Sustainable-oriented finance of development banks: A comparative analysis

David Hanft

No 276/2026, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: Multilateral development banks (MDBs) face growing pressure to demonstrate that their activities support the Paris Agreement's (PA) goal of aligning financial flows with low-emission and climateresilient development pathways (as outlined in Article 2(1)(c)), while concerns remain about the accuracy and interpretability of reported climate finance. This paper examines how sustainableoriented climate finance standards are operationalized in the financing decisions and capital mobilization strategies of multilateral development banks, and what this implies for the effectiveness and comparability of reported climate finance. Using comparative case studies of the World Bank Group (WBG), the European Investment Bank (EIB), and the African Development Bank Group (AfDB), the analysis compares portfolio composition and allocation patterns and assesses private capital mobilization structures across financial instruments. The findings indicate that Paris-aligned finance is operationalized through different institutional pathways: scale and mobilization in High-Income Countries with deeper financial markets (EIB), a diversified mix of financial instruments (WBG), and concessional, risk-mitigating finance, prioritizing vulnerable, debt-constrained and adaptation-relevant contexts (AfDB). These results suggest that policy effectiveness depends not only on the volume of mobilization, but also on whether portfolios reflect adaptation needs and provide debt-sensitive support in vulnerable settings.

Keywords: Multilateral Development Banks; Climate Finance; Paris Alignment; Private Capital Mobilization; Concessionality; Debt Sustainability; Sustainable Finance; Public Finance (search for similar items in EconPapers)
JEL-codes: F34 F35 G21 G28 Q54 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ipewps:344090

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