On October 31, 2021, the Group of 20 (G20) made a historic announcement by committing to end finance for coal-fired power plants overseas.
The G20 pledge caps a year of major sustainable finance pledges from national governments and their development finance institutions (DFIs) since the inaugural 2020 Finance in Common Summit, where DFIs pledged to align their financing with the goals of the Paris Agreement. In that time, the landscape of development finance has shifted dramatically in favor of developing countries with green energy transition goals.
As a result, a new policy brief by the Boston University Global Development Policy Center finds that as of November 1 2021, every major DFI that lends internationally has committed to ramping up support for green energy, with 99 percent of internationally available development finance committed to reducing or ending coal finance support and increasing support for renewable energy.
The policy brief charts the commitments made across DFIs up to November 1, 2021, analyzing how they affect the scope of available development finance and outlining policy recommendations for borrowers and lenders alike.
- As of November 1, 2021, every major DFI that lends internationally has committed to ramping up support for green energy.
- Of internationally available development finance, 99 percent is now committed to reducing or ending coal finance support and increasing support for renewable energy.
- The momentum in green energy transitions has shifted to DFIs based in middle-income countries, as the Brazilian Development Bank, African and Asian Development Banks, and China and South Africa have made or participated in major recent announcements.
- As the China Development Bank and the Export-Import Bank of China combined are the largest international public financier of coal power generation, China’s announcement that it would no longer build coal power abroad has dramatically reduced the available international development finance for coal power.
- About one-fifth of available development finance is associated with DFIs that have active programs for assisting countries in reducing their reliance on coal power, including technical and financial assistance.
- About one-third of available development finance is associated with DFIs that have active programs to provide concessional financial or technical assistance for renewable and low-carbon energy development.
- The remaining DFIs without commitments to end coal finance include the Development Bank of Latin America (CAF), the Islamic Development Bank (IsDB) and the New Development Bank (NDB). However, major shareholders of these banks, including Brazil, China, India, Russia, Saudi Arabia and South Africa, joined the October 2021 G20 commitment, which may signal future reforms at these DFIs.
In this brief, while we restrict our attention to renewable energy and coal, understanding how DFIs continue to support oil and gas would provide a more comprehensive picture in understanding how these DFIs might achieve the Finance in Common pledge. In fact, more can be done to improve existing commitments, policies, and assistance related to coal and renewable energy