IsDB: Overview

Founded:
1975
Mission:
"Promoting social and economic development in member countries and Muslim communities worldwide, delivering impact at scale."
Total assets:
$780 million
Headquarters:
Jeddah, Saudi Arabia
Top five shareholders:
Saudi Arabia, Algeria, Iran, Egypt and Turkey
Summary of Paris alignment assessment:
The Islamic Development Bank (IsDB) has been recognised to have 'some progress' across several metrics. There are, however, are a number of metrics that E3G could not assess. This is because the IsDB is yet to formally report or publish information on them. The list includes, but not limited to, level of transparency, nature based solutions and internal carbon pricing. Where the Bank is performing well is its technical assistance to its member countries in implementing the Paris Agreement. Conversely, two key areas to prioritise would be: setting energy efficiency standards and carrying out GHG accounting at project and portfolio level.

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.

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MetricSummary
Promotion of green financeParis aligned – The IsDB engages with an array of partners to help member countries ‘green’ their financial systems.
Fossil to non-fossil energy finance ratio and scaling up climate financeNot applicable – no information available for this metric.
Nature based solutionsUnaligned – Commitment to no deforestation for green finance lending but no evidence of commitments in areas of nature based solutions.
Climate risk, resilience, and adaptationSome progress – Evidence of good project-level climate risk screening. Further work needed at portfolio level and enhancing client climate resilience. More progress also needed on adaptation finance.  
Overarching climate strategy

Some progress – The strategic framework of IsDB for climate change is comprehensive and details how IsDB intends to align with the Paris Agreement. IsDB clearly links its climate change strategies to the overarching strategy. However, the strategy misses a clear timeline for Paris alignment.  

Integration of climate mitigation and resilience in key sectoral strategiesSome progress – The IsDB has put in place multiple sector strategies that incorporate climate effectively. The approach to adaptation in the energy sector should be highlighted as transformational best-practice. 
Institutional leadershipParis alignedThe IsDB has shown itself to be a leader in Islamic green finance and incorporating climate and sustainability into their approach to the Islamic finance industry. 
Energy access and fuel povertyNot available – It is unclear whether a bank-specific goal has been set and whether progress monitoring is taking place. 
Energy efficiency strategy, standards and investmentUnaligned – IsDB energy policy mentions efficiency but further information on exact standards applied needed. 
Fossil fuel exclusion policiesUnaligned – No policies to restrict financing of fossil fuels at IsDB, although significant exclusions are applied to IsDB “green” finance under the Sustainable Finance Framework, which is a first step. 
Greenhouse gas accounting and reductionUnaligned – No GHG accounting at project or portfolio level.
Shadow carbon pricingNot available – no information available on carbon pricing at IsDB.
Country level workParis aligned – The Bank integrates climate change in a number of country strategy documents, and supports members in NDC “improvement” and implementation.  
Technical assistance for implementing Paris goalsParis aligned – Partnerships within the IsDB and with partners in place to provide NDC and non-NDC climate related technical assistance. 
Transparency of climate finance dataUnaligned – There appears to be very little transparency of IsDB operations, although the bank has just started contributing to the Joint MDB Report on Climate Finance. 

Recommendations

  • The Islamic Development Bank (IsDB) should commit to specific energy efficiency standards for transport, buildings and financial intermediary projects. 
  • The Bank should consider setting a bank-specific energy access target and develop a method of monitoring progress against this. 
  • Explicitly provide information on the GHG accounting and reporting at project level for the sectors covered by IsDB policy.  
  • IsDB should move beyond the project-level climate risk analysis should put in place a dedicated system-level resilience strategy.  
  • The Bank should include NDC ambition into its “Reverse Linkage” philosophy of Technical Corporation Programme Framework to help member countries reach their “fair share” contributions.

Leadership area

The Islamic Development Bank is a leader with regards to integrating sustainability into the Islamic financial system. The Bank’s first Green Sukuk, valued at EUR 1 billion in 5-year Trust Certificates, is proof of their efforts to bring sustainability into the financial system of its member countries in a way that is respectful of their needs. The IsDB should use its knowledge of Islamic financial systems to guide peer MDBs and encourage their activity in this sphere, where relevant. 

Last updated: November 2020.

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