Reformed MDBS for a Just Energy Transition in Emerging Economies

Multilateral Development Banks (MDBs) are potentially an important source of finance for low-carbon transition pathways and just transition in the emerging economies. However, there is increasing concern among the developing countries that MDBs are unable to mobilise adequate finance to be in line with the global goals. The G20 injected a huge momentum towards reforming MDBs’ operations by commissioning an independent review of their Capital Adequacy Framework (CAF), which primarily defines their capacity to leverage shareholder’s capital contribution for financing. While various risk-sharing tools have been used by MDBs, the frequency of use of such tools, for example, ‘guarantees’, represent a minor share in their portfolio. This warrants the question of whether MDBs have the appetite to take up risk-sharing more aggressively and if that would require changing their existing business models and operation strategies. This Policy Brief seeks to address the challenge of MDB reform amidst the financing gap for just energy transition in emerging economies, and suggest policy recommendations for the G20 to push this agenda in India’s presidency.