New ADB initiative to raise billions in Climate Finance
The Asian Development Bank’s (ADB) new Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP) could be a groundbreaking initiative to kick-start the global pot for climate finance and taking their place as climate leaders instead of bit players.
Announced at the recent ADB annual meeting in Incheon, South Korea last week, the IF-CAP is a new program aimed at mobilising as much as $15 billion in financing to fund climate-focused projects in Asia and Pacific countries.
The initiative will leverage the bank’s existing sovereign loan network through guarantees offered by donor countries, effectively taking the sovereign loans off ADB’s books thereby freeing up capital to invest in much-needed climate projects.
“Climate change is the critical issue of our lifetime and here in Asia and the Pacific we are on the front lines of that battle,” ADB president Masatsugu Asakawa said at the launch.
According to the ADB, since 2000, more than 40 per cent of the world’s climate-related disasters have occurred in the region, such as the floods in Pakistan in 2022, and the drought in Afghanistan in 2021 to name but a few.
Under the initiative, four or five dollars can be borrowed for every dollar guaranteed by the donor countries to boost climate lending. IF-CAP will help the ADB finance an increase of US$20 billion (to potentially US$100 billion) in its own lending for climate projects but that is hopefully only the beginning.
This new model can be adapted by other Multilateral Development Banks (MDBs)across the globe. One of the main problems with climate finance is that for too long the burden has been pushed onto the private sector.
If other major MDB’s can adopt the mechanism, then the potential to raise the vast amounts of finance needed to combat Climate Change – and this is where the scale of financing can finally reach the levels that are desperately needed.
And as ADB President Masatsugu Asakawa said:
“Climate change is the critical issue of our lifetime and here in Asia and the Pacific we are on the frontlines of that battle. The climate events we have experienced over the past 12 months will only increase in intensity and frequency, so we must take bold action now. IF-CAP is an exciting, innovative program that will have a real impact.”