Energizing MDB Financing Capacity: Identifying and Filling Gaps to Raise Ambition for the 2030 Agenda and Beyond

The global community is running out of time and falling behind on financing shared climate and development goals, with the United Nations warning that 85 percent of the 2030 Sustainable Development Goals (SDGs) are either off track, stagnant or regressing. The economic and social costs of inaction will be catastrophic.

Multilateral development banks (MDBs) have a central role to play in raising ambition to get the international community back on track. But do they have the necessary policies and processes to regularly assess how they can increase financing to meet shared development and climate goals by 2030 and beyond?

A new report by the Boston University Global Development Policy Center finds that while MDBs have made important strides toward increasing their lending headroom, more ambition will be necessary to achieve development and climate goals in a timely and affordable manner.

The report estimates that to meet the lower-bound estimates of the system’s lending needs by 2030, MDBs will need to increase their lending by at least a factor of three to provide the necessary non-concessional and concessional financing.

Additionally, the study finds that, with some notable exceptions, the MDBs lack uniform, evidence-based policies and processes to assess new lending targets and resource needs.

The report was commissioned by the Brazilian Presidency to the Group of 20 (G20) as an input for the ‘G20 Roadmap towards Better, Bigger, and more Effective MDBs.’

 Policy recommendations:

1. Further raise ambition to create more lending headroom: G20 members should further raise ambition to create more MDB lending headroom to meet financing needs and provide buffers to maintain current credit ratings at the least level of new capital from shareholder taxpayers.
2. Identify where further ambition may be needed: The G20 should encourage MDBs to review resource needs calibrated to achieving the SDGs and Paris targets and conduct MDB-led reviews every three to five years.
3. Coordinate efforts to fill gaps in the MDB system: The G20 can be a platform for setting principles and tracking progress over time to assess the extent to which the individual MDB capital needs sum to a level of capital adequacy and financial capacity to put the MDB system on track ahead of 2030. Tracking would be conducted on a regular basis while avoiding impinging on the work of MDB boards and guided by robust frameworks that promote coherence with strategic objectives, operational effectiveness and resource efficiency. The G20 will need to develop a common methodology and reporting template for MDBs to report on progress.

The report ultimately argues that there is no time to waste, but MDB capital cannot be wasted either. As agents at the center of global resource mobilization for development, bigger, better and more efficient MDBs can enable new growth trajectories in emerging market and developing economies that will spill over to the broader global economy.