Global development banks on Wednesday pledged to align their financial power with the Paris climate accord but avoid committing to phasing out financial assistance to fossil fuel projects. Public development institutions are key funders to many major infrastructure and energy projects. These financial institutions, hence, have a crucial role in diverting finance away from fossil fuels to low-carbon energy projects.
Such institutions invest around $2.3 trillion every year globally. This figure represents roughly 10% of worldwide investments from both public and private funders. The French government organized a green finance summit this week where 450 public development banks declared to accelerate and expand investment in renewable energy, clean technologies, and energy efficiency. However, they did not promise to phase out financing on fossil fuel projects. The Asian Development Bank (ADB) even said it would not sign the declaration.
Previously, a group of European development banks announced steps to stop financing on fossil fuel projects. The French Development Agency (AFD) said the declaration is the initial step for more action. Some sources said that the text of the declaration had been watered down compared to the draft. For instance, the final text includes a commitment to developing explicit policies to stop coal financing. However, the draft initially targeted all fossil fuel, including oil and gas.
