The Development Opportunity: Unlocking Multiple Benefits
Decarbonization is the Growth Opportunity of the 21ST Century. Technical solutions are now widely available, centered around generating zero-carbon electricity, replacing fossil fuels in all sectors, expanding, protecting, and restoring high-carbon ecosystems, and advancing sustainable economic practices.
Investing in Adaptation and Resilience Shows a Cost-Benefit Ratio of Four to Seven Dollars Per Dollar Invested. The IPCC estimates that annual adaptation costs in developing countries at USD 70 billion, and this figure is expected to reach USD 140-300 billion in 2030 and USD 280-500 billion in 2050. Latin America and Caribbean countries must urgently step up action to adapt to the new climate reality or face severe costs, damages, and losses.
Download the Sector Framework Document here.
Through its financing, the IDB Group supports the Latin America and the Caribbean (LAC) region in the promotion of low-carbon and climate-resilient development. Through policy support and technical assistance, it seeks to progressively raise climate ambition in the region. Aligning IDB Group financing to the goals of the Paris Agreement is part of this agenda, and thus, one of the pillars in our Climate Change Action Plan 2021-2025. As of January 1st 2023, we assess all our new operations seeking to ensure they do not obstruct the transition to low greenhouse gas and climate-resilient economies in line with the goals of the Paris Agreement. The “IDB Group Paris Alignment Implementation Approach” (PAIA) contains the methodology, set of principles, and technical guidance on energy, water and sanitation, transportation, agri-food systems, and operations with financial institutions, to carry out this assessment. This helps shape the technical design of operations and informs our dialogue with clients. The PAIA has been designed with embedded flexibility to acknowledge different national contexts, and is to be updated on the basis of evolving knowledge, feedback, and lessons learned by all Multilateral Development Banks (MDBs). This is part of the process that IDB Group shares with other development finance institutions, as we begin to apply the principles of the “Joint MDB Methodological Principles for Assessment of Paris Agreement Alignment of New operations” which are the basis for the PAIA and were developed by IDB Group in collaboration with other MDBs. The principles represent the outcome of work amongst the MDBs since the Paris Agreement was signed. MDBs committed to align their financial flows with the objectives of the Paris Agreement in 2017.
Download the Joint MDB Methodological Principles for Assessment of Paris Agreement Alignment of New operations for General Corporate Purpose Financing, Policy-based Lending Operations, Direct Investment Lending Operations, Intermediated financing, Alignment Universally and Not Aligned Lists.
We develop economic tools and financing schemes, which serve to pool international resources and estimate investment impacts. We work together with public and private financial institutions as well as with ministries of finance and planning to implement climate governance systems, develop innovative schemes and instruments to promote investment in emissions reductions projects and programs, as well increase resilience to the impacts of climate change.
Public and private financial institutions, such as national development banks and commercial banks, play a fundamental role in channeling finance toward investment in activities that reduce greenhouse gas emissions. The IDB is working with commercial financial institutions and national development banks in the region to reduce their environmental impact and to develop “green” financial products and services.
Funds also strengthen the IDB’s ability to help Latin America and the Caribbean mitigate and adapt to climate change by leveraging resources. Operations with partner funds give the IDB an additional tool to leverage resources from other sources, including national financial institutions, governments, and international funding sources.
These are the funds we currently work with:
At 12%, Latin America and the Caribbean are relatively minor contributors to global greenhouse gas (GHG) emissions. However, under current regional development trends emissions are expected to grow. On a per capita basis, Latin America and the Caribbean citizens contribute more to GHG emissions than other developing countries, including China and India. With growing demands for energy, industrialization and urban development, Latin America and the Caribbean countries must prepare to introduce clean energy alternatives to reduce GHG emissions. The region also has vast areas of forest land that are converted each year to agricultural and other uses, making land use change and reduction of emissions resulting from deforestation a top priority for the region. Which is why setting a strong base of effective policy and regulations that not only reduce emissions but also encourage new, climate friendly business models are key to the region’s sustainable development.
In order to be effective, the region’s development agenda must include further climate change variables into key national strategies involving infrastructure projects, basic services, fiscal reforms, social programs, and economic plans. We help countries design and implement disaster risk management plans focused on risk identification, prevention and mitigation, financial and risk management and institutional strengthening for preparedness.
Ministries of Finance and Planning are key players when working on promoting low carbon and resilient development path. These ministries are the ones responsible for establishing development plans, designing the budget, as well as defining whether how public investments are carried out. The success of new policy choices and their implementation rely heavily on budgetary allocations. Mainstreaming climate change into these processes becomes crucial for advancing the region into a more resilient and less carbon intensive path. The IDB is working with Ministries in the region to provide support capacity building for these ministries.
IDB engages in capacity building with the objective of facilitating access to information on low carbon emissions financing pathways. We facilitate the exchange of knowledge and provide technical assistance with the vision of building the capacity necessary for effective use of current and future international mechanisms for climate actions.
At the IDB, we are committed to providing the tools for citizens and governments to make informed and effective decisions. We are part of an active and thriving community of climate change and sustainability experts, renewable energy aficionados and policy conscious tree-huggers. As a result, we are constantly researching, lecturing, updating databases, launching new publications, offering courses and even writing blog posts and tweeting.
The Climate Change and Sustainability Division (CCS) is made up of 50+ passionate specialists working to raise awareness about not only the issue of climate change but also, and perhaps more importantly, the adaptation and mitigation possibilities in Latin America and the Caribbean. We push for synergies between sectors and businesses.
Click here to access all of the IDB Group’s publications on climate change and sustainability, or access a list of pre-selected publications.