ADB to tap $700 million from two new funds to combat climate change

Manila - The Asian Development Bank (ADB) is planning to channel around $700 million from two new investment funds to its developing member countries as part of a broad global initiative to help developing countries meet the cost of actions needed to combat climate change.

Donor countries, including Australia, France, Germany, Japan, Netherlands, Norway, Spain, Sweden, Switzerland, United Kingdom and United States, pledged over $6.1 billion in 2008 for the Clean Technology Fund and Strategic Climate Fund. The climate investment funds (CIF) are being made available to multilateral development banks, including ADB, for climate change-related investments.

“The CIF provides concessionary funds for ADB to work together with developing member countries to transform to a low-carbon growth trajectory and strengthen their resilience to threats posed by climate change," said Xianbin Yao, Director General of ADB's Regional and Sustainable Development Department.

The Clean Technology Fund will support the deployment of low carbon energy technologies, such as wind, solar, hydro and geothermal power, as well as energy efficiency measures for industry, commercial buildings and municipalities. Activities supported by this fund will get cofinancing from ADB’s regular operations, and this is expected to mobilize additional financing from both the state and private sectors.

The Strategic Climate Fund will support pilot programs on climate resilience, forest investment and scaling up renewable energy use for low-income countries, with the end goal of demonstrating effective climate mitigation and adaptation interventions that can be expanded and replicated in future. For example, a successful adaptation program undertaken in a delta region such as Bangladesh could potentially be replicated in other countries with similar geography.

The two funds are designed to be interim financing tools and will be discontinued once the United Nations Framework Convention on Climate Change completes deliberations on a new global program for addressing climate change, and the new financial mechanisms needed to support it.

Money released by the Strategic Climate Fund will be in the form of grants. The Clean Technology Fund will issue concessional loans with interest on the loans as low at 0.25% for up to 40 years. Risk mitigation instruments such as guarantees and equity will also be available. The money can be tapped for both public and private sector initiatives.

"The comprehensive range of financing instruments available under the Strategic Climate Fund and the Clean Technology Fund will provide a solid platform for partnerships with ADB's developing member countries in the area of climate change," said Teresa Kho, Director of ADB's Office of Cofinancing Operations.

ADB has been investing heavily in programs and projects designed to help countries move on to a low carbon growth path and in 2008 it spent around $1.7 billion on clean energy projects, up from $230 million in 2003. It is now targeting annual investments of $2 billion by 2013.