Zero: The Climate Race These 'beautiful' banks are expected to save climate finance: Moving Money
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Apr 17, 2025 Avinash Persaud, Special Advisor on Climate Risk to the President of the Inter-American Development Bank and former advisor to Barbados Prime Minister Mia Motley, dives into the urgent need for funding in climate initiatives in developing countries. He discusses the crucial role of Multilateral Development Banks (MDBs) in channeling investments, especially as wealthier nations cut back on climate finance. Persaud also highlights innovative solutions like debt-for-nature swaps and the risks posed by shifting political landscapes that could hinder vital environmental funding.
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How MDBs Leverage Capital
- Multilateral development banks (MDBs) use government capital to leverage private market funds, multiplying lending capacity by about eight times.
- This leveraging power stems from MDBs' AAA credit rating and loss-absorbing capital from shareholders like governments.
MDB Lending Scale Needs Growth
- MDBs currently lend about $200 billion annually, a tiny portion compared to private lending in the trillions.
- To meet climate and development goals, MDB lending must triple to around $600 billion per year, with about half focused on climate projects.
Climate's Role in Development
- Climate change is a major threat to poverty reduction; hurricanes cause vastly different impacts based on development levels.
- Transitioning to net zero offers huge economic benefits, including health cost savings from reduced pollution.