Keywords

Introduction

The rising severity of climate change requires more active and cooperative climate actions. Unfortunately, negative impacts of climate change disproportionately affect developing countries which have contributed little and have less capability to respond. On the other hand, developed countries, such as Germany and Korea, have polluted considerably in the past and already achieved rapid economic growth (Gutierrez et al., 2014; Hallegatte et al., 2016; Mendelsohn et al., 2006; Mirza, 2003; Tan et al., 2021; Ward & Shively, 2012). For instance, Germany, despite being a leader in renewable energy adoption and low-carbon transition in recent years, has a historical legacy of heavy industrialization that contributed to greenhouse gas emissions. Similarly, Korea has implemented ambitious climate policies and invested in climate technology to address its historical emissions caused by rapid industrialization and economic development. A recent study also warned of a “doom loop” phenomenon, which means the increasing frequency and magnitude of climate-induced disasters and the rising costs of disaster recovery will result in a lack of resources for proactive climate actions. This in turn leads to a vicious cycle of failure to address the causes of disasters (Laybourn et al., 2023). The fact that the climate crisis is more devastating to vulnerable countries and communities increases the need and urgency to analyse the current status and plan for a better future from a climate justice perspective.

These disparities between developed and developing nations in the environmental domain were codified in the United Nations Framework Convention on Climate Change (UNFCCC) (UN [United Nations], 1992) as the principle of “common but differentiated responsibilities”. Since then, there have been various discussions on, and efforts to climate finance and climate technology transfer from developed to developing countries in consideration of historical responsibility. However, neither the actual needs nor the promised targets for addressing climate change are being met. For example, the goal of mobilizing USD 100 billion in climate finance by 2020, which was pledged at the 15th Conference of the Parties (COP) in 2009 under the UNFCCC, was extended to 2025 at COP21 in 2015. As of 2020, USD 83.3 billion was confirmed to have been raised (OECD, 2022), but achieving the climate financing target will be challenging as countries also increase their domestic carbon neutral investments.

Climate change poses a global challenge that calls for a multilateral response. A country cannot address climate issues by itself. Every nation has a responsibility to take part in climate actions since climate is global commons. In this regard, multilateral institutions are one of the important agents in combating climate change. This chapter will analyse climate actions of multilateral development banks from the perspective of climate justice. Specifically, climate action plans of the World Bank Group, the Asian Development Bank and the European Bank for Reconstruction and Development will be examined, including cases from Korea and Germany.

Multilateral Activities and Climate Justice

The notion of climate justice places significant emphasis on climate change as a matter of ethics and politics, with a particular focus on the interplay of environmental accountability, human rights and social justice (Baxi, 2016; Caney, 2020; Mary Robinson Foundation, 2018; Robinson & Shine, 2018). It examines the issue of climate change’s unequal effects on marginalized communities, emphasizing the importance of finding solutions for the rights and inclusion of those who are most impacted, particularly in developing countries. The primary elements encompass the obligation of developed countries with regard to historical emissions, the imperative of ensuring equitable transitions for workers in fossil fuel sectors, the pursuit of legal measures to establish accountability, and the incorporation of community-driven adaptation initiatives. Climate justice aims to adopt a comprehensive approach that promotes sustainable development while also guaranteeing fairness and equity in addressing climate-related issues.

In the pursuit of low-carbon and sustainable development, there is a growing need to more deliberately and comprehensively integrate climate justice principles that recognize the ethical consequences of climate change and the actions taken to mitigate its effects, while also considering their broader implications for justice, into development cooperation and climate actions. However, there have not been many studies exploring this critical subject, particularly concerning the role played by multilateral development banks (MDBs), who play a crucial role in allocating substantial financial resources towards the mitigation and adaptation of climate change. Additionally, they provide expertise and guidance to assist nations in formulating and executing climate-friendly policies, while also facilitating the attraction of private sector investments in climate-related projects. Furthermore, MDBs may support research and innovation endeavours aimed at addressing climate change mitigation and adaptation.

For instance, Lee et al. (2023) investigated the performance of MDBs and asked what the ideal characteristics were for development and climate banks. Their analysis included benefits and constraints of MDB operations in four aspects: financial models; finance instruments for governments; finance instruments for the private sector and mobilization; and goals, impact measurement and reporting. As an agenda for change, they suggested nine topics, which included predictable and sustained MDB support for a country’s climate and development strategy, helping countries borrow from markets on better terms, consolidation of MDB concessional climate finance to support larger country portfolios of climate lending, and assessing impact for an integrated climate and development mission.

