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Germany, IDB Create $20 Million Fund to Strengthen Green Fiscal Policies

The new partnership will finance technical assistance projects and help finance ministries coordinate and exchange knowledge on planning, investments, and green finance

Glasgow – The government of Germany and the Inter-American Development Bank (IDB) launched today a $20 million (EU17.5 million) fund to strengthen green fiscal policies in Latin America and the Caribbean. 

The trust fund will finance country-specific technical assistance projects. It will also help create a regional knowledge-sharing platform for finance ministries to exchange best practices in the design and implementation of climate-related fiscal policies.

“A strong partnership between Latin America, the Caribbean, and Germany is important for us given the region’s great potential for innovative climate action and fundamental role for achieving our common goals of the Paris Agreement”, said Germany’s State Secretary at the Ministry for Environment, Nature Conservation, and Nuclear Safety Jochen Flasbarth. “I am delighted that my ministry joins forces with the IDB to increase transparency, effectiveness, and efficiency of climate-related fiscal policies in the region.”  

“Latin America and the Caribbean has a tremendous opportunity to accelerate its economic recovery with fiscal policies that build its resilience against extreme weather events and attract green investments”, said IDB President Mauricio Claver-Carone. “This partnership with the German government will allow us to help finance ministries foster a just transition towards greener economies and advance some of the key priorities of our Vision 2025 blueprint to boost recovery in our region.”

The announcement comes as climate change exerts increased pressure on fiscal balances and public debt in Latin America and the Caribbean. The region’s countries are looking to strengthen policies addressing climate change and meet ambitious greenhouse gas emission goals under the Paris Agreement. A recent IDB study on fiscal policy and climate change estimates that decarbonization policies could help create 15 million net new jobs in the region by 2030.

The fund is comprised of financial resources donated by the German government and managed by the IDB. It will support ministries of finance design national climate finance strategies and instruments, develop, and implement of fiscal policy instruments and methodologies to track and evaluate climate-related public resources and expenditures, promote partnerships and exchange knowledge on green fiscal policies, and build capacity on matters related to fiscal policies and climate change management. 

The fund will also support a dedicated platform for ministries of finance to foster continuous dialogue on planning, green budgeting, carbon taxation, low carbon and resilient investments, sustainable PPPs, and green finance. The platform will help exchange lessons learned regarding adaptation and mitigation fiscal strategies, among other climate challenges. 

Germany and the IDB

The IDB and Germany have a long-standing partnership on climate change. In 2015, both parties issued a joint statement committing them to assist the Bank’s member countries in the areas of renewable energy, energy efficiency, and climate change.

Germany was also a core participant to the IDB’s first climate initiative, the Sustainable Energy and Climate Change Initiative in 2007, and has provided contributions and technical support to IDB operation in areas such as green bonds, renewable energy and sustainable infrastructure, and water and sanitation. 

About the IDB

The Inter-American Development Bank is one of the main sources of long-term financing for economic, social, and institutional projects in Latin America and the Caribbean. In addition to loans, grants, and credit guarantees, the IDB conducts cutting-edge research projects to provide innovative and sustainable solutions to the most pressing problems in our region. Created in 1959 to help accelerate progress in its developing member countries, the IDB works every day to improve lives.