Bilateral Financial Institutions or BFIs are investing far more in climate change actions in developing countries than many may presume.
A new study, released at the UN climate convention meeting, shows that the BFI's of France, Germany, Japan and the European Investment Bank alone invested funds worth around Euro 8 billion in climate related activities in 2008.The study, commissioned by the UN Environment Programme (UNEP), has been undertaken by the Stockholm Environment Institute SEI.
The findings have implications for the financial architecture of any outcome in Copenhagen and further highlight that in order to combat climate change, it will be key to mobilise all institutions – be they multilateral or bilateral-under the guidance of the UN Framework Convention on Climate Change.
Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said, "The findings underline how development aid is becoming increasingly climate aware. An agreement in Copenhagen needs to generate substantial and additional funds to assist developing economies adapt and to move towards a low carbon development path".
"The fact that BFIs of some major countries are already investing significantly in climate, as part of their development activities, can act as a good foundation upon which the additional investments can build"
The study looked at financial flows from France's AFD, Germany's KfW and Japan's JICA as well as the EIB.
It found that in 2008, the total climate change-related finance disbursed by these institutions was approximately EUR8 billion. This can be divided into approximately EUR5.8bn for mitigation and EUR2.2bn for adaptation.
The BFIs were amongst the first to finance climate actions in developing countries, and their commitments in this field have continued to increase over recent years.
Their flows are channelled though a wide range of instruments including debt, equity, credit lines and grants.
The study indicates that the principle objectives for the BFIs are to match the most appropriate instruments with local conditions and thereby maximise the effectiveness of the financial flows that they manage while assisting countries define their own climate change policies and to create and catalyse funds from the private sector.
In regional terms, a significant proportion (60 per cent) of BFI spending on climate finance is directed toward Asia and Oceania.
Lesser but still sizable amounts are disbursed to North Africa and the Middle East, Eastern Europe and Sub-Saharan Africa.
Even in Least Developed Countries, these institutions can both finance development and poverty alleviation, and tackle climate change, through a range of mitigation and adaptation actions.
Similar figures from other financial institutions are difficult to find, but the various estimates cited in this study suggest that finance for mitigation (excluding carbon finance) delivered by four major Multilateral Funding Institutions – the World Bank, Inter-American Development Bank (IDB), Asian Development Bank (ADB) and European Bank for Reconstruction and Development (EBRD) – in 2007 was around EUR 3-4 billion.
AFD, KfW, JICA and EIB are also developing tools and methods to systematically estimate the carbon impact of the projects that they finance.