Getzel and Prizzon (2023) acknowledged MDBs as the largest contributor of climate finance to low- and middle-income countries, and recommended ways in which MDBs could more effectively operate in achieving climate goals. Specifically, they emphasized that MDBs need a more robust integration of climate and development strategies, MDBs can scale up climate finance, and MDBs must create more effective incentives for client countries. For each topic, they examined the challenges that MDBs face in delivering climate interventions and that shareholders and MDB management can do and should prioritize.

Both reports recognized the significant contributions and important roles of MDBs in supporting climate actions of countries. Developing more predictable, sustained and robust strategies for integrating development and climate was one of the commonly suggested future actions, along with enlarging the amount of funding for climate solutions. However, neither of the two reports puts much emphasis on climate justice. They did not directly mention what climate justice is, nor clearly specify why and how climate justice principle needs to be considered and can be reflected in the effective operation of MDBs.

Climate Justice in the Strategies of Multilateral Development Banks

The strategies of three key multilateral development banks (MDBs) will be investigated in this section from climate justice perspective, which are the World Bank Group, the Asian Development Bank and the European Bank for Reconstruction and Development. MDBs jointly publish an annual report on their climate finance, and according to the report, these three institutions take a large portion of the total (Table 8.1).

Table 8.1 Climate finance commitments targeting low- and middle-income countries (USD billion, percentage of the total amount)
Full size table

World Bank Group

The World Bank Group (WBG) consists of five institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). Germany, the fourth-largest shareholder in the WBG, has been a member of IBRD since 1952, of IDA since 1960, IFC since 1956, MIGA since 1988 and ICSID since 1969. It strongly supports green, resilient and inclusive development. Korea initially joined as a beneficiary of IBRD in 1955 and of IDA in 1961. However, it successfully graduated from IDA in 1973 and IBRD in 1955. It became a member of IFC in 1962 and MIGA in 1988. Since 2013, Korea has been operating a WBG office focusing on disruptive digital innovation and innovative green growth.

The WBG published its five-year Climate Change Action Plan (CCAP) in 2016, around the time when the Paris Agreement was drafted and signed. The WBG recognized the adverse effect of climate change on development and the disproportional impact of climate risks on vulnerable countries, and adopted a CCAP to accelerate member countries’ climate action. The four priorities of the CCAP were to support transformational policies and institutions, leverage resources, scale up climate action and align internal processes and work with others. With the CCAP 2016–2020, the WBG increased financial and technical support to countries and is now known as the largest multilateral climate finance provider to developing countries. In the second CCAP, the WBG states that it pursues Green, Resilient and Inclusive Development approach, emphasizing integration of climate and development. Their main efforts in the CCAP 2021–2025 are categorized as aligning climate and development, prioritizing key systems transitions and financing to support the transitions.

Both in the first and second CCAP, the term climate justice itself is not mentioned directly. However, both the two CCAPs addressed the concept of climate justice from the introduction. For instance, the CCAP 2016–2020 mentioned “Lower-income countries suffer disproportionately from natural disasters, with almost half of disaster casualties occurring in low-income countries, and economic losses sometimes exceeding 10% of gross domestic product (GDP) in small, vulnerable economies”. The CCAP 2021–2025 says “The World Bank Group (WBG) recognizes that globally, the poor, who are the least responsible for greenhouse gas (GHG) emissions, often suffer the most from climate change impacts”. Just transition from coal is also highlighted in the second CCAP. These signify that the WBG considers climate justice principles when establishing its CCAPs.

In addition to recognizing the principles of climate justice, aligning climate and development is essential because climate action should be harmonized with broader development objectives. In the initial CCAP, the WBG committed to supporting client countries in integrating the development and climate agendas with a focus on the poorest and most vulnerable. Building on this commitment, the WBG indicates in the subsequent CCAP that it will engage at the country level in climate and development diagnostics, planning, and policies; align its financing flow with the Paris Agreement; and increase climate finance for both mitigation and adaptation to maximize the impact.

As a strategic approach to climate action, the WBG has selected and focused on several main areas. In the first phase of the CCAP, six high-impact areas were identified, which are renewable energy and energy efficiency; sustainable mobility; sustainable and resilient cities; climate-smart land use, water and food security; green competitiveness; and leaving no one behind. The second phase targeted five key systems: energy; agriculture, food, water and land; cities; transport; and manufacturing. These five were chosen since they collectively contribute to over 90% of global greenhouse gas emissions.

