UNFCCC COP29 – Baku, Azerbaijan
Overview
At the COP29 Climate Law and Governance Day 2024 (CLGD), a high-level plenary session brought together General Counsels of five multilateral financial institutions to explore the role of international financial institutions (IFIs) in advancing the Paris Agreement’s goals. The session was titled Creating Systemic Impact: Paris Alignment and the Green Transition and was chaired by Advocate Vesselina Haralampieva of the European Bank for Reconstruction and Development (EBRD) and Advocate Christina Pak of the Asian Development Bank (ADB).
This plenary addressed the critical intersection of climate finance, legal frameworks, and governance reform. The General Counsels from the various IFIs shared insights on fostering resilient economies in emerging markets, mobilising private capital, and driving systemic change through innovative tools and collaborative strategies.
- EBRD’s Commitments and Implementation of Paris Agreement Goals
General Counsel Michael Strauss provided an overview of the Bank’s comprehensive approach to Paris alignment, its innovative programs, and practical examples of how these initiatives are driving systemic change.
As a multilateral development bank (MDB) focused on the private sector, EBRD’s foundational Charter mandates environmentally sound and sustainable development. This directive is especially crucial for the regions it serves—Eastern Europe, the Middle East, North Africa, and Sub-Saharan Africa—where carbon-intensive development is prevalent, and vulnerability to climate impact is high.
Under its Green Economy Transition (GET) approach, EBRD aims to achieve more than 50% green finance in its annual business volume by 2025. Notably, in 2023, EBRD surpassed this target by allocating over €6.5 billion to green projects. EBRD plays a crucial role in fostering collaboration between public and private finance to scale climate action. For example, while the bank committed €7.4 billion in its own finance for climate projects this year, it successfully mobilised €26.7 billion, achieving a nearly 4:1 leverage ratio. EBRD employs several innovative strategies to facilitate private sector involvement, including green bonds, climate-resilient clauses for sovereign debt, and country platforms.
EBRD’s Climate Practices and Transition Planning Program, launched in early 2024, demonstrates its commitment to capacity building for just transition. In its pilot programme launched in Armenia, nine financial institutions engaged in structured expert-led sessions, collaborative group work, and self-paced learning to enhance capacities in managing climate-related risks and opportunities. A similar program was subsequently introduced in Iran, reflecting the adaptability of this model to diverse financial markets.
EBRD’s work with corporate clients focuses on enhancing climate-related governance, strategy, and risk management practices. A notable example is its support for Kernel Group, a leading Ukrainian agribusiness. By helping Kernel define a low-carbon pathway, EBRD enabled the company to analyse climate risks, evaluate mitigation costs, and publish its first Task Force on Climate-related Financial Disclosures (TCFD)-aligned report.
- International Finance Corporation (IFC) – Transformative Initiatives in Emerging Markets
Ramit Nagpal, General Counsel of IFC outlined the structured and results-driven approach adopted by IFC to align its operations with the Paris Agreement’s long-term climate goals. As the private sector arm of the World Bank Group, IFC’s initiatives focus on driving systemic change in emerging markets, fostering sustainable, low-carbon development pathways, and ensuring climate resilience.
IFC’s Climate Change Action Plan outlines a robust strategy to integrate mitigation and adaptation goals into its investment operations. IFC surpassed its 2023 target of aligning 85% of new investments with Paris goals, achieving an impressive 96%, and is on track to reach 100% alignment by July 2025. All new investments are assessed for alignment with both mitigation and adaptation criteria under the joint MDB Paris alignment framework. These commitments are also enshrined as binding provisions in the legal agreements governing IFC’s investments, ensuring transparency and long-term impact.
Additionally, IFC frequently conditions its financing on clients committing to climate-focused measures, ensuring accountability and measurable progress. For example, IFC requires clients to: (i) develop physical risk management systems to address climate vulnerabilities; (ii) implement greenhouse gas (GHG) accounting systems with clear decarbonisation targets.
IFC’s projects span critical sectors to address climate challenges and unlock opportunities in emerging markets. Recognising that food systems contribute approximately 13% of global GHG emissions, IFC invests in projects promoting sustainable supply chains, low-methane agricultural practices, and advanced agritech solutions. IFC’s investment in Antalya Airport, Turkey is a standout example of climate-focused infrastructure. By prioritising measures to reduce the airport’s carbon footprint, IFC is facilitating improved transport connectivity while ensuring sustainability remains a core objective.
IFC’s approach fosters transformative change by embedding climate resilience and sustainability into private sector operations. Its focus on innovative solutions, robust alignment frameworks, and accountability mechanisms positions IFC as a pivotal force in driving the green transition across emerging markets. By ensuring investments align with the Paris Agreement and emphasising collaborative solutions, IFC plays a critical role in supporting low-carbon, resilient development that addresses both regional and global climate imperatives.
- ADB: Advancing Paris Alignment in the Asia Pacific
Thomas Clark, General Counsel of ADB mapped out the robust frameworks and partnerships that enable ADB to integrate Paris Agreement goals into its operations, working to align its projects with mitigation and adaptation objectives while addressing unique regional challenges.
ADB’s approach to supporting Paris-aligned development is multifaceted, emphasising the importance of building enabling legal and policy environments in its developing member countries (DMCs). By fostering upstream capacity-building efforts and providing policy-based loans, ADB aims to empower its client countries to establish the foundations for long-term carbon neutrality. A hallmark of this strategy is its Climate Change Action Plan, launched in 2023, which includes over 70 targeted action items to guide ADB’s climate ambitions.
