Standalone climate strategy and integration of climate in overarching strategy

Explanation

Overarching strategy

The IsDB in Brief document incorporates climate change, mentioning both mitigation and adaptation.

IsDB has also published the 10-Year-Strategy in 2015. The strategy focuses on 5 strategic pillars, namely (i) inclusive Social Development; (ii) Private Sector Development; (iii) Islamic Finance Sector Development; (iv) Economic and Social Infrastructure; and (v) Cooperation between member countries. The incorporation of climate change and the Paris Agreement in the strategy is unclear. Deep integration of climate action seems unlikely, considering that the strategy is aligned to some SDGs, but does not include SDG 13 on climate action.

Standalone climate strategy

IsDB published its Climate Change Policy in 2019. The policy is structured around four pillars: 1) Mainstreaming climate action in the Bank’s operations, 2) Promoting climate change resilience, 3) Green growth and supporting the transition to a green economy and 4) Leveraging resources. The implementation of the Climate Change Policy is further detailed in the Climate Action Plan.

In January 2020, IsDB published its 2020-2025 Climate Action Plan. IsDB claims that the Climate Action Plan builds on and is aligned with its overall 10 Year Strategy. The Plan follows the Climate Change Policy’s pillar structure and has been developed in reference to the Paris alignment process. IsDB has linked the pillars explicitly to the building blocks of the Joint MDB Paris Alignment Framework.

In addition to this strategic positioning of IsDB for Paris Alignment, the following excerpt shows that the Bank thinks this issue beyond a simple ‘Just Paris alignment’ approach:

“IsDB recognizes that the MDBs’ Paris alignment is a dynamic process. Indeed, activities that are considered ‘aligned’ with the Paris Agreement today, as part of the transition towards a low-carbon development pathway, may well become ‘misaligned’ in a few years and thus IsDB will assess its performance on an ongoing basis in the context of overall warming levels, required ambition to support a low-carbon transition and IsDB member country development needs.” In this context, IsDB commits to: “(i) a commitment to ensure all its financing is consistent with low-carbon and resilient development, (ii) specific means to support the establishment of long-term low-carbon and resilient pathways, and (iii) corresponding practical operationalization modalities.”

However, the action plan misses concrete steps for implementation, as well as a timeline, including a specific date at which IsDB will be Paris aligned.

Furthermore, E3G understands that every project “task team” includes a member of the climate change team. This is a welcome step towards climate mainstreaming.

Specifically, climate change considerations have been incorporated and will be further integrated into:

• IsDB’s “functional areas” including risk management and strategy, Operations and Evaluations Department, country programming, global practices and regional hubs;
• IsDB’s project cycle, from upstream work with its members on country and sector strategies, through project-level investments and portfolio management, to post-project evaluations;

Special consideration will be given to climate risk management, throughout the project cycle, recognizing the need to assess climate risks to increase sustainability of both country investments and IsDB’s overall impacts.

IsDB will also undertake additional efforts to help accelerate mainstreaming, including:

(i) setting climate finance targets, and tracking progress against those targets;

(ii) establishing dedicated funding, mobilization vehicles and/or approaches that can be provided to clients to undertake climate-smart investments; and

(iii) adopting common metrics and standards for assessing climate impacts.