Multilateral development banks are facing mounting pressure to reduce or eliminate their climate finance targets, raising concerns about the future of international efforts to support developing countries in addressing climate change. Sources familiar with ongoing discussions indicate that institutions such as the Inter-American Development Bank (IDB) and the Asian Development Bank (ADB) are considering abandoning established green finance goals, following a similar move by the World Bank in June.
The World Bank announced it would retire its commitment to allocate 45 percent of its financing toward projects with climate-related benefits, a decision attributed to intensifying influence from the United States. This shift reflects broader geopolitical and budgetary pressures as the US government, particularly under the administration of former President Donald Trump, has expressed skepticism about climate change and advocated scaling back restrictions on funding fossil fuel projects.
The IDB, a chief financier in Latin America and the Caribbean, reportedly faces "real pressure" to drop its climate finance target, which set climate-related lending at 45 percent of its portfolio. Last year, the bank increased its climate finance by 46 percent compared to the previous year, reaching nearly $10 billion. Meanwhile, the Manila-based ADB is also deliberating whether to remove its green finance targets. In the previous year, the ADB committed $13.5 billion to climate-related projects, accounting for just over half of its total financing.
A senior development finance expert noted that many multilateral development banks with significant US shareholder influence are likely to abandon these targets, a move that could substantially impact global climate finance flows. However, the IDB stressed that while volume-based climate finance targets have been useful in tracking ambition, they do not fully capture the effectiveness or outcomes of investments. The bank emphasized a shift toward measuring impact and resilience in communities alongside emissions reduction, affirming its ongoing commitment to climate action despite the potential removal of specific targets.
The ADB stated that its climate finance goals remain intact and are subject to review next year as part of the institution’s standard procedures. The differing approaches highlight tensions within multilateral banks on balancing accountability through targets with flexible metrics that assess real-world outcomes.
Joe Thwaites, international climate finance director at the Natural Resources Defense Council, highlighted that US stakeholders are not the sole influencers within these finance institutions and noted the role of other donors. He suggested that external actors could leverage their financial contributions to encourage continued support for climate initiatives despite pressures to scale back.
In addition to multilateral institutions, countries such as the United Kingdom and Germany are reportedly under financial and political strain, leading them to reconsider their levels of international climate finance. This trend raises questions about the sustained commitment of global partners to providing the estimated $1.3 trillion in climate finance agreed upon under international frameworks aimed at helping developing nations transition away from fossil fuels and adapt to climate impacts.