To implement its CCAPs, the WBG has actually augmented its climate finance allocations, particularly for low- and middle-income countries. In addition, the second CCAP explicitly indicated that the WBG’s commitment was increasing the percentage of climate finance from 20% of lending in 2016 to 28% by 2020, and this target has been surpassed every year since 2018. The share of the WBG projects incorporating climate finance also enlarged from 26% in 2015 to 62% in 2020. This substantial increase reflects the WBG’s dedication to climate-related initiatives.

Asian Development Bank

Asian Development Bank (ADB) directed its attention to the Asia and Pacific region, which “has the largest number of climate-vulnerable people worldwide, women being among the most vulnerable” (ADB, 2017). Both Korea and Germany, as founding members of ADB, actively contribute to the climate fund. As an example, Korea has committed to the Future Carbon Fund, while Germany has pledged support to the Asia–Pacific Climate Finance Fund and the Energy Transition Mechanism Partnership Trust Fund.

ADB’s strategic document for climate response is Climate Change Operational Framework 2017–2030 (CCOF2030). The CCOF2030 is formulated to facilitate low greenhouse gas emissions and climate-resilient development in the Asia and Pacific. Through this, ADB endeavours to position itself as a leading development partner of its member countries and to reinforce its climate operations. For monitoring and reporting of the CCOF2030, a results framework is presented, with 45 performance indicators. Implementation will be conducted in two phases: (i) current and near-term operations, from 2017 to 2023 and (ii) long-term operations, from 2024 to 2030.

While the term “climate justice” is not explicitly stated in the CCOF2030, ADB acknowledges the disproportional impact of climate change in the Asia and Pacific region, the heterogeneity of member countries, including small island and low-lying countries, and the heightened vulnerability of specific individuals or groups, such as women and the poorest populations, in terms of climate challenges. It can be inferred that climate justice principles are considered when the CCOF2030 is designed. Additionally, “just transition” is not found in the CCOF2030, however, ADB was one of the MDBs that jointly committed to supporting a just transition (ADB, 2021).

There are five principles of the CCOF2030: (i) supporting ambitious climate objectives articulated in nationally determined contributions and other climate plans; (ii) accelerating low greenhouse gas emissions development; (iii) promoting climate change adaptation; (iv) integrating climate change adaptation and disaster risk management; (v) linking climate actions to wider sustainable development agenda. The first principle shows ADB’s commitments to promote coherence and integration between climate and development objectives. To ensure this, ADB institutionally strives to mainstream climate considerations into its strategies, policies, plans and projects, while at the same time, actively supporting member countries in translating climate action into their national policy frameworks.

To effectively monitor and evaluate ADB’s performance, a report to review the CCOF2030 results framework in the middle of the first implementation phase was released. Alignment of the CCOF2030 with relevant documents or indicators, including ADB’s Strategy 2030 Operational Priority 3, ADB Corporate Results Framework 2019–2024, Sustainable Development Goals, the Paris Agreement, and Sendai Framework for Disaster Risk Reduction 2015–2030, was also examined. Regarding the amount of climate finance, ADB sets a target of USD 6 billion by 2020. According to ADB Annual Report 2020, ADB disbursed USD 4.3 billion in 2020 and USD 10.8 billion cumulatively for 2019 and 2020. Recently, USD 6.7 billion was provided through ADB in 2022, contributing to a cumulative total of USD 21 billion for the period 2019 to 2022. ADB has continuously scaled up climate finance and monitored its operations for better measures against climate change.

European Bank for Reconstruction and Development

Founded in 1991, the European Bank for Reconstruction and Development (EBRD) has been committed to green investment and assessing the environmental and social impacts of all of its projects from the beginning. Germany has been one of the main sources of foreign direct investment in the EBRD’s countries of operation, and a driving force behind the bank’s approach to financing low-carbon transition. Korea has acted as an EBRD donor since 1993 and is an important contributor to the bank’s work, including in the field of green growth and climate change.

With regard to climate change, the EBRD carries out climate risk assessments and integrates adaptation measures in its investment operations. In 2020, the EBRD adopted the Green Economy Transition (GET) approach for the period 2021 to 2025 in order to accelerate the transition to a low-carbon and resilient economies in its countries of operations. Through the GET approach, the EBRD will increase green financing to more than 50% of its annual business volume by 2025 as well as aim to reach net annual greenhouse gas emissions reductions of at least 25 million tonnes over the five-year period.

