2023 will be a critical period for implementing reforms to meet the scale and urgency of the climate crisis while also addressing the other crises facing developing countries – food and energy price inflation, debt sustainability, among others – as well as development priorities as targeted in the Sustainable Development Goals. International pressure and a leadership change at the World Bank have created an opportunity to dramatically increase the volume of finance that the international financial system can deploy. As shareholders look to reform the international financial architecture, it is important to consider not only where the additional capital will come from, but also how capital can be effectively spent for maximum climate and development impact.
This paper lays out key products and processes that need to be introduced, reformed, and/or scaled to effectively deploy existing and new volumes of climate finance. The paper focuses on the multilateral development banks (MDBs), notwithstanding the critical roles of other institutions such as the International Monetary Fund (IMF) and other public development banks (PDBs). It builds on seminal reports such as the “Songwe-Stern report” by zeroing in on the specific models that can be adopted and scaled with urgency.