September 2019: The emergence and rise of new multilateral development banks is increasingly shaping how large infrastructure projects are financed. New evidence calls for collaborative guidelines and standardised lending approaches to promote the design of climate resilient infrastructure projects.
Information
Multilateral development banks (MDBs) increasingly focus on global infrastructure investments, hence steering the social and ecological impact such projects can have. Infrastructure was identified by the G20 as a central aspect of the SDGs and as a potential engine for renewable growth by means of connecting people, services, and markets. Consequently, banks such as the Asian Infrastructure Investment Bank (AIIB) have crossed the 100-member threshold, thereby gaining increased influence over infrastructure investments and their members currently account for 78% of the global population and 63% of global GDP.
Implications & Opportunities
Increasing influence of MDBs in the US, Europe, or Asia over infrastructure projects potentially increases the risk of undermining climate action and locking regions into carbon-intensive development pathways; thus, requiring close monitoring and encouragement to follow international sustainability standards. Despite the increased risk, these banks may also have the potential to align large infrastructure projects with the SGDs and the Paris Climate Agreement, ensuring climate resilience and zero-carbon pathways when designing new projects. This requires MDBs to collaboratively create guidelines for sustainable infrastructure and mainstream their approaches to infrastructure lending.
Limitations
There are currently no legally binding mechanisms to align lending approaches of MDBs, requiring each bank to operate under different legal and cultural contexts which may limit the applicability of system-wide mechanisms.
Sources
Wang, H. (2019). The New Development Bank and the Asian Infrastructure Investment Bank: China’s Ambiguous Approach to Global Financial Governance. Development and Change, 50(1), 221–244. doi:10.1111/dech.12473
BrettonWoods Project. (2019). Low-carbon infrastructure, sustainable finance, and people-focused development. Retrieved from https://www.brettonwoodsproject.org/2019/07/low-carbon-infrastructure-sustainable-finance-and-people-focused-development/