To achieve these goals, the GET approach (i) assesses projects in relation to the principles of the Paris Agreement; (ii) enhances policy engagement for the development of long‐term low-carbon strategies and greening of financial systems; and (iii) scales investments across a set of priority environmental, climate mitigation and resilience themes, which includes just transition. Regarding just transition, the GET approach acknowledges the need to provide sustainable economic and job alternatives to communities reliant on sectors due to decline in a low-carbon future. More generally, the EBRD states in the GET approach that for just transition it is necessary that the benefits of transition are shared widely, including by those who stand to lose economically, thus recognizing the importance of considering the distribution of costs and benefits of a green economy transition. Korea, for example, has stressed that the EBRD should concentrate on establishing efficient and green energy systems in order to mitigate supply shocks that may threaten reaching the long-term goal of carbon neutrality (EBRD, n.d.). Germany’s position on just transition aligns with that of the bank and has not been subject to country-specific reflections or interpretations.

The GET approach also acknowledges the need to integrate climate finance policies with social policies; social policies should provide job alternatives to communities, depending on sectors that are likely to decline as the transformation towards a low-carbon economy advances.

Areas the EBRD has identified as requiring enhanced attention in relation to just transition are energy systems, the decarbonization of industries, and issues related to cities and the environmental infrastructure. Loans, equity and guarantees are the main direct forms of financing the EBRD uses to achieve the goals put forth by the GET approach. The EBRD is committed to international cooperation, which includes the EU, the Climate Investment Funds, the Green Climate Fund and the Global Environment Facility.

Challenges, Opportunities, and Recommendations for Multilateral Climate Justice

This chapter has examined the strategies implemented by major multilateral development banks to facilitate a just transition to address the negative impacts of climate change. These institutions utilize their array of pre-existing financial tools to provide green financing but also to enhance the connection between climate finance policy and climate justice. The World Bank Group (WBG), the Asian Development Bank (ADB) and the European Bank for Reconstruction and Development (EBRD) have made contributions to climate justice by adopting climate action strategies that prioritize ethical and social considerations.

Multilateral development banks (MDBs) can play a crucial role in this process by ensuring that climate action is both environmentally efficient and socially just, by addressing the needs of the most vulnerable groups, and distributing the responsibilities and advantages of climate action fairly across the global community. MDBs have the capacity to tackle both domestic and global inequities in the impacts of climate change. By possessing this dual competence, they are positioned as a significant force in promoting a fair and impartial approach to addressing the complex difficulties presented by climate change.

Although there have been encouraging advancements and the possibility for even greater effects, there remain substantial obstacles in properly executing climate justice concepts. Although progress has been achieved, there is still a requirement for ongoing dedication and ingenuity in incorporating climate justice into the worldwide efforts to address climate change.

It is clear that there is a requirement for a more intentional and thorough incorporation of climate justice ideas into development cooperation and climate efforts. Proficiency in this integration necessitates a profound comprehension of the ethical ramifications of climate change and the measures implemented to alleviate its consequences. In order to ensure that the benefits and burdens of climate action are distributed fairly among all nations, especially taking into account the interests and rights of the most vulnerable countries and communities, it is imperative that their actions and plans demonstrate a strong dedication to sustainable development, equity and fairness.

For instance, as important contributors and influential decision makers in MDBs, both Germany and Korea have made strides in incorporating climate justice principles into climate actions. However, there is room for increased impact. This could involve augmenting the volume of climate finance, and establishing innovative mechanisms for climate funds or investments, specifically geared towards promoting climate justice. In addition, Germany and Korea can more actively support climate technology development and transfer. This includes more proactive engagement in capacity building initiatives and policy consulting tailored to the needs of domestic and global vulnerable groups. By leveraging expertise and resources of Germany and Korea, both countries can further contribute to bridging the technological and knowledge gaps and advancing climate justice on a global scale through MDBs.

In conclusion, both the strategies of MDBs and a concerted effort by member countries such as Germany and Korea to amplify their commitments within MDBs are pivotal. By reinforcing their dedication to sustainable development, equity and fairness, MDBs can serve as catalysts for a more just and inclusive approach to addressing the challenges posed by climate change on a global scale and ensuring a more equitable and resilient future for all.