Six development finance proposals to expand climate investment

Briefing papers
March 2017
Ilmi Granoff, Darius Nassiry, Neil Bird, Chris Humphrey, Paddy Carter, Alberto Lemma and Annalisa Prizzon

This policy brief describes six promising finance proposals to support greater ambition for low-carbon development:

  1. Increase Multilateral Development Bank (MDB) loan to capital ratios.
  2. Expand DFI use of guarantees.
  3. Encourage DFIs to invest in clean technology deployment. 
  4. Strengthen MDB support of national financial intermediaries. 
  5. Scope a new Green Cities Development Bank.
  6. Deliver green debt reimbursement in low-income countries.

In assessing these proposals in terms of their potential impact on climate investment, we highlight two points. First, there will be differences in the relative cost of political capital required to implement each proposal, which may vary over time and circumstance. Second, each proposal might enlarge the size of the development finance envelope generally or boost funding for climate-related investment more directly.

Many of the proposed changes require better leveraging of existing resources, rather than new flows and will use existing resources more effectively. The proposals have also not been a significant part of climate finance discussions to date. These proposals have the potential for material, scalable impacts and are compatible with climate investment needs. 

Development finance proposal 1: increase multilateral development bank loan to capital ratios
Development finance proposal 2: expand development finance institutions' use of guarantees
Development finance proposal 3: encourage development finance institutions to invest in clean technology deployment
Development finance proposal 4: strengthen MDB support of national financial intermediaries
Development finance proposal 5: scope a Global Green Cities Bank
Development finance proposal 6: deliver green debt reimbursement