Level of climate finance transparency

Transparency of climate finance data

Climate finance tracking at the AfDB was first formalised in 2013, with the development of the Bank’s own Climate Finance Tracking Methodology. This was accompanied by sector-specific guidance for the energy, transport, agriculture, and water sectors. Since this methodology was developed, the AfDB has contributed to the development of the Joint MDB methodology for tracking mitigation and adaptation finance (leading the work on the latter within the associated Joint MDB working group), which is now implemented.

The AfDB provides project level data in its submission to the OECD-DAC (Development Assistance Committee) climate-related development finance database. Moreover, the AfDB’s sovereign and non-sovereign portfolios were both  ranked second in the 2023 DFI Transparency Index (second only to the ADB in the sovereign index, and IFC in the non-sovereign index), reflecting leading levels of overall portfolio transparency relative to peer institutions. Specifically, its sovereign portfolio has consistently been rated as “very good” by the index since 2014. The AfDB has published International Aid Transparency Initiative (IATI) data for its sovereign portfolio since 2013 and continues to do so monthly. It has been publishing non-sovereign data consistently since late 2021. However, its non-sovereign IATI data lacks any disbursements, expenditure, and client description data.[1]

In view of this generally very positive assessment of the AfDB’s project- and portfolio level transparency measures, it is notable that the Bank does not release underlying machine-readable project level data to accompany its submission to the joint MDB report. Doing so would represent best practice, contributing to comparable information on MDB climate financing.

Transparency of financial intermediary lending

The AfDB has a comprehensive data portal which details every project financed by the Bank, including loans to financial intermediaries. The name of the intermediary, location, size of the loan, and a general description of operations and objectives are made available for such .

The AfDB’s guidance on financial intermediaries states that “subprojects must meet eligibility and development criteria agreed with the Bank” and that “the Bank will also agree appropriate arrangements to monitor subproject compliance with these criteria”. Accordingly, the AfDB, financial intermediary, and any subsidiary financial institutions must establish (ex-ante) both eligibility criteria and monitoring arrangements to cover any subprojects. As part of this, the AfDB will conduct a formal review to determine continued compliance with eligibility criteria “at least once each year during implementation”. There is also a requirement for the Bank, intermediary, and any subsidiary financial institutions to establish performance indicators which, alongside progress reports and reviews of samples of subprojects, will be used to monitor implementation progress throughout the project.

However, the overarching AfDB financial intermediary guidance does not make any stipulations for the disclosure of details of subprojects financed by intermediaries. Nor are any such details made available in the data portal. Insufficient disclosure obligations in this regard raise the risk of AfDB funds being used in Paris unaligned activities in cases where intermediaries are responsible for determining end use. Best practice would be to mandate financial intermediaries to disclose a breakdown of subprojects financed, including their location, sector(s), and a brief description of activities. Where commercial confidentiality represents a barrier to disclosure, this should be detailed.

TCFD reporting

There is no evidence that the AfDB currently undertakes any TCFD reporting. Going forward, disclosure should be in line with the International Sustainability Standard Board (ISSB) standards, as the TCFD has been absorbed into these. Of particular relevance for MDBs is alignment with ISSB’s IFRS S2 climate-related disclosure standard, both for the Bank’s own portfolio and for dissemination as a norm across its countries of operation. 

Notably, the AfDB signed a letter of intent with the International Financial Reporting Standards (IFRS) Foundation during the 2024 AfDB annual meetings. This established a partnership to develop knowledge and capacity among African financial institutions, regulators, and policymakers to support disclosure in line with the ISSB standards. This will be organised through the AfDB’s African Financial Alliance on Climate Change (AFAC). However, despite this promising partnership there has been no explicit confirmation that the AfDB itself will also undertake such disclosure, as has been announced by peer institutions.

Recommendations:

• The AfDB should release the project level data underlying its submission to the joint MDB report on climate finance. This should be in a machine-readable, ideally Excel, format.
• The AfDB should mandate financial intermediaries to disclose a breakdown of subprojects financed, including their location, sector(s), and a brief description of activities. This could involve making use of dedicated disclosure clauses in financial intermediary arrangements.
• Where commercial confidentiality represents a genuine barrier to granular disclosure (such as that recommended above), the justification for this should be detailed publicly. In such cases, the AfDB should also publicly disclose details of a thorough counterparty assessment to validate its decision to on-lend to a given entity and support that entity with strengthening its disclosure framework going forward. Where necessary, this would involve the AfDB providing technical assistance.
• In view of the AfDB’s excellent initiative to disseminate ISSB disclosure as a norm across its region of operation, the Bank should consider committing to undertaking ISSB IFRS S2 disclosure for its own portfolio. This could initially be tested for the non-sovereign portfolio, where transparency is currently slightly lower and where this reporting standard may be best suited.

[1] As a reference point, in the area of non-sovereign IATA data disclosure the International Finance Corporation (IFC) is a leader among MDBs, publishing all applicable indicators to the IATI Standard.