The World Bank and other MDBs are increasing funding for renewable energy

Commercial lending for sustainable energies has slowed in the wake of the financial crisis, but support from multilateral development banks is on the rise. This multilateral support, however, only accounted for almost one-eighth of the global sustainable energy investment in 2009. Recent estimates suggest that the public financing needed to achieve a stabilized global temperature increase of 2 degrees Celsius far exceeds this amount.

Despite this limited means, support from multilateral banks is critical in developing countries transitioning to a sustainable energy sector, as these institutions provide technical assistance, concessional loans, and guarantees that can help mitigate the perceived risks associated with renewable energy technologies. The banks also play an important role in building the conditions that enable investors and commercial financiers to plan investments in these sectors.

A November 2010 study from Bloomberg New Energy Finance describes the growing role of multilateral development banks in providing capital for sustainable energy projects. From 2008 to 2009, such loans increased more than threefold, to $21.1 billion, or almost one-eighth of the $162 billion in global sustainable energy investment in 2009. Most of these institutions have integrated clean energy technologies and energy efficiency into the framework documents for their energy sector and lending portfolios. Most recently, the first draft of the Energy Sector Strategy of the World Bank Group aimed to increase the sector’s share of clean energy projects to 67­–75 percent by 2015.

Institutions showing the greatest growth in sustainable energy investment between 2008 and 2009 are the European Investment Bank, the Inter-American Development Bank, the Asian Development Bank, and the International Finance Cooperation. Most of these banks have either set new targets or updated existing targets for supporting renewables and energy efficiency activities in the coming years. A comparison of their strategy documents, however, reveals high variability in the types of technologies classified as low-carbon, clean, or sustainable. (See Table)

Support for sustainable energies in top growing institutions

Institution Framework document Lending targets and commitments Technologies supported
European Investment Bank “Supporting Sustainable, Competitive and Secure Energy” named as the 6th priority area of the Corporate Investment Plan (2011–13). For EU countries, the share of renewables lending in the EIB energy portfolio tripled from below 10% in 2006 to more than 30% in 2010 (to $9 billion). Lending for energy efficiency doubled to $2.1 billion in 2009 and is targeted at $3.3 billion in 2010.
For non-EU member countries: increase of the Energy Sustainability Facility from USD 4.3 to 6.5 billion by 2013.
Renewable energy and energy efficiency, including nuclear and carbon capture and sequestration (CCS). (Clean Energy Policy, 2007) 


Inter-American Development Bank “Sustainable and renewable energy” mentioned as a priority in IDB’s Integrated strategy for climate change. (2011) Annual lending target of 25% for climate change, renewable energy, and environmental sustainability, to be met at the end of the 2012–15 period. 


Sustainable energy, including renewable energy and energy efficiency, refers to a sector approach that prioritizes access, meeting current and future demand, energy efficiency, and reduction of environmental impacts.
Asian Development Bank Both the overall strategy framework Strategy 2020 (2008–12) and the Energy Policy (2009) list “clean energy” as one of their priorities. Target of $2 billion by 2013 (with $1.7 billion of approved investments in 2010). Wind, solar, small and large hydro, geothermal, biomass, biofuels, biogas, landfill biogas, municipal waste, demand and supply side energy efficiency, and supply side fuel switching, CCS. (See Guidelines.)
World Bank Group Draft of the WBG energy strategy (2011) The Bank reported a 62% increase in low-carbon commitments (to $5.5 billion) compared to FY2009 (42% of the energy financing commitments in FY10) 

Target of 75% clean energy projects in the energy portfolio by 2015.

Low-carbon projects include renewable energy projects (including all sizes of hydropower), energy efficiency improvements, power plant retrofits to improve efficiency (coal, gas); district heating; biomass waste-to-energy; reductions in gas-flaring; and displacement of carbon-intensive fuels with cleaner fuels. (World Bank energy lending reporting definitions)

The European Investment Bank, for example, has significantly increased its share of lending for both renewable energy and energy efficiency. Most of this investment is targeted at EU members and provides financial support to implement their climate and energy policy targets. The EIB’s Energy Sustainability Facility, its lending arm for non-EU members, is set to expand by $4.3–6.5 billion by 2013.

The Inter-American Development Bank plans to double its lending capacity for clean and sustainable energy to a quarter of its lending portfolio by 2012, from $1.5 to $3 billion. This reflects the bank’s expanded capital base during the 9th general capital increase, as well as growing demand from borrowing member countries. More clarity is needed, however regarding the types of technologies funded, since the framework document on climate change mentions renewable energy as part of sustainable energy but does not specify an actual share.

The Asian Development Bank increased its clean energy and energy efficiency target from $1 billion to $2 billion by 2013 as a result of growing demand in member countries. A significant share of clean energy investments went to supporting projects in China, India and Vietnam for municipal energy infrastructure, dedicated power lines for renewable power, and hydropower development.

The World Bank Group, comprising the World Bank, IFC, and MIGA, reports a 62-percent increase in low-carbon commitments in FY2010 over FY2009. The group’s energy strategy is currently being reviewed in its Committee for Development Effectiveness (CODE).

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