Standalone climate strategy and integration of climate in overarching strategy

Overarching strategy

Since July 2023, the ADB is committed to having aligned 100% of its new sovereign operations and 85% of non-sovereign operations with the goals of the Paris Agreement. The Bank is subsequently due to align 100% of non-sovereign operations by July 2025.[1] Notably, the ADB’s Strategy 2030 refers to the Paris Agreement as a plan to “keep global warming below 2 degrees”, suggesting that Paris alignment is considered primarily in terms of a maximum 2 °C scenario (rather than 1.5 °C).

Strategy 2030, published in July 2018, sets out seven operational priorities and their respective associated plans. These operational priorities are:

1. Addressing remaining poverty and reducing inequalities.
2. Accelerating progress in gender equality.
3. Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability.
4. Making cities more liveable.
5. Promoting rural development and food security.
6. Strengthening governance and institutional capacity.
7. Fostering regional cooperation and integration.

Climate change considerations are given dedicated coverage and are substantively integrated in the ADB’s overarching strategic approach through operational priority 3 (“Tackling Climate Change, Building Climate and Disaster Resilience, and Enhancing Environmental Sustainability”). The ADB has also published a dedicated operational plan for priority 3, outlining three strategic priorities: (1) increasing climate change mitigation; (2) building climate and disaster resilience; and (3) enhancing environmental sustainability. The plan set targets for achieving these priorities, which have since been superseded by those included in the CCAP 2023–2030. Nevertheless, these notably included:

• 75% of operations (as a proportion of total projects, as opposed to as a financial proportion of total disbursements) supporting climate change mitigation and/or adaptation by 2030 (exceeded across 2022-2024, at 91%)
• USD 80 billion in cumulative climate finance over 2019–2030 (updated in the Climate Change Action Plan (CCAP) to USD 100 billion – of which USD 34 billion is earmarked for adaptation).
• USD 6 billion in annual climate finance by 2020 (achieved in 2019, and updated by the CCAP).
• USD 2 billion in climate finance specifically to concessional assistance countries by 2020 (exceeded in 2020 with USD 2.91 billion, and dropped by the CCAP).

Notably, the Bank’s most recent Corporate Results Framework 2025–2030 sets out an additional climate finance target. Namely a commitment for 50% of overall ADB lending (sovereign and non-sovereign) to be climate finance by 2030. Compared with the 2023 baseline of 46%, this will require an increase of four percentage points over seven years.

The Strategy 2030 document also includes details on how different sectors and thematic issues contribute to operational priority 3, setting out interdepartmental cooperation mechanisms for the cross-cutting consideration of climate change within the ADB.[2]

The operational plan for priority area 3 (on climate change and environmental sustainability) also explicitly outlines how the ADB intends to align with the Paris Agreement. It states that: “ADB will start monitoring and reporting on ‘Paris-aligned’ and ‘non-aligned’ finance flows. This will be based on assessing if projects are consistent with the different countries’ low-emissions development pathways, and if they are compatible with the overall climate change mitigation objectives of the Paris Agreement”. To date, the ADB has not developed its own methodology for ensuring the alignment of its operations with the Paris Agreement in this way, relying instead on the Joint MDB Methodology.

Critically, the operational plan goes on to state that “non-aligned projects can still be financed, but in those cases developing member countries should be engaged on putting in place long-term strategies and accelerate the transition to low-emissions and climate-resilient development pathways”. The practice of allowing unaligned projects to be approved and only suggesting post hoc engagement with the country policy environment severely limits the extent to which the ADB’s Paris alignment commitment can be considered binding in practice.[3]

A best practice approach in this regard would be to commit to providing technical assistance and policy support to address any systemic and/or project-specific barriers to alignment during the project design phase. Such an approach has been implemented by the Inter-American Development Bank (IDB) as part of its Paris Alignment Implementation Approach to support alignment prior to approval.  

