Development finance institutions (DFIs) play a key role in achieving the Paris Agreement’s goal of aligning financial flows with low-emission, climate-resilient development pathways. Many DFIs have committed to aligning their investments with the objectives of the Paris Agreement, but to date, efforts to align DFI investments have primarily focused on direct project financing. Most DFIs channel substantial portions of their finance through financial intermediaries. To be fully aligned with global climate goals, DFIs must also align these “indirect” investments.
This paper proposes a robust yet practical approach for development finance institutions to follow to align their investments through financial intermediaries with the goals of the Paris Agreement.
Strengthening sustainability policies and governance in strategically-important institutions—including the multilateral development banks—to promote financing for sustainable activities and discourage financing for unsustainable ones.