President of the Asian Infrastructure Investment Bank (AIIB) Jin Liqun on Wednesday urged multilateral development banks (MDBs) to "strengthen their ability to operate holistically as a coordinated system" on climate finance.
"If humanity's moonshot to net-zero is to be successful, then coordination and collaboration in climate finance are mission critical," Jin said in the opening keynote at an event themed "MDB Responses in the Polycrisis Era," held by the Rockefeller Foundation.
Noting that firm and effective action must be taken to drive the transition full throttle towards net-zero, Jin put forward three proposals to strengthen the multilateral system in his speech.
The first is to create "an institutionalized forum" for international financial institutions to discuss progress and actions on climate finance, he said.
MDBs holding a "joint annual meeting every two years" in place of their individual annual meeting comes second, said Jin, adding that "we could target 2025, the year that global emissions must peak to meet our 1.5 degree Celsius warming pathway, as the year that MDBs come together to deepen their coordination on climate action."
The third idea is to create "a marketplace" for climate projects, he said. "This would be a platform that matches financing for technical assistance and projects. The AIIB is already working on this and we welcome engagement with other partners."
By citing research from the Climate Policy Initiative, Jin also said that the current work needs to be further improved. "If humanity's effort to limit global warming to within 1.5 degrees is to be successful, climate financing must grow to 4.5 to 5 trillion U.S. dollars annually by 2030, up from 653 billion dollars in 2020," Jin said.
According to the Intergovernmental Panel on Climate Change, "while sufficient capital and liquidity exist globally to meet this task, current financial flows are 3 to 6 times lower than what is needed, particularly for developing economies," he said.
In 2021, climate finance from major MDBs totaled 82 billion dollars, of which over 60 percent went to low- and middle-income economies. However, humanity's colossal climate financing needs far exceed the fiscal capacity of governments and the balance sheets of MDBs.
Jin said the AIIB has set a "very ambitious target" of reaching an at least 50 percent climate finance share by 2025, cumulating to about 50 billion dollars by the end of this decade. In 2022, it delivered a record 2.4 billion dollars in climate finance, or 56 percent of its total financing, reaching its climate finance goal three years earlier.
Underlining the importance of the private sector, he said that "by 2030, our aim is that 50 percent of all our financing will be directed toward the private sector. We are investing in opportunities with the potential to leverage even greater amounts of private capital toward green infrastructure investment."
Meanwhile, the AIIB took the G20 Capital Adequacy Framework (CAF) report's recommendations "very seriously," Jin said, adding that "we have been actively engaging our Board on the implications of the CAF review recommendations and our progress in implementing them."
Jin concluded by saying that the AIIB stands ready to work with relevant parties to ensure that the actions taken today meet the challenges of the future.
"While we may indeed be living in the era of the polycrisis, we must remember that the future is not as uncertain as the present. The path ahead is clear. The climate financing obstacles ahead are tough, but they are not insurmountable. Reform of the multilateral system and the international financial system should be welcomed, and it must be ongoing," said Jin.