Concessional Climate Finance: Is the MDB Architecture Working?

Our paper evaluates the climate financial intermediary funds (FIFs) which are one of the largest sources of multilateral grant and concessional finance for climate, especially for middle-income countries. Donors have contributed more than $50 billion to these funds. The World Bank acts as a trustee for twelve climate FIFs. In this paper, we focus on the three largest: the Global Environment Facility (GEF), Climate Investment Funds (CIF), and Green Climate Fund (GCF).

Our findings reveal significant challenges at the systemic level and differing performance across FIFs. FIF funding is not allocated according to shared criteria measuring results and impact, nor are there consistent results and impact reporting standards. This makes it hard for donors to assess where best to put their scarce grant resources.

Based on our analysis, we recommend consolidating funds in order to increase efficiency and impact; deploying more concessional funds at the climate finance portfolio (vs. transaction) level to achieve greater scale and leverage; avoiding the creation of new climate funds that would further fragment this system; and allocating FIF finance according to a shared set of criteria that maximizes mitigation and adaptation impact and impact per dollar of FIF funding.

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