To track progress in achieving the goals of Strategy 2030, the ADB has developed the Development Effectiveness Review monitoring framework, on which it reports annually. In terms of climate-relevant metrics, the ADB monitors and reports on annual reduced GHG emissions, climate finance committed, additional climate finance mobilised, and the number of people that have benefitted from strengthened environmental sustainability and climate disaster resilience due to the ADB’s operations.[4] While annual reporting of these metrics promisingly indicates that the ADB is transparently assessing progress towards its priorities, no corresponding targets or thresholds (either interim or final) are publicly available to gauge the Bank’s progress – aside from a climate finance commitments interim target (USD 35 billion over 2019–2024). This is a missed opportunity for the Bank to strengthen the transparency and accountability of its climate ambition at the strategic level.

Following the development of Strategy 2030, in late 2022 the ADB adopted a new operating model, intended to ensure the Bank is fit for purpose to tackle contemporary challenges (including climate change). This involved four “shifts” on:

• solutions
• private sector development
• climate change
• ways of working.

Under the climate change shift, the ADB recognises the need to develop a more coordinated and integrated operational approach to climate action across the institution, deepen its internal technical expertise, and foster innovation that can accelerate climate impact.

Considering these needs (along with aspects from the three other areas requiring shifts in the Bank’s approach), the ADB made significant changes to its operating model, notably including establishing a new “Climate Change and Sustainable Development Department”, aiming to facilitate a more coherent approach to cross-cutting priorities. These actions are laudably proactive in recognising the need to update and improve the Bank’s governance structures in order to pursue a more effective approach to climate action.

Standalone climate strategy

The ADB Climate Change Operational Framework 2017–2030 (CCOF) intends to “broadly direct how to strengthen climate action and enhance resilience” in the ADB’s operations and interventions. Key objectives outlined in the framework include:

• Supporting the ADB’s commitment to provide USD 6 billion per year in climate financing by 2020, which the Bank had already achieved in 2019.
• Mainstreaming climate considerations into ADB strategies, policies, plans and projects, such as through incorporating climate risk assessments and adaptation priorities into country level planning and including climate-related indicators in project results frameworks.
• Strengthening partnerships and networks to develop knowledge and capacity on climate change.

The CCOF notably includes a results monitoring framework, designed to track progress achieved across the two phases of the framework’s implementation.[5] The results framework considers regional climate progress, the ADB’s own climate impact, and improvements in both the Bank’s operational climate management capacities and its organisational climate capacity (such as training in climate change and climate finance provided to staff).

The CCOF has since been superseded by the ADB’s Climate Change Action Plan (CCAP) 2023–2030, published ahead of COP28. With the CCAP, the ADB intends to position itself as “The Climate Bank of Asia and the Pacific”, as part of the Bank’s new operating model to implement Strategy 2030 and support transformational change in the region. Accordingly, the CCAP includes the headline commitment to provide USD 100 billion of direct funding to climate finance between 2019 and 2030, and to align the Bank’s operations with the Paris Agreement (according to the timeline outlined above). It also commits to ensuring 75% of the total number of operations support climate change mitigation and/or adaptation by 2020, as assessed using a 3-year rolling average.[6] Overall, the strategy also places a strong emphasis on supporting the transition to clean energy sources (reaffirming the ADB’s commitment to not finance any new coal-fired power plants or facilities in the process), improving energy efficiency, and assisting its member countries in meeting their climate commitments under the Paris agreement.

While the CCAP anchors this alignment pledge in the Joint MDB Alignment Approach to the Paris Agreement (which the ADB is a signatory of), it falls short of detailing the specific strategic, institutional and operational reforms that will facilitate this approach. In contrast, other signatories of the Joint MDB Alignment Approach (such as the Asian Infrastructure Investment Bank (AIIB) and the IDB) have since developed their own approaches and methodologies for institutional and operational Paris alignment.

Relying entirely on the Joint MDB Alignment Approach to facilitate the ADB’s own Paris alignment is not without pitfalls.[7] In particular, this approach utilises Nationally Determined Contributions (NDCs) and Long-Term Strategies (LTSs) as a benchmark for approving investments, regardless of their alignment with a 1.5 °C pathway. This can hamper effective evaluation of whether projects are fundamentally compatible with the core goal of the Paris Agreement to limit global warming to an upper limit of 2 °C. Moreover, the Joint MDB Approach does not set out specific provisions for applying the methodology to the context of the ADB’s operations.

