15 Jul 2024
Driving Climate Action: The Rockefeller Foundation’s Support to MDB Reforms
by Deepali Khanna For the first time since their 2009 COP 15 pledge to mobilize $100 billion annually for developing nations to address their climate needs, developed countries provided $115.9 billion in climate finance in 2022. While the fulfillment of this goal is important, this funding is insufficient—addressing climate change and meeting the Sustainable Development Goals will require trillions of dollars in financing. Moreover, the bulk of this financing is in the form of loans, which has proven to be a cause of concern for several climate experts. Several multilateral development banks (MDBs) also have continued to provide climate financing by sanctioning loans to developing nations. MDBs have always played a pivotal role in addressing global development challenges. However, their current structures and policies require significant and comprehensive reforms to enhance their effectiveness. For instance, instead of loans, developing countries have been demanding more grants based and concessional lending to encapsulate losses and damages. It thus becomes important to provide a platform for developing nations to voice their needs and call for reforms within the system. The Rockefeller Foundation (Foundation) has advocated for these reforms by backing Barbados Prime Minister Mia Mottley’s Bridgetown Initiative and identifying innovative financing mechanisms. Through its 111-year journey, the Foundation has sought to address monumental global challenges. Today, with its USD 1 billion novel climate strategy, the philanthropy aims to drive meaningful climate action. At the recently concluded Spring Meetings of the International Monetary Fund (IMF) and the Boards of Governors of the World Bank (WB), the Foundation convened high-level stakeholders to discuss how to build a stronger, more responsive global financial system to respond to escalating climate and development challenges. Reversing climate change requires the banks, and the major economies who fund them, to take bold steps to reform the system. After the conclusion of the Spring Meetings, the Foundation emphasized the need for MDBs to exponentially increase the financing available to vulnerable low- and middle-income countries, along with improving operations and impact assessments. The most significant call for action was the expansion of World Bank’s balance sheet by another $ 80 billion as well as asking other MDBs to extend their balance sheets and capital. The Foundation underscored the urgency required in adopting a climate resilience and sustainability lens into financing decisions. Mainstreaming climate-risk assessments and low-carbon strategies helps ensure that the MDBs prioritize renewable energy and sustainable infrastructure. With the immediate need for innovative ways to expand MDB lending, MDBs must mobilize private capital and take steps to reduce the disproportionate risk premiums that enlarge the debt burdens on developing nations. Over the years, the Foundation has promoted novel financial instruments such as blended financing mechanisms that bolster climate action. These mechanisms combine concessional finance with private capital to mitigate investment risks and attract more funding for climate projects. Transparency and accountability are crucial elements in transforming the current state of the MDBs. The Foundation supports the Climate Policy Initiative’s tracking system, which helps MDBs monitor and report their climate finance allocations more effectively. Additionally, the Foundation fosters partnerships between MDBs and the public and private sectors for creating symbiotic climate action efforts. Owing to its widespread implications, the overhaul of the existing MDBs requires inclusive governance within the MDBs. By advocating for governance reforms that elevate the voices of developing countries, the Foundation hopes to help ensure that climate policies and projects are more equitable and attuned to the needs of the most vulnerable populations. Vulnerable nations should continue to raise their voices in calling for equitable grants and concessional lending to meet their climate financing needs. It is time that they are given a seat at the table and encouraged to highlight their concerns. With reforms in MDBs, the global financial system will witness a necessary shift in decision-making—and the world will be able to build a more equitable, sustainable future. |
About the Author As the Head of The Rockefeller Foundation’s Asia Regional Office, Deepali Khanna amplifies the Foundation’s impact and initiatives in line with its mission to promote the well-being of humanity and make opportunity universal and sustainable. She builds networks, leverages collaborations and financing, and provides thought leadership on Asian development trends. Having served on the G20 India and G7 Japan task forces in the past, she continues to serve on several G20 Brazil task forces. She frequently writes on climate action and South-South cooperation in major Asian publications and speaks at global platforms. Deepali also chairs the board of the Digital Green Foundation and has held leadership roles at The MasterCard Foundation and Plan International. |
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