Global (Commonwealth) _ In order to assist its developing member countries (DMCs) in Asia and the Pacific in reducing greenhouse gas emissions and preparing for the effects of global warming, the Asian Development Bank (ADB) has offered a record amount of climate financing for 2023.
ADB increased its climate funding pledges for 2022 by more than 46% to $9.8 billion from its own resources last year, with $5.5 billion going toward mitigation and $4.3 billion toward adaptation.
ADB surpassed its aim of $9 billion in 2019–2024 one year early thanks to the bank’s climate adaptation finance commitments in 2023, totaling more than $10.4 billion in adaptation financing from 2019 to 2023. In Asia and the Pacific, where there are increasingly intense heatwaves, droughts, and torrential downpours, but where adaptation expenditures are still far short of what is needed, finance for adaptation is vital.
All development faces a threat from climate change. According to ADB President Masatsugu Asakawa, 2023 was the warmest year on record and experienced a wide range of catastrophic, fatal climate impacts in the region in question. In addition to creating budgetary difficulties, this crisis endangers food and energy security. ADB is devoted to assisting our developing countries in de-fossilizating their economies, moving forward with their climate transition plans, and achieving their net-zero objectives as the climate bank for Asia and the Pacific. We need to move as a team, quickly, and extensively.
In addition to producing almost half of the world’s carbon dioxide emissions, Asia and the Pacific region is particularly sensitive to the effects of climate change. For the area to achieve net zero by 2050, an estimated $3.1 trillion in annual investments in energy and transportation assets alone are required—roughly 50% more than present levels.
As the climate bank for Asia and the Pacific, the Asian Development Bank (ADB) plans to finance climate change with $100 billion of its own funds between 2019 and 2030. ADB contributed $6.7 billion in climate funding from its own funds in 2022, of which $2.7 billion was allocated for adaptation and $4 billion for mitigation.
A $1 billion loan to support the deployment of the Philippines’ first large-scale electric bus system in Davao City; a $400 million policy-based loan to assist Bangladesh in implementing its national adaptation plan and pursuing climate-focused development; and a $18 million offer from the Asian Development Fund (ADF) to enhance the Federated States of Micronesia’s water supply and sanitation services’ resilience, inclusivity, and sustainability are among the ADB’s flagship climate projects for 2023. ADF funds support poverty reduction and quality of life enhancements to ADB’s lower-income DMCs.
While continuing its efforts to end extreme poverty, ADB is dedicated to creating a prosperous, inclusive, resilient, and sustainable Asia and the Pacific region. It was founded in 1966 and is owned by 68 people, 49 of whom are local.
With the aim of scaling up funding for faster action against climate change in Asia and the Pacific, the Innovative Finance Facility for Climate in Asia and the Pacific, or IF-CAP, is a multi-donor financing partnership facility. For a portion of ADB’s sovereign loan portfolio, IF-CAP partners will offer guarantees, allowing ADB to free up funds to expand financing for climate initiatives. Supplementary funding will help with knowledge solutions, capacity building, and project planning.
What is IF-CAP?
Asia and the Pacific will determine whether or not the fight against climate change is won. Furthermore, our area is particularly susceptible to the effects. Since the year 2000, Asia and the Pacific have experienced over 40% of all climate-related catastrophes, impacting around 3.6 billion people. According to ADB projections, between 2016 and 2030, infrastructure in developing Asia would require annual investments of $1.7 trillion in order to satisfy both development and climate targets.
The year 2030 is a critical turning point, according to the International Panel on Climate Change (IPCC), after which meeting climate objectives would become much more difficult.
The Asian Development Bank is leading the way in the area in terms of climate change finance and knowledge as it is the climate bank for Asia and the Pacific. The first leveraged guarantee instrument for climate funding that a multilateral development bank has ever established is called IF-CAP. It draws inspiration from the International Finance Facility for Education (IFFEd), whose mission is to unlock additional funds for education in low- and middle-income nations via the use of creative finance.
How will IF-CAP proceed?
With the help of IF-CAP, ADB will be able to dramatically expand its climate investments in line with the Paris Agreement and other important ADB directives, such as the upcoming Climate Change Action Plan. The initial goal of $3 billion in guarantees may generate up to $15 billion in additional loans for urgently needed climate projects throughout Asia and the Pacific, according to the “$1 in, $5 out” concept. Projects funded by IF-CAP will focus on adaptation—which aims to increase resistance to the effects of climate change—and mitigation, which aims to lower greenhouse gas emissions. A wide range of industries, including transportation, energy, urban development, and agriculture, may be the focus of these investments.
Why won’t IF-CAP be effective?
In line with the ADB’s energy strategy, which was established in 2021, IF-CAP finance will not support the development of new fossil fuel-based electricity generating. Therefore, IF-CAP may assist ADB’s Energy Transition Mechanism, which aims to expedite the retirement or conversion of coal- and other fossil fuel-based power facilities and assist in directing investment toward dependable and reasonably priced sustainable energy.
