil fuels.

A stable investment of USD 1 trillion annually over the next five years can help developing countries address their energy transition needs.

In July, Azerbaijan announced the Climate Finance Action Fund (CFAF) to invest in climate action in the developing countries. Fossil fuel producing countries, including Azerbaijan as the founding contributor, along with oil, gas and coal companies, will be the major financiers of the CFAF through annual contributions as a fixed-sum or based on volume of production.

Half of the contributions will be dedicated to assisting members in achieving their next-generation Nationally Determined Contributions (NDCs), ensuring the 1.5°C temperature goal remains attainable. Additionally, one-fifth of the revenue generated from investments will be redirected to a Rapid Response Funding Facility (2R2F), offering highly concessional and grant-based support.