INTERNATIONALDEVELOPMENTINFOCUSGreeningNationalDevelopmentFinancialInstitutionsTrends,LessonsLearned,andWaysForwardEmmaDalhuijsen,EvaGutierrez,TatsianaKliatskova,RachelMok,andMartijnGertJanRegelinkINTERNATIONALDEVELOPMENTINFOCUSGreeningNationalDevelopmentFinancialInstitutionsTrends,LessonsLearned,andWaysForwardEMMADALHUIJSEN,EVAGUTIERREZ,TATSIANAKLIATSKOVA,­RACHELMOK,ANDMARTIJNGERTJANREGELINK©2023InternationalBankforReconstructionandDevelopment/TheWorldBank1818HStreet,NW,Washington,DC20433Telephone:202-473-1000;Internet:www.worldbank.orgSomerightsreserved123426252423BooksinthisseriesarepublishedtocommunicatetheresultsofWorldBankresearch,analysis,andoperationalexperiencewiththeleastpossibledelay.Theextentoflanguageeditingvariesfrombooktobook.ThisworkisaproductofthestaffofTheWorldBankwithexternalcontributions.Thefindings,interpretations,andconclusionsexpressedinthisworkdonotnecessarilyreflecttheviewsofTheWorldBank,itsBoardofExecutiveDirectors,orthegovernmentstheyrepresent.TheWorldBankdoesnotguaranteetheaccuracy,completeness,orcurrencyofthedataincludedinthisworkanddoesnotassumeresponsibilityforanyerrors,omissions,ordiscrepanciesintheinformation,orliabilitywithrespecttotheuseoforfailuretousetheinformation,methods,processes,orconclusionssetforth.Theboundaries,colors,denominations,andotherinformationshownonanymapinthisworkdonotimplyanyjudgmentonthepartofTheWorldBankconcerningthelegalstatusofanyterritoryortheendorsementoracceptanceofsuchboundaries.NothinghereinshallconstituteorbeconstruedorconsideredtobealimitationuponorwaiveroftheprivilegesandimmunitiesofTheWorldBank,allofwhicharespecificallyreserved.RightsandPermissionsThisworkisavailableundertheCreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO)http://creativecommons.org/licenses/by/3.0/igo.UndertheCreativeCommonsAttributionlicense,youarefreetocopy,distribute,transmit,andadaptthiswork,includingforcommercialpurposes,underthefollowingconditions:Attribution—Pleasecitetheworkasfollows:Dalhuijsen,Emma,EvaGutierrez,TatsianaKliatskova,RachelMok,andMartijnGertJanRegelink.2023.GreeningNationalDevelopmentFinancialInstitutions:Trends,LessonsLearned,andWaysForward.InternationalDevelopmentinFocus.Washington,DC:WorldBank.doi:10.1596/978-1-4648-2031-1.License:CreativeCommonsAttributionCCBY3.0IGOTranslations—Ifyoucreateatranslationofthiswork,pleaseaddthefollowingdisclaimeralongwiththeattribution:ThistranslationwasnotcreatedbyTheWorldBankandshouldnotbeconsideredanofficialWorldBanktranslation.TheWorldBankshallnotbeliableforanycontentorerrorinthistranslation.Adaptations—Ifyoucreateanadaptationofthiswork,pleaseaddthefollowingdisclaimeralongwiththeattribution:ThisisanadaptationofanoriginalworkbyTheWorldBank.ViewsandopinionsexpressedintheadaptationarethesoleresponsibilityoftheauthororauthorsoftheadaptationandarenotendorsedbyTheWorldBank.Third-partycontent—TheWorldBankdoesnotnecessarilyowneachcomponentofthecontentcontainedwithinthework.TheWorldBankthereforedoesnotwarrantthattheuseofanythird-party-ownedindividualcomponentorpartcontainedintheworkwillnotinfringeontherightsofthosethirdparties.Theriskofclaimsresultingfromsuchinfringementrestssolelywithyou.Ifyouwishtore-useacomponentofthework,itisyourresponsibilitytodeterminewhetherpermissionisneededforthatre-useandtoobtainpermissionfromthecopyrightowner.Examplesofcomponentscaninclude,butarenotlimitedto,tables,figures,orimages.AllqueriesonrightsandlicensesshouldbeaddressedtoWorldBankPublications,TheWorldBankGroup,1818HStreet,NW,Washington,DC20433USA;e-mail:pubrights@worldbank.org.ISBN:978-1-4648-2031-1DOI:10.1596/978-1-4648-2031-1Coverphoto:©gonin/iStockimageno.975728788.Usedwithpermission;furtherpermissionrequiredforreuse.Coverdesign:DebraNaylor/NaylorDesignInc.ContentsForewordvAcknowledgmentsviiAbouttheAuthorsixExecutiveSummaryxiGlossaryxviiAbbreviationsxixCHAPTER1Introduction1Background1Nationaldevelopmentfinancialinstitutions2Analysisforthispublication4Notes5Bibliography5CHAPTER2LandscapeofNDFIs7Summary7Background7Coreactivities7Countriesandregions9Missionsandmandates9Note10Bibliography10CHAPTER3StateandTrendsofGreeningNDFIs11Background11Governanceandstrategy11Greenfinancingsourcesanduses14C&Efinancialriskmanagement20C&Edisclosuresandreporting23Notes25Bibliography26CHAPTER4ToolkitsforGreeningNDFIs27Background27Governanceandstrategy27Greenfinancingsourcesanduses30C&Efinancialriskmanagement37C&Edisclosuresandreporting40Notes40Bibliography41iiiivGreeningNationalDevelopmentFinancialInstitutionsCHAPTER5ConclusionsandKeyRecommendations43Background43Currentstatusofgreenobjectives43Factorsimpedingscalingupgreenfinancing44Workingtowardgreenobjectives44MDBsupportforNDFIs46Note47Bibliography47APPENDIXACharacteristicsofNDFIs,fromSurveyResponses49APPENDIXBNDFICaseStudies55Boxes3.1GoodNDFIpracticesongovernanceandstrategy133.2GoodNDFIpracticesongreenfinancingsourcesanduses183.3GoodNDFIpracticesforC&Eriskmanagement223.4GoodNDFIpracticesonC&Edisclosuresandreporting254.1ParisAlignmentandnet-zerotransitionplans284.2ExamplesofNDFIgreenMSMEproducts314.3FacilitatingclimateactionbySOEs344.4NDFIs’roleinscalingupfinanceforadaptationandresilience364.5OpportunitiesforNDFIstoleveragecarbonmarketstoenableprivateinvestments37FiguresES.1KeyresultsofNDFIsurveyxiiES.2OverviewofkeyrecommendationsforNDFIs,authorities,anddevelopmentpartnersxiv1.1ModulesofassessmentofNDFIC&Epractices32.1NDFIfundingsourcesandservices82.2DistributionofNDFIs93.1NDFIsshowahigh-levelcommitmenttothegreenagenda123.2NDFIclimatefinancingsourcesandregionaldistribution,globalannualaverages,2019−20153.3NDFIs’surveyresponsesongreenfinancingpractices163.4SurveyresponsesonC&Eriskmanagementpractices213.5TrackingNDFIs’greenfinancing24B.1FIRA’sInstitutionalProgram,2020–2456Tables4.1Potentialapproachestoaddressbarrierstostimulatinggreeninvestmentsfromtheprivatesector325.1OverviewofkeypolicytoolkitstogreenNDFIs45A.1“GreeningNDFIs”questionnaire50A.2ListofNDFIssurveyed53ForewordGlobalpursuitofclimateandenvironmental(C&E)objectiveswillrequire­trillionsofdollarsofinvestmentoverthenextdecade.However,manycountries,particularlylow-andmiddle-incomenations,aregrapplingwithsignificant­fiscalandeconomicconstraintsintheaftermathofpandemic-relatedd­isruptionstoeconomicandsocialactivity.Inthiscontext,NationalDevelopmentFinancialInstitutions(NDFIs)arevitalactorsinmobilizingneededfinancingfromprivatesourcestomeetcountries’pressingneeds.Thesefinancialinstitutions,typicallystateownedanddrivenbysocioeconomicobjectives,guidecountrydevelopmentplansandpolicies.Withtheirsubstantialassets—amountingtooverUS$19trillionandaccountingformorethan10percentofglobalinvestmentsannually,NDFIshavethescaleandinfluencetoplayatransformativerole,especiallyinlow-andmiddle-incomecountries,wherepublicactorsprovide60per-centoftotalclimatefinancing,almosthalfbyNDFIs.NDFIs,whenmanagedefficiently,canhelpovercomemarketbarriersandmobilizeprivate-sectorfinancingforgreeninvestment,includingthroughtheprovisionoflong-termfinancing,aswellasinnovativestructuringofblendedfinanceandcreditenhancements.NDFIscanaddressexistingmarketgapsbyhelpingwithstructuringandco-financinglong-term,high-riskprojectsandwithsurmountingobstaclessuchasextendedpaybackperiodsandperceivedprojectrisk,particularlyforprojectsinwhichsocialreturnsexceedfinancialreturns.NDFIshavealsohelpedcreatemarketsthroughtransactiondemonstra-tioneffects,havingbeenthefirstissuersofgreenbondsinmanycountries.Thisuniquepositionmakesthemeffectiveinmobilizingfinancefrompublicandpri-vateinvestorsforprioritygoals.Likeotherfinancialinstitutions,NDFIsalsofacerisksfromclimatechangeandenvironmentalconcernsintheirinvestmentsandlending.Thus,theyareawareoftheimportanceoffollowingemergingguidanceonC&Erisk­managementanddisclosuresfromfinancial-sectorsupervisorsandstandardsetters.NDFIsarealsofamiliarwiththeapplicationofenvironmentalsafeguardstolimitnegativeimpactsoftheiroperationsandcanbeaneffectiveadvocateforwiderapplicationofthesegoodpracticesthroughoutemerging-marketfinancialsystems.vviGreeningNationalDevelopmentFinancialInstitutionsTheWorldBankGroupstandsreadytosupportNDFIsthroughfundingandtechnicalassistancetostrengthentheirgovernanceandriskmanagementwhileworkingcloselywithgovernmentstocreatethepreconditionsforNDFIsto­catalyzeprivatefundingforclimate.Thisreportispartofthiseffort.Itoffersacomprehensiveanalysisofthecurrenttrendsandpolicyactionsrequiredtoexpandthe“green”roleofNDFIs.Drawingonasurveyof22NDFIsfromdiverseregionsandincomelevels,aswellasin-depthcasestudiesofselectedinstitu-tions,thereportpresentsrecommendationstoenhancetheefficiency,effective-ness,andenvironmentalimpactoftheirinvestments.Italsoemphasizestheimportanceofpipelinepreparationandprivatecapitalmobilizationtoboostgreenfinancing.Welookforwardtoworkingwiththesefinancialinstitutionstoapplythe­lessonsfromthisreport,expandC&Einvestments,andmoveclosertothescaleofpublicandprivatefundingrequiredtoreverseclimatechange.JeanPesmeGlobalDirectorofFinanceFinance,Competitiveness,andInnovationGlobalPracticeWorldBankAcknowledgmentsThispublicationisaproductoftheWorldBank’sFinance,Competitiveness,andInnovationGlobalPracticewithfinancialsupportfromtheGlobalProgramonSustainabilityandtheClimateSupportFacility.ThisworkwaspreparedbyEmmaDalhuijsen,seniorfinancialsectorspecialist;EvaGutierrez,leadfinancialeconomist;TatsianaKliatskova,financialsectoreconomist;RachelMok,financialsectorspecialist;andMartijnGertJanRegelink,seniorfinancialsectorspecialist,alloftheWorldBank.PabloSaavedra,vicepresident,EquitableGrowth,Finance,andInstitutions;JeanPesme,globaldirectoroffinance;andLoicChiquier,senioradviser,providedoverallguidance.TheteamthanksChristinaAnnDavisforeditorialsupportandDatapagefordesignandlayoutassistance.TheteamwouldliketothankseniorofficialsoftheNationalDevelopmentFinancialInstitutionswhoparticipatedinthesurvey.WearealsoverygratefultoseniorofficialsoftheFideicomisosInstituidosenRelaciónconlaAgricultura(FIRA,inMexico),theKoreaDevelopmentBank(intheRepublicofKorea),TürkiyeSinaiKalkinmaBankasi(inTürkiye),andtheDevelopmentBankofSouthernAfrica(inSouthAfrica)whosharedtheirdataandinsightswithusforin-depthcasestudies.Wearegratefulforthesubstantivefeedbackreceivedfromthepeerreviewers—LouiseGardiner,Africacoordinator,SustainableBankingandFinanceNetwork,InternationalFinanceCorporation;ThomasMichaelKerr,leadclimatechangespecialist,WorldBank;RodrigoPereiraPorto,financialsectorconsultant,WorldBank;andAngelManuelO’DoghertyMadrazo,generaldirectorofsectoralintelligence,FIRA.TheteamalsobenefitedfromreviewandinsightsfromcountryteamsandtheWorldBankCountryManagementUnitscoveringthecountriesmentionedinthispublication.Anyerrorsoromissionsinthedataorinterpretationsareattributablesolelytotheauthorsofthework.viiAbouttheAuthorsEmmaDalhuijsenisaseniorfinancialsectorspecialistattheWorldBank,­advisinggovernmentsandcentralbanksonthedevelopmentofgreenfinancing­marketsandtheintegrationofclimateandenvironmental(C&E)financialrisksintosupervisoryframeworksandfinancialregulation.PriortotheWorldBank,sheworkedattheBankofEngland,coordinatingitssupervisoryresponseto­climaterisk,andattheDutchCentralBank.ShealsoisaboardmemberofElleSolaire,asocialenterprisesupportingwomen’sempowermentthroughcleanenergyentrepreneurship.EmmahasanMScineconomichistoryfromtheLondonSchoolofEconomicsandaBScineconomicsandBAinhistoryfromtheUniversityofAmsterdam.EvaGutierrezisaleadfinancialeconomistintheLatinAmericaandtheCaribbeanRegionoftheWorldBank.Shehasworkedonstate-ownedbankreforminmorethan20countriesthroughadvisoryandlendingoperations,includingBrazil,Colombia,Ecuador,Mexico,Turkmenistan,Uzbekistan,andVietNam.ShedevelopedtheguidancenotetoassessperformanceofState-OwnedFinancialInstitutions,partoftheWorldBankIntegratedState-OwnedFramework,andtheguidancenotetoevaluatetheroleofthestateintheprovi-sionoffinancialservicesinthecontextoftheFinancialSectorAssessmentProgram,implementedbytheInternationalMonetaryFund(IMF)andtheWorldBank.ShehasledtheWorldBankCommunityofPracticeforState-OwnedEnterprises.Sheisleadingprojectssupportingthedevelopmentofa­sustainablefinancetaxonomyandformulationforenvironmental,social,andgovernanceguidelinesforcommercialbanksinMexico.Shehaspublishedarti-clesonvariousfinancialtopics,includingdevelopmentbankreformandthe­resolutionofstate-ownedbanksandcooperativebanks.PriortojoiningtheWorldBank,sheworkedattheIMF,withafocusonmacrofinancialissues.EvahasaPhDineconomicsfromBostonUniversity,amaster’sdegreeinfinan-cialeconomicsfromtheCenterforMonetaryandFinancialStudies,Madrid,andabachelor’sdegreeineconomicsfromtheUniversidaddeMurciainMurcia,Spain.TatsianaKliatskovaisafinancialsectoreconomistintheSouthAsiaFinance,Competitiveness,andInnovationGlobalPracticeoftheWorldBank.PriortoixxGreeningNationalDevelopmentFinancialInstitutionsjoiningtheWorldBank,shewasaresearchfellowattheDeutscheBundesbankandaresearchassociateatDIWBerlin.Hermainresearchandpolicyinterestsincludetheroleofthestateindevelopmentandfinance,bankregulationandsupervision,andcapitalmarketsdevelopment.TatsianahasaPhDineconomicsfromtheFreeUniversityofBerlin,Germany,andamaster’sdegreeineconomicpolicyfromtheCentralEuropeanUniversityinBudapest,Hungary.RachelMokisafinancialsectorspecialistfortheSouthernandEasternAfricaUnitoftheWorldBank,wheresheprimarilydevelopstechnicalassistancepro-grams,operations,andpolicydiagnosticsrelatedtogreeningcountries’financialsystems.Examplesofherworkincludedevelopingapproachestodeepengreenfinancing(forexample,inthecontextofgreeningNationalDevelopmentBanks,developinggreenfinancinginstrumentssuchaslabeledbondsorloans,andstimulatingtheprivateandfinancialsector’sengagementincarbonmarkets)andworkingwithcentralbanksandfinancialregulatorstoenhancetheassess-mentandmanagementofclimate-relatedfinancialrisks.Inaddition,shehassupportedthedevelopmentoftheWorldBank’scorporatestrategyonclimatefinance,whichaimstoidentifywaysinwhichtheInternationalFinanceCorporation,theMultilateralInvestmentGuaranteeAgency,andtheWorldBankcouldworktogethertoscaleupclimatefinanceforclientcountries.Shealsoworksonprogramsrelatedtocarbonpricingandcarbonmarkets,includingthroughthePartnershipforMarketImplementation,NetworkedforCarbonMarketsinitiative,andInvestforClimateprograms.RachelhasanMScinenvi-ronmentaltechnologyfromImperialCollegeLondonandaBScingeographywitheconomicsfromtheLondonSchoolofEconomicsandPoliticalScience,UnitedKingdom.MartijnGertJanRegelinkisaseniorfinancialsectorspecialistintheFinance,Competitiveness,andInnovationGlobalPracticeoftheWorldBank.HeleadstheWorldBank’sadvisoryservicesonC&Erisksforthefinancialsector,provid-ingpolicyadvicetoregulatorsandsupervisorsaroundtheworld.Inaddition,herepresentstheWorldBankintheNetworkforGreeningtheFinancialSystemandFinancialStabilityBoardworkinggroupsonclimaterisk.Previousexperi-enceincludesworkingasastrategyadvisertotheboardoftheDutchCentralBank,wherehespearheadedthebank’sinauguralprogramfocusingonclimaterisks.MartijnhasanMScininternationaleconomicsandbusinessandanMAininternationalrelationsandorganizations,bothfromGroningenUniversity,theNetherlands.ExecutiveSummaryNationalDevelopmentFinancialInstitutions(NDFIs)arecrucialformobilizingtherequiredfinancing,includingfromprivatesources,toreachcountries’climateandenvironmental(C&E)objectives.Fundingneededtoachievecountries’C&Egoalsisinthetrillionsofdollars.Atthesametime,manycountriesarealsofacingsignificantfiscalandeconomicconstraints.Low-incomeandmiddle-incomecountries(LICsandMICs),otherthanChina,needanestimatedUS$783billionperyearinadditionalinvestmentsforclimateactionthrough2030(WorldBank2023).NDFIshavethescaletoplayanessentialroleinmobilizingtherequiredfinancingfrompublicandprivatesourcestowardC&Egoals.NDFIsarewellpositionedtoovercomemarketbarriersassociatedwithgreeninvestmentsandcatalyzeprivate-sectorfinancing.NDFIs,whenadequatelymanaged,canaddressmarketfailuresandcreatenewmarkets.Comparedtopri-vateinvestors,NDFIshaveastrongerappetiteforfinancinglong-term,high-riskinvestmentsandcanthusovercomemarketbarriersassociatedwithgreeninvestments,suchaslongpaybackperiodsandhighperceivedprojectrisk.NDFIshavethetoolstosupportprivatecapitalmobilizationthroughde-riskinginstrumentsandblendedfinancing.Moreover,NDFIscanenableprivatecapitalmobilizationbysupportingthegenerationofagreenprojectpipelineandthroughdemonstrationtransactionsthatstimulatemarketcreation.GiventhelimitedcapacityofgovernmentstoscaleupC&Efinancingowingtocurrentfis-calconditions,NDFIs’roleinmobilizingprivatefinancingwillbecriticaltoclos-ingtheC&Efinancinggaps.Atthesametime,NDFIsmustmanagetherisksthatclimateandotherenvi-ronmentalconcernspresenttotheirinvestmentandlendingoperations.NDFIs,likeotherfinancialinstitutions(FIs),areexposedtotheimpactsofphysicalrisks—financialrisksstemmingfromtheeffectsofclimatechange,environmen-taldegradation,andlossofnatureontheeconomy—aswellastransitionrisksoriginatingfromtherealignmentofeconomieswithC&Egoals.Inaddition,lackofcompliancewithgoodC&Epracticesandregulationscanaffectthefinancialperformanceofassetsorresultinreputationalrisksfortheinstitution.Movingforward,NDFIsshouldrespondtoemergingguidancesetbyfinancial-sectorsupervisorsandstandardsetterstobettermanageanddiscloseC&Erisksattheinstitutional,project,andportfoliolevels.xixiiGreeningNationalDevelopmentFinancialInstitutionsThemainpurposeofthispublicationistotakestockofthecurrenttrendsandrecommendpolicyactionsfor“greening”NDFIs.ThereportidentifieskeystepsNDFIscantaketocatalyzefinancetowardcountries’C&Eobjectivesandman-ageC&Erisks.TheassessmentofNDFIs’C&EpracticesisbasedonareviewofkeyelementsofNDFIoperationsandtheirinstitutionalsetup.ItdrawsfromtheresultsofasurveyconductedbytheWorldBankofgreeningpracticeswithinNDFIsbasedincountriesinarangeofregionsandincomelevels,1aswellasonin-depthcasestudiesoffourNDFIs:1.FideicomisosInstituidosenRelaciónconlaAgricultura(FIRA,inMexico),2.KoreaDevelopmentBank(KDB,intheRepublicofKorea),3.TürkiyeSinaiKalkinmaBankasi(TSKB,inTürkiye),and4.DevelopmentBankofSouthernAfrica(DBSA,inSouthAfrica).ResultsofasurveyofNDFIs(refertofigureES.1)conductedbytheWorldBankshowthatthemajorityofNDFIshaveadoptedgreengoalsintheirstrategyandgovernanceandthatafewhavesetspecifictargetslinkedtoParisAgreementorotherclimatecommitments.Morethan80percentofthesurveyrespondentshavesetgreenobjectivesandpreparedstrategiestogreentheirportfolios,oftenaccommodatedwithintheexistingdevelopmentmissionandstrategyoftheinstitution.Abouttwo-thirdsofrespondentshavemadepublicpledgesorcom-mitmentstoalignwithinternationalornationalclimategoals.However,onlyafewinstitutionshavesetspecifictargetsordisclosedtheircontributionstoC&EtargetssuchastheParisAgreement’sNationallyDeterminedContributions(NDCs).ThemajorityofsurveyedNDFIshavesetgreenfinancingtargetsandexcludedfinancingofsomenongreenprojects.OverhalfofthesurveyedNDFIshaveincorporatedenvironmentalandsocialconsiderationsintotheirgover-nancearrangements,oftensupportedbyspecificpoliciesandstrategies,andmanyhavecreateddedicatedunitsorhigh-levelcommitteestoaddressC&Etopics.NDFIsareleadingplayersinpublicclimatefinance,buttheshareofgreenassetsintheirportfolioremainslow,withlimitedadaptationfinancingandFIGUREES.1KeyresultsofNDFIsurveyNDFIsreportonC&ErisksSurveyquestionsNDFIsassesstheimpactofC&EfinancialrisksintheirportfolioNDFIshavespecificgreenfinancingtargetsNDFIshaveC&Eobjectivesintheirmissionormandate020406080100PercentageofresponsesYesNoSource:Figureoriginaltothispublicationandbasedonself-reportingby22NDFIs.Note:C&E=climateandenvironmental;NDFI=NationalDevelopmentFinancialInstitution.ExecutiveSummaryxiii­privatecapitalmobilization.NDFIsprovidearound22percentoftotalglobalclimatefinancingandthemajorityofpublicclimatefinance,especiallyinLICsandMICs.2However,althoughNDFIsarecriticalplayersinpubliccli-matefinancing,theshareofgreenassetsintheircreditportfoliosisstillrela-tivelylow,withmostsurveyrespondentsreportinggreenassetsoflessthan20percentofcreditportfolios,or14percentonaverage.Forthefewsurveyedinstitutionsthatmonitorclimateadaptationandmitigationfinance,climatefinanceisstronglybiasedtowardmitigation,mainlythroughdirectlending,withlimitedexposuretoclimateadaptation.OnlyahandfulofthesurveyedNDFIstargetandtrackthemobilizationofprivatecapital,includingthroughco-financingwithotherFIs.SurveyedNDFIsusegreenandsustainability-​linkeddebtinstrumentstofundtheirgreenambitions.However,useoftheseinstrumentsremainslimited.PerceivedchallengesbyNDFIstoscalingupgreenfinancingincludeanunsupportivepolicyenvironment,afundinggap,andlackofknowledgeandawarenessofC&Eissuesonboththeclients’andNDFIs’sides.Moreover,C&Eriskmanagementanddisclosurepracticesarestillnascent.Sofar,surveyedNDFIshavebeenintroducingC&Erisksmainlythroughthelensofenvironmentalandsocialriskmanagementsystems.InstitutionsassesstheserisksattheloanoriginationlevelwithafocusontheimpactsofloansandinvestmentsonC&Efactors,insteadofthefinancialrisks.Althoughthesesystemsarestillbasicinmanycases,themajorityofthesurveyedNDFIshavedevelopedsomedefinitionorclassificationsystemforgreenprojects.Atthesametime,mostNDFIsarenotassessingandmanagingexposurestoC&Efinancialrisksattheportfolioandbalancesheetlevelsorintegratingthisinformationintostrategyandgovernancearrangements.Lackofdata,standardizedmethodologies,andtechnicalcapacityarecitedascriticalchallengestomainstreamC&Eriskmanagementpractices.Moreover,whilesomeofthesurveyedNDFIshavepublicsustainabilityreports,C&Efinancialdisclosuresinlinewithinternationalguidancearemainlyabsent.NDFIscantakevariousactionstoboostgreenfinancing,includingthroughprivatecapitalmobilization,andtoimprovethemanagementanddisclosureofC&Erisks(refertofigureES.2).•NDFIsshouldintroduceinternalgovernanceandstrategyarrangementstosupporttheprioritizationofgreenobjectivesandensurestakeholdercoordination.Governancearrangementsshouldincludestrongboardinvolvementandcoordinationmechanisms.Astrategyshouldcoverthecom-pletesetofactivitiesacrossgreenfinancingandC&Eriskdimensions.Itshouldalsocommunicatecleartargets,includingthetargetedshareofgreenassets.ThestrategiescouldconsiderbroadercontextualprioritiessetoutbytheNDCsandalignwithglobalagendasaroundtheParisAgreement.NDFIsshouldalsobuildtherequiredexpertiseacrosstheorganizationbyleveraginginternationalandnationalnetworks.•Toincreasegreenfinancing,pipelinepreparationandprivatecapitalmobilizationshouldtakecenterstage.NDFIscansupporttheenablingenvironmentforprivatecapitalthroughthedevelopmentofbankableproj-ectsusingtechnicalassistance,marketeducation,standardizationofapplica-tionprocedures,andthecreationofprojectpreparationfacilities.ImprovedaccesstointernationalconcessionalclimatefundscanfurthersupportNDFIstofinancetheirambitions.Wherepossible,NDFIsshouldexploreusingmorexivGreeningNationalDevelopmentFinancialInstitutionsinnovativeinstruments(beyonddirectlendingactivities)tocatalyzeprivatefinance.Thisincludesincreasingfocusonblendedandequityfinancing,aswellasscalinguptheuseandpilotingofinnovativegreeninstruments,suchassustainability-linkedbondsandloanstoincentivizegreenperformance.NDFIsshouldalsoexpandtheirofferingsincriticaldevelopmentareasthatgenerateimportantglobalordomesticpublicgoods,suchasadaptationandnature-basedfinancing.•AbetterandmoresystemicunderstandingofC&EfinancialrisksisanimportantfirststeptoinformingC&Eriskmanagementpractices.NDFIsshouldadoptcomprehensiveC&Eriskmanagementapproachesthatcon-siderC&Erisksfromboththeimpactandthefinancialriskangles—thatis,FIGUREES.2OverviewofkeyrecommendationsforNDFIs,authorities,anddevelopmentpartnersNationalDevelopmentFinancialInstitutions•DevelopaninternalstrategyforGovernanceGreen•SupportthedevelopmentofC&EriskmanagementandandstrategyfinancingbankableC&Eprojectsgreenfinance•Designfinancialinstrumentsto•Developaninternalgovernancestimulateprivateinvestmentsframeworktodeliveronthestrategy•Improveaccesstoconcessionalfundsandgrants•Deepengreenfinanceandcarbonmarkets•Implementclimatefinance–DisclosureandC&Erisk•ConductaC&Eriskassessmenttrackingmethodologies,reportingmanagementincludingtrackingprivate•ImproveC&Edataaggregationfinancemobilizationandinternalreportingframework•Enhancedisclosureand•BuildinternalcapacitytoassessreportingonC&ErisksC&Erisks•IntegrateC&ErisksintoexistingriskmanagementframeworksNationalgovernmentsandWorldBankGroupandotherinternationalfinancialregulatorsdevelopmentpartners•Createtheenablingpolicyenvironmentfor•ProvidetechnicalassistancetoimproveNDFIs’greeningNDFIsC&Epractices•EnhanceNDFIs’accesstomultilateralfunding•ProvidefundingtogreenNDFIoperationsandandinternationalcapitalmarketspilotnewgreenproducts•AlignNDFIs’mandatesandmissionswithC&E•Providetechnicalassistancetogovernmentandobjectivesregulatorstocreateenablingpolicyenvironment•Providesupporttogovernments(andNDFIs)toenhanceNDFIs’overallcorporategovernanceSource:Figureoriginaltothispublication.Note:C&E=climateandenvironmental;NDFI=NationalDevelopmentFinancialInstitution.ExecutiveSummaryxvcoveringpotentialrisksgeneratedbytheinstitutions,aswellasfinancialriskstotheirbalancesheets.NDFIscouldconductexposureandforward-lookingassessments,includingmoreadvancedtoolssuchasscenarioanalysisandstresstesting,tobetterunderstandtheimpactandmaterialityofC&Efinan-cialrisksonNDFIs’creditandinvestmentportfolios.Theseeffortsshouldbesupportedbyharmonizingandobtainingrelevantdata.Basedoninitialfind-ingsoftheriskassessment,NDFIscouldintegrateC&Erisksintotheirriskmanagementprocess,internalcontrolframeworks,andcapitalandliquidityadequacyassessmentprocesses.•NDFIsshouldenhancetheirC&Edisclosureandreportingpractices,whichisanimportantmeanstofacilitatecommunicationwithclients,­beneficiaries,andotherstakeholders.DisclosuresshouldbuildonTaskForceonClimate-RelatedFinancialDisclosures(TCFD)guidanceandInternationalSustainabilityStandardsBoard(ISSB)guidance.Equally,NDFIsshouldaimtoimprovethequality,transparency,andconsistencyofgreenfinancingtrackingmethodologies,includingmethodologiesthattracktheamountofprivatefinancemobilized.Governments,financial-sectorregulators,andMultilateralDevelopmentBanks(MDBs),includingtheWorldBank,haveanessentialroleinsupportingthegreeningofNDFIs.Governmentsandotherfinancial-sectorauthoritieshaveacrucialroleinshapingtheenablingenvironmentforgreeningNDFIs.Thisinvolvesseveralkeyactions,suchasdevelopingambitiousnationalC&Etargets,integratingNDFIsintotheimplementationofNDCs,establishingsupportivelegislationandpolicies(forexample,carbonpricingandsectorregulations),aswellasdevelopingfinancial-sectorpoliciesandregulations(forexample,agreentaxonomyorprudentialregulations).Governmentscanincentivizefurther­integrationofC&EconsiderationsintoNDFIs’mandates,strategies,businessmodels,andinvestmenttargets.TheWorldBankandotherMDBscouldprovidetargetedsupportthrough•TechnicalassistanceforNDFIstobuildtheircapacityonC&Eriskmanage-mentandgreenfinancing,•FundingtoNDFIsthatarelookingtogreentheiroperations,and•SupporttoauthoritiestocreatetheenablingenvironmentforgreeningNDFIs.AsNDFIsscaleupoperationstomeetgreenfinancingneeds,itisessentialtoenhanceNDFIs’efficiencyandeffectivenessbyensuringthattheyareeffectivelymanagedandproperlysupervised.Toimproveefficiency,governmentscouldincentivizethegreeningofstate-ownedNDFIsbyintegratingC&EandprivatecapitalmobilizationconsiderationsintoNDFIs’mandatesormissionsandalign-ingincentivesthroughouttheinstitutionbyusingeffectiveshareholderfunc-tions.NDFIsshouldmaintainfinancialsustainability,beyondsubsidies,limitingthescopeofsubsidizedlendingwithaviewtoavoidingcrowdingouttheprivatesector,fosteringinnovation,andreducingincentivesforcorruption.FinancialsupervisoryauthoritiesshouldensurethatNDFIsareproperlysupervisedandoperateonalevelplayingfieldrelatedtoprudentialregulationsandcompeti-tion.IncaseswheretheenvironmentisnotsupportiveofNDFIeffectiveness,itmaybeadvisabletooperateinasecondtierthroughotherfinancialintermediaries.xviGreeningNationalDevelopmentFinancialInstitutionsNOTES1.Theresultsofthesurveycoverresponsesfrom22NDFIsaccountingforabout9percentofglobalNDFIassets.AlthoughtheresultsofthesurveyarenotnecessarilyrepresentativeforthewholeuniverseofNDFIs,theyareusedtoshowcasethebestpracticesofNDFIsindevelopingandpursuingagreenagenda.2.AccordingtotheClimatePolicyInitiative,theaverageclimatefinanceprovidedbyNDFIsin2019–2020wasUS$145billion,or22percentoftotalclimatefinancing,representingthemajorityofpublicclimatefinancinginthatperiod(CPI2022).BIBLIOGRAPHYCPI(ClimatePolicyInitiative).2022.GlobalLandscapeofClimateFinance:ADecadeofData.https://www.climatepolicyinitiative.org/wp-content/uploads/2022/10/Global-Landscape​-of-Climate-Finance-A-Decade-of-Data.pdfWorldBank.2022.WhatYouNeedtoKnowaboutNetZero.Washington,DC:WorldBank.https://www.worldbank.org/en/news/feature/2022/05/23/what-you-need-to-know​-about-net-zero#:~:text=Technically%2C%20global%20net%20zero%20will,be%20released%20into%20the%20atmosphere.WorldBank.2023.SpendingNeedstoAddressSelectedGlobalChallenge.BackgroundnotefortheEvolutionRoadmap.Unpublished.GlossaryClimateadaptationandresilienceisaresponsetoglobalwarmingthatseekstoreducethevulnerabilityofsocialandbiologicalsystemstotheimpactofclimatechange.Climatefinanceisalllendingandinvestmentsdrawnfrompublic,private,andalternativesourcestosupportmitigationandadaptationactionsthatwilladdressclimatechange.Climatemitigationconsistsofactionstolimitthemagnitudeorrateoflong-termglobalwarminganditsrelatedeffects.Climatephysicalrisksare(financial)risksresultingfromthephysicalimpactsofclimatechange.Thiscouldincludeacutehazards(thatis,event-drivenhaz-ards,includingmorefrequentandintenseextremeeventssuchascyclonesorheatwaves)andchronichazards(thatis,long-termchangesinclimatepatterns,suchastemperaturerise).Climateriskisabroadtermcapturingclimatephysicalandtransitionrisks.Climatescenarioanalysisexplorespotentialclimateriskoutcomes.Byexamin-ingawiderangeofscenarios,thisapproachcanhelpexplainuncertaintiesandestimatetailrisks.Climatestresstestingisapplyingscenarioanalysistoevaluatetheresiliencyofthefinancialsectororindividualinstitutionstoshockscausedbytheeffectsofseverebutplausibleclimatescenarios.Stresstestsforclimaterisksaretypicallyexplorativeinnatureandhavesofarnotbeenusedaspass/failexercisesortoincreasecapitalrequirementsforfinancialinstitutions(FIs).Climatetransitionrisksare(financial)risksthatcanresultfromtheprocessofadjustmenttowardalower-carbonandmorecirculareconomy,prompted,forexample,bychangesinclimateandenvironmentalpolicy,technology,market,andconsumersentiment.Environmentalriskscoverclimatephysicalrisks,transitionrisks,andnon-­climatechange–relatedenvironmentalriskssuchaslocalairpollutionandlossofbiodiversity.xviixviiiGreeningNationalDevelopmentFinancialInstitutionsFinancialinstitutions(FIs)arefinancial-sectorfirms,includingbanks,pensionfunds,insurancecompanies,assetmanagers,brokeragefirms,andinvestmentdealers.Greenfinancingincludesalllendingandinvestmentsthatcontributetoclimatemitigation,adaptation,andresilienceandtootherenvironmentalobjectives,includingbiodiversitymanagement.Greeningthefinancialsystemistheroleofallactorsinthefinancialsectorinmobilizinginvestmentsandlendingtowardgreengoalsandmanaging­climate-relatedandenvironmentalrisks.Greenwashingisthepracticeofmarketingfinancialproductsasgreenwheninfacttheydonotmeetclimate-relatedorenvironmentalstandards.NationalDevelopmentFinancialInstitutions(NDFIs)areanytypeoffinan-cialinstitutionthatanationalgovernmentfullyorpartiallyownsorcontrolsandthathasbeengivenanexplicitlegalmandatetoreachsocioeconomicgoalsinaregion,sector,ormarketsegment.DevelopmentBanksarethelargestNDFIs,butotherinstitutions,suchaspubliccreditguaranteefunds,publictrustfunds,orpubliccreditagencies,areincludedundertheNDFIdefinition.NationallyDeterminedContributions(NDCs)areacentralelementforimple-mentingtheParisAgreementandrepresentacountrygovernment’splanfornationalclimateactions,includingclimate-relatedtargets,policies,andmeasures.Net-zerogreenhousegas(GHG)emissionswillbeachievedgloballywhenhuman-causedGHGemissionshavebeenreducedtotheabsoluteminimum­levelsfeasibleandanyremaining“residualemissions”arebalancedbyanequiv-alentquantityofpermanentanthropogenicremovalssothattheycannotbereleasedintotheatmosphere.ThetermanthropogenicremovalreferstothewithdrawalofGHGsfromtheatmospherethroughdeliberatehumanactivities,forinstance,bytechnologicalsolutions(directaircaptureandstorage)orby­naturalsolutions(landrestorationandimprovedforestmanagement).ParisAgreementisalegallybindinginternationaltreatyonclimatechangethatwasadoptedby196PartiesatCOP(ConferenceoftheParties)21inParisonDecember12,2015,andenteredintoforceonNovember4,2016.Publicauthoritiescovergovernmentministriesorgovernmentagencies,aswellassupervisorsandcentralbanks.Thisreporttargetsfinancialpolicymakers(forexample,ministriesoffinance,centralbanks,andfinancialregulatorsandsupervisors).Sustainablefinanceincludesalllendingandinvestmentthatcontributestoenvironmental,social,andgovernance(