Developed countries hide behind MDBs to avoid their responsibility to pay up
The increased role for multilateral development banks (MDBs) in the new climate finance goal agreed at COP29 provides rich countries with an opportunity to dodge their responsibilities.
Contact: Sophie Richmond, Climate Action Network International - srichmond@climatenetwork.org
The COP29 climate finance outcome has laid out a much bigger role for MDBs in the delivery of climate finance. In line with agreements also made at the G20 in Brazil this month, the amplified role for MDBs, provides rich countries with an opportunity to evade their responsibility to provide grants-based public finance for Global South countries.
The outcome raises concern among many civil society organisations for the increased role given to the MDBs seemingly ignoring the option for climate finance to flow via more democratic institutions that are already part of the UN system. The MDBs are presented as a key part of the solution despite these institutions still funding the problems: fossil fuels and a record-breaking debt crisis.
At COP29, MDBs announced they estimate their climate finance will reach $120bn per year for low and middle income countries by 2030. However, to fund a just energy transition, rich countries’ governments must pay up in grants — not MDB loans — for climate action. The COP29 outcome mentions non-debt inducing finance but this doesn’t square with the 4% of MDB climate finance that was given as grants last year compared to 70% in loans.The MDBs’ overreliance on the private sector as the vehicle to fund climate solutions has delivered far less money than promised while often delivering great harm to communities.
Even more controversially, MDB climate finance is not fossil free - projects contributing to MDB climate finance to date include a greenfield gas power plant and a mega LNG project. Many of the most-needed elements of a just energy transition require grants or highly concessional finance that a strong, grant-based new climate finance goal can deliver, and that the MDBs are not currently set up for. This includes energy access, 100% renewable-ready grids, community-owned projects, fossil fuel worker and community support, housing retrofits, and electrified public transportation.
Reactions from civil society:
Sophie Richmond, Climate Action Network International ‘If COP29 aimed for an outcome on climate justice, enlarging the role of the MDBs was not it. Global North countries have been let off the hook in paying their fair share on fair terms for climate action by saying the MDBs can do most of the job. Developing countries will end up paying for this decision. The MDBs still fund fossil fuels, they can’t be climate bankers if they are still fossil bankers.’
Julie Rødje, Debt Justice Norway: With a global debt crisis, it is shocking that the MDBs' roles are increasing in the new finance goal. They are adding to the debt burden to countries facing the highest cost of climate change. Also, this gives more power to undemocratic institutions, instead of securing power within the UN and for countries and local communities. This goes against global climate justice.
Gerry Arances, Center for Education and Economic Development (Philippines): The NCQG was supposed to deliver justice. Instead, it’s too little, too late - a hollow promise sabotaged by those who refuse to pay their climate debt. It’s atrocious that MDBs, which drove developing economies across the globe to debt and fossil fuel dependence, are being hailed as instruments to advance climate finance. This isn’t diplomacy - it’s betrayal. The failure of wealthy countries to deliver funding commitments at COP29 are a direct attack on vulnerable countries. Developed nations must stop hiding behind MDBs, pay their climate debt, and phase out fossil fuels - anything less is a death sentence for the world’s most vulnerable.
Karabo Mokgonyana, Power Shift Africa: By expanding the role of multilateral development banks, developed nations are effectively outsourcing their climate responsibilities while deepening the debt crisis in Africa and across the Global South. MDBs, which remain heavily tied to fossil fuel financing and private sector interests, fail to provide the grants-based climate finance urgently needed for a just energy transition. Instead, they impose loans that burden vulnerable economies already reeling from climate impacts and economic injustice. True climate finance must prioritize reparative, non-debt-inducing mechanisms that empower communities, advance renewable energy, and ensure equitable development - not perpetuate cycles of dependency and exploitation.
Alison Doig, Recourse: The increased dependence on multilateral development banks to deliver climate finance, agreed at COP29, is a diversion that will enable private sector profit-making out of the climate crisis and allow developed countries to dodge accountability. Development banks are still promoting fossil fuels in climate-vulnerable countries, offering mostly debt-distressing loans, and cannot effectively deliver on adaptation or loss and damage, meaning that this outcome is set to take climate finance even further away from the people who need it the most.
Beyrra Triasdian, Trend Asia (Indonesia): The time has come for big polluters to pay for the climate crisis that they created, but at COP29 we saw rich countries and fossil fuel companies stalling and stripping back ambition in the new climate finance goal. It is worrying that COP29 put multilateral development banks at the helm of climate finance delivery, given their long history of funding damaging, polluting projects and their ongoing support for false, private-sector led solutions. It has never been clearer—we need an energy transformation, and we need it now. For climate-vulnerable people across Southeast Asia, climate justice is non-negotiable, yet we leave COP29 without what we’re owed: new, additional, grant-based, and public finance that would allow us to pursue a just and equitable energy transition.