CEE is proud to announce that we have formally partnered with the Big Shift Global campaign. The Big Shift Global (BSG) is a multi-stakeholder, global campaign coordinated by organizations from the Global North and South. Together, we aim to make the people’s views on energy finance known to Multilateral Development Banks (MDBs), their Executive Directors, as well as the Heads of State and Finance Ministers of the members countries.
You can hear it straight from them here.
CEE got involved because we cannot adequately address the climate crisis while the world keeps bankrolling and burning fossil fuels. It’s like trying to patch a hole in a bucket that doesn’t have a bottom. You’re solving for the wrong problem. We want to solve for the right problems which means getting money away from fossil fuels and towards renewable energy projects that will bring clean, affordable energy the world round. There are a lot of banks and financial institutions that invest in fossil fuels and with this campaign we’re focusing on Multilateral Development Banks, which we get into below.
What’s a Multilateral Development Bank
Multilateral Development Banks (MDBs) are institutions composed by a group of countries that provide financing and professional advising for the purpose of development. Development here is a broad category. It can be anything from fossil fuel projects to infrastructure, financial development, or agricultural development. Really anything needed to make society function. MDBs finance projects in the form of long-term loans at market rates, very-long-term loans (also known as credits) below market rates, and through grants.
Twelve notable MDBs are:
The World Bank, European Investment Bank (EIB), Islamic Development Bank (IsDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), CAF – Development Bank of Latin America (CAF), Inter-American Development Bank Group (IDB, IADB), African Development Bank (AfDB), New Development Bank (NDB), Asian Infrastructure Investment Bank (AIIB), Arab Petroleum Investments Corporation (APICORP), and Eastern and Southern African Trade and Development Bank (TDB)
For reference, the USA is a member of five MDBs: the World Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, and the African Development Bank.
How do MDBs Work
Great question. MDBs are made up by lending countries (rich countries) and borrowing countries (not rich countries). While it’s far more complicated than this, basically the rich countries pool their money together in the MDBs and then decide which projects they want to fund in which countries. There’s a lot that goes into this process including applications and indicators for returns on the investment (ROIs) and loan repayment plans but at the end of the day, the MDBs essentially have the say in what countries and what projects are worthy of their investment.
For decades, the sure fire money makers have been and continue to be fossil fuel development projects. With Paris and climate change on people’s minds, many MDBs have shifted towards renewable, sustainable projects but not all of them, and even the ones who do still keep a toe in the fossil fuel pool.
You’re Telling Me that My Tax Dollars Fund Fossil Fuel Projects Around the World
Yes. As stated above, the United States is a member in five separate MDBs. Representatives from the United States Treasury – under the leadership of Steve Mnuchin – sit on the boards of MDBs to vote which projects go forward and which ones don’t. The number of votes each representative on the board gets is typically determined by the amount of money said country has in the bank. Predictably the United States and other major economies like China and Europe tend to be big lenders and have significant sway over what does and doesn’t get funded.
MDBs, 1.5 C, and Paris
A 1.5C global temperature increase is bad. However, 1.5C is much better than 2C, which is infinitely better than a 3C increase. If we eclipse 3C then pack your things and find the high ground.
To help meet the 1.5C target – ideally coming in under it – nine MDBs pledged to align their financial flows to the Paris Climate Agreement during the 2017 One Planet Summit. These nine bank heroes further announced at COP 25 that they will “design and implement long-term low GHG emissions and climate resilient strategies that grow in ambition over time.”
This is well and good but ambition doesn’t always match outcome. With President Trump in the White House and vehement climate denial from fossil fuel companies and conservative regimes across the planet – to say little of how entrenched global economies are in fossil fuels – the move towards financing renewable energy projects is slow and even saw a decline between 2017 and 2018.
So Are MDBs Good or Bad
Yes. MDBs have huge potential for creating better lives and living for developing countries. MDBs can also serve as the invisible hand that picks development projects that may not necessarily be in the interest of the borrowing country but has huge upside for the lending country. There’s lots of room for corruption and for special interests to put their own interests over those of the country being lent to.
But with positivity in mind, MDBs can and have acted as positive forces for good. They are increasingly shaping their investment strategies to the shifting needs of climate and energy finance. This includes innovative projects around wind and solar, which bring energy to previously energy starved areas.
This piece is essential for BSG. It’s not only about getting money out of fossil fuels but using the shift to renewables to improve currently impoverished regions. Unlike fossil fuel driven energy sources, wind and solar can be adapted to most any region to provide on the spot energy. Neither wind nor solar require the drills and wells and bulky housing units that fossil fuels do. Renewables can mark a just transition towards energy for all creating new jobs, now opportunities, and new for folks around the world.
Show up and speak up. We’ve learned through the divestment campaign that our voices do matter. The Big Shift Campaign is more than simply moving money away from fossil fuels. Its moving money from fossil fuels to renewable sustainable energy options that will bring energy to currently energy starved populations. This a project for human and planetary well being that moves us away from death towards life.
We know what doesn’t work. We know what is causing the planet to fall a part. We know who is responsible for it. We all know what does work and what can be done. Keeping on this current path is like someone with lung cancer investing in a lifetime’s supply of cigarettes. It just doesn’t make sense. Let’s speak the truth and do what makes sense. Let’s tell MDBs and our governments that we want to invest in life.
Let’s get our money into renewables.