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.
Islamic Development Bank
Integration of climate mitigation and resilience in key sectoral strategies
|Some progress||The IsDB has put in place some sector strategies that incorporate climate. The approach to adaptation in the energy sector should be highlighted as transformational best-practice.|
|Energy||Focus on renewables, but fossil investment not completely excluded.||The Adaptation Guidance Note for the energy sector can be considered transformational, due to its technical detail and the transparent decision trees for various energy technologies.|
|Transport||Focus on fuel efficiency and clean vehicle technologies. No specific transport energy efficiency standards.||Climate risk screening of all projects|
|Water & cities||Sector policies are currently reviewed by the board and will be published soon. This section will be updated.||Sector policies are currently reviewed by the board and will be published soon. This section will be updated.|
Internal alignment between IsDB’s objectives and sector strategies is crucial to ensure that project selection and implementation supports IsDB’s overall strategy. Since 2017, all IsDB sectors and cross-cutting divisions have been developing, revising or updating their policies. Each of the policies presented to the Board since 2018 has outlined climate change as a key dimension.
Moreover, sector strategies to be developed are expected to have specific sector-based objectives related to climate change. See below for sector-based commitments by IsDB as reflected in Board-approved strategies.
IsDB’s energy sector policy is closely aligned with its Climate Action Plan. It states that it will enable “wide partnerships to develop a strong knowledge base, promoting regional cooperation, especially in the areas of renewables and energy efficiency, and facilitating increased private sector involvement to achieve energy prosperity”. It will also enable member countries to realize “their NDCs submitted to the United Nations Framework Convention on Climate Change under the Paris Climate Accord”.
The Energy Sector Policy identified innovative financing for “energy efficiency, renewable energy and climate change as one of four enablers to stimulate the pillars of the policy”. The focus on energy efficiency, renewable energy and climate change will require a “major increase in concessional or soft financing, even in middle-income countries”. The Bank will identify opportunities for developing effective and innovative cooperation models with partner development institutions, through thematic programmes (e.g. for energy poverty, sustainability). This includes creating innovative financing and leveraging opportunities by creating climate financing architecture with external partners. This may include “resource-mobilization opportunities and mechanisms such as crowdfunding and mapping of climate funds and donors”.
IsDB intends to play a “catalytic role in promoting renewables, and solar energy in particular, as a part of its goal of sustainable energy development and as an alternative to fossil fuels”. (Please see the fossil fuels page for information in that area.) IsDB, however, has only phased out fossil fuel financing as part of its green finance lending. The energy sector strategy still states that “this policy will build on the recognized strengths of IsDB in energy practice, particularly in areas of conventional power generation – such as thermal and hydropower technologies and transmission and distribution networks – to consolidate the considerable scaling up of the IsDB portfolio seen in recent years.”
On adaptation, the IsDB has published a Energy Sector Climate Change Adaptation Guidance Note. The note has been developed together with the World Resources Institute. The document provides abundance of details on how to integrate climate risks into energy projects, ranging from which software to use to challenges when applying the climate risk screening. The climate-risk appraisal process for energy projects is outlined in five decision-making trees for the Climate Risk Management Process in general, and for thermal power, hydro power, solar and wind projects, as well as transmission lines. The application of the framework presents a best-practice example and, given the use of innovative software and decision-making steps, a transformational approach.
As noted in the IsDB Transport Sector Policy of December 2018, transport CO2 emissions from IsDB member countries are growing rapidly, driven by growth in transport demand. From 2010 to 2050, “emissions are projected to increase almost three fold, with total emissions reaching about 2.2 Gt in 2050”. As a result of climate change, countries face “new challenges to adapt their transport infrastructure to be resilient in changing climate conditions”. The IsDB countries encompass a wide range of climates, and the range of climate risks and vulnerabilities relevant for transport includes “extreme high temperatures, rising sea levels, increases in flooding and storms, and melting of permafrost”.
