Climate and Sustainable Finance

In March 2023 the IDB Group published its “Paris Alignment Implementation Approach: Principles, Methodology, and Technical Guidance” (PAIA). The document is based on the joint MDB framework and lays out how the IDB plans to adapt the framework to its own institutional procedures. This blog post provides an overview on what are promising, concerning and unclear elements in the IDB Group’s general Paris alignment methodology.

The current international scenario is characterised by a complex web of global crises. This situation is having a particularly negative impact on the countries of the Global South, which are facing considerable financial constraints that are hindering the implementation of the 2030 Agenda. In this context, the French Government is organising the Summit for a New Global Financing Pact on 22-23 June 2023, which aims to forge a new pact between Global North and Global South countries.

The emerging polycrisis is challenging governments and institutions around the world. Especially countries in the Global South lack the financial capacity to address the current challenges and simultaneously prepare their nations for the impacts of climate change. The existing international financial architecture has so far been unable to provide the necessary financial resources.There are three major reform proposals that address different institutions within the international financial architecture. This primer introduces the proposals presented and provides an overview of the main institutions and actors involved in the process in Germany.

The multi-country projects and programmes financed by the Green Climate Fund (GCF) are of particular interest to African civil society organisations (CSOs) that, through their engagement with GCF processes and financed activities in their countries, have identified several concerns with their implementation.

A ‘race to the top’ or global crawl? Despite global climate negotiations at COP27 and the G20 inching far too slowly towards the financial transformations we need to tackle climate change, country-level progress is being made. A common framework would help track that progress.

One of the three main goals of the Paris Agreement is to ‘make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development’, as stated in Article 2.1c. This long-term goal recognises that, complementary to an increase in finance that supports climate action, there needs to be redirection of finance, both public and private, that locks countries into a future of low emissions and higher resilience. Given that Article 2.1c has yet to be fully operationalised, this case study examines the progress towards implementing it in Germany. It is a first attempt to provide a comprehensive analysis framework for the implementation of Article 2.1c.

The world is paying close attention to the multilateral development banks' (MDBs') potential for financing global climate action. MDBs have committed to aligning their financing with the Paris Agreement, and an explicit approach towards Paris-alignment of policy-based finance has been long expected from them. This working paper explains why this is important and what such an approach would entail.