Multilateral development banks claim to have handed out a record $125 billion in “climate finance” in 2023. However, a recent report finds that some of the funds went to “problematic projects.”
“The development banks’ climate finance figures should be read with great caution,” Petra Kjell Wright, campaigns manager at Recourse, a Netherlands-based nonprofit that published the report, said in a statement. “We found financing for projects involving fossil fuels, human rights violations, and environmental destruction.”
The Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB), for example, classified more than 91% of their funding to the Greater Malé waste-to-energy project in the Maldives — which burns trash to produce energy — as “climate finance,” despite criticisms over its impacts on local communities and emissions of hazardous fumes and greenhouse gases, the report found.
Similarly, the World Bank, AIIB and ADB classified most of their funding to Nepal’s Upper Trishuli-1 hydropower project as climate finance, although the dam’s development “has marginalised and adversely affected Indigenous peoples in several critical ways,” the report noted.
The ADB also counts 100% of its investment into a project in Mongolia aiming to mine minerals for renewable energy as “climate finance.” Yet more than 60 civil society groups have raised health, economic, pollution and land-grabbing concerns about the project, in addition to Indigenous rights violations.
One problem with “climate finance,” the report noted, is that there’s no universally accepted definition for it. “[This] means that what counts as climate finance can include activities that in fact contribute to GHG emissions as well as undermining human, gender, environmental, health, land and Indigenous rights,” the report said.
Another issue, the report added, is that 70% of the climate financing in 2023 was in the form of loans. Moreover, instead of prioritizing climate-vulnerable areas, 44% of the 2023 climate financing went to European countries, while only 21% went to Asia Pacific and 14% to sub-Saharan Africa.
Nick Dearden, director of U.K. charity Global Justice Now, not involved in the report, told Mongabay by email that some of the projects reviewed “look like they are aimed more at enriching big business rather than building the just transition we need.”
“Those countries least responsible for the climate crisis are being made to pay, through high levels of debt, to deal with problems they haven’t created,” he said, adding that loans will make it harder for developing countries to pursue a clean energy transition.
The report’s authors say multilateral development banks’ climate financing should exclude projects involving fossil fuel and those that offer “false solutions” such as waste-to-energy incineration and carbon capture, and use caution when financing transition mineral mining.
Continued investment into problematic big business projects “will fundamentally turn people against a green transition which should be making their [lives] better but is actually exacerbating inequality,” Dearden said.
Banner image of AIIB headquarters by N509FZ via Wikimedia Commons (CC BY-SA 4.0).
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