Mobilizing New Funds for Development and Climate Finance

The transition to clean energy fundamentally requires access to finance, as clean energy sources substitute capital for the use of fossil fuels. Private finance—cross border finance that is—is currently unavailable to much of the world economy at a price that enables long-term investments in either the green transition or the basic infrastructure needed for development.

Public resources in the advanced economies are limited and getting the needed political consensus to support the mobilization even of limited funds has been challenging. The multilateral development banks (MDB), as preferred creditors, have the technology needed to mobilize large sums of money for long-terms at low rates. But they are currently constrained by their existing capital base and the difficulties in increasing their leverage using their traditional funding models. There are options—hybrid capital, SDR bonds that mobilize the large, currently trapped pool of SDRs held in the reserve accounts of the major advanced economies—that realistically could enable the MDBs to expand their balance sheets on a scale that maps to the current challenge and doesn’t leave the multilateral banks financially outmatched in competition with Chinese policy lenders. The Project on Mobilizing New Funds for Development and Climate Finance will explore the challenges of mobilizing climate finance and make recommendations through blogs, op-eds, and convenings in a roundtable series on markets and imbalances.