Support for greener financial systems

The IKI continues to expand its long-standing and successful cooperation in the NDC Partnership by becoming involved in a new initiative.

The impacts of climate change pose substantial risks for the financial sector. At the same time, the financial sector offers many possibilities of mobilising funds for climate mitigation and adaptation. Together with the NDC Partnership, the International Climate Initiative (IKI) is supporting central banks and other financial institutions in identifying climate risks, integrating them into their regulatory framework and mobilising environmentally friendly investments.

This support takes place as part of a new initiative of the NDC Partnership: “Readiness Support for Greening Central Banks”. It was introduced in November 2021 during the 26th World Climate Conference in Glasgow (COP 26) and is the NDC Partnership’s reaction to the growing need to encourage actors from the financial and private sectors to increase their funding of climate mitigation and adaptation measures.

Together with the European Central Bank (European Investment Bank), the IKI has initiated the Greening-Financial-Systems-Programme, which contributes to the initiative with a funding volume of 20 million EUR. It supports financial actors in making use of existing regulatory measures to direct financial flows into ecologically sustainable investments.

The IKI uses this support as the basis for building up an extensive cooperation with the NDC Partnership, which has been continuously strengthened and expanded since its foundation in 2016.

A partnership for the global implementation of national climate contributions

The Nationally Determined Contributions (NDCs) constitute the heart of the Paris Agreement: in which industrialised, emerging and developing countries formulate their objectives for the mitigation of greenhouse gas emissions and the adaptation to climate change. So far, however, the NDCs are not sufficient to limit global warming to significantly below 2 degrees, or ideally 1.5 degrees Celsius compared with the pre-industrial level. In 2016, with the aim of bringing the NDCs in line with the Paris Agreement and the development targets of the Agenda 2030, the German Government, together with international partners, formed a global partnership to implement the national climate contributions: the NDC Partnership.

The NDC Partnership is the most important global initiative to coordinate support for the implementation and further development of the national climate contributions in developing and emerging countries worldwide. It is also a forum for climate policy exchange between governments and international organisations. The German government has been a member and promoter of the initiative since its foundation.

How the members of the NDC Partnership collaborate

The NDC Partnership has more than 200 members, including 119 countries and more than 80 international organisations and development banks. The partnership brings together specific climate-relevant support requests from developing and emerging countries with offers from industrialised countries and international organisations. This strengthens financial resources and professional expertise for the effective implementation of climate targets, in particular in developing countries, which receive less support than non-developing countries in this field.

Specific support in partner countries

75 developing countries cooperate with the NDC Partnership to implement their national climate contributions. These so-called country processes not only promote international cooperation. Various ministries and authorities are also brought together at national level in a dialogue to ensure that, for instance, not only environment ministries shape climate mitigation and adaptation, but also transport, energy or finance ministries.

Apart from the current coordination of support requests and offers, the NDC Partnership also acts by means of initiatives to provide partner countries with temporally limited support focussing on specific topics. In addition to the financial sector and the “Readiness Support for Greening Central Banks” initiative, this has so far been directed towards updating the NDCs during the run-up to the COP26 in Glasgow with the “Climate Action Enhancement Package” (CAEP) and towards supporting green economic recovery from the Covid 19 pandemic with the “Economic Advisory Initiative”.

IKI cooperation with the NDC Partnership

The IKI supports requests from countries regarding existing projects that assume additional tasks and is also involved in NDC Partnership initiatives. As part of the CAEP, IKI supported 21 partner countries, including Costa Rica and Namibia, in revising their climate targets with the aim of making them more ambitious.

Costa Rica presented a more ambitious NDC in 2020 with the long-term target of becoming greenhouse gas neutral by 2050. Amongst other things, the country relies on nature-based solutions (NbS), whereby intact ecosystems and biological diversity form the basis for climate mitigation and adaptation. In order to integrate these approaches into the NDC, the IKI has provided technical expertise within the framework of the CAEP.

As part of the “Economic Advisory Initiative”, which was launched in June 2020, the IKI promoted the placement of consultants in finance and planning ministries in eight partner countries. Whereby they supported the formulation of climate-sensitive and sustainable economic recovery packages.

In Rwanda, for example, consultant Louise Brown is assisting the Ministry of Finance and Economic Planning to improve the alignment of climate adaptation ambitions and Covid 19 recovery programmes - and to mobilise the resources required to do so.

In Colombia, consultant Mónica Parra prepared recommendations for nature-based solutions, green hydrogen and sustainable transport systems as part of Green Recovery Strategies.

The new “Readiness Support for Greening Central Banks” initiative now enhances the NDC partnership portfolio by another important aspect. In the years to come, the IKI support will play a major role in shaping the transformation to a low-carbon future and will continue to expand the cooperation with the NDC Partnership.

More information is available on the NDC Partnership website.

By financing economic advisors, IKI is providing support to its partner countries during the coronavirus crisis as they work to combine economic recovery goals with climate and biodiversity targets.

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