The Asian Development Bank (ADB) plans to increase its climate-related lending by up to $7.2 billion, thanks to U.S. and Japan-backed sovereign guarantees for existing loans. This is the first-ever use of sovereign guarantees for climate finance.
ADB has set a long-term climate finance lending target of $100 billion between 2019 and 2030. In 2023, it lent $9.8 billion towards climate projects, Reuters news report said.
The U.S. will guarantee up to $1 billion of existing loans, while Japan will underwrite $600 million, freeing up ADB to lend more for climate-related initiatives without needing a general capital increase.
One early beneficiary of this scheme will be a project in Pakistan aimed at generating sustainable aviation fuel from cooking oil, with ADB providing around $45 million of the $90 million required.
The ADB has been working closely with other multilateral development banks (MDBs) like the World Bank and European Investment Bank, hoping that other countries will adopt similar approaches.
Developing countries are expected to need more than $2 trillion annually by 2030 to address climate change and transition to clean energy. Rich nations are seeking to leverage development banks and private investors for most of this financing, rather than relying solely on donations.
The report notes that the U.S. election victory of Donald Trump, who has promised to exit the Paris Agreement, casts a shadow over COP29 talks, adding pressure on Europe and China to take the lead in addressing climate finance.