As a member of the Multilateral Development Bank Working Group on Sustainable Transport (WGST), IsDB is planning to step up its support for climate mitigation and adaptation in the transport sector. The Bank defined its target and action plan in the IsDB Transport Sector Policy. Priorities for mitigation in the transport sector include “urban public transport, railways, inland waterway transport, multimodal logistics, intelligent transport systems, fuel efficiency and clean vehicle technologies”.
The IsDB has confirmed that it uses a best-practice approach, but specific issue like fuel-efficiency can play a subordinated role, depending on the country context. However, the Bank follows the country-specific standards as a minimum and employs an Avoid-Shift-Improve approach.
For climate adaptation, IsDB will introduce “climate risk screening of all transport project proposals” to ensure that climate adaptation needs are addressed and incorporate climate resilient design where significant risks are identified. In addition, technical assistance will be provided to help member countries prepare “mass transit and low-carbon transport projects, sector-wide approaches to climate adaptation, and nationally determined contributions (NDCs) under the Paris Agreement”.
It should be noted that IsDB’s green and social lending, which is governed by its Sustainable Finance Framework, excludes the “construction, maintenance or expansion of roads”.
Water and Cities
Both Water and Urban (Cities) strategies have been finalised. Board will approve both documents by the end of 2020. Both have climate change pillars. Further information would be welcome on the approval process of the two strategies.
It should be noted that IsDB’s green and social lending, which is governed by its Sustainable Finance Framework, excludes “landfill construction or expansion”.
Annexe: Other sectors
Climate change is well integrated into the IsDB’s health policy. The Bank’s Health Policy received Board approval in late 2019. It is intended to guide “all health programmes and operations of IsDB, focusing on the need to attain universal health coverage within the context of delivery of primary healthcare”.
As its member countries have various levels of fragility, conflict and climate vulnerabilities, IsDB will target the “most vulnerable and poor population groups to deliver health services from a ‘rights perspective’, which honours the fundamental principles of equity and social justice”. IsDB will support schemes to finance the delivery of universal access to “affordable and quality primary healthcare, including ensuring health security in the face of global health threats including climate change”. As health has been identified as a priority sector in “54% of NDCs featuring adaptation”, the Bank will identify opportunities for addressing the priority actions identified in the Health Policy while at the same time ensuring that the “supported health systems are climate-proofed and that capacities are built at the institutional level to tackle health-related climate vulnerabilities in member countries or identify climate opportunities”. Relevant mechanisms, tools and funding channels already used or developed by the Bank that could harness adaptation and mitigation co-benefits in the health sector will be considered.
The IsDB Education Policy (approved December 2018) recognizes that education should be a more central and visible part of the international response to climate change. At the operational level, it is highly relevant to IsDB’s endeavour to strengthen the capacity of its member countries to provide quality climate change education – “encouraging innovative teaching approaches to integrate climate change education and raising awareness about climate change through media, networking and partnerships”.
Women in member countries also “rely heavily on environment-related livelihoods, leaving them especially vulnerable to the impacts of climate change, making them key resources to addressing climate change mitigation and adaptation in their communities”. At COP21, Parties recognized the importance of involving women and men equally in UNFCCC processes and in the development and implementation of national climate policies that are gender-responsive, by establishing a dedicated agenda item under the Convention addressing issues of gender and climate change, and by including overarching text in the Paris Agreement. The preamble calls for gender equality and women’s empowerment, and the sections of the agreement on adaptation and capacity-building efforts specifically call on countries to adopt gender-responsive approaches. This includes “the recognition that women commonly face higher risks and greater burdens from the impacts of climate change in situations of poverty, and the majority of the world’s poor are women. Women’s unequal participation in decision-making processes and labour markets compound inequalities and often prevent women from fully contributing to climate-related planning, policy-making and implementation”.
The IsDB Women’s Empowerment Policy recognizes that climate change is a macro issue that disproportionately impacts women and youth, and has incorporated climate change considerations into its approach to improving women’s empowerment in its efforts with member countries.
IsDB developed its own internal tool to monitor and assess the effectiveness of mainstreaming climate considerations in its operations at different stages. Use of the tool will be piloted in 2020 for further application across the whole project cycle (programming, appraisal, implementation, evaluation) in subsequent years.