This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs.
| Paris alignment | Reasoning |
|---|---|
| Transformational | The IDB’s Country Strategies integrate climate mitigation and adaptation and aim to address the priorities of countries’ Nationally Determined Contributions (NDCs). Furthermore, the Bank proactively supports transformational initiatives for deep decarbonisation (e.g. the Deep Decarbonisation Pathways in Latin America and the Caribbean programme) and to update and increase the ambition of NDCs (e.g. NDC Invest). The IDB has made a concerted effort to relocate staffing capacity to country offices to better support the institutional capacity of client countries and better connect country level work to broader IDB operations. |
Country level strategies and approach
The IDB’s engagement with countries takes place in the context of its Country Strategies. The preparation of each individual Country Strategy begins with a Country Development Challenges (CDC) document, which uses evidence-based analysis to address and prioritise country development challenges, before considering possible project and policy solutions for the Country Strategy’s four-year timeline. As of the latest IDB Group Institutional Strategy (issued in 2024), the preparation of CDC documents will integrate insights from IDB Invest and IDB Lab, in order to more effectively assess private sector challenges and priorities for public upstream work in a given country. This reflects a highly comprehensive, best practice approach to developing country level strategies that is well aligned with the Bank Group’s parallel commitment in its Paris Alignment Implementation Approach (PAIA) to identify “climate transition gaps” across its areas of operation.
The CDC document is followed by a synthesised “Overview Paper”, and then the relevant and specific “Sector Notes” are prepared and validated by the Office of Strategic Planning and Development Effectiveness. The final four-year Country Strategy is then submitted to the Board for approval. Once approved, the Strategy becomes “active”.
The IDB has developed a comprehensive process for ensuring that climate is integrated into its Country Strategies work. The relevant guidelines state that cross-cutting issues such as gender and climate change “must be taken into account in the analyses prepared and the relevant recommendations, as well as in the strategic objectives agreed upon in the [Country Strategy]”.[1] The IDB aims to prioritise in line with country NDCs throughout the Country Strategy process and implementation.
The IDB’s Environmental and Social Policy Framework (ESPF) sets ambitious standards in several areas to provide IDB country clients with provisions to manage environmental and social issues. The latest ESPF, effective from November 2021, includes a number of climate-related improvements including a specific section on resilience to natural hazards and climate change (ESPS 4) as well as alignment of its standards on biodiversity protection and conservation with international best practices. It is worth noting, the IDB is the first MDB to not allow biodiversity offsets in critical habitats (ESPS 6). The ESPF also incorporates an exclusion list that identifies particular activities that the IDB will not finance. This includes activities deemed inconsistent with the Bank’s commitment to address the challenges of climate change and promote environmental and social sustainability, and which may significantly impact people and/or the environment.
The IDB has made a concerted effort to relocate staffing capacity to country offices, to better support the institutional capacity of client countries and better connect country level work to broader IDB operations. In this vein, the IDB set a target to employ staff directly in 23 out of 26 member countries offices by the end of 2023. The intention behind this policy is for Bank staff to be better placed to support mainstreaming of climate within national governments, and to support them with accessing and managing concessional resources. In-country staff are supported by sector specialists based at the IDB headquarters in the United States.
Country level initiatives
The IDB’s Deep Decarbonisation Pathways in Latin America and the Caribbean (DDPLAC) Programme facilitated country level university and civil society research teams, working with international partners, to develop cross-sectoral national long-term decarbonisation pathways for individual countries. This represented a transformational programme supporting countries in their 2050 planning efforts.
Aligning climate policies with long-term economic planning can reduce risks of stranded assets given the long lifespans of infrastructure. These pathway models will then inform Country Strategies and reprioritise projects, thus helping governments “identify financing gaps and possible approaches to catalyse investments”. Some examples of potential projects were identified in the explanatory and progress report Getting to Net Zero. These include integrating land-use modelling in Peru, decarbonising transport in Costa Rica, and bottom-up energy models in Argentina.
The work done under the DDPLAC Programme is complemented by the Bank’s NDC Invest Platform which makes use of an array of financing instruments (a key part of the IDB’s country level work, see the “Technical assistance for implementing Paris goals” metric). For example, in March 2020, the IDB announced a USD 320 million Policy Based Loan to Costa Rica, to assist with implementing climate-focused political reform, replacing high-emitting agricultural practices, conserving high-carbon ecosystems and encouraging the use of electric mobility, in alignment with its National Decarbonisation Plan.
The NDC Invest approach to country level decarbonisation work is made up of four components:
- Updating NDCs to align with Long-Term Strategies (LTSs).
- Designing investment and finance plans to implement LTSs.
- Using markets and investment to create transformative initiatives.
- Mobilising the private sector to act in green finance and sustainable projects.
It is worth highlighting that LTSs are not necessarily directly related to countries’ NDCs. Nevertheless, given that these documents are published by the same national governments within the UNFCCC context, and cover mitigation, resilience and adaptation measures, it is important that they are actively complementary. IDB Invest’s work also involves building local capacity by training local academic and research teams to use modelling and analysis to better prepare decarbonisation strategies. Currently, this work is being conducted in Colombia, Peru and Chile.
Recommendation:
- To further enhance its track record for transformational country level engagement, the IDB Group should take a leading role in supporting the development and effective operationalisation of the next generation of country platforms within the LAC region. As a trusted regional partner, the IDB Group can connect national financial institutions with international support, helping to advance LAC countries’ national development and climate priorities. With its extensive experience in financing investment projects, the IDB Group is well equipped to identify and mitigate barriers, creating an environment that facilitates financial flows in support of these priorities.
[1] Information received from the IDB Group.
Last Update: February 2025