Islamic Development Bank

Promotion of green finance

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 alignmentReasoning
Paris alignedThe Bank engages with an array of partners to help member countries to ‘green’ their financial systems


Green bonds

Sustainable Finance Framework

As part of this continued commitment to sustainability, IsDB has decided to create a Sustainable Finance Framework which is in accordance with the four components of Green Bond Principles 2018 , Social Bond Principles 2018, and Sustainability Bond Guidelines 2018, and under which IsDB can issue Green or Sustainability Sukuk (an Islamic financial certificate, similar to a bond in Western finance).

All operations are subject to SDGs and do no harm, however the green part of the Sustainable Finance Framework only applies to green financing. The Framework does however guide all the work of the institution. Exclusion criteria applies to green and social part of their financing.

IsDB has developed a Green Projects Framework, where each project has to confirm to or be assigned one of the following:

  • Project categories, which demonstrate relation to a SDG or SDGs
  • Relevant IsDB objectives
  • The Eligibility Criteria; and
  • Alignment with a UN SDG Target

Greening the system

As background, Green growth and supporting the transition to a green economy is Pillar 3 of IsDB’s 2020 Climate Action Plan.

IsDB will support member countries in their low-carbon, green economic transition by supporting policy-level efforts that can help create the right enabling environment for green investments. As a member of the NDC Partnership, the Bank will leverage funding, in addition to its own resources, to provide technical assistance from the Climate Action Enhancement Package (CAEP) to its MCs. This includes supporting MCs’ low-carbon NDC and/or sector strategies in ways that can catalyse investments (both public and private).

The Bank has also set up a crowdfunding platform called IsDB Innovate. On this platform, various groups such as non-profits and social entrepreneurs submit ideas to be crowdfunded to be approved by the Bank. Once approved, the projects are listed on the Bank’s site to attract local and international funders. When a project is fully funded, the Bank uses the funds to develop and invest in the project.  Projects that have been fully funded include job creation campaigns in Palestine and Cyclone Shelters for vulnerable communities in Bangladesh, amongst others. Currently, almost 30 projects are on the platform and accepting donations. This is an interesting and innovative platform for an MDB to pursue, and can potentially have large impacts for bottom-up climate adaptation and mitigation.

Recommendation:  The Bank should make clear how, if at all, they are working with financial insurers and regulators.

Case study: IsDB Climate Change Facility   IsDB will seek to establish a specific ‘Climate Change Facility’ for the purposes of mobilizing additional resources that can support its overall efforts to address climate change within its MCs, with the following key benefits for the Bank and its MCs:   Strategic mobilization and delivery of climate finance: Establishing and managing a dedicated Climate Change Facility (CCF) will enable IsDB to have a strategic approach for mobilizing climate finance and integrating the delivery of those funds. The CCF will be consistent with commonly agreed IsDB, donor and international climate objectives. Such a facility can help IsDB: (i) facilitate getting resources to MCs to meet their NDC commitments; (ii) establish funding mechanisms that specifically target climate resilience/adaptation measures and project components, sustainable infrastructure investments and investments within the sectors targeted; and (iii) provide funding for technical assistance and capacity-building (both investment-specific and policy-related).   Access to international sources of climate finance: IsDB’s CCF can be the conduit and organizational focal point for accessing international sources of climate financing. Having a focal point within IsDB’s CCF to engage and channel climate funds can help IsDB MCs gain access to these sources of funding.   Conduit for targeted bilateral and philanthropic funding: IsDB’s CCF can also be a platform for bilateral donors seeking to support IsDB’s Climate Change Policy and its MCs’ climate-related actions, including investment and technical assistance and capacity-building activities. It would be developed according to IsDB’s policies for off-balance-sheet resource mobilization and designed to complement the Bank’s existing support to its MCs. It may be used as a channel for external sources of climate finance managed by IsDB and may provide additional financing and targeted support to MCs for climate change action.

Last Update: November 2020

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