As evidenced by the IDB’s Paris Alignment Implementation Approach (PAIA), developing a complementary institutional approach to Paris alignment can provide a beneficial additional layer of specificity and support more robust implementation. For example, the IDB’s PAIA makes repeated reference to the temperature goal of the Paris Agreement as part of gauging alignment (without departing from the first principle of considering client countries’ NDCs and LTSs).

A commitment to “do no harm” or “do no significant harm” does not explicitly feature in either the CCAP or Strategy 2030. Adopting such a principle at the strategic level can serve as a valuable minimum safeguard to ensure the ADB’s operations do not inadvertently create negative impacts on communities, the environment (including biodiversity and critical ecosystems), and the climate more broadly.

Recommendations: 

• The ADB should reconsider its position on permitting the financing of “non-aligned” projects to avoid undermining the credibility of the Bank’s full Paris alignment commitment. Rather than permitting non-aligned projects to be financed and suggesting post hoc engagement with local policy actors, the Bank should proactively support countries with ensuring the necessary policy framework is in place to enable the development of Paris aligned projects. This could draw on the logic of the “climate transition gaps” approach developed by the IDB. This requires identifying and overcoming the barriers to the deployment of climate-transition-compatible technologies in cases where they are not considered technically or financially feasible. Similarly, if non-aligned projects are presented to the ADB for approval, the Bank should identify the aspects hindering alignment and commit to tailoring its support to remedy these factors. This could include both project-specific support at the development phase, and wider engagement with policy actors in the host country.
• Establishing metrics for monitoring and reporting progress on the ADB’s Strategy 2030’s operational priorities is commendable. However, the value of these indicators could be strengthened by setting out corresponding time-bound, quantifiable targets to track progress. Doing so would provide a transparent accountability mechanism for the Bank to verify that it is delivering results in line with its stated priorities. This is particularly relevant for climate-related metrics considering the ADB’s vision for becoming the “Climate Bank of Asia and the Pacific”.
• The ADB should make its “Guidance Note on Implementing Operations’ Alignment with the Paris Agreement at ADB” available to the public. This would improve the transparency and credibility of how the Bank is implementing its Paris alignment commitment. Developing a tailored, individual methodology or guidance document for implementing Paris alignment reflects best practice among peer institutions. This can concretise the provisions of the Joint MDB Methodology and provide complementary guidance adapted to a specific institution’s operations, enabling heightened robustness and ambition.[8] Allowing external stakeholders to review the quality of this methodology can in turn help to ensure that best practices are replicated and can be disseminated, and any pitfalls are identified for improvement.
• To solidify its commitment to become the region’s climate bank, the ADB should explicitly integrate a minimum principle of “do no harm”, and ideally to “do good beyond do no harm”, in both its overarching and climate strategies. Adopting such a principle at the strategic level can serve as a valuable minimum safeguard to ensure the ADB’s operations do not inadvertently create negative impacts on communities, the environment (including biodiversity and critical ecosystems), and the climate more broadly.

[1] Discussions with the ADB have suggested that despite this phased deadline for 100% alignment, in practice the ADB has only funded projects (both sovereign and non-sovereign) assessed as aligned with the Paris Agreement since July 2023.

[2] See Appendix 1 and 2 of Operational Plan for Operational Priority 3.

[3] Noting information received directly from the ADB that in practice, the Bank has only funded projects assessed as aligned with the Paris Agreement since July 2023.

[4] Under the ADB’s Tracking Indicator Definitions, “additional climate finance” is calculated as the total volume of mitigation finance mobilised by Developing Member Countries (DMCs), excluding financing from the ADB’s own or externally managed resources, and including finance invested by other public and private entities alongside the ADB’s contribution.  

[5] Phase 1 of implementation between 2017-2023, phase 2 of implementation between 2024-2030. 

[6] As referenced in the previous section, this is now complemented by the new target of 50% of overall Bank financing for climate action by 2030 set out in the Corporate Results Framework 2025–2030.

[7] See Germanwatch’s Multilateral Development Banks’ Paris Alignment Methodologies for full analysis.

[8] Ibid.