This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs.
| Paris alignment | Reasoning |
|---|---|
| Some progress | The IsDB’s Energy Sector Policy designates energy efficiency as one of four core policy pillars, recognising the need to manage energy intensity and maintain the rate of energy consumption growth at levels compatible with sustainable development through targeted energy efficiency improvements. While an energy efficiency first principle has not been adopted, energy efficiency has been clearly integrated in the Bank’s strategies across key sectors (e.g. energy, transport, and urban development). There remains scope for strengthening the IsDB’s approach, such as through explicit adoption of the Avoid-Shift-Improve framework, establishing clear minimum energy efficiency standards to be applied across all building interventions, and ensuring that activities financed through financial intermediaries maintain a clear set of minimum standards consistent across sectors. |
| Overarching energy efficiency first strategy/principle |
| The IsDB’s Energy Sector Policy designates energy efficiency as one of four core policy pillars, committing to assisting member countries with moving energy sectors along a less energy-intensive path through targeted energy efficiency improvements. However, there is no indication that an energy efficiency first principle is implemented. |
| Transport energy efficiency | Building energy efficiency | Financial intermediary energy efficiency |
|---|---|---|
| “Efficient transport systems” are a priority area of the IsDB’s Transport Sector Policy. The Avoid-Shift-Improve framework does not feature in the policy, although support for investments targeting the particularly relevant “shift” and “improve” aspects is implied. | The IsDB’s Urban Sector Operational Strategy includes some provisions for supporting building energy efficiency improvements, while the Bank’s internal Paris alignment guidance explicitly refer to green building certification in certain contexts. However, specific minimum standards and criteria are not set out, nor is it clear if these are required across all interventions. | There is little indication regarding the Bank requiring financial intermediaries to apply any specific energy efficiency standards across key sectors. |
Energy efficiency financing
The IsDB’s Energy Sector Policy (ESP) designates energy efficiency as one of four core policy pillars. According to the energy sector webpage, energy efficiency represents about 25% of the IsDB’s energy lending portfolio (although it is unclear what time period this figure covers).
The Bank’s ESP recognises the need to maintain the rate of energy consumption growth at levels compatible with sustainable development and commits to assisting member countries (MCs) moving energy sectors along a less energy-intensive path through targeted energy efficiency improvements. In doing so, the Bank will support MCs to:
- Evaluate best practices in energy management tailored to MCs’ unique characteristics.
- Adapting policy frameworks and planning and management procedures for the adoption of new energy technologies.
Innovative financing and building partnerships are identified as key enablers for delivering this support. However, the IsDB does not go as far as adopting an “energy efficiency first” principle to ensure that energy efficiency solutions are considered as the first option in policy, planning and investment decisions (even if they are in turn not deemed the most practical option or financially and/or technically feasible).
The terms of reference for the IsDB’s forthcoming Green and Sustainability Strategy (2026-2030) include specific references to energy efficiency, suggesting this will continue to be a priority area for support going forward.[1]
Transport
“Efficient transport systems” is one of five core policy pillars in the IsDB’s Transport Sector Policy. In this vein, the Bank outlines support for investments targeting improved efficiency and competitiveness of high-volume transport systems to support resource optimisation.
Although the sector policy makes no reference to the best practice “Avoid-Shift-Improve” framework, it does outline support for operations in line with the “shift” and “improve” aspects of this approach in practice. For example, the IsDB commits to supporting MCs with the introduction of energy-efficient and clean-vehicle technologies, including electric and hydrogen vehicles, energy-efficient locomotives, and intelligent transport systems.
Buildings
Considering that some of the most energy-intensive economies globally are among the IsDB’s MCs, and that in Gulf Cooperation Council countries buildings can account for two-thirds of total energy consumption, building energy efficiency is a highly relevant topic for the Bank. The IsDB’s Urban Sector Operational Strategy makes some references to energy efficiency in the context of buildings. Supporting the upgrading and retrofitting of municipal infrastructure, including buildings, with energy efficiency (and renewable energy and disaster resilience) requirements is an implementation action under the “disaster, climate & environmental resilience” policy pillar. Concrete actions include for instance, supporting the uptake of tools such as TRACE (Tool for Rapid Assessment of City Energy) to help cities gauge energy consumption across areas, including municipal buildings, and in the use of innovative sustainable building technologies.
Beyond this, there is also practical evidence of the IsDB raising awareness on building energy efficiency, such as the Bank organising a webinar in 2020 alongside the United Nations Economic and Social Commission for Western Asia (ESCWA) on financing the upscaling of buildings energy efficiency programs in the Arab region.
The IsDB does not appear to explicitly have adopted or recommended any specific minimum energy efficiency standards for buildings across all sectoral interventions, either as part of its urban sector policy and/or operational strategy, or its Environmental and Social Safeguards Policy. The Bank’s Paris alignment guidance specifies that buildings meeting the green building certification criteria established by a given MDB are considered universally aligned.[2] Moreover, reference is made to education and health facilities needing to be aligned with relevant green building standards as part of BB1 screening. However, the guidance notes do not specify which criteria are established in the IsDB’s case, or which green building standards are applied as part of BB1 screening.
This falls short of best practice examples among peer institutions. For example, as part of its Paris alignment note for the building sector, the IDB Group anchors its minimum accepted standards in the national certification systems recognised by the World Green Building Council, as well as international efficiency standards such as EDGE and Energy Star.
Financial intermediaries
With the IsDB’s commitment for operations to be Paris aligned (and the accompanying guidance) applying to sovereign direct financing, there is little indication (such as in the Bank’s Environmental and Social Safeguards Policy) regarding the Bank requiring financial intermediaries to apply any specific energy efficiency standards across key sectors. This represents a significant potential gap in the context of ensuring all IsDB funds are used in activities that are aligned with the Bank’s overarching climate goals, including across indirect financing.
Recommendations:
- To operationalise the strategic recognition of energy efficiency as a critical area in the IsDB’s Energy Sector Policy, the Bank should implement an energy efficiency first principle across sectoral interventions. This would enable the systematic consideration of energy efficiency solutions as the first option in policy, planning and investment decisions (even if they are in turn not deemed the most practical option or financially and/or technically feasible).
- To operationalise the strategic recognition of efficient transport systems as a critical area in the IsDB’s Transport Sector Policy, the Bank should consider integrating the Avoid-Shift-Improve framework to guide sectoral interventions. In particular, this would provide a clear strategic framing for energy efficiency investments under the “improve” aspect of the framework.
- This could be complemented by adopting minimum standards for transport investments to be labelled as energy efficiency. Peer institutions have implemented approaches which could be adapted to the IsDB’s operations. For example, the EBRD dictates projects must achieve at least 15% GHG savings compared with the baseline ‘no project’ scenario and also sets minimum emissions performance (<50 g/km CO2e) for light-duty vehicles, heavy-duty vehicles and rail.
- To strengthen its consideration of energy efficiency in building interventions, in public documentation the IsDB should:
- Specify which green building certification criteria it uses to deem whether buildings are considered universally aligned.
- Specify the green building standards used to screen education and health facilities as part of BB1 screening.
- Clarify which standards or certification criteria apply across the remainder of building sector operations not covered by either of the above.
- On the basis of establishing minimum energy efficiency standards across key sectors (as detailed above), the IsDB should consider explicitly specifying (as part of its Environmental and Social Safeguards Policy) that activities financed through financial intermediaries are required to uphold the same minimum energy efficiency standards as sovereign direct investments.
[1] Information received directly from the IsDB.
[2] Information received directly from the IsDB.
Last Update: July 2025