Government-owned development banks must take on the climate crisis

27 January 2020

Despite having the power of the government behind them state-owned national development banks around the world have been neglected in the fight against climate change, according to new research from the Overseas Development Institute.
The London-based think tank’s new report “Securing climate finance through national development banks” calls on the NDBs to redirect their investment to low-carbon and climate-resilient projects.
These state-owned banks have a government guarantee so can raise funds more cheaply and pay for them over more time than the private sector. Some NDBs also receive public funds directly.
These advantages should allow them to invest in vital climate friendly development -and expect lower returns than would be expected in the private sector. 
Estimates place the total assets of NDBs at $5 trillion, well in excess of the assets held by multilateral development banks like the World Bank, and many times the value of donor aid. 
Samantha Attridge, a senior research fellow at the Overseas Development Institute – and joint author of the research, said: “In the poorest countries climate-smart investment often requires large upfront expenditure in climate friendly infrastructure with long payback periods, requiring long-term financing, which often is just not available or it is very expensive. 
“Other challenges include the risk to profit associated with potentially risky new climate-smart technologies, which is not very attractive to the private sector. 
“It is now time now for NDBs to claim their rightful place at the policy table, as key players in financing the global response to the climate crisis and the transition to a low-carbon economy.”
The ODI research concludes that three things must be in place for this to happen.
•         Good governance - well-run NDBs with a ‘green mandate’ are more likely to be integrated into policy frameworks.
•         Resources - to enable them to operate at the scale that is required to support the transition to climate-smart growth.
•         International support – at the moment NDBs – who are uniquely placed to leverage concessional climate finance to maximum effect are often not in receipt of it as this goes through the multilaterals and international institutions such as the UN..
The research will be launched in Paris tomorrow at the Organisation for Economic Co-operation and Development (OECD) Private Finance for Sustainable Development Conference  on Tuesday 28 jointly hosted by the International Development Finance Club and the OECD.
A national development bank is a development bank created by a country's government that provides financing for the purposes of economic development of the country.
 
Ends
 
You can read the full report online
 
For more info or to arrange an interview with Samantha or another expert from the Overseas Development Institute please contact Miles Barter on [email protected]  or call +44 (0)7808 791265.