Beyond the targets: What levers can MDBs pull to scale finance?

Multilateral Development Banks’ (MDBs) climate finance is well on course to meet 2030 targets, yet those targets sit far below what independent economists judge necessary. Of the supply-side levers, new capital and higher climate shares are currently politically fraught, whereas balance sheet optimisation and private capital mobilisation are ripe for action and should be pursued at scale.

The World Bank’s decision to retire its 45% climate finance target while extending its Climate Change Action Plan signals intensifying shareholder pressure on MDB climate commitments, and other MDBs are likely to face similar scrutiny in the coming months. Ahead of COP31, the 2026 IMF/World Bank Annual Meetings present an opportunity to assess MDB performance against the New Collective Quantified Goal (NCQG) and to ask which supply-side levers are presently viable. For negotiators and banks alike, it is crucial to distinguish what is ideal from what shareholders are currently willing to sanction amid a difficult political environment.

MDBs: How are we doing?

• The baseline. At COP29, MDBs pledged to increase annual climate finance for low- and middle-income countries (LMICs) to $120bn/year by 2030, plus $65bn/year in mobilised private capital. These figures contribute towards the NCQG’s $300bn/year public finance goal and its $1.3tn/year aggregate ambition, respectively.
• The progress. The 2025 Joint MDB Climate Finance Report records $103bn for LMICs, some 86% of the 2030 level, having doubled in five years. In other words, the target is calibrated to trajectories already well underway. Private mobilisation is less advanced, but the World Bank Group’s record $112bn in private capital mobilised in FY2026, albeit across all sectors, suggests the $65bn/yr goal for climate is eminently attainable. Adaptation finance, at $35bn, is also approaching its $42bn/yr 2030 projection.
• The ambition. Here’s the rub: independent analyses imply a materially higher benchmark. The G20 Expert Group’s Triple Agenda, the Independent High-Level Expert Group’s fourth report and the G20’s roadmap for Bigger, Better, and More Effective Banks all point towards a need for roughly $180–225bn in MDB climate finance annually by 2030. That means current targets are a floor, not a frontier: on a simple linear extrapolation, $120bn would leave MDBs well short of the contribution that is truly warranted towards the $1.3tn goal.

So, progress is real but insufficient. Where, then, can additional supply-side leverage be had for the MDBs? Four levers merit assessment, differentiated by political feasibility, that could point to where advocacy capital is perhaps best spent in 2026–27.

MDB Climate finance Levers

1. Inject new capital: politically difficult. Given contracting ODA, general capital increases are unrealistic in the current political environment, and voluntary innovations such as hybrid capital face strained domestic budgets. Special Drawing Rights (SDR) rechannelling could be an exception: MDBs should prepare the operational architecture, so that they can act promptly should the IMF need to issue emergency recovery assets down the road.
2. Raise climate targets: politically infeasible. As climate shares approach 50% of MDB portfolios, political tolerance for further increases diminishes. The World Bank’s recently retired target, driven by a few shareholders against a bloc of nearly 100 countries, is instructive. Other MDBs, facing similar pressure, should stay the course for now, defending existing climate plans rather than reopening them. Advocates must recognise that pressing for higher internal targets today risks catalysing further erosion.
3. Optimise balance sheets: increasing momentum. Continued Capital Adequacy Framework (CAF) reform is a more promising lever, and recently aligned credit rating agencies’ math is crucial to unblocking it. S&P’s revised methodology, alongside Fitch’s projections and Moody’s updated revisions, indicates that MDBs could lend substantially more, potentially hundreds of billions more, without forfeiting AAA ratings. The binding constraint is now behavioural: MDBs should continue lowering equity-to-loan limits, removing institutional lending limits, and actually lend accordingly. Headroom unused is, in effect, climate finance forgone.
4. Mobilise private capital: full speed ahead. World Bank President Ajay Banga’s Private Sector Investment Lab appears to be onto something. The World Bank Group’s mobilisation has more than tripled since FY2022, and its guarantee issuance exceeded $25bn this year, surpassing the 2030 target of $20bn four years early. This approach should be replicated across the MDB system, and Multilateral Investment Guarantee Agency (MIGA), whose annual issuance has nearly doubled since FY2022, should keep pushing. Why stop at 3x if 10x could be transformational?

To be clear, MDBs can only meet existing demand, so expanding the supply of finance only addresses half the problem. For some client countries, bottlenecks lie on the demand side, where structural reforms are needed to allow the absorption of more finance, faster. Many of the levers governing MDB finance demand, namely prudential and regulatory regimes, debt burdens, risk perception, etc. lie somewhat beyond MDBs’ remit. Nonetheless, MDBs can champion international financial architecture reforms that strengthen the enabling environment, including building on demand incentive schemes such as the World Bank’s Framework for Financial Incentives, or engaging in country platforms, for example.

Bottom line: the next wave of MDB climate finance likely won’t come from a raft of new capital or louder targets; it will come from sweating existing balance sheets and making private money work harder.