ESG)orothersustainabledevelopment–relatedgoals.AbbreviationsAFDAgenceFrançaisedeDéveloppementBCBSBaselCommitteeonBankingSupervisionBNDESBrazilianDevelopmentBankC&EclimateandenvironmentalCFFClimateFinanceFacilityCPIClimatePolicyInitiativeDBDevelopmentBankDBSADevelopmentBankofSouthernAfrica(SouthAfrica)DFIDevelopmentFinancialInstitutionE&SenvironmentalandsocialEIBEuropeanInvestmentBankERETTSKBEnvironmentalandSocialRiskEvaluationToolESGenvironmental,social,andgovernanceESRMenvironmentalandsocialriskmanagementESSenvironmentalandsocialstandardsFIfinancialinstitutionFIRAFideicomisosInstituidosenRelaciónconlaAgricultura(Mexico)GCFGlobalClimateFundGDPgrossdomesticproductGEFGlobalEnvironmentalFacilityGHGgreenhousegasHIChigh-incomecountryIADBInter-AmericanDevelopmentBankICinvestmentconceptIDFCInternationalDevelopmentFinanceClubIFCInternationalFinanceCorporationIFOInternationalFinancialOrganizationISDAIntegratedSustainableDevelopmentApproachISSBInternationalSustainabilityStandardsBoardKDBKoreaDevelopmentBank(theRepublicofKorea)KFWKreditanstaltfürWiederaufbau(Germany)LIClow-incomecountryxixxxGreeningNationalDevelopmentFinancialInstitutionsLMIClower-middle-incomecountryMDBMultilateralDevelopmentBankMICmiddle-incomecountryMSMEmicro,small,andmediumenterpriseNDBNationalDevelopmentBankNDCNationallyDeterminedContribution(perParisAgreement)NDFINationalDevelopmentFinancialInstitutionSARASSistemadeAdministraciondeRiesgosAmbientalesySociales(FIRA)SDGSustainableDevelopmentGoal(perUnitedNations)SOEState-OwnedEnterpriseSOFIState-OwnedFinancialInstitutionTCFDTaskForceonClimate-RelatedFinancialDisclosuresTNFDTaskforceonNature-RelatedFinancialDisclosuresTSKBTürkiyeSinaiKalkinmaBankasiUMICupper-middle-incomecountryUNUnitedNationsUNDPUnitedNationsDevelopmentProgrammeUNEPUnitedNationsEnvironmentProgramme€euroUS$USdollars₩won1IntroductionBACKGROUNDFundingneededtoreachcountries’climateandenvironmental(C&E)objectivesisinthetrillionsofdollarsatatimewhenmanycountriesfacesignificantfiscalandeconomicconstraints.Low-incomeandmiddle-incomecountries(LICsandMICs),otherthanChina,needanestimatedUS$783billionperyearinadditionalinvestmentsforclimateaction—torecovereducationandinvestmentlossesfromthepandemicandtoaddressconflictandfragility—through2030(WorldBank2023).Investmentneedscouldincreasesharplyifinterventionsaredelayed,spendingisinefficient,orpoliciesareinadequate(RozenbergandFay2019).Greenfinancingcanimprovelong-termfiscalsustainabilityandresilience,aswellasenhancecountries’competitivenessandgrowth;however,thelargefund-ingneedsforC&Eactioncomeatatimewhenmanycountriesarefacingbroaderdevelopmentchallenges.Slowinggrowth,risingfoodandenergyprices,highlevelsofpublicandprivatedebt,andgrowingfiscalconstraintsareexacerbatedbyrisinginterestratesglobally,thepersistenceoftheCOVID-19pandemic,andtheimpactofthewarinUkraine(WorldBank2022b).Undersuchcircum-stances,LICsandMICsfacedifficulttrade-offsbetweencompetinginvestmentneedsandarestrugglingtomobilizepublicandprivateresourcesrequiredfortheirclimate,environmental,anddevelopmentpriorities.RecognitionisgrowingthatC&Ephysicalandtransitionriskscouldnegativelyaffectcountries’economiesandfinancialsectors.Physicalrisksstemfromtheshort-andlong-termeffectsofclimatechange,environmentaldegradation,andnaturaldisasterssuchassealevelrise,droughts,floods,andhurricanes.Transitionrisksoriginatefromeffortstomitigateclimatechangeandimproveenvironmentalconditionsbygreeningtheeconomy,whichmaycreateeconomicadjustmentcostsinabroadrangeofsectors.OneestimatesuggeststhatinsufficientactiononclimatechangecouldcosttheglobaleconomyUS$178trillionby2070,almostdoublethecurrentglobalgrossdomesticproduct(GDP)(Deloitte2022;WorldBank2022c).Atthesametime,climatechangeandotherfactorsareleadingtoirreversible,nonlinearimpactsonbiodiversityandecosystemservices.EstimatessuggestthatthisissuecouldleadtoareductioninGDPofmorethan10percentinLICsandMICsin203012GreeningNationalDevelopmentFinancialInstitutions(Johnsonetal.2021).Theseimpactscould,inturn,adverselyimpactthefinancialsectoriftheyarenotanticipatedbyfinancialinstitutions(FIs).Torespondtotheserisks,anincreasingnumberofcentralbanksandsupervi-sorshavebeguntoreformtheirsupervisoryframeworktoencourageFIstobet-terassess,disclose,andmanageC&Erisks.Standard-settingbodiesarealsostartingtointroduceguidanceandprinciplestopromoteacommonunderstand-ingaroundhowclimate-relatedfinancialriskscanbeeffectivelymanaged.1Thisreportaimstotakestockofthecurrenttrendsandrecommendspolicyactionsfor“greening”NationalDevelopmentFinancialInstitutions(NDFIs).2Byexaminingthecurrentstateandtrendsacrossdifferentdimensions,asdis-cussedlater,thispublicationaimstoidentifystepsthatNDFIscouldtaketocat-alyzefinancetowardcountries’C&EobjectivesandtomanageC&Erisks.Italsoidentifiespriorityactionsthatcountrygovernments,MultilateralDevelopmentBanks(MDBs)(includingtheWorldBank),andfinancialregulatorscouldtaketocreateanenablingenvironmentforgreeningNDFIs.NATIONALDEVELOPMENTFINANCIALINSTITUTIONSNDFIsarewellpositionedtoplayanessentialroleinmobilizingtherequiredfinancingtowardcountries’C&Eobjectives.ThecollectivescaleofNDFIassets(closetoUS$19trillion)significantlyexceedsthatofthemultilateralsystem,andNDFIfinancingactivitiesrepresentover10percentofglobalinvestmentsannually.3Inthiscontext,NDFIscouldplayanimportantroleinaddressingC&Echal-lenges.First,theinvolvementofNDFIsintheprovisionofgreenfinancingcanbejustifiedbytheirroleinaddressingmarketfailures,includingthosearisingfromexternalitiesthatresultinunderfundingofprojectswithlargesocialreturns,suchasgreenprojects(Levy-Yeyati,Micco,andPanizza2004).Thus,NDFIsoftenfulfilldevelopmentobjectivesbyfinancingprojectsthatthepri-vatesectorisunwillingorunabletofinance—forexample,insuchunderservedsectorsasagricultureandmicro,small,andmediumenterprises(delaTorre,Gozzi,andSchmukler2007;Gutierrezetal.2011;HainzandHakenes2012;WorldBank2012).Furthermore,ascomparedtoprivateinvestors,NDFIsusu-allyhaveastrongerappetiteforfinancinglong-term,high-riskinvestmentsandcanthusaddresscriticalmarketbarriersassociatedwithgreeninvestments,suchaslongpaybackperiodsandhighperceivedprojectrisks.Second,NDFIscanhaveconsiderableinfluenceonacountry’sdevelopmentandinvestmentplansandpoliciesowingtotheirproximitytopolicymakers,localmarkets,andinternationaldevelopmentfinance.Third,NDFIscancrowdinprivateinvestmentforgreenactivitiesbydevelopinginnovativeapproachessuchasblendedfinancing,co-financing,andde-riskinginstruments.Finally,NDFIscanalsoplayaroleincreatingprivatecapitaltoenableenvironmentalprojectsbybuildingatrackrecordongreeninvestmentsandactingasafirstmoverinfinancingdemonstrationprojectsattheearlystagesofmarket­development.NDFIscanalsoprovidetechnicalassistanceandcapacitybuildingatallstagesofprojectdevelopment.AswithanyotherFIs,NDFIsmustproperlyidentifyandmanagetherisksthatC&Efactorsposetotheirportfolios.Assuch,NDFIsshouldconsiderC&Erisksbeyondthelensofenvironmentalandsocialriskmanagement(ESRM)sys-tems—thatis,assessingenvironmentalandsocialrisksattheloanoriginationIntroduction3levelwithafocusontheimpactsofloansandinvestmentsonC&Efactors—andalsoconsiderthefinancialrisksC&Efactorsposetotheirbalancesheets.C&Erisksincludephysicalrisks—thatis,financialrisksstemmingfromtheeffectsofclimatechange,environmentaldegradation,andlossofnatureontheeconomy—aswellastransitionrisksoriginatingfromtherealignmentofeconomieswithC&Egoals.Inaddition,lackofcompliancewithgoodC&Epracticesandregula-tionscanaffectthefinancialperformanceofassetsorresultinreputationalrisksfortheinstitution.ThereiswiderecognitionoftheroleofNDFIsintheattainmentofgreenobjec-tives,despiteconcernsoverstateownershipoftheseentities.Mainconcernsinclude,forexample,crowdingoutprivateinvestments,inefficientmanagementofresources,creatingcompetitionwithcommercialbanks,andsupportingtheobjec-tivesofpoliticalelites,ratherthanaddressingsustainabledevelopmentobjectives.Despitetheseconcerns,74newNDFIswereestablishedduringtheperiod2010–20.TheEuropeanCommissionandtheUnitedNationshaveexpressedstrongsup-portforNDFIs(GutierrezandKliatskova2021),withtheG20(GroupofTwenty)andtheWorldBanksimilarlyrecognizingtheimportantroleofpublicdevelop-mentbankstowardtheachievementoftheUnitedNationsSustainableDevelopmentGoals(SDGs)andtheParisAgreement(WorldBank2022a).TheconceptualframeworkfortheassessmentofNDFIs’C&EpracticesisbasedonthereviewofkeyelementsofNDFIoperationsandtheirinstitutionalsetup.TheframeworkisbasedontheWorldBankState-OwnedFinancialInstitution(SOFI)diagnostics,4whichincludesthreepillars:functional,eco-nomic,andoperational.Thefunctionalpillarassessesthemandateormissionoftheinstitution,itsoperations,anditsalignmentbetweenoperationsandman-date.TheeconomicandfinancialassessmentpillarexaminestheeconomicandfinancialperformanceoftheSOFI.Finally,theoperationalassessmentpillarevaluatestheadequacyofthelegalandoversightframework,corporategover-nance,riskmanagementpractices,andmonitoringandevaluationpractices.FortheevaluationofNDFIC&Epractices,thisreportfocusesonthefunctionalassessmentaspects(mandateormissionandoperations)andtheoperationalaspects,excludingthelegalandregulatoryframeworkunderwhichtheinstitutionsoperate.5Thekeyelementsoftheassessmentincludethefollowingmodules(refertofigure1.1):FIGURE1.1ModulesofassessmentofNDFIC&EpracticesGreengovernanceandstrategyGreenfinancingsourcesandusesC&EriskmanagementC&EdisclosuresandreportingSource:Figureoriginaltothispublication.Note:C&E=climateandenvironmental;NDFI=NationalDevelopmentFinancialInstitution.4GreeningNationalDevelopmentFinancialInstitutions•Greengovernanceandstrategy:AddressingC&ErisksandopportunitiesrequirestheboardsandseniormanagementofNDFIstobecommittedandengaged.ThismoduleassessesNDFIs’strategies,internalorganizationandgovernancestructures,andallocationofadequateresourcestoeffectivelyintegrateC&EconsiderationsintoNDFIs’operations.•Greenfinancingsourcesanduses:ThismodulefocusesonNDFIs’supportofinvestmentscriticalforachievingacountry’sC&Eobjectives.Inaddition,itassessesNDFIs’roleincatalyzingprivatefinancetowardC&Eactionsthroughblendedfinancingorco-financing,creditenhancements,andde-r­iskinginstruments(forexample,guarantees).Finally,themoduleexam-inesNDFIs’abilitytoleveragedifferentmechanismstoensurethattheyhavesufficientfundingtosupportgreeninvestments,includingaccessingnationalandinternationalclimatefundsandengagingingreenfinancingmarkets(forexample,byissuinggreenbonds).•C&Eriskmanagement:NDFIscanusevarioustechniquestoidentify,assess,andmanageC&Erisks.BeyondapproachesusedinESRMsystems,toolsforidentifyingandassessingC&Efinancialrisksincludesurveys,interviews,exposureanalysis,scenarioanalysis,andstresstesting.•C&Edisclosuresandreporting:ThismoduleexaminesNDFIs’applicationofgreendefinitionsandtaxonomyframeworkstodeterminewhatactivitiescontributetoC&EobjectivesandenhancementofC&Edisclosureandreportinginlinewithinternationalstandards.TheseapproachesareusedbyNDFIstoenhancemarkettransparencyandunderstandingofC&Erisksandopportunities.TheroleofNDFIsinthegreenandbroadersustainabilityagendaisgettingincreasingattention,withseveralguidancenotesandreportsonthetopichavingrecentlybeendeveloped.Forexample,theUnitedNationsDevelopmentProgramme(UNDP)haspublishedapaperontheroleofpublicdevelopmentbanksinscalingupsustainablefinance(UNDP2022).6TheInternationalDevelopmentFinanceClub(IDFC),withsupportfromtheInstituteforClimateEconomics(I4CE)andtheNewClimateInstitute,hasdevelopedanoperationalizingframework,whichincludesasetofprinciplesandtoolsforaligningNDFIs’financialflowswiththeParisAgreement(Lütkehermölleretal.2021).Inaddition,theInter-AmericanDevelopmentBankhasdevelopedaguidebookforNationalDevelopmentBanks(NDBs)onclimaterisk,whichprovidesaroadmapforintegratingclimaterisksintoNDBs’lendingstrategiesandportfoliomanagement(IADB2021).ANALYSISFORTHISPUBLICATIONTheanalysisforthispublicationbuildsonexistinganalyticalwork,aqualitativesurvey,andinterviewswithaselectionofNDFIs.Itbuildsonthewealthofresearchthathasalreadybeenconductedtoidentifypriorityactionsforgreen-ingNDFIsaswellasonasurveyconductedbytheWorldBankinJanuary2022.Thesurveyincludesquestionson(a)NDFIs’high-levelcommitmentstothegreenagenda;(b)provisionandtrackingofgreenfinancing;(c)sourcesoffund-ing,includingaccesstogreenfunding;(d)managementofC&Erisks;and(e)challengesandaspirationsforgreeningtheNDFIs(furtherdetailsontheIntroduction5surveymethodologyisprovidedinappendixA).Theresponseswerereceivedfrom22NDFIs,withwidegeographicalandincome-levelcoverage.Thedistri-butionofthe22NDFIsbyincomelevelisasfollows:3arefromhigh-income,13arefromupper-middle-income,4arefromlower-middle-income,and2arefromlow-­incomecountries.Byregionofoperation,8NDFIsarebasedinLatinAmerica,4areinEuropeandCentralAsia,5areinEastAsiaandthePacific,3areinSub-SaharanAfrica,and2areinSouthAsia.Inaddition,in-depthinterviewswereconductedwith4NDFIstoidentifygoodpractices.InterviewedNDFIsincludetheFideicomisosInstituidosenRelaciónconlaAgricultura(Mexico),theKoreaDevelopmentBank,theTürkiyeSinaiKalkinmaBankasi,andtheDevelopmentBankofSouthernAfrica(SouthAfrica),focusingonthefourpillarsdescribedintheconceptualframework.NOTES1.Notably,theBaselCommitteeonBankingSupervisionrecentlyissuedprinciplesfortheeffectivemanagementandsupervisionofclimate-relatedfinancialrisks,whichprovidesanimportantbaselineforbanks’andsupervisors’practicesrelatedtoclimaterisks.2.ThispublicationdefinesNDFIsasanytypeoffinancialinstitutionthatanationalgovern-mentfullyorpartiallyownsorcontrolsandthathasbeengivenanexplicitlegalmandatetoreachsocioeconomicgoalsinaregion,sector,ormarketsegment.DevelopmentBanksarethelargestNDFIs,butthereareotherinstitutions—suchaspubliccreditguaranteefunds,publictrustfunds,orpubliccreditagencies—thatareincludedunderthisdefinition.3.ThisnumberisbasedontheInstituteofNewStructuralEconomicsandAgenceFrançaisedeDéveloppementPublicDevelopmentsBankDatabase(November2022).4.TheSOFIdiagnosticisconductedinthecontextoftheIntegratedState-OwnedEnterpriseDiagnostic,theFinancialSectorAssessmentProgram,oronastand-alonebasisattheleveloftheSOFIsectororindividualinstitutions.5.AssessmentofNDFIs’financialperformanceandeconomicimpactoftheirgreenactivitiesisbeyondthescopeofthispublication,whichfocusesonreviewingNDFIinstitutionalarrangementsforgreenfinancing.Thefinancialperformanceassessmentwouldinvolveassessingprofitabilityinrelationtotheriskassumed,includingclimaterisks.Evaluatingtheeconomicimpactofgreenactivitiesinvolvesassessingcontributiontoclimategoals.Theassessment,however,coverswhetherinstitutionshavesystemsinplacetomeasureandmonitorclimaterisksintheirportfoliosandwhethertheytrackreductionincarbonemissions.Similarly,thepublicationdoesnotreviewtheC&Elegalframeworkofthecoun-triesinwhichNDFIsoperateortheextenttowhichtheprudentialregulatoryframeworkincludesenvironmentalorclimateconsiderations.However,thepublicationcoversNDFIspracticestoaddressC&Eeffects.6.Basedoninterviewsandconsultations,UNDP’sreportassessed(a)theroleofpublicdevel-opmentbanksinscalingfinancingtowardSDGs,(b)thegoodpracticesthatbankshavealreadydeveloped,and(c)hownationalandinternationalactors,includingMDBsandtheUnitedNations,cansupportthisagenda.BIBLIOGRAPHYdelaTorre,A.,J.C.Gozzi,andS.L.Schmukler.2007.InnovativeExperiencesinAccesstoFinance:Market-FriendlyRolesfortheVisibleHand?Washington,DC:LatinAmericanDevelopmentForum,WorldBank.Deloitte.2022.TheTurningPoint.Washington,DC:Deloitte,UNDP,WorldBank,andIADB.Gutierrez,E.,andT.Kliatskova.2021.NationalDevelopmentFIs:Trends,CrisisResponseActivities,andLessonsLearned.Washington,DC:WorldBank.6GreeningNationalDevelopmentFinancialInstitutionsGutierrez,E.,H.P.Rudolph,T.Homa,andE.BiancoBeneit.2011.“DevelopmentBanks:RoleandMechanismstoIncreaseTheirEfficiency.”PolicyResearchWorkingPaperWPS5729,WorldBank,Washington,DC.Hainz,C.,andH.Hakenes.2012.“ThePoliticianandHisBanker—HowtoEfficientlyGrantStateAid.”JournalofPublicEconomics96(1–2):218–25.IADB(Inter-AmericanDevelopmentBank).2021.AGuidebookforNationalDevelopmentBanksonClimateRisk.Johnson,J.,G.Ruta,U.Baldos,R.Cervigni,S.Chonabayashi,E.Corong,O.Gavryliuk,J.Gerber,T.Hertel,C.Nootenboom,andS.Polasky.2021.TheEconomicCaseforNature:AGlobalEarth-EconomyModeltoAssessDevelopmentPolicyPathways.Washington,DC:WorldBank.Levy-Yeyati,E.L.,A.Micco,andU.Panizza.2004.