Asian Development Bank Doubles Climate Financing

There is a growing momentum in Asia to advance climate finance. Asian Development Bank (ADB) plans to double its climate financing from $3 billion to $6 billion by 2020.

ADB’s member countries include some of the largest carbon dioxide emitters, such as China and India, as well as some of the countries most vulnerable to climate change. These nations are six out of the top 10 countries most impacted by extreme weather, according to the Global Climate Risk Index.

Preety Bhandari, ADB’s advisor and head climate change coordinator, spoke with Clean Energy Finance Forum about the bank’s climate change strategy.

CEFF: How has ADB’s climate change strategy changed after the issuance of the Paris Agreement?

Bhandari: Leading up to the Paris Agreement, there were two important internal developments. First, in 2014, ADB undertook a midterm corporate strategy review. Climate came through as one of the seven areas ADB would commit itself to.

Second, in September 2015, we made a commitment to double our climate finance by 2020. We were the first multilateral development bank to make this kind of commitment. It spurred the action of others. It will be a battle to address climate change in the Asia Pacific, given both the vulnerability to climate change and the emissions coming from this region.

Now we are developing our 2030 climate change strategic framework. The framework is centered on building climate resilience and doubling our climate financing by 2020. Of the $6 billion [allocated] for climate financing by 2020, $4 billion is for mitigation. The bulk of that will come from the energy and transportation sectors. We hope to finalize the strategy by the first quarter of 2017.

It’s important to note we have been doing clean energy financing for many years. ADB was the first multilateral development bank to have articulated a clean energy target. In 2009, ADB announced this target with $2 billion in clean energy financing to be reached by 2015. We achieved this target.

CEFF: Reflecting on the Paris Agreement, are you optimistic or pessimistic about the mitigation pathway for the Asia Pacific?

Bhandari: I am a born optimist, so there is no other line I can take. Some of the developing countries have made very aggressive commitments. Many of them have included plans for adapting to climate change. This puts a nice balance to climate change action, considering we are already on a warming trajectory.

CEFF: How can the $6 billion in climate finance be best used to accomplish mitigation?

Bhandari: Our financing has two parts. We are deploying our own financing and we are leveraging financing from other partners. In our own financing, we have issued $1.8 billion in green bonds.

One example of leverage is a recent geothermal project which garnered local financing through an issuance of a bond. The bond was made possible though a guarantee provided by ADB. That is a unique mechanism.

The other new vehicle we are contemplating is an Asia climate-finance facility. We have commitment from the government of Germany for some initial funding for mitigation and adaptation. It will also provide climate risk insurance. We will also be using technical assistance.

Often, it is not the financing that is an issue, it is the lack of good projects that integrate climate considerations. Technical assistance is something we have already talked to the government of Germany about. By the end of next year, the facility should be operational. We hope that other donors will join that facility.

It is important to look at the co-financing we are able to generate. A small amount of money can generate money from other partners. You may also wish to look at our climate-finance report. It shows clearly that the six multilateral development banks are providing $25 billion in climate financing and leveraging an additional $55 billion.

CEFF: How is ADB supporting Asia Pacific governments to implement the Paris Agreement Nationally Determined Contributions (NDCs)?

Bhandari: In August 2016, we published a working paper analyzing the Intended Nationally Determined Contributions (INDCs) for each member country.

What is not in the working paper is some internal work ADB has done. For each country, we generally plan activities 2-3 years out. We have tried to assess to what extent the pipeline is aligned with NDCs. We recognize that the NDCs will be in effect by 2020, and that our pipeline is through 2019, but we want to make sure our work is directionally aligned with the NDCs.

The analysis of our pipeline against the NDCs tells us how closely our strategy aligns with what each country thinks is important on climate change.

Another important element of our strategy is the implementation of a climate-risk screening for our entire portfolio of projects. We have developed a system such that projects with high and medium project risks are subject to a climate assessment. This is a very significant step in ensuring we have a climate-resilient portfolio.

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