The Role of Multilateral Development Banks in Closing the Climate and Energy Transition Finance Gap

The central tenet of the Bretton Woods Committee is that multilateral cooperation and coordination lead to better outcomes than noncooperation and competition. That principle applies not only to the global financial architecture—which includes the activities of the International Monetary Fund (IMF) and the World Bank—but also to newer realms: the emerging digital finance ecosystem and finance for climate action and the energy transition. For this reason, the Committee has established the Future of Finance Working Group and its two project teams—the Digital Finance Project Team and the Climate and Energy Transition Finance (CETF) Project Team—to tackle each of these issues. The CETF Project Team covers a broad scope of climate finance issues, ranging from the specific role of the multilateral development banks (MDBs) to the challenge of reforming and coordinating the wider international financial system to debt distress in low- and middle-income (LMI) countries. We are examining these questions in the context of the cumulative climate, health, energy, and inflation crises. Those crises have put enormous pressure on advanced and developing economies alike over the past three years and have led to growing calls for a fundamental rethinking of how the system for multilateral development finance works. The CETF team’s mission is to tackle the urgent question of how to close the current vast gap in financing climate action and the energy transition, encouraging mitigation, and boosting adaptation, particularly in LMI countries. It plans to publish briefs designed to explain the key issues, assess possible routes of action, and recommend practical solutions.It plans to publish briefs designed to explain the key issues, assess possible routes of action, and recommend practical solutions.