“ShouldtheGovernmentBeintheBankingBusiness?TheRoleofState-OwnedandDevelopmentBanks.”WorkingPaper517,Inter-AmericanDevelopmentBank,Washington,DC.Lütkehermöller,K.,A.Kachi,A.Pauthier,andI.Cochran.2021.OperationalizingFrameworkonAligningwiththeParisAgreement.Washington,DC:ClimateInstitute.Rozenberg,J.,andM.Fay.2019.BeyondtheGap:HowCountriesCanAffordtheInfrastructureTheyNeedWhileProtectingthePlanet.Washington,DC:WorldBank.UNDP(UnitedNationsDevelopmentProgramme).2022.TheRoleofPublicDevelopmentBanksinScalingUpSustainableFinance.NewYork:UNDP.WorldBank.2012.GlobalFinancialDevelopmentReport2013:RethinkingtheRoleoftheStateinFinance.Washington,DC:WorldBank.WorldBank.2022a.AchievingClimateandDevelopmentGoals:TheFinancingQuestion.Washington,DC:WorldBank.WorldBank.2022b.TheFoodandEnergyCrisis:WeatheringtheStorm.Washington,DC:WorldBank.WorldBank.2022c.GDP(currentUS$).Databank.Washington,DC:WorldBank.WorldBank.2023.SpendingNeedstoAddressSelectedGlobalChallenge:BackgroundNotefortheEvolutionRoadmap.Unpublishedmanuscript.2LandscapeofNDFIsSUMMARYNationalDevelopmentFinancialInstitutions(NDFIs)arehighlydiverseinsize,financialperformance,developmentobjectives,businessmodels,fundingarrangements,andgovernancepractices.TherolesthatNDFIscanplayinthegreentransitiondifferwidelyandlargelydependontheirspecificstructureandscope.ThischapterprovidesanoverviewofthelandscapeofNDFIs,presentingageneraldescriptionoftheirgrowthtrends,keychallengesfacedbythem,andhowtheymaydifferbyfundingsource,structure,andmandateacrossregions.BACKGROUNDNDFIscoveravarietyoffinancialinstitutions(FIs)thataretypicallystate-ownedandhaveasocioeconomicobjective.NDFIshaveapolicyobjectivethatiscloselyrelatedtotheeconomicdevelopmentofacountryorgivensector.AlthoughtheymaynottechnicallybeFIsbycountrydefinitions,NDFIshavetheirownbalancesheetsindependentfromthegovernmentthattypicallyownsthem.1DevelopmentFinancialInstitutions(DFIs)includeDevelopmentBanks(DBs),nonbankinstitutionsthatprovidecreditfordevelopmentalpurposes(forexample,theFideicomisosInstituidosenRelaciónconlaAgricultura[FIRA]inMexicoorCaissedesDépôtsinFrance),andpartialcreditguaranteefunds.DBsareDFIswithabankinglicense,whichallowsthemtocollectretailorwholesaledepositsandprovidecredit.NationalDBsarethemostcommontypeofDFIs,whichiswhythesetermsaresometimesusedinterchangeably.COREACTIVITIESNDFIs’coreactivityislending,andthemajorityrelyoninternationalcapitalmarketsforfunding.AccordingtotheWorldBank2017survey,themost­commonsourceoffundingisissuingdebtininternationalcapitalmarkets(85­percent),fol-lowedbyborrowingfromotherFIs(84percent),offeringofficialdevelopment78GreeningNationalDevelopmentFinancialInstitutionsassistance(77percent),andissuingdebtinlocaldebtmarkets(75percent;refertofigure2.1a)(WorldBank2018).TheprimaryactivityofNDFIsislending,with10percentfocusedexclusivelyonwholesaleloans,40percentprovidingonlyretailloans,and50percentprovidingacombinationofthetwo.AbouthalfofNDFIsprovideloansatsubsidizedrates,whicharefundedthroughcheaperlinesofcreditfromdonors,budgettransfersfromthegovernments,and,toalesserextent,cross-subsidizationfromprofitablebusinesslines.Apartfromcredit,NDFIsalsoofferloanguarantees(55percent),privateequityandventurecapital(47percent),anddepositaccounts(44percent;refertofigure2.1b).FIGURE2.1NDFIfundingsourcesandservicesa.SourcesoffundingIssuingdebtininternationaldebtmarkets85Borrowingfromotherfinancialinstitutions8477Officialdevelopmentassistance75IssuingdebtinlocaldebtmarketsParticipationatthelocalinterbankmarket56Depositsfromgovernmentagencies4631Depositsfromgeneralpublic29Directbudgettransfers1020304050607080900Percentageofrespondentsb.FinancialproductsandservicesLoanguarantees55Privateequity4744DepositaccountsMoneytransfers34Leasing3430Corporatebondissuance29Savingsaccounts28ForextradingE-banking28Mobilebanking23ODAloans23Trustservices2222Environmentinitiatives22Factoring2018Agentbanking16Securitization1412IPOandM&Aservices10Derivativestrading5DebtcollectionMicroinsurance102030405060Property/assetselling0PercentageofrespondentsSource:WorldBank2018.Note:IPO=initialpublicoffering;M&A=mergersandacquisitions;NDFI=NationalDevelopmentFinancialInstitution;ODA=officialdevelopmentassistance.LandscapeofNDFIs9COUNTRIESANDREGIONSHigh-incomecountries(HICs)andupper-middle-incomecountries(UMICs)aloneaccountforabouttwo-thirdsofNDFIs(refertofigure2.2).FarfewerNDFIsexistinlow-incomecountries(LICs)thaninHICs,UMICs,andlower-​middle-incomecountries(LMICs)(refertofigure2.2a).ThisfactmaybebecauseofdifficultiesinraisingfundsforNDFIs(includingincapitalmarkets),aswellaspoorinstitutionalcapacitytoestablishandoperateNDFIs.ThesmallmarketsizeofLICsmayalsoreducetheneedtoestablishmanyspecializedNDFIs.Asshowninfigure2.2b,thelargestconcentrationofnationalandsubnationalNDFIsisintheEuropeandCentralAsiaregion(102NDFIs,or22­percentoftotalNDFIs).ThisisfollowedbyEastAsiaandPacific(18percent),Sub-SaharanAfrica(17percent),andLatinAmericaandtheCaribbean(17percent).MISSIONSANDMANDATESAbout33percentofNDFIshaveabroadmissionofsupportingeconomicandsocialdevelopment.Inlow-incomeeconomies,morethanhalfoftheNDFIsFIGURE2.2DistributionofNDFIsa.Distributionbyincomegroupb.Distributionbyregion120160140139102100123114NumberofNDFIs120817676NumberofNDFIs10080806060404032282619202000HICsUMICsLMICsLICsECAEAPSSALACMENASARNAc.DistributionofnationalNDFIsbytheirmandate,byincomegroup10080Percentage6040200HICsUMICsLMICsLICsGeneralAgricultureMicro,small,andmediumenterprisesExportorimportHousingLocalNASource:DatabasedonXuetal.(2021).Note:EAP=EastAsiaandPacific;ECA=EuropeandCentralAsia;HIC=high-incomecountry;LAC=LatinAmericaandtheCaribbean;LIC=low-incomecountry;LMIC=lower-middle-incomecountry;MENA=MiddleEastandNorthAfrica;NA=NorthAmerica;NDFI=NationalDevelopmentFinancialInstitution;SAR=SouthAsia;SSA=Sub-SaharanAfrica;UMIC=upper-middle-incomecountry.10GreeningNationalDevelopmentFinancialInstitutionshaveageneralmandate,whereasNDFIsinHICshavemorespecificmandates,inpartbecausethesecountrieshavemorethanoneNDFI(refertofigure2.2c).ManyNDFIsinHICs,UMICs,andLMICshaveafocusedmandatetosupportmicro,small,andmediumenterprisesandentrepreneurship,reaching49­percentofallNDFIsinhigh-incomeeconomies.Incontrast,agriculturebanksaremuchmoreprevalentinlow-incomeeconomies.NOTE1.MostNDFIsaregovernment-owned;however,therearesomeprivateNDFIs,suchasTürkiyeSinaiKalkinmaBankasi(TSKB)inTürkiyeortheGreenInvestmentBankintheUnitedKingdom,thatwerecreatedaspublicdevelopmentinstitutionsandsubsequentlywereprivatizedwithoutchangingtheirgreenfocus.BIBLIOGRAPHYXu,Jiajun,RégisMarodon,XinshunRu,XiaomengRen,andXinyueWu.2021.“WhatArePublicDevelopmentBanksandDevelopmentFinancingInstitutions?—QualificationCriteria,StylizedFactsandDevelopmentTrends.”ChinaEconomicQuarterlyInternational1(4):271–94.PublicDevelopmentBanksandDevelopmentFinancingInstitutionsDatabase;http://www.dfidatabase.pku.edu.cn/.WorldBank.2018.2017SurveyofNationalDevelopmentBanks.Washington,DC:WorldBank.3StateandTrendsofGreeningNDFIsBACKGROUNDToidentifylessonslearnedandbestpracticesofgreeningNationalDevelopmentFinancialInstitutions(NDFIs),theWorldBanklaunchedasurveyinJanuary2022,aswellasconductedin-depthinterviews.Responsestothesurveywerereceivedfrom22NDFIs,withwidegeographicalandincome-levelcoverage.AppendixAdescribesthesurveymethodology.1Thein-depthinterviewswereconductedwithfourNDFIs:1.FideicomisosInstituidosenRelaciónconlaAgricultura(FIRA,Mexico),2.KoreaDevelopmentBank(KDB,theRepublicofKorea),3.TürkiyeSinaiKalkinmaBankasi(TSKB,Türkiye),and4.DevelopmentBankofSouthernAfrica(DBSA,SouthAfrica).AppendixBprovidesmoredetailsaboutthecasestudies.Theassessmentframe-workandrecommendationsfocusedonthefollowing:•Integrationofclimateandenvironmental(C&E)considerationsintoNDFIs’governanceandstrategies,•MobilizationoffinancingtowardC&Eobjectives,•C&Eriskmanagementpractices,and•C&Edisclosuresandreporting.GOVERNANCEANDSTRATEGYGoodgovernanceandstrategyarekeytoNDFIs’prioritizingtheiractionsto­supportC&Eobjectivesandfacilitatecoordinationacrossdifferentstakehold-ers,includingnationalandsubnationalpolicymakersandsectorparticipants.Agoodstrategyandgovernanceframeworkshouldhaveclearlydefinedobjec-tivesthatareinlinewithcountryC&Eobjectives,specifytherolesandrespon-sibilitiestoachievedifferentobjectives,anddescribeactionstobetakenbydifferentactorstoensurethestrategy’sadequateimplementation.1112GreeningNationalDevelopmentFinancialInstitutionsOver80percentoftheNDFIssurveyedhaveadoptedgreenobjectives,and73percentarecontributingtotheimplementationoftheParisAgreement’sNationallyDetermined­Contribution(NDC)targets.Over80percentofrespon-dentshavesetgreenobjectivesorpreparedastrategytogreentheirportfolio(refertofigure3.1).Inmanycases,greenobjectivesarereflectedintheinstitu-tion’smissionandstrategy,beingaccommodatedwithinthepreviouslyexistinglegalmandate.GreenstrategiessometimesfocusonreducingtheNDFIs’owncarbonfoot-printinadditiontogreeningtheirportfolio(refertotheFIRAcasestudyinappendixB).Inmostcases,thestrategiesarepublished.Seventy-sevenpercentofrespondentsreportedhavingmadepublicpledgesorcommitmentstoaligntheiractivitieswithinternationalornationalclimategoalsandtobeinvolvedintheimplementationofthecountry’sNDCs.However,onlyafewinstitutions(includingtheBrazilianDevelopmentBank[BNDES],TSKB,andKreditanstaltfürWiederaufbau[KFW])havesettargetsordisclosedtheircontributionstoNDCs.Forexample,BNDEShasanNDCPanelanddisclosesitscontributiontotheBrazilianNDCsonline.Inaddition,KFWhascommittedtoacarbon-neutralportfolioby2050.Alignmentwithnationalclimategoalsisoftensupportedbyadoptingasustainablestrategy,beingaccreditedbytheGlobalClimateFund(GCF),ordevelopinggreenfinancingfacilities.ThemajorityoftheNDFIsexaminedhavespecificgreenfinancingtargetsandexcludefromtheirportfoliothefinancingofsomenongreenprojectsorsec-tors.Ofthe22NDFIssurveyed,15havegreenfinancingtargets.Someinstitu-tionstargetthenumberoftransactionsforclimateobjectivesortheUnitedNationsSustainableDevelopmentGoals(SDGs),whereasothersaimtoincreasegreenfinancinginabsoluteterms,inthepercentageofnewcommitments,orintheshareofgreenassetsintheirportfolio.Inaddition,someinstitutionstargetareductioninfinancingofpollutingsectors,suchasfossilfuels;13NDFIsreportedthattheyexcludefinancingofspecificnongreenornonsustainableprojectsfromtheirportfolio.Mostrespondentspointtoexclusionlistsofactivitiesinlinewithnationalregulationsorinternationalstandards(forexample,KFWreferstotheInternationalFinanceCorporation[IFC]exclusionlist;BancodeInversiónyFIGURE3.1NDFIsshowahigh-levelcommitmenttothegreenagendaMandateand/ormissionincludesgreen,climate,orenvironmentalobjectivesStrategyispreparedtogreenportfolioPublicpledgesweremadetoalign20406080100activitieswithclimate-relatedandenvironmentalgoalsInstitutionisinvolvedintheimplementationofthecountry’sNDC0PercentageYesNoSource:FigureoriginaltothispublicationbasedonWorldBankdata.Note:NDC=NationallyDeterminedContribution;NDFI=NationalDevelopmentFinancialInstitution.StateandTrendsofGreeningNDFIs13ComercioExteriorreferstotheWorldBankandInter-AmericanDevelopmentBankexclusionlists).Afewinstitutionsdonothaveexclusionlistsbutinsteadpointtotheprohibitionagainstfundingcoalminingorcoal-generatedenergy(forexample,TSKB,KDB,andtheIndustrialBankofKorea[IBK]).NDFIsoper-atingthroughfinancialintermediaries(secondtier)oftenimposetheirgreenfinancingtargetsonotherfinancialinstitutions(FIs).Furthermore,someNDFIsalreadyhavebindingtargets,whereasothersimposetargetsforgreenfinancingtobeachievedinthefuture.Somereportedthattheyhavemorethanachievedtheirgreentargets.MorethanhalfofNDFIsincorporateC&Econsiderationsintotheirgover-nancearrangements.Themajorityhavecreateddedicatedunitsandhigh-levelcommitteestoaddressC&Etopics,oftensupportedbytheapprovalofspecificpoliciesandstrategies.ThirteenNDFIsincorporateC&Econsiderationsintotheirgovernancearrangements.Sixdidnotprovidedetailsorrefertotheadop-tionofC&E-relatedpoliciesimplementedbytheexistinginstitutionalunits.Theremainingrespondentsreferredtothecreationofeitherspecificunitsassessingandmanagingtheenvironmentalandsocialimpactsofprojectsandprovidingsustainablefinanceorofhigh-levelcommitteesanddirectorpositionsfocusedonC&Eorsustainabilityissuesmorebroadly.ExamplesofgoodNDFIpracticesongovernanceandstrategyarepresentedinbox3.1.BOX3.1GoodNDFIpracticesongovernanceandstrategyNDFIsrarelyhaveC&E–relatedgoalsexplicitlytheirmandatesmaygivethemmorelegitimacyandincludedintheirmandates.Forexample,FIRA’sman-clouttomakeprogressonthesetopics.dateis“topromote,untilitiswellestablished,aninclusive,sustainableandproductiveagri-foodandInstitutionswithgreenorsustainabilitystrategiesruralsector.”KDB’smandateistosupportthecoun-oftensetgreenfinancingtargetsandtrackgreentry’ssustainablegrowth.Similarly,TSKB’smissionfinancing.FIRAdevelopedataxonomytolabelfocusesoninclusiveandsustainabledevelopment,andgreenfinancingproducts,andDBSAusestheDBSA’sActreferstofinancingsustainabledevelop-InternationalDevelopmentFinanceClubtaxonomy.mentprojectsandprograms.KDBdevelopedasustainableframeworkalignedwithinternationalstandards,andTSKBtracksfinancingLackofanexplicitlegalmandatehasnotpre-linkedtoclimateandSDGs.KDB’saimistoincreaseventedNDFIsfromincorporatingC&Econsider-theshareofgreenfinancingto16.8percentofitstotalationsintotheiroperationsorfromdevelopingannualfinancingby2030.TSKBhassetatargetofastrategiestogreentheirportfolios.FIRAhasdevel-60percentshareofC&E-focusedorSDG-linkedloansopedasustainabilitystrategywiththreepillarsthatinthetotalportfolioby2025.(a)aimtoavoidenvironmentalharm,(b)financegreenprojects,and(c)catalyzesupportforgreenSomeinstitutionshavecreatedhigh-levelcom-financing.KDB’sgreenfinancingstrategy’sgoalistomitteesinchargeofthedevelopmentandimplemen-supportthegovernment’sNDCand2050carbontationofC&Epolicies.Forexample,BNDEShasaneutralitytarget.TSKBpublishedtheCombatingSustainabilityCommitteelinkedtothebank’sClimateChangeandAdaptationPolicyinJune2020.ExecutiveBoard,whichisthemainforumfordis-In2021,DBSAapprovedtheJustTransitioncussingC&Econsiderations.ItsboardofdirectorsInvestmentFrameworktobecomeanet-zerobankhasasubcommitteedealingwithESGaspects.Inby2050.KDBandTSKBhavealsophasedouttheiraddition,thebankhasassignedadirectorresponsi-investmentsincoal-poweredenergy.NDFIshavebleforthesubjectintheinstitution,asustainabilityindicatedthatformalinclusionofgreenobjectivesinteaminthestrategicplanningdivision,andanenvi-ronmentdepartment.continued14GreeningNationalDevelopmentFinancialInstitutionsBox3.1,continuedInaddition,IBKhasestablisheditsESGcommit-thatindicatesthatthehigherdecision-makingbodiesteeasthetopdecision-makingorganizationunderoffinancialinstitutionsshouldbeinvolvedinC&Etheboardofdirectors,whichregularlyreviewsandissues.FIRAhasalsocreatedahigh-levelworkingmakesresolutionsforrisk,opportunities,andstrate-groupthatcomprisesallthedifferentareasinthegiesrelatedtoclimatechangebasedoninternationalbankinvolvedinclimateissues.Finally,TSKB’ssus-standards.Furthermore,thehigherdecision-makingtainabilitystrategy,visionandgoals,andclimate-­bodyofFIRA,theTechnicalCommittee,hasbecomerelatedrisksandopportunitiesareaddressedbytheinvolvedinenvironmentalissues,reflectingitssign-SustainabilityCommitteewiththeactiveparticipa-ingoftheSustainabilityProtocoloftheMexicanBanktionoftheboardofdirectorsandtheExecutiveAssociation,whichincludesagovernanceprincipleCommittee.Note:BNDES=BrazilianDevelopmentBank;C&E=climateandenvironmental;DBSA=DevelopmentBankofSouthernAfrica(SouthAfrica);ESG=­environmental,social,andgovernance;FIRA=FideicomisosInstituidosenRelaciónconlaAgricultura(Mexico);IBK=­IndustrialBankofKorea(theRepublicofKorea);KDB=KoreaDevelopmentBank(theRepublicofKorea);NDC=NationallyDeterminedContribution;NDFI=NationalDevelopment­FinancialInstitution;SDG=SustainableDevelopmentGoal;TSKB=TürkiyeSinaiKalkinmaBankasi.GREENFINANCINGSOURCESANDUSESCountriesfaceasignificantfinancinggapinreachingtheirclimategoals.ThefirstbatchofCountryClimateandDevelopmentReportsfromtheWorldBankfoundthatthefinancingneededforclimateactionacrossthe24countriesanalyzedwillaverage1.4percentofgrossdomesticproduct(GDP)by2030.However,largedifferencesexistacrosscountryincomeclasses:1.1percentofGDP,onaverage,inupper-middle-incomecountries,increasingto5.1percentinlower-middle-incomecountriesand8percentinlow-incomecountries(LICs)(WorldBank2023).Thesedatasuggestthatclimate-developmentfinancingneedsareasignificantlylargerpercentageofGDPincountriesthathavecontributedtheleasttoglobalwarmingandwhereaccesstocapitalmarketsandprivatecapitalismorelimited.NDFIs,whichcouldhelpclosethisfinancinggap,haveanimportantpositioninthedomesticfinancinglandscapegiventheirproximitytopolicymakers,localmarkets,andinternationaldevelopmentfinance.Theyarealsouniqueinthattheycanpotentiallydeployaffordable,flexible,andrisk-tolerantfundingtailoredtocountrycontext,thusaddressingkeymarketbarriersthatimpedeprivateinvestmentsforclimateaction.NDFIsarealreadyleadingplayersinclimatefinancing,especiallyinLICsandmiddle-incomecountries(MICs).AccordingtotheClimatePolicyInitiative(CPI),theannualaverageclimatefinancingprovidedbyNDFIsin2019–20wasUS$145billion,or22percentoftotalclimatefinancing,representingthemajor-ityofpublicclimatefinancingduringthatperiod(refertofigure3.2a).2Thissit-uationisespeciallytrueforLICsandMICs,wheremorethan60percentofannualaverage2019–20climatefinancingwasprovidedbypublicactors,ledbyNDFIs(45percent),state-ownedFIs(17percent),andmultilateralDevelopmentFinancialInstitutions(DFIs)(17percent).Byregionaldistribution,theEastAsiaandPacificregion(75percent;refertofigure3.2b)receivesthemostclimatefinancingfromNDFIsbyfar.TheannualaverageflowstaggedtoadaptationinStateandTrendsofGreeningNDFIs15FIGURE3.2NDFIclimatefinancingsourcesandregionaldistribution,globalannualaverages,2019−20a.Climatefinancing,bysourceb.Distributionofclimatefinancing,byregion40388075.335367030602522502019Percentage4015Percentage30104519.752011010002.80.60.200.11.30.10nsinvelaterarsGolDFIsalclimmentsMultilatfundsNatioFIsPublicFIsfundsOtherWesternPacificandpeasternalAsiadaEuroandSubSoutperansiaMOtherOAfricaNdleEceaniaantheAmefricadTranbbeaaanndnalBstovern-SahhAidCarriricstitutioratioiateeralDnalDandUSEuroECentrCanaaastsregioAInCorponalAsiaorthMultilEastLatinaterSource:ClimatePolicyInitiative(CPI2022).Note:DFI=DevelopmentFinancialInstitution;NDFI=NationalDevelopmentFinancialInstitution.LICsandMICsin2019–20wereaboutUS$44billion(thatis,approximately10percentoftotalclimatefinancingflows).3AlmostalladaptationfinancingtrackedtoLICsandMICswasprovidedbypublicactors(98percent),suchasmultilateralDFIs(37percentofpublicadaptationfinanceinLICsandMICs)andnationalDFIs(34percent).4Nevertheless,thesurveyresultssuggestthattheshareofgreenassetsinNDFIs’creditportfoliosisstillrelativelylow(approximately14percent,onaver-age),andthemajorityofinvestmentisinclimatemitigationprojects.Theshareofgreenassetsdifferssubstantiallybetweeninstitutions.Ofthe12surveyedNDFIsthatreportedtheshareoftheircreditportfolioingreenassets,7haveamodestshareofgreenassetsbelow10percent,4haveashareofgreenassetsbetween10percentand25percent,andinonly1doestheshareofgreenassetsexceed50percentofthetotalportfolio(refertofigure3.3a).MostoftheNDFIsdonotdistinguishbetweenfinancingforclimateadap-tationandthatforclimatemitigation.SomeNDFIsare,however,developingmethodologiestoidentifywhatcouldbeconsideredclimateadaptationandmitigationfinancing.TheNDFIswithmitigationandadaptationprojectshaveashareoftheirportfolioinadaptationthatissubstantiallylowerthanthatformitigation.Inaddition,someNDFIsprovidefinancingexclusivelyformitiga-tionpurposes.Thebiastowardmitigationinvestmentsisfurtherevidencedinotherstudies,suchasthatoftheInternationalDevelopmentFinanceClub(IDFC),whichsuggeststhatUS$146billionoftheUS$185billioningreenfinancingprovidedbyIDFCmembersin2020wasdedicatedtoclimatemiti-gation(IDFC2021).CPIdatasimilarlyshowthatapproximately89percentofclimatefinancingfromNDFIsisdedicatedtoclimatemitigation(CPI2022).ThesurveyresultsalsosuggestthatNDFI’sgreenfinancingisconcentratedinselectedsectors,withthemajorityinthepower,agriculture,transport,andindustrysectors(refertofigure3.3b).Ofthe22NDFIssurveyed,17provide16GreeningNationalDevelopmentFinancialInstitutionsFIGURE3.3NDFIs’surveyresponsesongreenfinancingpracticesa.Percentageofgreenassetsb.MainsectorssupportedwithincreditportfolioC&EobjectivesPercentage60PowerAgriculture50Transport4035Industry20LanduseInfrastructure10Building00FI1FI2FI3FI4FI5FI6FI7FI8FI9FI10FI11FI125101520DDDDDDDDDNNNNNNNNNNDNDNDNumberofbanksc.Greenfinancingtrendsd.SourcesoffundingInstitutionhasInstitutionhasaccessspecificgreentonationaland/orfinancingtargetsinternationalcapitalInstitutionexcludesmarketsfinancingtospecific(nongreen)projectsInstitutionissuedagreenbondInstitutiontracksthelevelofmobilizedInstitutionissuedaprivatefinancesustainability-linkedbondInstitutionisaccreditedbyinternationalclimatefunds020406080100020406080100PercentagePercentageYesNoYesNoe.ChallengesinscalingupfinancingforC&EobjectivesLackofeffectivepublicpoliciesandregulations,includinggreentaxonomyandreportingstandardsAttractingcapitalforhigh-riskprojects,fundinggapLackofknowledgeandawarenessonclients'sideLackofinnovativefinancialinstrumentsforclimate-relatedprojectsLackofknowledgeinFls,includingoncarbontradingandrisksTechnicaldifficultiesinevaluatingprojectsLackofbankableprojectsandpossiblylowprofitabilityoftheprojectsLackofincentives,includingsubsidiestofossilfuelsExpensivegreentechnologies,benefitsrealizedinthelongterm02468101214NumberofNDFIsSource:FigureoriginaltothispublicationbasedonWorldBankdata.Note:Panelashowstheresultsfor12NDFIsthatprovidedresponsestothissurveyquestion.C&E=climateandenvironmental;FI=financialinstitution;NDFI=NationalDevelopmentFinancialInstitution.StateandTrendsofGreeningNDFIs17financingtorenewableenergyprojects,suchashydropowerandsolarprojects.NDFIsalsofinancesustainabletransport(10NDFIs),includingelectricandalternative-fuelvehicles,aswellassustainableagricultureandfarming(10NDFIs).Someinstitutionsalsoprovidefinancingforgreeninfrastructureproj-ects,waterefficiency,wastemanagement,andpollutionprevention,aswellassustainabletourism.NDFIs’mainclientsrangefromnationalandsubnationalgovernmentstolargecorporations,includingstate-ownedenterprises.Inaddition,someNDFIsprovidefinancingtomicro,small,andmediumenterprises(MSMEs),farmersandsmallagri-producers,andentrepreneursandindividuals.Thebanksthatprovidesecond-tierlendingprovidefinancingtotheabove-mentionedgroupsviaotherbankandnonbankFIs.ThesurveyandstakeholderconsultationsfoundthatNDFIsuseawiderangeofFIstochannelgreenfinancing.Themostwidelyusedinstrumenttoprovidegreenfinancingislending.NDFIsprovidefirst-andsecond-tierlend-ing,withshort-tolong-termloansandcreditlines.5Lessthan25percentofinstitutionsreportedprovidingconcessionalclimatefinancing,althoughthisfiguremaybeunderrepresented.Onlyfourinstitutionsreportedpricingaspartoftheirportfolioatconcessionalterms,andthesubsidyappliedtomorethanhalfoftheportfolioinonlyonecase.Threeinstitutionsindicatedthattheinformationwasnotavailable,andothersdidnotconsidertheconcessionalfinancingreceived.SomeNDFIsprovidecreditguaranteestofinancegreenprojects,andsomealsoissuegrants,particularlytounderservedsegments.Lesswidelyusedinstrumentsincludeequityinvestmentfinancing,venturefinancing,andprojectstructuring.Apartfromfinancialproducts,someNDFIsprovidetechnicalassistanceandadvisoryservicestohelpclientsgreentheiractivities.SomeNDFIsmobilizeprivatefinancingforgreenprojects,butmorecouldbedone.Afewinstitutionsalsoestablishedmechanismstotrackandmonitorhowmuchprivatefinancingwasmobilized(refertofigure3.3c).Inaddition,forsomeNDFIprojects,contributionfromtheprivatesectorismandatoryatsomeper-centageoftheprojectvalue.However,thefocusonprivatefinancemobilizationseemslimited,anditspotentialislargelyunexplored.SeveralNDFIsalsocollab-oratewithsubnationaldevelopmentbankstochannelfinancingtothelocallevel.Inaddition,NDFIssometimeshaverequirementstoco-financeprojectswithotherFIs(forexample,MexicanNDFIshaveco-financingrequirementsforrenewable-energyprojects).Eighteenoutof22NDFIshaveaccesstointernationalornationalcapitalmar-kets,buttheuseofgreendebtinstrumentshasnotyetbeenmainstreamed(refertofigure3.3d).Onlyhalfoftherespondentshaveissuedagreenbond,andlessthanaquarterhaveissuedasustainability-linkedbond.Nevertheless,itisimportanttonotethat,inseveralcases,NDFIswerefirstmoversingreenbondissuance.Forexample,NacionalFinancieraissuedthefirstMexicangreenbondin2015(andwasthefirstinLatinAmericatohaveclimatebondcertification).Lessthan40percenthaveaccreditationtoaccessinternationalclimatefundssuchastheGCF.ManyNDFIsdonotusetheresourceseveniftheyareaccred-ited.Examplesofgoodpracticesonsourcesandusesforgreenfinancingarepresentedinbox3.2.ThekeychallengetoscalingupfinancingforC&Eobjectivesisthelackofeffectivepublicpoliciesandregulations.Thirteenof20banksindicatedthatthe18GreeningNationalDevelopmentFinancialInstitutionsBOX3.2GoodNDFIpracticesongreenfinancingsourcesandusesSomeNDFIshavedevelopedspecializedprogramsandDBSAhaslaunchedtheClimateFinanceFacility,productsforfinancingofC&Eobjectivesandpriori-whichfocusesonblendedfinancemechanismsandtizedprojectsthatarenotcommerciallyviable.Forcreditenhancements,suchassubordinateddebtandexample,FIRAhasdevelopedthePro-Sostenibletenorextensions.Program,whichprovidesaninterestratesubsidy(cashback)tofinalborrowersofsustainableprojectsusingNDFIsalsoprovidenonfinancialsupporttobor-donorfunding.TheEnergyEfficiencyProgrampro-rowersinrelationtogreenfinancing.Forexample,thevidesatechnologicalguarantee,payingthedifferencePROINFORProgram,administeredbyFIRA,sup-betweenestimatedandrealizedsavingsfromtheadop-portssmallforestproducerswithtechnicalassistancetionofenergy-efficienttechnologies.TSKBiscurrentlytoadoptsustainableproductionpractices.Inaddition,developingvariousthematiccreditlines(projects)withTSKBviaEscarus(TSKBSustainabilityConsultancy)topicsrelatedtothecirculareconomy,greendealpro-providestechnicalassistanceandconsultancyser-motion,climatechangeadaptation,andemploymentvices,suchasthematicbondissuances,toitsclients.creationviagreengrowth.KDBhastargetedprojectsFinally,DBSAprovidesprojectpreparationsupporttothatarenotcommerciallyviable,suchasearly-stagefurtherfacilitatethedevelopmentofgreenbankableinvestmentsinnascenttechnologysolutions(forexam-projects.ple,carboncaptureandstorage,greenhydrogen).NDFIsoftencatalyzedevelopmentoflocalgreenNDFIs,oftenincollaborationwithothernationalfinancingmarketsbyraisingtheprofileanddemon-entities,providecreditenhancementmechanismsstratingthefeasibilityofgreenbondswithpotentialforgreenfinancing.Forexample,theNationalForestissuers.Forexample,KDBwasafirstmoverinaFundandtheCreditGuaranteeFundfortheEfficientgreenbondmarketintheRepublicofKoreathatUseofWater,co-administeredbyFIRA,offercreditcurrentlyaccountsfor₩3.7trillion(equivalenttoguaranteestofinancialintermediaries,withahigherUS$3billion)ofgreenbondsissueduptoMarchguaranteeforsustainableprojects(65percentver-2022.KDBfurtherbolsterstheprivatesector’spar-susthestandard40−50percentguarantee)atnoticipationinthelabeledbondmarketbyarranging,additionalcost.Moreover,KDButilizesfundingunderwriting,andinvestingingreenandsustainablefromtheGreenClimateFundtocoverfirstlossesofbonds.KDBhasissuedthreeprimarycollateralizedprivatesectorgreeninvestments.KDBalsolowersbondobligationsbackedbyprivatelyplacedESGinterestratesforcertaingreenprojectstoincreasebondsissuedbyMSMEsthatbackcorporatecapitaltheattractivenessoftheseinvestments.Finally,investmentsingreenprojects,extendingthereachtoMSMEsandprivateplacements.Note:C&E=climateandenvironmental;DBSA=DevelopmentBankofSouthernAfrica(SouthAfrica);ESG=environmental,social,and­governance;FIRA=FideicomisosInstituidosenRelaciónconlaAgricultura(Mexico);KDB=KoreaDevelopmentBank(theRepublicofKorea);MSME=micro,small,andm­ediumenterprise;NDFI=NationalDevelopmentFinancialInstitution;TSKB=TürkiyeSinaiKalkinmaBankasi.lackofanenablingpolicyenvironmentisamajorbarriertoattractingpublicandprivatecapitalforclimateprojects.Forexample,enablingpoliciescanincludeacommongreentaxonomy,aswellasdisclosureandreportingstandards,thatallowsfortransparentidentificationandmonitoringofgreenfinancingflows.Strengtheningnationalclimatestrategiesandlegislationarealsorequiredtosig-nalthegovernment’slong-termcommitmenttotheclimateagenda.Inaddition,policiesthatencouragepublic-privatepartnershipsareimportanttoencouragecollaborationongreeninvestmentsbetweenNDFIsandtheprivatesector.Fundinggaps,particularlyinLICsandMICs,areanotherchallengeNDFIsface.EightNDFIsindicatedthatitisdifficulttoattractcapitalforhigh-risk,long-termprojects;manyNDFIshavelimitedaccesstofundingbecausetheirStateandTrendsofGreeningNDFIs19localcapitalmarketsareunderdeveloped,andtheyhavenoaccesstointerna-tionalcapitalmarkets.AccessingconcessionalfinancingfromglobalfinancingmechanismssuchastheGCFisalongprocess,withprovisionsthatcanbechal-lengingtoimplement.Inaddition,thisissueexposesbankstotheriskofforeignexchangeratesandrequiresimplementingcostlyhedgingmechanisms.Furthermore,availablepatientcapital(forexample,equityfunds,privateangels)islackingforgreenprojects.SomeNDFIsindicatedthatfinancialincentivesintheformofgovernmentguaranteesmightbeusefultoaddressfundinggaps.SeveralNDFIsindicatedthatthelackofknowledgeandawarenessofC&Eissuesisafurtherchallenge.NDFIsrevealedthattheyhavelimitedknowledgeandcompetencesontopicsrelatedtogreenfinancing,suchasprojectstructur-ing,financinginstruments,carbontrading,andevaluationofC&Erisks,andrequirecapacitybuilding,specializedtraining,andknowledgesharingtobemoreawareofinternationalbestpractices.Inaddition,clientsoftenlackaware-nessandknowledge,accordingtosevenNDFIssurveyed.MSMEsandthegen-eralpopulationgenerallyareunawareofkeyissuessuchasenvironmentalproblemsorenergy-savingbenefits,whichhampersdemand.Awarenessandpromotionalcampaignscanhelpcreatedemandforgreentechnologies.Moreover,somecompanies,especiallyMSMEs,havelimitedknowledgeandlackthetechnicalpersonneltoimplementgreenprojects.Severalotherbarriersexisttoscalingupgreenfinancing,includingprojectcomplexitiesandcost,alackofincentives,andtailoredfinancialsolutions.SomeNDFIsindicatedthatcostsforprojectpreparationandimplementationarehigh(refertofigure3.3e).Therefore,highrealandperceivedimplementationcostsmightfurthersuppressdemand.Identificationandtechnicalevaluationofgreenprojectsatthepreparationstageofteniscostly,requiresspecializedskills,andiscompoundedbythelackoftransparentinformationanddata.Supervisionandimpactevaluationofsuchprojectsisalsomorecostlythanthatforotherprojects.Inaddition,greenprojects(forexample,hydropower,biodiversity)arelongtermbynatureandhaveahighrisk,withtheirbenefitsrealizedonlyafterprojectcompletion.Smaller-scaleprojectsthathavegreatersustainabilityvalueoftenhavealowerinternalrateofreturn,aswellascomplex,costlytransactionsandinstitutionalarrangements.Theseadditionalcostsputgreenprojectsatadisad-vantage,decreasingthewillingnessoftheprivatesectortoprovidefinancing.SomeNDFIsalsohighlightedthelackofincentives,suchaseconomic,finan-cial,andlegal,toprovidefinancingtogreenprojects.Insomecountries,subsi-diesforfossilfuelscansetnegativeeconomicincentivesforclimatemitigationprojects(forexample,renewableenergy).SevenNDFIshighlightedtheimpor-tanceofdevelopinginnovativefinancialinstruments(suchasblendedfinancing)orde-riskinginstruments(suchasguarantees)thatarespecificallycustomizedforclimate-relatedandenvironmentalprojects.ThesurveyedNDFIsidentifiedseveralprioritiesforscalingupfinancingtomeetC&Eobjectivesinthenext1–5years.TheNDFIsplantofocusonobtainingaccesstofundingtofinancegreenprojects,suchasimprovingaccesstoconces-sionalresources,includingfromtheGCF;mobilizingprivatefinancing;andtap-pingintothelabeledbondmarket.SeveralNDFIsareworkingtosetuppartnershipsandcollaborationsandtocoordinatewithkeystakeholdersandpotentialfundingagenciestoscalegreenfinancingefforts.Inaddition,NDFIsalsoplantoenhancedemandforgreenprojectsbyraisingawarenessthroughbuildingcampaignsandeducatingclients,aswellasbybringingtothemarketnewfinancialproductstargetingcertaingroupsof20GreeningNationalDevelopmentFinancialInstitutionscustomersandprojects.Forexample,BNDESaimstoscaleBNDESenvironmen-tal,social,andgovernance(ESG)credit,whichprovidesadiscountonfundingtoborrowersattainingcertain­sustainability-linkedobjectives.Someinstitutionsmentionedtheneedtoengagewithborrowerstoreducetheircarbonfootprint.C&EFINANCIALRISKMANAGEMENTC&Eriskmanagementpracticesinthefinancialsectorhaveevolvedsubstan-tiallyoverthepastdecade.AnincreasingnumberofcentralbanksandregulatorsaretakingactiongloballytoaddresstheimpactsofC&EphysicalandtransitionrisksonthestabilityofFIsandtheirfinancialsystems.Standard-settingbodies,aswellastheNetworkofCentralBanksandSupervisorsforGreeningtheFinancialSystem,havestartedtoissueguidanceforregulatorsandFIsonhowtomanageC&Erisks,includingarecentsetofprinciplesforthebankingsectorissuedbytheBaselCommitteeonBankingSupervision(BCBS).Inresponsetothisguidance,FIshavebeguntointegrateclimateand,insomecases,broaderenvironmentalfinancialrisksintotheirriskmanagementframe-worksandstrategies.Thisapproachisdifferentfromtheenvironmentalandsocialriskmanagement(ESRM)assessmentsthatNDFIsandotherinstitutionshavehistoricallyconductedtoconsidertheimpactoftheirfinancingactivitiesonenvironmentalandsocialissues.ThefollowingsectionconsidersC&Erisksprimarilyfromthefinancialriskangle,giventhatawell-establishedfoundationforESRMalreadyexists.6AlthoughESRMprimarilylooksattheexternalimpactofoperations,incertaincases,thisexaminationcouldalsotranslateintofinancialrisks(primarilycreditrisk)orreputationalrisks.SometimesthetwoapproachesarepartofonebroadC&Eriskmanagementframework.Ingeneral,oursurvey(seefigure3.4)suggeststhattheintegrationofC&EfinancialrisksinNDFIs’strategiesislimited.Theconsiderationoftheserisksgenerallyisnotincorporatedintolong-termorganizationalstrategies.Eventhoughnearlythree-quartersoftheNDFIsindicatedthattheyhaveintegratedsomeC&Econsiderationsintotheirstrategy,theseconsiderationsareoftenhighlevel(fromageneralsustainabilityperspective)ratherthanamorein-depthanalysisoftheimpactoflong-termC&Efinancialrisksontheirbusiness.NDFIsrecognizetherelevanceofC&Efinancialrisksfortheirbusinessmod-els,but,inmostcases,theydonotexpectthemtomaterializeintheshortterm.Nearlyall(86percent)oftheNDFIssurveyedexpectthatC&Efinancialriskswillaffecttheirbusinessmodel.However,theseNDFIsstatedthattheserisksaregenerallynotexpectedtomaterializeovertheshortterm,althoughseveralNDFIs—mostofwhichareinvolvedintheagriculturesector—indicatedthatsomerisksarealreadybecomingapparent.Forexample,institutionscitedtheimpactofclimate-relatedweathereventsonfarmers’abilitytorepaytheirdebts.OtherNDFIsnotedtheimpactofchangesinprecipitationpatterns,whichtrig-geredfinanciallossesandrestructuringsforhydropowerprojects.Dependingonthenatureandscopeoftheirbusinessmodels,someNDFIs(forexample,thosethatfocusontheagriculturesector)expectclimatephysicalriskstobethemainsourceofrisk,whereasotherNDFIs(forexample,thosethatfocusonfossilfuelindustries)indicatethatclimatetransitionwouldbethemainsourceofrisktotheirbusinessmodelsiftheydonotadapttomarketandregulatorydevelop-mentsthatsupportthelow-carbontransition.StateandTrendsofGreeningNDFIs21FIGURE3.4SurveyresponsesonC&EriskmanagementpracticesInstitutionexpectsthatclimate-relatedandenvironmentalfinancialriskswillaffectitsbusinessmodelInstitutionhasassessedtheimpactofclimate-relatedandenvironmentalfinancialrisksonitsportfolioInstitutionhasintegratedtheconsiderationofclimate-relatedandenvironmentalfinancialriskintoitsgovernancearrangementsStrategyincorporatesclimate-relatedandenvironmentalfinancialriskconsiderationsClimate-relatedandenvironmentalfinancialriskisembeddedinriskmanagementframeworkInstitutionconductsscenarioanalysisorstresstestingtoassessclimate-relatedandenvironmentalfinancialriskInstitutionreportsonclimate-relatedandenvironmentalriskInstitutionusesspecifictargets,tools,ormetricstoassessclimate-relatedandenvironmentalfinancialriskInstitutionhasasystemtoadministerandmanageenvironmentalriskscreatedbyitsportfolio020406080100PercentageSource:FigureoriginaltothispublicationbasedonWorldBankdata.Note:C&E=climateandenvironmental.ManyNDFIsconsideronlyhowtheiractivitiesimpactC&Efactors,oftenaspartofESRM,anddonotyetconsiderhowC&Eriskstranslateintofinancialrisksfortheirowninvestmentandcreditportfolio.LessthanhalfoftheNDFIssurveyeddemonstrateanunderstandingoftheclassificationofC&Ephysicalandtransitionrisksortheirtransmissionchannelstoexistingcategoriesofpru-dentialfinancialrisk,primarilycreditrisk.ManyinstitutionsseetheserisksexclusivelythroughtheESRMlens.NinetypercentoftheNDFIshaveasysteminplacetoassessandmanageenvironmentalrisksfromtheimpactperspective.ThissystemofteniscombinedwiththatforsocialrisksaspartofbroaderESRMsystems.Inthiscontext,severalinstitutionsmentionedtheapplicationofenvi-ronmentalsafeguardsoralignmentwith,forexample,theIFC’sEnvironmentalandSocialPerformanceStandards.Therefore,environmentalriskisconsideredmorelikelyatthepointofloanorigination(consideringadverseenvironmentalimpacts)ratherthanattheportfoliolevel.AlthoughawarenessofthepotentialimplicationsofC&Efinancialrisksseemshigh,lessthanhalfofthesurveyedNDFIshavestartedassessingtheexpo-sureoftheirportfoliototheserisks.SeveralNDFIsmentionedthattheyhaveassessedtheserisksaspartoftheirESRMsystem,althoughthissystemmayuseadifferentmethodologythanthatforaprudentialfinancialriskassessment.C&Eriskassessmentmethodologiesthatwerementionedaresofarprimarilyfocusedonhigh-levelsectoralorgeographicalexposureassessmentsorthecar-bonfootprintoftheportfolio(forexample,refertotheTSKBandDBSAcasestudiesinappendixBforanillustrationofriskassessmentmethodologies).OnlyaquarterofNDFIshavestartedmoreadvancedstress-testingorsce-narioanalysisexercises.However,manyinstitutionsindicatedthattheyare22GreeningNationalDevelopmentFinancialInstitutionslookingtodevelopthesecapabilitiessoon,ideallywithfinancialandtechnicalsupportfrommultilateralanddevelopmentpartnersinthisarea.Someinstitu-tionshavesetaminimumthresholdforassessingtheserisks,conductinganaly-sesonlywhenexposuresexceedacertainvalue.Movingforward,atoppriorityforthesurveyedNDFIsistodevelopmethodologiesandprocessesforintegrat-ingC&Erisksintotheloanevaluation,internalrating,loanallocation,andmon-itoringprocesses,whichmayallowNDFIstoalsostrengthentheidentification,monitoring,andmanagementofinstitutionalexposuretopotentialC&Erisksonaportfoliobasis.LessthanhalfofthesurveyedNDFIsprovideddetailsontheintegrationofC&Efinancialrisksintotheirgovernancearrangements.GovernancestructuresaremostlyrelatedtothebroaderESRMframework,withlessconsiderationofhowC&Erisksarebeingembeddedinto(credit)riskcommitteestructures.Governanceoftenisdifferentforbankswithanagriculturalfocus,forwhichcli-mateconsiderationsaremoreformallyembeddedinriskmanagementstruc-turesorprocesses.Knowledgeofrelevantinternationalstandardsandframeworksislow.Mostnotably,NDFIshavelimitedawarenessoftheBCBSPrinciplesonclimaterisks,whicharesettobetheinternationalbaselinestandardforaddressingclimate-­relatedrisksincorporategovernance,internalcontrols,riskmanagement,­monitoringandreporting,andscenarioanalysis.OnlyoneNDFImentionedthattheseprinciplesareinformingtheintegrationofclimateriskintoitsown­frameworksandactivities.ExamplesofgoodNDFIpracticesforC&Erisk­managementareprovidedinbox3.3.LackofdataandstandardizedmethodologieswereidentifiedaskeychallengeshinderingNDFIs’abilitytomainstreamC&Eriskmanagementpractices.Sofar,BOX3.3GoodNDFIpracticesforC&EriskmanagementThecasestudiesinappendixBdemonstrateancanbeaneffectivemechanismforinstitutionstotestincreasingawarenessoftheurgencyandrelevanceofrelevantapproachesanddevelopcapacity.C&Efinancialriskstoinstitutions’portfoliosandbusinessmodels.NDFIshaveasolidgraspofphysicalDespitegloballyrecognizeddatachallengesrelatedandtransitionriskconcepts,whereastheyfocusontomeasuringScope3emissions,TSKBhastakenthetheimpactangleofbroaderESRM.ambitioussteptocalculateandpublishtheScope3emissionsofcompaniesithasfinancedthatoperateinAdiversityinapproachesexists,withthefourcarbon-intensiveindustries.Furthermore,TSKBNDFIcasestudiesshowcasingdifferentinnovationsidentifiesclimate-relatedrisksinitsportfoliothroughandgoodpractices.Theseencouragingdevelopmentsasector-basedheatmapthatwillbeusedasabasisforcouldprovideanexampleforotherNDFIslookingtothedevelopmentofmoreadvancedscenarioanalysisdeveloptheircapabilitiesonC&Efinancialrisks.Forandstress-testingapproachesthatarecurrentlyunderexample,FIRAparticipatedinseveralpilots,includ-development.inginadroughtstress-testingtooltoassesstheimpli-cationsfortheriskprofileofitsloanportfolioandinaParticularlynoteworthyistheinnovativeapproachstudytoidentifyphysicalrisksinitscreditportfolioKDBhasdevelopedtosetacapitalbufferfortransi-basedonclimatemodelsandscenariosofthetionriskwithinits2022riskmanagementframework.IntergovernmentalPanelonClimateChange.PilotsThecapitalbufferwasestablishedbycalculatingastressedclimateprobabilityofdefaultbasedonacontinuedStateandTrendsofGreeningNDFIs23Box3.3,continuedtransitionriskstresstestusingtheNetworkfordevelopmentofitsowninternalcarbonfootprintingGreeningtheFinancialSystemscenariotoachievetooltoassessitscounterparties.Alsorecognizingthatnet-zeroby2050.buildingupfurtherinternalcapabilitiesfortheassess-mentofC&Efinancialrisksiskey,DBSAisengagingOntheimpactside,DBSAhassystematicallywithnumerousrelevantnetworkstodeveloptheembeddedtheconsiderationofenvironmentalrisksrequiredexpertise.acrossallstagesoftheloanlifecycle.ThisincludestheNote:C&E=climateandenvironmental;DBSA=DevelopmentBankofSouthernAfrica(SouthAfrica);ESRM=environmentalandsocialriskm­anagement;FIRA=FideicomisosInstituidosenRelaciónconlaAgricultura(Mexico);KDB=KoreaDevelopmentBank(theRepublicofKorea);NDFI=NationalD­evelopmentFinancialInstitution;TSKB=TürkiyeSinaiKalkinmaBankasi.littleriskquantificationhasoccurred.NDFIscitedthelackofreliableandhigh-qualitydataasakeyreasonforclimatechangenotbeingpartoftheirriskmanagementprocesses.Thisissuealsoincludesthedifficultyofincorporatingqualitativedataintoriskassessmentmodels.Onemaindifficultyinmeasuringclimaterisksisthathistoricaldataarenotreliableindicatorsforfuturerisksandcanweakenpredictability.TheabsenceofstandardsoraharmonizedapproachtoassessC&Efinancialriskconstitutesanotherbarriertodevelopinganapproachtoaddressthisrisk.Disclosureandreportingstandardswillalsobevitaltoprovidethetransparencyandinformationneededtoidentify,assess,andpricetherisk.Othercommonlycitedchallengesarethelimitedcapacityandtechnicalskillswithintheinstitution.SeveralNDFIshighlightedthattheyhavelimitedinternalknow-howtoallowthemtoproperlyaddressC&Erisks,andthatriskanalyses,includingstresstestingandscenarioanalysis,areparticularlychallenging.Nonconduciveregulatoryframeworks,oruncertaintiesabouttheregulatorydirectionoremergingregulations,alsocanimpacttheassessmentofC&Efinancialrisks.C&EDISCLOSURESANDREPORTINGAdequatedisclosureandreportingareneededtohelpNDFIsunderstand,price,andmanageC&Erisksandgreenfinancingopportunitiesintheirportfoliosandoperations.AgrowingnumberofcountrieshaveintroducedclimateandESGdisclosureandreportingrequirementsforfinancialandnonfinancialentities.TheInternationalFinancialReportingStandards’InternationalSustainabilityStandardsBoardisalsointheprocessofdevelopingaglobalbaselinefor­sustainability-relateddisclosurestandards,withthegoalofprovidinginvestorswithinformationaboutcompanies’ESGrisksandopportunities.Beyondregula-toryrequirements,manycompaniesalreadyareenhancingtheirclimateorESGdisclosuresbasedontherecommendationsofvoluntaryinitiativessuchastheFinancialStabilityBoard’sTaskForceonClimate-RelatedFinancialDisclosures(TCFD)andtheCarbonDisclosureProject.Atthesametime,severalcountrieshavedevelopedgreenandsustainabletax-onomiestouniformlydeterminewhateconomicactivitiescanbeconsideredenvironmentallyandsociallysustainable.Ataxonomycanperformavarietyof24GreeningNationalDevelopmentFinancialInstitutionsfunctions,includingsupportfinancialactorstomakeinformeddecisionsonsus-tainableinvestments,facilitatereliableandcomparabledisclosures,andprovideaconsistentwaytotrackwhatgreenactivitiesarebeingfinanced.C&Edisclosurepracticesarestillatanascentstage.SomeofthesurveyedNDFIshavepublicsustainabilityreports,butmostofthesereportsdonotexplic-itlycoverC&Efinancialrisks.Whileone-thirdofthesurveyedNDFIsreportonC&Efinancialrisks,onlyonehasissuedaformaldisclosureinlinewiththeTCFD(seetheTSKBcasestudyinappendixB).However,severalinstitutionsindicatedthattheyareplanningtoissueTCFDdisclosuresinthefuture.FewNDFIsusetoolsormetricstoassesstherisksrelatedtoC&Eissues.Somementionedthattheyareusinggreenhousegas(GHG)–relatedmetricstoassessthecarbonsensitivityoftheirportfolio,althoughtheyarenotyetplan-ningtopubliclydisclosethisinformation.MostNDFIsarenotcollectingspe-cificdatatoassessC&Efinancialrisks.ThemaindatatoinformassessmentsisrelatedtoGHGemissionstoadvisetransitionriskanalyses,butdataarealsocollectedfromexternalpartiessuchasmeteorologicalinstitutestosupportthephysicalriskassessment.NDFIsusedifferentclassificationsystemstoidentifygreenprojects,andmanydonotdisclosegreenfinancingvolumespublicly,whichcreateschallengesintrackingtheamountofgreenfinancingprovided.Approximately80percentofthesurveyedNDFIsindicatethattheyhavedevelopedaclassificationsystemtoidentifygreenprojects(refertofigure3.5).However,thesemethodologiescanvarysignificantly.SomeNDFIsuseclassificationsystemsdevelopedinternationally(forexample,IDFC)toidentifygreenprojects.Othershavedevelopedinternaltaggingcriteriausingnationalorsubnationaltaxonomies.Whilesomebankstagtheirprojectsorloansas“green,”othersusealternativetagging,suchas“SDGprojects,”“NDCprojects,”and“environmentprotectionprojects”(seecasestudiesinappendixB).ForNDFIswithoutataggingsysteminplace,workhasbeenkick-startedtodevelopaclassificationsystem;however,theseframeworksremainworksinprogress.Basedonthedevelopedclassificationsystems,approximately70­percentofthesurveyedNDFIsmeasuregreenfinancingvolumesintheirportfolio(refertofigure3.5).Somemeasuretheirgreenfinancingvolumesbasedonthesourcesoffundsonly,possiblyunderestimatingtheirtotalgreenportfolio.AlthoughsomeNDFIstracktheirgreenfinancingportfolioregularly(monthly,yearly),othersperformonlyone-timeassessments.FIGURE3.5TrackingNDFIs’greenfinancingInstitutionusesadassificationsystemtotag/identifygreenprojectsInstitutiontracksgreenfinancingvolumes020406080100PercentageYesNoSource:FigureoriginaltothispublicationbasedonWorldBankdata.Note:NDFI=NationalDevelopmentFinancialInstitution.StateandTrendsofGreeningNDFIs25BOX3.4GoodNDFIpracticesonC&EdisclosuresandreportingNDFIsoftenuseinternationallyrecognizedmethod-NDFIsdisclosetheirclimate-relatedriskstosomeologiesaswellastechnicalassistancefrominterna-extent,withmanyaimingtostartreportinginlinetionalorganizationstodeveloptheirgreenreportingwithTCFDrecommendations.In2021,TSKBissuedmethodologies.Forexample,DBSAhasrecentlycom-itsfirstclimateriskreportpreparedinlinewithTCFDpleteda“GreenDeepDive”toobtainamoredetailedrecommendationsthataregoodpracticesforreport-understandingofitsloanbookusingthemethodologying.KDBhaspublishedannualreportsonitsimple-oftheIDFC.FIRAhasdevelopeditstaxonomytomentationoftheEquatorPrinciplessince2018intrackgreenfinancingvolumesandisnowinthepro-whichtheydisclosetheirESRMprocessesandproj-cessofdevelopingamethodologytoidentifywhatects’exposuretoenvironmentalandsocialrisks.FIRAcouldbeconsideredclimateadaptationfinancingreportsallsustainability-relatedinformationinthewiththesupportoftheAgenceFrançaisede“MemoriasdeSostenibilidad,”followingtheGlobalDéveloppement.StandardsforSustainabilityReporting.Note:C&E=climateandenvironmental;DBSA=DevelopmentBankofSouthernAfrica(SouthAfrica);ESRM=environmentalandsocialriskmanagement;FIRA=FideicomisosInstituidosenRelaciónconlaAgricultura(Mexico);IDFC=InternationalDevelopmentFinanceClub;KDB=KoreaDevelopmentBank(theRepublicofKorea);NDFI=NationalDevelopmentFinancialInstitution;TCFD=TaskForceonClimate-RelatedFinancialDisclosures;TSKB=TürkiyeSinaiKalkinmaBankasi.Furthermore,manyNDFIsdonotdisclosetheirgreenfinancingvolumespublicly.ExamplesofgoodNDFIpracticesonC&Edisclosuresandreportingarereportedinbox3.4.NOTES1.TheresultsarenotnecessarilyrepresentativeforthewholeuniverseofNDFIs,as­developmentfinancialinstitutionsthatdidnotparticipateinthesurveymightbelessactiveinthegreenfinancingspace.Instead,theresultsareusedtoshowcasethebest­practicesofNDFIsindevelopingandpursuingagreenagenda.2.AccordingtoCPI(2022),NDFIsaredefinedasinstitutionsthatareownedbyasinglecoun-tryandthatdirectfinancingdomestically.CPI’sdatasourceforNDFIsisbasedonsurveys,NDFIs’annualreportsorwebsites,andexternalsourcessuchasConvergence,BloombergNEF,andtheOrganisationforEconomicCo-operationandDevelopment.FurtherdetailsonCPI’sdatacollectionapproachcanbefoundinCPI’smethodologynote(CPI2022).3.InthereferencedatasetfromCPI(2022),theRepublicofKoreaandJapanareincludedintheEastAsiaandPacificregion.Intheabsenceofmoregranulardataforthesecountries,weuseLICsandMICstomeanEastAsiaandPacific(includingKoreaandJapan),EasternEuropeandCentralAsia,LatinAmericaandCaribbean,MiddleEastandNorthAfrica,Sub-SaharanAfrica,andSouthAsia.ThefinancingflowstoLICsandMICsare,therefore,overestimated,astheyincludeflowstoKoreaandJapan.4.Adaptationfinancingisdifficulttotrackbecauseofalackofwidelyacceptedandconsis-tentdefinitionsandbecausefundsearmarkedforadaptationoftenareinternalizedascon-tingenciesorriskmanagementexpensesbypublicandprivatesectoractors.5.First-tierlendingisdirectlytothefinalborrower(thatis,businessorindividual).Second-tierlendingisprovidedtofinancialintermediariestolaterlendtothefinalborrowers.6.ThisincludesthroughtheInternationalFinanceCorporation’sEnvironmentalandSocialPerformanceStandards,WorldBankEnvironmentalandSocialSafeguardPolicies,theEquatorPrinciples,andNDFIs’internalESRMpoliciesandstandards.26GreeningNationalDevelopmentFinancialInstitutionsBIBLIOGRAPHYCPI(ClimatePolicyInitiative).2022.GlobalLandscapeofClimateFinance:ADecadeofData.Washington,DC:CPI.IDFC(InternationalDevelopmentFinanceClub).2021.IDFCGreenFinanceMappingReport2021.Paris,France:IDFC.WorldBank.2023.WhatYouNeedtoKnowaboutHowCCDRsEstimateClimateFinanceNeeds.Washington,DC:WorldBank.4ToolkitsforGreeningNDFIsBACKGROUNDThetoolkitsdescribedinthischapterhighlighttherangeofapproachesthatNationalDevelopmentFinancialInstitutions(NDFIs)couldtaketopromotegreenfinancingandtomanageclimateandenvironmental(C&E)risks.Thesetoolkitsarehighlevel,sotheimplementationofthesepracticalrecommenda-tionsmaydifferdependingonthelocalcontext.Forexample,theactionstakenmaydependonanNDFI’slevelofexpertiseandcommitmenttoC&Eissues,aswellasthenatureandscopeofitsbusinessmodel.Insomecases,itmaybemoreeffectivetoapplydifferenttoolkitstogetherinapackage.Inothercases,NDFIsmaypreferaphasedapproach,startingwithaselectedtoolkit.Inaddition,whetherNDFIscansuccessfullygreentheir­operationsmaydependonfactorsthatarebeyondtheircontrol.GOVERNANCEANDSTRATEGYNDFIsshoulddevelopaninternalstrategytoidentifykeyprioritiesformanag-ingC&Eopportunitiesandrisks,modifyinginstitutionalmandatesormissionsasnecessary.DevelopinganinstitutionalstrategytoaddressC&Eissuesisessen-tialforNDFIstoinitiatetheirgreentransformation.Incorporatinggreenobjec-tivesexplicitlyininstitutionalmandatescanbeuseful,butthattasktypicallyrequireslegalmodification,andmostmandatesappearbroadenoughtoaccom-modategreenstrategiesintheinstitutionalmission.Forgreenfinancing,NDFIsshoulddevelopadetailedinternalstrategytoillustratehowtheyintendtosupporttheimplementationofthegovernment’sC&Eobjectives.1ForC&Erisk,thestrategyshouldconsiderdifferentriskassess-mentapproaches,including,whererelevant,forward-lookingassessmentssuchasscenarioanalysisandstresstestingtobuildasolidunderstandingofhowC&Ephysicalandtransitionriskscantranslateintofinancialrisks.Furthermore,anapproachtoreduceprojects’negativeC&Eimpactsthatcouldultimatelyunderminethoseprojects’financialperformanceshouldbeconsidered(whichoftenispartofNDFIs’environmentalandsocialrisk2728GreeningNationalDevelopmentFinancialInstitutionsmanagement[ESRM]systems;refertothe“C&EFinancialRiskManagement”sectionlaterinthischapterforfurtherdetails)(IADB2021).Actionsshouldalsoincludeastrategyoncapacitybuildingthatincludesquantitativetargets(forexample,inrelationtotheamountorshareofgreenassetsincreditandinvest-mentportfolios,aswellasthecarbonfootprintfromScope1,2,and3greenhousegas[GHG]emissions),2clearmilestones,andmonitoringandevaluationindica-torstoensurethatpracticalactionsaretakentoaddresskeyprioritiesforman-agingC&Erisksandopportunities.StrategiescouldconsiderexplicitalignmentwiththeagendaaroundtheParisAgreement(refertobox4.1).BOX4.1ParisAlignmentandnet-zerotransitionplansAgrowingnumberofFIsarecommittingtoaligntheirassessanddiscloseGHGemissionsassociatedlendingandinvestmentdecisionswiththePariswithfinancingactivities.Agreementorotherclimategoals.Severalinitiatives,•Target-settingusuallyinvolvessettingquantita-suchastheGFANZandtheNet-ZeroBankingtiveemissionreductiontargetsusingglobalguid-Alliance,havebeenestablishedtohelpFIstransitionancesuchastheScience-BasedTargetsInitiativetowardnet-zero.MajorcommercialbanksandMDBs(n.d.).d(includingtheWorldBank)havealsomadecommit-•SteeringinvolvesadjustingFIs’lendingandmentsrelatedtonet-zeroortheParisAlignment.ainvestmentportfoliosinlinewiththeagreedtar-get.SeveraltoolshavebeendevelopedtosupportInaddition,supervisorsaroundtheworldthisprocess.Forexample,theParisAgreement­(includingintheUnitedStates,Japan,theEuropeanCapitalTransitionAssessmenttool(ClimateUnion,andtheUnitedKingdom)areexploringtheirScenarioAnalysisProgram,n.d.)canbeusedtoroleinguidingthedevelopmentofFIs’transitionassesswhetherinvestmentorlendingportfoliosplans.Evaluatingandmonitoringtherisksarisingareinlinewithavarietyofclimatescenarios.efromplanmisalignmentcanfeedintothesupervisory•Trackingprogressusuallyinvolvesdevelopingareviewprocessandtheassessmentoftransitionrisks.transitionplan,whichallowsFIstoanticipatethetransitionandprepareforadjustmentsAsthemomentumisgrowing,FIs’approachestototheirbusinessmodels.Theplanshouldnet-zeroortheParisAlignmentareheterogeneous;noincludeadetailedmultiyearroadmapwithcommondefinitionexistsforwhatitmeanstoachievecleartargetsandactions(GranthamResearcheither.However,bothgenerallyentaildevelopingInstitute2022).InitiativessuchastheGFANZapproachestoreduceGHGemissionsinFIs’lendingandtheNet-ZeroBankingAlliancehavebeenandinvestmentportfoliostoalignwithpathwaystoestablishedtosupportthisprocess.Toensurenet-zerobythemiddleofthiscentury(UNEPFIn.d.).bintegrityandcredibility,thetransitionplanParisAlignmentmayalsoincludeobjectivesrelatedtoshouldinclude(a)adefinitionofthecurrentadaptationandresilience.Eventhoughtheseemissionbaseline(business-as-usuals­cenario);approachesarediverse,severalcommonelementscan(b)commitmenttoreduceScope1,2,or3applytoFIs’approachesforboth(CoalitionofFinanceemissionsatentry;and(c)interimtargetsMinistersforClimateAction2021;GFANZ2022;(asrelevant).Ideally,institutionalprocessesforWorldResourcesInstitute2021):qualityassuranceshouldalsobesetupandmayinvolveexantevalidationofthetransitionplan,•Datacollectionusuallyinvolvescollectingdataincludingbaselineandtargets.Reportingononportfolio-wideemissionstoinformFIs’andindependentverificationofprogressduringtargets,transitionplans,andclientengage-ment.ThePartnershipforCarbonAccountingcontinued­Financials(n.d.)cwasdevelopedtohelpFIsToolkitsforGreeningNDFIs29Box4.1,continuedplanimplementationandtargetachievementsufficientdatatotrackandmeasuretargets,andthecouldbeconsidered.widerangeofmethodsbeingusedtooperationalizetheconceptanditscommitments.MethodsarealsoFIsaimingtoalignlendingandinvestmentportfo-noteasilycomparableandcanleadtodifferentlioswiththeParisAgreementareconfrontedwith­outcomes,allowingroomforinterpretationand,manychallenges,includingthelackofacleardefini-therefore,“greenwashing.”tionofParisAlignmentandnet-zero,alackofNote:FI=financialinstitution;GFANZ=GlasgowFinancialAllianceforNetZero;GHG=greenhousegas;MDB=MultilateralDevelopmentBank.a.TheWorldBankhascommittedtoalignallitsfinancingoperationswiththegoalsoftheParisAgreementinitsClimateChangeActionPlan2021–25.TheParisAlignmentofthesenewfinancingflowsisthemostcomprehensiveinstitutionalundertakingeverdonebytheWorldBanktoreconciledevelopmentandclimate.TheWorldBankisontracktoalign100percentofnewoperations,startingfromJuly1,2023.FortheMultilateralInvestmentGuaranteeAgency,85percentofnewoperationswillbealignedstartingJuly1,2023,and100percentfromJuly1,2025.ThisworkispartofabroaderMDBvisiontoalignfinancingflowswiththeobjectivesoftheParisAgreement.b.TheNet-ZeroBankingAlliancedefinesnet-zero/ParisAlignmentasthetransitionofalloperationalandattributableGHGemissionsfromlendingandinvestmentportfoliostoalignwithpathwaystonet-zerobythemiddleofthiscentury,orsooner,includingcarbondioxideemissionsreachingnet-zeroby2050atthelatest,consistentwithamaximumtemperatureriseof1.5°Cabovepreindustriallevelsby2100.c.https://carbonaccountingfinancials.com/.d.https://sciencebasedtargets.org/.e.https://2degrees-investing.org/resource/pacta/Moreover,NDFIsshouldconsidertheirroleinaddressinggreenwashingpractices,providinganexampletothefinancialsector,andshouldincludesup-portforthedevelopmentofrelevantstandardsandpoliciestoreducethepoten-tialformarketactorstomakeunsubstantiatedclaimsaboutthedemonstratedenvironmentalmeritsoftheirproductsandservices.ThestrategyshouldbeendorsedbyNDFIs’boardsofdirectorsorseniormanagementtoensureaccountability.NDFIscouldconsiderlaunchingtheinternalstrategypubliclytoleadbyexampleanddemonstratetheircommitmenttotheagenda.EquallyimportantisforNDFIstodeveloptheappropriategovernanceframeworkfordeliveringontheinternalstrategy.Well-informeddecision-makingandcoordinationateverylevel(includingmunicipalandlocallevels)areimportanttoensuretheeffectivenessofgreeningNDFIs.Forthisreason,NDFIsshoulddevelopanappropriateinternalgovernanceframe-worktomakeinformeddecisionsonhowC&Erisksandopportunitiesaremanaged.Thisworkmayinvolve,forexample,ensuringthataboardrepresen-tativeisresponsibleformonitoringandmanagingC&Erisksandopportuni-ties.Securingboardsupportatanearlystageisimportanttodemonstratecommitmenttoandleadershipfortheagenda.Relevantcommitteesanddepartmentsshouldalsobeidentifiedtoensureroleclarityandresponsibili-tiesforimplementingtheinternalstrategy.Itmayalsoinvolveestablishingaspecificdepartmentoracross-functionalworkinggrouptocoordinateandimplementC&E-relateddecisionsandpriorities.Insomecases,itmaybehelp-fultoadjusttheNDFIs’formalmandatetoexplicitlyincludeelementsrelatedtoC&E,althoughthisisnotaprerequisiteforgreeningNDFIs’operations(refertobox3.1ongoodpracticesongovernanceandstrategy).30GreeningNationalDevelopmentFinancialInstitutionsNDFIsshouldleverageinternationalandnationalnetworkstobuildtherequiredexpertiseongreenfinancing,C&Eriskmanagement,anddisclosureandreporting.AwiderangeofinitiativesaresupportingtheagendatogreenNDFIs.Asnotedintheintroduction,severalguidancenoteshavealreadybeendeveloped,includingbytheInter-AmericanDevelopmentBank,theUnitedNationsDevelopmentProgramme,andtheInternationalDevelopmentFinanceClub.NDFIscouldleveragetheseinternationalresourcesandnet-workstodevelop­capacity-buildingprogramsonkeytopics.Atthesametime,NDFIsshouldstrengthencollaborationwithpublicauthoritiestoensurethatitsinternalstrategyisfullyalignedwithacountry’sC&Eobjectives.Engagementwithauthoritiesmayalsobeimportanttosupportspecificpolicyagendas(forexample,developingaprojectpipeline;seefurtherdetailsinthefollowingsection,“GreenFinancingSourcesandUses”).ConcernsexistthatfocusingonC&EactivitiesbyNDFIspossiblycanaffectfinancingflowstootherunderservedsegments,suchassmallbusinesses;how-ever,suchafocuscanalsopresentopportunities.Micro,small,andmediumenterprises(MSMEs)accountforalargeshareoffirmsandemploymentinmanycountries.MostMSMEsoperateintheservicesindustryinsectorswithrelativelylowemissions,suchasretailcommerce,hospitality,repairs,andper-sonalorenterpriseservices.However,MSMEsinthemanufacturingsectorthatareintegratedintovaluechainsfacegrowingpressuretogreentheiroper-ations,asanalysisofthegreennessoflargefirmsturnsitsfocustoScope3emissions(thatis,emissionsthroughfirms’valuechain).AlthoughMSMEclientsincreasinglypayattentiontofirms’greencredentials,MSMEsoftenneedtheircashflowforpurposesotherthangreeninvestmentsandareunsurehowtostartontheirgreenjourney.Atthesametime,MSMEsfacechallengeswithaccesstocreditduetolackofphysicalcollateral,weakerbalancesheets,andlackofcredithistory.Forthosereasonsandalsofortheirsocioeconomicimportance,MSMEsaretypicallyaprioritysectorforNDFIs.However,NDFIs’focusongreenactivitiescouldfurtherhamperMSMEs’accesstocredit.RequirementsforNDFIborrow-erstoreporttheiremissionsorobtaingreencertificationscanpresentchallengesforMSMEs.However,NDFIgreenoperationscanalsoprovideMSMEswithequityorloansinnewgreentechnologiesthatcanenhanceproductivityandincreasecashflows,aswellasadvisoryservicestogreensmallbusinesses(refertobox4.2).DevelopmentoffinancialsolutionstofundinvestmentsthatincreaseMSMEadaptationtoclimatefinanceisanareaofopportunity.GREENFINANCINGSOURCESANDUSESPipelinedevelopmentandprojectpreparationforgreenprojectsarecriticaltoensurecapitalflowstoprioritysectorsforC&Eobjectives.Thelackofanade-quate,bankableprojectpipelineisoftencitedasakeychallengetoscalingupgreenfinancing—sometimesevenmorechallengingthanaccesstothefinanc-ingitself.NDFIshavearoletoplayinidentifyinganddevelopingbankablegreenprojects.First,buildingontheirexpertise,stakeholderconnections,andunderstand-ingofthelocalcontext,NDFIscouldprovidetechnicalassistancetosupportprojectpreparation,especiallyinsectorsinwhichgreeninvestmentisneededthemost.Second,marketeducationcouldbeprovidedtoprojectdevelopersandToolkitsforGreeningNDFIs31BOX4.2ExamplesofNDFIgreenMSMEproductsNacionalFinancierainMexicohasoperatedtheBrasilwillofferitsclientspackagesthatintegrateMassiveBusinessEco-CreditProgramformorethanfinancingwithsupporttoaccesscarbonmarketsadecade.Throughthisprogram,NacionalFinancierathrougha“one-stopshop.”Thisprogramwillpro-offersacreditlinetotheEnergySavingsTrustFund,videBrazilianfirms—smallandmidsizecompanieswhichinturnprovidescreditstothefinalin­particular—withanaccessible,end-to-endservicebeneficiaries.Financingisofferedatpreferential­startingfrommeasuringtheircarbonfootprinttorates,andcreditrepaymentsaremadethroughgeneratingreturnsfromhigh-i­ntegritycarbonelectricitybilling.Electricitysavingsareusedforloancredits.repaymentwithoutaffectingthefirm’scashflow,whiletheinvolvementoftheelectricitycompanyinBpifranceEcotechnologiesprovidesequityandtheloancollectionthroughtheelectricitybillingconvertibleloanstoinnovativeMSMEsactiveinreducestheMSMEcreditriskthattraditionally­carbon-freerenewableenergiesandgreenchemistry,impedesaccesstoinvestmentloans.aswellasinthecirculareconomy(wasterecovery,ecodesignofproducts,andindustrialecology).TheyBancodoBrasil,astate-ownedcommercialbankinvestinticketsfrom€2millionto€10million,withthemissiontosupportsustainableeconomicsystematicallyseekingco-investmentwithprivatedevelopmentinBrazil,willbeginoffering­sustainability-​playersinthelogicofawiseinvestor.linkedloanstocompaniescommittedtoreducingtheircarbonfootprintthroughtheirvaluechainTohelpMSMEsbegintheirgreentransition,underarecentlyapprovedWorldBankproject.TheNDFIscanofferavarietyofnonfinancialproducts.initiativealsoincludesaUS$98millionpilotClimateTheStrategicBankingCorporationofIrelandoffersDebtFund,whichisexpectedtoleverageprivateMSMEsvouchersforgreenaudits.Bpifranceoffersa­capitaltoexpandsustainability-linkedfinanceinthefreeinformationtechnologyself-diagnosis,calledbroadereconomy.Undertheprogram,Bancodo“TheClimatomètre,”tohelpfirmsassesstheirclimatematurity,aswellasconsultingservices.Note:MSME=micro,small,andmediumenterprise;NDFI=NationalDevelopmentFinancialInstitution.financierstoraiseawarenessofinvestmentopportunities,forexample,throughsectorstudiesoroutreachprograms.Third,NDFIscouldsimplifytheprocessofdevelopingprojectsthroughstandardization.Forexample,thisworkmayincludestandardizingprojectdocumentstominimizetheneedforextensivenegotiationsandprovidingacommonsetofserviceproviders(suchastechnicalandinsuranceadvisers)toachievebulkdiscountsandlowerfees.Itmayalsoinvolveofferingcommercialco-financingonaprogrammaticbasistofacilitateinvestmentatscale.Bystandardizingprocessesatthecountryandprogramlev-els,theseapproachesenablecompetitivetendering,fasterdelivery,andlowerprices.Finally,NDFIscouldalsomobilizeprivatefundstowardprojectprepara-tionbyco-investingwithinstitutionssuchastheInternationalFinanceCorporation(IFC)andothergreen-orientedinvestorsinprojectpreparationfacilities.Privateinvestorsparticipatinginthosefacilitieshavetheoptiontorecoverthosecostsbyparticipatinginaproject’sdebtandequityfinancing.Mobilizingprivatefinancingforgreenprojectsshouldbeaprimaryobjec-tiveforNDFIs;mandatesandmissionstatementsshouldincorporaterefer-encestocrowdinginprivatesectorfinancetomeetC&Egoals.FocusingoncrowdinginprivatesectorfinancepromotesleverageandefficientuseofNDFIresourcesanddoesnotprecludethemfromprovidingcreditdirectlyto32GreeningNationalDevelopmentFinancialInstitutionsborrowersbutencouragesthemtoshifttheirfocustowardco-financingandrisk-sharingmechanisms(GutierrezandKliatskova2021).HavingaclearunderstandingofmarketbarrierswillallowNDFIstodevelopinnovativefinancingapproachestailoredtothelocalcontextandtoleveragetheirareasofexpertise,aswellastomanagethechallenges(referalsototable4.1).Beyondtheprivatesector,NDFIsshouldalsoexplorewaystoengagewithState-OwnedEnterprises(SOEs),whichareimportantplayersinboththeclimatemitigationandadaptationagenda.Box4.3providesfurtherdetailsonhowNDFIscanfacilitateSOEs’climateaction.TABLE4.1PotentialapproachestoaddressbarrierstostimulatinggreeninvestmentsfromtheprivatesectorMARKETBARRIERAPPROACHESTOADDRESSTHEBARRIERPerceivedhighriskinessofgreenprojects:Significantrealorperceivedriskinessofgreen•Co-investment,includingsubordination:Ifaprojectcansecurefinancingforprojectsincreasesthecostofcapitalandonlyaportionofitscosts,NDFIscanprovidegapfinancingtohelpclosethepreventsprojectsfrommovingforward.Fordeal.Theseinstrumentscanhavedifferentstructures,terms,andtenors.Takingexample,offtakeandcreditriskscanleadtoasubordinatedpositioninthecapitalstackandprovidingfirst-losscapitalhighunderwritingcostsforcleanenergyandstructurescanfurthermitigatetherisksandeffectivelymobilizeadditionalenergy-efficiencyprojects.Constructionrisk,fundingsources.particularlyfornascenttechnologieswithalimitedtrackrecord,canleadtoashortageof•Creditenhancements,includingguarantees,insurance,first-losscapital,andcapitalintheprojectdevelopmentphase.loan-lossreserves:Inadditiontode-riskingprojects,creditenhancementscanhelpinvestorsgainexperienceinlesser-knownsectors,buildtheirinternalHighup-frontfinancingcosts,hight­ransactioncapacity,andshapetheirriskperception(forexample,refertoMcKinseyandcosts,andlongpaybackperiods:GreenprojectsCo.2016).Guaranteesareflexibleinstrumentsthatcanbetailoredtodifferent(forexample,renewableenergy,energycircumstancesandtypesofrisk.Loan-lossreservefundscanbestructuredinefficiency)oftenrequireasignificantup-frontdifferentwaystohaveasimilarcrowding-ineffect—forexample,byprovidingcapitalinvestmentandhavelongmaturityfirst-orsecond-lossprovisionstoincreaseprivatesectorrisksharing.profiles.Thetransactioncostsoftheseinvest-mentsarealsogenerallyhigherinEMDEs(for•Capitalmarketaccess:NDFIscanhelpconnectlocalandinternationalcapitalexample,duetolackofinstitutionalcapacityormarketswithprojectsthatarebeyondthehigh-riskdevelopmentphase.Theselackofaregulatoryenablingenvironment).operationalprojectscanoffercompetitiverisk-adjustedreturnsandmaybeThesefactorscouldincreasethecostformoresuitabletomeetinstitutionalinvestors’riskappetite.ForEMDEs,accesstoinvestorstoidentify,assess,andmanagetheselocalcapitalmarketscanhelpavoidtheneedforexpensivecurrencyhedgingprojects.products.Increasinglocalinvestorparticipationcanbuildconfidenceinthemarketandincreaseoverallwillingnesstoinvest.