Rebalancing climate finance: Analysing multilateral development banks' allocation practices

Abstract

This paper provides novel evidence on the climate financing practices of Multilateral Development Banks (MDBs) and their long-term social and climate consequences. We find that the majority of MDB climate finance is for mitigation projects, concentrated in a few relatively wealthy countries, and positively correlates with countries' greenhouse gas emissions but not with their vulnerability to climate risks. A transition towards a more equal allocation between mitigation and adaptation can substantially reduce global climate vulnerability for an additional 1.9 billion people without significant changes in the annualized growth rate of emissions. Our results contribute to the discussion on global equity in climate finance allocation and the societal impact of climate change.