World Bank approves $5 billion climate funds
London, 3 July: The board of the World Bank has approved the creation of two funds to help developing countries reduce greenhouse gas emissions and adapt to the consequences of climate change – and has received commitments of some $5 billion.

The two Climate Investment Funds (CIFs) are designed to provide “scaled-up funding” to developing countries, via a mix of grants, concessional loans and risk mitigation instruments.

The US has committed $2 billion over three years, while the UK and Japanese governments have pledged around $1 billion each. Other donors have committed to another $1 billion, but have not yet gone public, according to a World Bank spokeswoman.

The bulk of the money – $4.5 billion – will be allocated to the Clean Technology Fund, to provide new, large-scale financial resources to invest in projects and programmes in developing countries which lead to the uptake of low-carbon technologies, and have “significant potential for long-term greenhouse gas savings”.

The remainder will go to the Strategic Climate Fund, which will provide grants to help least-developed countries adapt to the effects of climate change. It is hoped that both funds will grow, the spokeswoman said.

The funds have been under discussion since late last year, and faced developing country criticism over their governance. However, the Bank has committed to equal representation from developing and developed countries in their governing bodies.

The mix of grant financing and concessional loans has also been controversial, with some NGOs and governments concerned that developing countries should not have to increase their borrowing to respond to climate change.

The spokeswoman said that there are “no predefined criteria” as to whether financing would be available as grants or loans, but suggested that projects involving the private sector would be more likely to receive loans, while assistance to least developed countries to adapt to rising sea-levels, for example, would most likely be in the form of grants.

The Bank hopes to approve the first projects under the funds by the end of this year, after a first “partnership forum” for the funds is held in September.

“These Climate Investment Funds are part of the World Bank Group’s expanded response to the challenge of climate change”, said World Bank Group president Robert Zoellick. “They are a key element in our six-point programme, specifically to provide innovative and concessional financing to facilitate both public and private sector investments in low-carbon and adaptation projects.”

“We think the CIFs will have a significant impact in generating even more financing for climate action, but also in demonstrating new approaches to address the current and future effects of climate change. These approaches will range from agriculture to water management, from transport to urban development and from biodiversity to energy access,” he said.