Filling the Gap: A review of Multilateral Development Banks' efforts to scale up financing for climate adaptation
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As MDBs work toward alignment with the Paris Agreement in their developing country portfolios, they must transition from a focus on increasing climate finance for stand-alone adaptation projects or added-on adaptation components of development projects to instead ensuring that all investments consider and incorporate the adaptation objectives of the Paris Agreement.
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Adaptation flows accounted for 34% of total MDB climate finance flows in 2019, an increase from 20% in 2015.
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Effective MDB-developing country engagement to generate financing for adaptation requires drawing on developing country adaptation plans and processes when formulating MDB country partnership strategies and identifying new programs and investments.
The main research questions addressed in this paper are:
- What constraints and barriers are MDBs encountering as they work to scale-up and mainstream adaptation across their investment portfolios at the developing country level?
- How are MDBs working with developing country governments to overcome these challenges and further integrate adaptation into their development finance portfolios?
Finance for adaptation is not flowing at the pace or scale needed to address the needs of developing countries. Multilateral Development Banks (MDBs) are expected to play a critical role in addressing this adaptation gap because they provide and leverage large-volume finance under attractive terms. MDBs have taken significant steps to increase the provision of climate finance and to align their development finance flows with the Paris Agreement, yet MDBs have encountered challenges when attempting to fully mainstream climate resilience across their portfolios.
The report highlights the need for MDBs to transition from a focus on increasing climate finance for stand-alone adaptation projects or added-on adaptation components of development projects to instead ensuring that all investments consider and incorporate the objectives of the Paris Agreement. The report concludes that MDBs’ success in increasing finance for adaptation requires active support of developing country partners, improved tracking of adaptation finance at the country level, alignment of MDB finance with national adaptation priorities, and engagement of the private sector in adaptation actions.
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