ADB’s approach to achieving long-term carbon neutrality is multifaceted and includes several key initiatives. For example, climate risk assessments are integrated into project designs from the outset to ensure emissions reductions and resilience to climate impacts. ADB is committed to transparent reporting, with periodic sustainability reports that track progress toward its $100 billion climate finance target, including an upcoming publication in 2024. It also focuses on capacity building and knowledge sharing, investing in legal and policy reforms, educating local judiciaries, and supporting carbon market development.
Recent reforms to ADB’s Capital Adequacy Framework have expanded its financing capacity, enabling $36 billion in annual commitments over the next decade, and the launch of the Innovative Finance Facility for Climate (IF-CAP) will unlock $11.5 billion in additional climate financing through guarantees from member countries. Additionally, the Asian Development Fund, replenished with $5 billion for 2025–2028, prioritises climate adaptation and disaster risk reduction, especially for vulnerable small island developing states facing threats from rising sea levels.
ADB’s proactive and collaborative approach positions it as a leader in addressing the unique legal and operational complexities of the region. By integrating compliance, transparency, and innovation into its operations, ADB is fostering a resilient, sustainable future for its member countries, aligning with both their national ambitions and the global goals of the Paris Agreement.
- IDB Invest – Paris Alignment and Just Transition
Rosemary Jeronimides, General Counsel at IDB Invest, shared insights into how the institution is aligning its operations with the Paris Agreement and supporting the just transition. IDB Invest, the private sector arm of the IDB Group, has committed to ensuring all new operations align with the Paris Agreement, effective from January 2023. This alignment is guided by the IDB Group’s Paris Alignment Approach, which outlines a set of principles and provides sector-specific technical guidance.
IDB Invest focuses on key sectors such as infrastructure, energy, water, sanitation, manufacturing, digital economy, and operations with financial institutions. Their approach to Paris alignment considers national priorities, decarbonisation pathways, and the institutional capacities of the countries they serve. Projects undergo rigorous assessments, which are integrated into the institution’s environmental and social due diligence processes and sustainability policies, specifically addressing both transition and physical climate risks.
IDB Invest develops strategies for decarbonisation and managing physical climate risks. A standout project involved supporting small beekeepers in Latin America, who were severely impacted by tropical storms disrupting honey production. IDB Invest partnered with strategic clients to offer training, resources, and resilience-building measures, enhancing climate adaptation efforts and strengthening local supply chains.
IDB Invest uses local currency financing to bridge gaps in climate finance, particularly in high-risk markets. Local currency helps reduce currency risk and makes projects more viable, enabling broader participation. IDB has been involved in guarantees and blended finance to de-risk projects, such as financing solar projects in Brazil with a credit guarantee.
Furthermore, IDB Invest focuses on ensuring that the green transition is inclusive and equitable. A successful initiative involved structuring blended finance for a solar energy project in Latin America, which incentivised the recruitment and leadership opportunities for women. The success of this initiative led the government to introduce similar gender-inclusive policies in future public tenders for solar projects, demonstrating how private sector finance can drive broader policy changes. This approach highlights IDB Invest’s commitment to a green and just transition, promoting inclusive growth and enhancing resilience in the face of climate change.
- Green Climate Fund (GCF): Paris Alignment and Climate Finance
Gülen Newton, General Counsel of the Green Climate Fund (GCF) highlighted GCF’s programming that supports the goals set out in the Paris Agreement, particularly the achievement of low-emission and climate-resilient development pathways. Since its first project approvals in 2015, GCF has mobilised $61.5 billion in funding, with $16 billion in direct financing and the remainder from co-financing.
GCF’s unique mandate, guided by the principles of the Paris Agreement, enables it to play a central role in delivering the necessary climate finance to developing countries. Its design allows for a considerable risk tolerance and a focus on impact rather than financial returns. This approach is exemplified by projects like the public sector adaptation project in Tanzania, aimed at improving water supply and agricultural practices to strengthen climate resilience.
Through its projects, GCF aims to support vulnerable communities, with $57% of its portfolio dedicated to adaptation, a higher proportion than most other climate finance institutions. GCF also prioritises innovative financial instruments, such as the creation of new asset classes and local currency risk hedging. GCF uses guarantees, equity investments, and risk management tools to scale up private sector engagement and to support small and medium-sized enterprises (SMEs) with systemic impact.
GCF operates with a governance framework that distinguishes it from other climate finance institutions, with an equal representation of developed and developing countries on its board, and special representation for low-income countries and small island developing states. Civil society and private sector observers also participate in GCF’s decision-making processes, ensuring broad stakeholder engagement. Additionally, GCF has a unique project evaluation process, assessing each project against six investment criteria: impact potential, paradigm shift potential, sustainable development potential, country needs, ownership, and effectiveness. Projects undergo thorough risk assessments, ensuring that the benefits of financing outweigh the associated risks, particularly in vulnerable regions. For example, the GCF’s support for Somalia’s climate-resilient agriculture project, which addresses the urgent needs of a highly vulnerable population, reflects its commitment to supporting countries with the most pressing climate challenges.
Through its innovative risk management, focus on impact, and inclusive governance structure, GCF is positioned as a key player in aligning climate finance with the goals of the Paris Agreement while supporting the most vulnerable countries and communities.
Conclusion
The insights from the General Counsels of EBRD, IFC, ADB, IDB Invest and GCF underscored the importance of aligning investments with climate goals, fostering private sector involvement, and building inclusive and resilient economies. The session reinforced that systemic change requires strong legal frameworks, collaborative partnerships, and a commitment to addressing the needs of vulnerable regions. By integrating climate resilience, governance, and capacity-building, these IFIs are playing a crucial role in driving the green transition and supporting the global effort to combat climate change.