Climate Change

Created in 2011, Tthe Climate finance Working Group is echoing with the Club genesis and its commitment to implement the Paris Agreement. Knowledge sharing and capacity building, climate finance tracking and advocacy in international fora are its main activities.

The Paris Agreement bears particular significance to development finance institutions, which are well positioned to demonstrate the opportunities and returns of investments in sustainable development, and reduce the risks associated with them.  Development banks – national, regional, international and multilateral – such as IDFC members and Multilateral Development Banks, already represent some of the largest providers of public finance for sustainable development. In accordance with their mandates, they can actively contribute to “mainstreaming” or “integrating” the sustainable development and climate agendas not only within the financial community, but also across all sectors, by scaling up and mobilizing finance and helping shape the policies and regulations needed for low-carbon, climate resilient development. Together, they can facilitate and accelerate the implementation of the Paris Agreement, continuously raising their ambitions.

In this context, the concept of ‘Aligning Finance’ with the Paris Agreement has emerged as the new frontier for increasing climate action ambition within the financial community. This concept means that the entire financing and investment portfolios, beyond the assets and projects that are directly beneficial for the climate and traditionally classified as climate finance, need to be made consistent with the Paris Agreement, including its long-term goals.

In December 2017, IDFC members have committed to align their financial flows with the objectives of the Paris Agreement by pursuing six goals:

• Increasing climate finance
• Supporting country-led strategies
• Mobilizing the private sector
• Promoting adaptation and resilience
• Supporting the energy transition
• Recognizing the need for internal transformation of financial institutions.

IDFC took another step almost 1 year later, at COP24, by publishing a position paper on aligning with the Paris Agreement. In 2021, IDFC published also an operational framework to align with the Paris Agreement developed by two independent think tanks, the New Climate Institute (NCI) and the Institute for Climate Economics (I4CE). This framework provides clear and practical guidance on how IDFC members — and the financial community at large — can reach a better alignment of their strategies, programs and operations with the requirements of the Paris Agreement, including through the implementation of TCFD recommendations.

To achieve these goals, the Club works through:

• Research programs and reporting methodologies (Green Finance Mapping, Common Principles on mitigation and adaptation, etc.)
• Knowledge sharing and capacity building, especially with IDFC Climate Facility
• Advocacy in the international fora (Climate COP, UN Summits, Finance in Common Summit, etc.)
• Partnerships with other financial stakeholders (Green Climate Fund, Mainstreaming Climate Initiative, Multilateral development banks, etc.).

• Green Finance Mapping

The Green Finance Mapping, a periodic report initiated with the creation of the Club in 2011, is one of IDFC’s most important and renowned publications. It illustrates the contributions that IDFC members provide to green and climate finance. IDFC members recorded US$ 1200 billion of green and climate finance over the 2015-2021 period.

Since 2015, climate finance reporting is based on a methodology, jointly developed by the IDFC and Multilateral Development Banks, called the Common Principles for Climate Finance Tracking. The reporting methodology is constantly improved, hoping to further members´ efforts for tracking and reporting on green finance flows — in 2021 Common Principles for Climate Finance Mitigation have been revised.

• State of Ambition (2021)

IDFC members work to promote and finance investment supporting their countries of interventions reach carbon neutrality as soon as possible, and their adaptation efforts. Following the decision of the G20 Summit in Rome, IDFC commits in its State of Ambition to end the provision of international public finance for new unabated coal power generation abroad by the end of 2021.

• IDFC Strategic Partnership with the Green Climate Fund

IDFC and the GCF signed at COP27 the extension of their partnership (renewal for 2022-2025). This partnership is focused on 3 main areas: i) Sharing knowledge for climate finance and jointly promote the mainstreaming of climate considerations throughout the financial community, ii) Facilitate the access to GCF resources with co-financing from IDFC members, iii) Joint advocacy in international fora in climate finance. The GCF has accredited 35 Public Development Banks (PDBs), 15 of which are IDFC members, making the IDFC the largest group of financial institutions collaborating with the GCF, and key partners in achieving mutual climate finance goals.

• IDFC participation to the COP

Since 2020, IDFC has been organizing a pavilion during the COP, hosting side events from its members and partners, and showing the strong commitment of the Club to implement the Sustainable Development Goals & the Paris Climate Agreement agendas.