Conference of the Parties (COP28): Heads of Multilateral Development Banks explore closing nature and water financing gap

Heads of multilateral development banks attending the 2023 global climate change conference, COP28, on Tuesday committed to scale resource mobilisation to close the nature and water sector financing gap.

At a high-level panel moderated by Lord Zac Goldsmith, former UK Minister for Climate and Environment, the banks shared views on what can be done differently to ensure that the world delivers on water, nature&climate agendas. Speakers included representatives from the Inter-American Development Bank (IDB), the Asian Development Bank, and the African Development Bank.

IDB President Ilan Goldfajn shared the institution’s CLIMA pilot programme, an innovative financial tool that provides grants (5% of the IDB loan principal) to incentivise borrowers to achieve nature and climate objectives. CLIMA assists countries with access to green and thematic debt markets to mobilise capital for climate and nature investments at scale. Borrowers must meet three Key Performance Indicators – setting ambitious environmental targets, identifying the proper policies and expenditures to meet these targets, and measuring and reporting on their progress on time – to be eligible.

The President of the Asian Development Bank, Masatsugu Asakawa, reinforced the need for the development community to lead in mobilising partnerships that can generate new and additional financing. He referenced the launch of the joint Common Principles for Climate Change Adaptation Finance Tracking (https://apo-opa.co/4868jkb) by Multilateral Development Banks and the International Development Finance Club to improve the reporting on adaptation finance.

He also highlighted the Asia and the Pacific Water Resilience Initiative, which the Asian Development Bank launched at last year’s COP (https://apo-opa.co/3RbrMJE) to mobilise at least $200 million by 2025 for water and sanitation resilience and security in Asia and the Pacific. “Multilateral Development Banks need to take charge of water, nature, and climate,” Asakawa said.

Dr. Beth Dunford, Vice President of Agriculture, Human and Social Development at the African Development Bank Group, urged urgent action to achieve Sustainable Development Goal 6 of “clean water and sanitation for all”.

Globally, water resources are dwindling, and impacts are intensifying due to increasing temperatures. By 2030, a quarter billion people will grapple with water scarcity and by 2050, climate impacts could cost Africa $50 billion per year. Since 2010, the African Development Bank has invested an estimated $7.4 billion in water supply and sanitation services delivery, benefitting about 90 million people in Africa.

The African Development Bank has pledged to quadruple its financing for climate adaptation to reach $25 billion by 2025 through promoting climate-smart investments. The Bank will encourage private-sector funding, particularly for water treatment, recycling, and other components in the water value chain. It will also consider strategic debt relief programs like debt-for-nature swaps in return for a commitment from regional member countries to invest in climate-resilient infrastructure.

“Even a drop in the ocean can make a wave of change. The African Development Bank Group joins fellow multilateral development banks in sharing a crystal-clear vision to ensure the availability and sustainable management of water systems for all,” Dr Beth Dunford said.

Dr Johan Rockstrom, Director of the Potsdam Institute for Climate Impact Research and the co-chair of the Global Commission on the Economics of Water, delivered a keynote on “Rethinking the Financial Architecture for Water and Nature”. He said nature and climate must go together in efforts to create solutions. “The overexploitation of natural resources at a global scale has put the world at risk of destabilising the entire planet, and we are in a state of planetary emergency,” he said.

He further called for the management of water and consideration of water, nature, and climate as a whole when looking at the mechanism for finance. “We need to manage water as an entity, valued as a capital that we all depend on because it determines the sustainability of the biosphere…water is a provider of livelihoods, resilience, and part of the mitigation story.”

Dr Rockstrom called for collaboration in mobilising finance and advancing a conceptual framework and restructuring for the overall financial architecture for climate, water and nature, noting the provisioning and resilience of all natural capital assets are fundamental supports to human well-being and economies.

The meeting affirmed that there can be no sustainable future without urgent, systemic, and collective attention to the inextricable links between climate change, water crises, and biodiversity loss. Safeguarding water resources and biodiversity should be prioritised as they are crucial in climate strategies. 

Distributed by APO Group on behalf of African Development Bank Group (AfDB).