IF-CAP can be a key financing vehicle that boosts ADB’s ability to financially support Asia’s developing economies in addressing the climate challenge
Public and private investment in climate change adaption and mitigation in Asia is growing, but not fast enough to respond to the enormity of the challenge.The Manila-based Multilateral Development Bank (MDB) plans for IF-CAP to reach an overall size of US$3 billion. IF-CAP will pilot a guarantee mechanism, where every US$1 guarantee from financing partners can generate up to US$5 in new loans for climate adaptation and mitigation projects across Asia. Through such leverage, ADB could ultimately generate up to US$15 billion in funding for climate action. To put that figure in perspective, ADB’s total financial commitments from its own resources for all operations totalled US$20.5 billion in 2022. IF-CAP substantially boosts ADB’s ability to financially support Asia’s developing economies in addressing the climate challenge. The creation of the facility also means that ADB is among the first international financial institutions to respond to the recommendation of the G20 expert panel on MDB investing capacity to expand the use of financial innovations.
ADB will establish donor trust funds, framework arrangements, and other forms of financing partnerships, such as grants, guarantees, and similar arrangements that support IF-CAP’s objectives and scope.In addition, ADB will establish donor trust funds, framework arrangements, and other forms of financing partnerships, such as grants, guarantees, and similar arrangements that support IF-CAP’s objectives and scope. IF-CAP will receive and administer contributions by public and private sources to each trust fund, and other financing partnership arrangements (including guarantees) established or entered into under IF-CAP. Most contributions to the facility will be in the form of guarantees or grants. The governments that have committed to (or are thinking about) making contributions to IF-CAP can probably be gleaned from the list of speakers at IF-CAP’s official launch. That event will take place in the Republic of Korea on 6 May 2023. Officials from Denmark, Japan, the Republic of Korea, Sweden, the United Kingdom, and the United States are scheduled to join the launch.
IF-CAP support can be combined with other ADB resources and forms of bilateral or multilateral assistance and made available to central and sub-national governments, government agencies, the private sector, and other entities eligible to receive assistance from ADB.IF-CAP’s structure also includes a committee of financial contributors (Donor Committee), which will take decisions on matters including specific guarantee and grant fund considerations, IF-CAP structure, and governance. The Donor Committee will set the general framework for operating IF-CAP but will not get involved in areas of implementation, such as the selection or processing of individual projects. It will take the guidance of the Strategic Partners Forum into consideration in carrying out its responsibilities. ADB will chair the Donor Committee together with a co-chair from one of IF-CAP’s financing partners. The remaining financing partners will be Donor Committee members or observers. Upon completion of IF-CAP’s 5-year investment period, the Donor Committee will decide on whether to continue or wind up IF-CAP investments. Notwithstanding the Donor Committee’s decision, guarantees issued by financing partners bilaterally or through the IF-CAP Guarantee Trust Fund will remain effective until the completion of the stipulated 25-year term, unless otherwise agreed. IF-CAP is expected to be one of the key financing vehicles with which ADB can meet, and possibly exceed, its previously declared ambition to achieve US$100 billion in cumulative climate financing between 2019–2030. It could also inspire and inform the creation of similar climate finance facilities at other international finance institutions.
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Bart des a former Director in the Asian Development Bank's Sustainable Development and Climate Change Department is now a Distinguished Fellow at the Asia Pacific ...Read More +