Association for Public Policy Analysis & Management

A global transition of the power system is required to avoid dangerous levels of climate change. In developing countries, which account for the strongest carbon emissions growth, a major barrier for the diffusion of new energy technologies is a lack of financing. The perceived and actual investment risk is high in many developing countries, for instance due to political and regulatory uncertainties – making the risk-return profile unattractive for private investors. Multilateral development banks (MDBs) can play an instrumental role in addressing this financing gap, by providing debt and de-risking products (such as guarantees). However, to date it is unclear whether and to which extent these banks contribute to the clean energy transition through their lending portfolios. Here, we present new quantitative and qualitative data on MDBs’ power generation portfolios between 2005 and 2015. To this end, we complied a new database of all MDB-supported projects and interviewed 12 MDB officials. Overall, we find that most MDB created a significant renewables portfolio “on top” of their conventional business, but some barriers for a further dissemination of new power generation technologies remain, especially in the public sector. Based on these findings, we provide recommendations on how to decarbonize the portfolios of MDBs, thereby making them an effective policy institution in accelerating the global energy transition.