New calculations show 39 signatory countries and institutions make up a majority of multiple MDBs’ shareholders
Last week at COP26, almost 40 countries and institutions, including the United States, Canada, Germany, UK, France, Spain, Mali, Sri Lanka, Zambia, and Costa Rica, launched a joint statement committing to end direct international public finance for unabated coal, oil, and gas by the end of 2022 and to prioritize clean energy finance. After a wave of commitments to end international coal finance since 2013, this was the first international political commitment that also addresses public finance for oil and gas. From 2018 to 2020, the signatory countries backed more than USD 24 billion a year for fossil fuels, and this amount will be shifted to renewables if the initiative is implemented effectively.
However, the major MDBs were conspicuously absent from this pact and were criticized at COP26 by UN officials and civil society for cancelling civil society engagements and for the poor ambition shown in their COP26 update on their long-promised joint Paris Alignment process. To date, only the European Investment Bank and the regional East African Development Bank have signed on to the pact.
The high level of participation from MDB donor and client shareholder governments alike means MDBs may soon be forced to end their fossil fuel finance. New calculations from the Big Shift Global coalition show signatory governments to the Glasgow joint statement now make up:
MDB shareholder governments vote on project approvals and some policies through their Executive Director representatives, and directly on major policy changes through each banks’ Board of Governors. This means at the EBRD and IaDB future fossil fuel project proposals are unlikely to be approved, and a more cross-cutting policy barring future fossil fuel finance should now be possible to pass. The other MDBs are nearing this scenario as more countries and institutions are expected to sign on to the joint statement in the coming weeks. The Big Shift Global Coalition is calling on MDBs to take leadership and sign on to the joint agreement as well.
Shifting public finance for energy out of all fossil fuels and into clean energy is an urgent task. The International Energy Agency (IEA) says that to limit global warming to 1.5°C, 2021 needs to mark the end of new investments in not just coal, but also new oil and gas supply.
Collectively the MDBs still provided at least $6.3 billion each year in preferential finance and grants to fossil fuel projects between 2018 and 2020. This does not include further investments through financial intermediaries and policy-based support that are influential and not possible to track in full. This continued fossil fuel support flouts their joint commitment to Paris Alignment first made in 2017 and updated during COP26. Their collective statement and progress report on this Paris Alignment process was met with disappointment as it included few new details, made no limits on fossil fuel support outside of coal and peat, and aims for implementation only by 2025.
“In 2017, the MDBs were among the very first financial institutions to commit to Paris Alignment. Four years later they are far behind, standing in the way of the Paris Agreement rather than aligning with it. The first step to fixing this is joining the Glasgow joint statement. After that, they must follow through and end all fossil fuel finance, greatly increase support for community-led energy access and just transition, and re-focus their climate finance to serve the most vulnerable communities rather than private sector profits.” Bronwen Tucker, Oil Change International
“Major borrowers and donors alike have agreed it is time for the Big Shift — out of fossil fuels and into renewable energy. Some development banks, like the East African Development Bank (EADB) and the European Investment Bank (EIB) have rightly embraced this shift as fiduciarily prudent. Other MDBs, if they’re serious about aligning with the Paris Agreement and doing their duty to smart development, must step up now.” Ladd Connell, Bank Information Center
“For every $1 spent on renewables, the Asian Infrastructure Investment Bank (AIIB) spends almost double on fossil fuels. As it reviews its Energy Sector Strategy, the imperative to act is clear. Nearly a quarter of AIIB’s shareholders committed to stop funding fossil fuels. Joining this progressive alliance must be a first and significant step to show that AIIB is a climate leader and not a laggard.” Petra Kjell Wright, Recourse
“The World Bank Group’s Climate Change Action Plan for 2021-25 stops short of ending support for fossil gas, noting vaguely that “all WBG investments in new gas infrastructure will be assessed for consistency” with national climate and development plans. Governments who have signed on to the COP26 clean energy declaration — who account for nearly 45 percent of World Bank (IBRD) voting shares — have acknowledged it is time to go further and put an end date on fossil fuel finance. We look forward to the Bank joining this coalition, as the logical next step in its efforts to align with the Paris Agreement. The Bank should apply the declaration’s commitment to end support for fossil fuels to both its direct and indirect financing instruments, while broadening its just transition approach beyond coal to include all fossil fuels.” Jon Sward, Bretton Woods Project
“When news broke on 4 November of the leading economies and institutions in support of the joint statement and the African Development Bank was nowhere to be found, it became clearer why they had abruptly cancelled a COP 26 side event at the AfDB pavilion where they had requested African civil society to present their stance on the Bank’s role in financing the just transition. At the same time, AfDB President Akinwumi Adesina stood on a COP 26 stage to tell audiences, “Renewable energy is Africa’s future”. Empty promises of climate action have failed us — and it’s time for the AfDB and shareholders to stick to their word.” Nicole Rodel, African Climate Reality Project
“The climate crisis precludes room for MDB spending on fossil fuel investments. Instead MDBs must contribute to decarbonizing countries and planetary ecosystems. While MDBs boast about their [highly inadequate] gender-equality focus, their dirty energy investments increase illness and thus the unpaid care work of poor women who bear this burden because of patriarchal gender biases.” Elaine Zuckerman, Gender Action
A legal opinion by Professor Jorge E Viñuales from the University of Cambridge and Barrister Kate Cook of Matrix Chambers argues that governments and public finance institutions that continue to finance fossil fuel infrastructure are potentially at risk of climate litigation.
For further information, see the Big Shift Global.