•Equityinvestments:NDFIscouldconsiderexpandingtheirequityinvestmentstocapturetheupsidepotentialofprojects,which,inturn,couldhelpfinanceotherNDFIinvestments.TakingequitypositionsmayincreasetheNDFI’sinfluenceonthecompany’stransitionpathway(ODI2020).Equityinvestmentscouldbedonethroughpublic-privategreenequityfunds,withNDFIsactingasanchorinvestors,mobilizingprivatefundstowardgreenequityinvestments,anddevelopingcapitalmarkets.•Co-investmentandloansyndication:Toalleviatetheup-frontcapital­requirement,NDFIscouldco-investwithprivateinvestors,potentiallytakingasubordinateposition,toprovidefurtherriskmitigation.Throughloan­syndication,NDFIscanaddvaluebystructuringdealsandactingasfacilitatorbetweenprojectdevelopersandinvestors.•Creditenhancements,suchasguarantees,insurance,andloan-lossreserves:NDFIscanprovidecreditenhancementsbyofferinglongermaturities,differentiatedpricingstructure,ormorefavorabledebtrepaymentschedules.•Refinancing:NDFIscanproviderefinancingtorecyclemoreexpensivecapitalduringthehigh-riskconstructionstagetolessexpensivecapitalattheoperationalstage,whencashflowsaresteady.continuedToolkitsforGreeningNDFIs33TABLE4.1,continuedMARKETBARRIERAPPROACHESTOADDRESSTHEBARRIERSmallticketsizeanddisaggregatedprojects:•Aggregationandwarehousing:NDFIscanaggregatesmall,dissimilar,andSmallandgeographicallydispersedprojectsdifficult-to-evaluateprojectsthatarenotcost-effectivetounderwriteontheir(forexample,residentialorsmallbusinessown.NDFIscouldunderwriteandwarehousetheloansdirectly,eitherkeepingenergyefficiencyprojects)areoftennotthemason-balance-sheetinvestmentsoraggregatingasanintermediaryforcost-effectiveforprivatelenderstounderwrite.otherinvestors.Poolingtheseloansdiversifiesriskandachievesscale,makingThehightransactioncostcreatesbarriersforthemmoreattractivetoinvestors.small-scaleprojectstoaccessfinancing.•Securitization:Bypoolingprojectsortransformingilliquidassetsintotradablesecurities,NDFIscanlowertransactioncostsandspreadtherisk,makingprojectsmoreattractiveforprivateorinstitutionalinvestors.LimitedC&Eexpertiseandlackofabilityto•Demonstrationinvestment:NDFIscantakeonearly-stageinvestments,whichidentifyandclassifyprojects:Investors,lenders,privateinvestorsoftenshyawayfrom.Bydevelopingatrackrecordandorprojectdevelopersareoftenunfamiliarwithfillinginformationgaps,NDFIscanbuildconfidenceinthemarketfornewemerginglow-carbontechnologiesandothertechnologies.greenprojects.Wholesaleactorsmaybeunawareoftheopportunitiesinthe•Technicalassistance:GivenNDFIs’proximitytothegovernmentandlocalgreenfinancingmarket,leadingtoadisconnectmarkets,NDFIsarewellplacedtoeducatelocalfinanciersabouttheinvestmentbetweencapitalsupplyanddemand,aswellasopportunitiesandrisksingreensectors.tounderinvestmentingreentechnologies.Localbanksmaylacktheknowledgetoadapt•Greencreditlines:NDFIscanprovidegreencreditlinestofosterlendingtounderwritingmethods,asassessingthegreenprojectsthroughlocalinstitutions.Throughthisprocessandadditionaleconomicviabilityofgreenprojectsrequirestechnicalassistance,NDFIscouldincreaselocalFIs’awarenessandexpertiseinspecifictechnicalexpertise.greencreditproducts,thusexpandingthelocalgreen-lendingmarket.Limitedconsumerunderstanding:Consumers•Marketeducation:NDFIscanprovidetrainingandsupporttoconsumersandmayhavedifficultyperceivingtheeconomicenduserstogeneratedemandforpublicorprivatesupportprogramsbenefitsofgreenprojects(forexample,energy(forexample,specializedlendingforhomesolar).efficiencyanddistributedsmall-andmedium-​scalerenewableenergyprojects).Thisissue•Customersolutions:NDFIscanensurethatendusersfaceminimalcomplexitycouldreduceinterestintakingonassociatedwhenconsideringaclean-energysolutionbydevelopingaccessibleprocessespublicorprivatesupportprograms(forexample,toconnectlendingprogramstoconsumers.specializedlendingprogramsforenergyefficiencyorhomesolar).•First-lossprovisionsandloan-lossreserves:NDFIscanreservecapitaltocoveracertainportionofaproject’slosses.Areservecanbeinthefirst-lossorRegulatoryandpolicyrisk:Thelackofansecond-losspositioninrelationtothelender.ThisstructureassuresalenderenablingregulatoryandpolicyenvironmentisathatsomeportionofpotentiallosseswouldbecoveredorsharedbytheNDFI.keychallengeforgreeninvestmentsinEMDEs.Suddenchangestopoliciesandregulationscan•Coordinationandtechnicalassistance:NDFIscanfunctionasthebridgeincreaseinvestmentuncertaintyandreducebetweenlocalgovernmentsandthemarketandhelpdriveregulatoryreformsprivateinvestors’appetiteforgreenprojects.thatfurtherde-riskgreenprojectsandcreateamorestable,policy-enablingenvironment.Currencyrisk:Localcapitalmarketsoftenlackthedepthtosupplythefinancingneededfor•Currencyhedge:Thecostsofhedgingproductscanbehigh,especiallyforgreeninvestments,meaningthatmanyprojectscountrieswithahistoryofunstableexchangeratesandhighpoliticalinstability.mustrelyonforeigninvestmentsupport.OwingNDFIscanbuildonexistingmodelstocreatecost-effectivelocalhedgingtomacroeconomicinstabilityandotherfactors,facilities,which,inturn,couldenablemoreforeigninvestmentinlow-carbonEMDEsareoftenvulnerabletocurrencyprojects.afluctuations.Thedepreciationoflocalcurrenciescouldincreasetheriskforforeigninvestors,continuedparticularlyforcapital-intensiveprojectswithcashflowsinlocalcurrencies.Conversely,investmentsdenominatedintheeuroordollarcancreateriskforlocalborrowerstoservicetheirdebtobligations.34GreeningNationalDevelopmentFinancialInstitutionsTABLE4.1,continuedMARKETBARRIERAPPROACHESTOADDRESSTHEBARRIEROfftakerisk:Thecreditworthinessof(often•Co-investmentthroughsubordination:Byprovidingsubordinatedfinancing,state-owned)utilitiesinEMDEsishighlyNDFIscaneffectivelyprovideabufferforseniorprivatecapital,boostingtheunstable.Utilitiesmayfailtomeettheirattractivenessoftheproject.obligationsunderpower-purchaseagreements(thatis,purchasethepowerattheagreed-on•Creditenhancements,suchasguarantees,insurance,andloan-lossreserves:price),whichputsthereturnforinvestorsandCreditenhancementscanbedesignedtobackstoppowerpurchaseagree-projectdevelopersatrisk.Debtinvestorsinments.ThisdesigncanfacilitateutilitylendinginEMDEsandassurelendersmanycountrieswillpricethisriskintotheirthatlosseswillbeshared.requiredreturns,whichreducestheamountofdebtthatprojectscanattract.Itcanalsoleadtoanincreaseinenergypricesthatareeventuallychargedtoconsumers.Source:Tableoriginaltothispublication.Note:C&E=climateandenvironmental;EMDE=emergingmarketsanddevelopingeconomies;FI=financialinstitution;NDFI=NationalDevelopmentFinancialInstitution.a.Forexample,theCurrencyExchangeFund(TCX)orIndianCurrencyHedgingFacility.BOX4.3FacilitatingclimateactionbySOEsSOEsarecriticalplayersintheclimateagenda.Ongovernmentmandatesandpolicyobjectives)couldtheonehand,SOEsareamajorsourceofGHGlimitthee­ffectivenessofmarketwidepolicyemissions,reflectingsomeofthemainsectorsininterventionsdesignedtoengagewithprivatewhichtheyoperate,suchaselectricitygenerationorcompanies.Inaddition,significantheterogeneityutilities.SOEsaccountforatleast7.49gigatonsofexistsamongSOEs(forexample,levelofcapacity,carbondioxideequivalent(GtCO2e)annuallyinmandates,andrelationshipswithgovernments).direct(Scope1)emissions,awhichrepresentedNDFIs’approachestofacilitatingSOEclimateactionapproximately14­percentoftotalannualaveragecanincludethefollowing,dependingonSOEglobalGHGemissionsbetween2010and2019.bOngovernancestructureandmandates:theotherhand,SOEsalsohavearoletoplayinadaptationandresilience,becausetheyaccountfor•ImprovingSOEs’accesstofinancingforlow-­overhalfoftheinfrastructureinvestmentinLICscarbon,climate-resilientactivities(forexample,andMICs,includingpower,water,andtransport,allthroughconcessionalloans);ofwhichhavetoincreasinglyadapttotheimpactsofclimatechange(WorldBank2022).•Investmentsinsupportingpublicinfrastructure(forexample,transmissionlines,gridexpansion);NDFIsshouldprovidetargetedsupporttoenableSOEs’low-carbonandclimate-resilienttransition.•ProvidingcapacitybuildingtoimproveNDFIsaremajorfinanciersofSOEs;therefore,theySOEclimateriskassessmentsandclimatearebestplacedtofinanciallysupportSOEs’green­disclosures;andinvestmentsandencouragesoundC&EriskmanagementinSOEprojectsthroughtheapplication•Providingtechnicalandfinancialsupporttoofrelevantframeworks.AlthoughsomeoftheimproveSOEs’abilitytoattractprivateclimateapproachessuggestedintable4.1tofacilitateprivatefinancing(forexample,facilitatereformssectorclimateactionmaybeapplicabletoSOEs,toimproveSOEs’creditworthinessorlong-typicallylowerSOEprofitability(partlyreflectingterm­financialstabilityanduseofde-riskinginstrumentssuchasguarantees)(Benoit,Clark,andSchwarz2022;WorldBank2022).Note:C&E=climateandenvironmental;GHG=greenhousegas;LIC=low-incomecountry;MIC=middle-incomecountry;NDFIs=NationalDevelopmentFinancialInstitutions;SOE=state-ownedenterprise.a.EstimatedGHGemissionfromSOEsisbasedondatafrom300majorSOEs(ClarkandBenoit2022).b.TotalglobalGHGemissionsaveraged54.4GtCO2ebetween2010and2019(UNEP2022).ToolkitsforGreeningNDFIs35NDFIsshouldalsoaimtoexpandtheirofferingsinclimateadaptationfinanc-ing.Fundingforclimateadaptationandresilienceobjectivesischallengingandmayrequiremechanismsdifferentfromthoseformoremainstreamgreeninvest-ments.AlthoughNDFIsareimportantplayersintheadaptationspace,therelativefinancinggapformostcountriesremainssignificantascomparedwithmitigationfinancing.NDFIscouldcontributetobuildingthebusinesscaseforadaptationfinancingandtoenhancingtheunderstandingofprivateinvestorsandotherrele-vantstakeholdersaboutthepotentialeconomicbenefits.Forexample,throughcapacity-buildinganddemonstrationinvestments,NDFIscouldshowthebenefitsoffinancinginvestmentsinsectorsrequiringadaptationfinancing,suchasclimate-resilientagriculturalpracticesorinfrastructure(refertobox4.4).Similarly,NDFIscanpromotegreaterinvestmentinbiodiversity,theconser-vationandrestorationofecosystemservices,andnature-basedfinance.Giventheimportanceofnatureandecosystemservicesforsustainabledevelopment,itisimperativeforNDFIstoconsiderprotectingandpreservingtheseservicesaspartoftheiractivities(forexample,refertoIDFC2022;WWFandTheBiodiversityConsultancy2021).NDFIsarewellplacedtotakeamoreactiveroleinscalingupbiodiversityandnature-positiveinvestmentsbyfocusingoninvestinginprojectsthatenhanceorrestorebiodiversity,aswellasonincorporatingnature-basedsolutionsintheirportfoliosandstrategicdecision-makingtoreduceharmtobiodiversity.Theeconomicbenefitsofnature-relatedfinancemaybesignificant;however,aware-nessofthesetypesofinvestmentsisgenerallylow.Thislackofawarenesspro-videsNDFIswithanimportantmarketeducationrole,aswellasanincentivetomainstreambiodiversityandnature-basedsolutionsintheirportfoliosandinvestmentdecision-makingprocesses.NDFIshaveseveraltoolsthatcouldpro-videsupportbyidentifyingbiodiversity-relatedrisksandopportunities.3Moreover,NDFIscouldprovidesupporttogovernmentstocreatestrategic,technical,andlegalframeworksfavorabletobiodiversity.Finally,NDFIscouldincreasetheprivatesector’sparticipationingreenfinancingmarketsandcarbonmarketsbyactingasafirstmoverandprovidingcapacitybuilding.Inmanycountries,NDFIshaveoftenactedasthefirstmovertoissuegreenbonds,whichnotonlyisaneffectivewaytoraisecapitaltofinancegreenprojects,butalsocanraisetheprofileofgreenbondswithotherpotentialissuers,thusprovidinganopportunitytodeepenthelocalgreenbondmarket.NDFIscantakesimilaractionstostimulateinterestinothernovelmarkets,includingcarbonmarketsandsustainability-linkedinstruments,whichcanbeasourceforresults-basedfundingforNDFIs(refertobox4.5forfurtherdetailsonNDFIs’potentialroleincarbonmarkets).Beyondstimulatinggreenfinancinginstrumentsandcarbonmarkets,NDFIscouldalsoincreasetheprivatesector’sfamiliaritywithC&Epolicyinstruments,throughtechnicalassistanceandpilotingactivities.Forexample,intheRepublicofKorea,KoreaDevelopmentBankisresponsibleforpilotingtheapplicationoftheKoreanGreenTaxonomy(refertoappendixB).NDFIsshouldaimtoenhancetheiraccesstofinancingfrominternationalclimatefunds.Accessonconcessionaltermscanbevaluableforseveralreasons.Forexample,concessionalfinancingorgrantsmayberequiredtosupportaproj-ect’spreparationtoincreaseitscommercialviability.Concessionalfinancemayalsoberequiredforurgentinterventionsthatcannotbedelayedwithoutincreas-ingtransitioncosts.Incountriestransitioningawayfromfossilfuels,additionalconcessionalfinancingisneededforplantretirementsandtransition.36GreeningNationalDevelopmentFinancialInstitutionsBOX4.4NDFIs’roleinscalingupfinanceforadaptationandresilienceItisdifficulttoquantifycurrentlevelsofadaptationandinvestmentsrequiredtomeetacountry’sadap-resilienceinvestmentsfromtheprivatesectorbecausetationandresilienceneeds.Theinvestmenttheseinterventionsareoftenpartoflargerinvestmentplanshouldalsoinvolvemarketassessmentstoandbusinessactivities.Incomparisonwithmitigationidentifywhichprojectsare—orcouldbecome—projects,adaptationandresilienceinvestmentsarealsocommerciallyviableandwhichprojectsdonothardertodefinebecausetheycantakemanyforms.meetprivatesectorinvestmentcriteria,evenWhatconstitutes“adaptationandresilience”dependswhenbelow-marketfinancingandde-riskingarelargelyonacountry’scircumstances.DespitethesedataofferedbyNDFIs.limitations,estimatessuggestthatcurrentlevelsof•Supportthepreparationof“bankable”adapta-adaptationfinancingfallfarshortofneeds.Accordingtionprojects.OncebankableprojectshavebeentotheClimatePolicyInitiative,adaptationfinanceidentified,targetedsupportcouldbeprovidedaccountedforonly7.5percentofclimatefinanceinforprojectpreparationandtohelptheseprojects2019–20,andthemajorityoftrackedadaptationfinanceenterthemarket.Forexample,thissupportmaycamefromthepublicsector(CPI2022).Atthesameinvolveconductingfeasibilitystudiestoassesstime,estimatessuggestthattheeconomicbenefitsofaproject’sriskandreturn,mappingcashflows,investinginadaptationcanfaroutweighthecosts.aandidentifyingpotentialfundinggapsorwhereNDFIriskmitigationmayberequired.ItmayAdaptationandresilienceinvestmentsfromthealsoinvolveprojectstructuringandcoordinatingprivatesectorarelaggingforseveralreasons.Forprojectfinancingwithrelevantinvestorstocloseinstance,adaptationbenefitstendtobedifficulttothetransaction.monetize,havehightransactioncosts,andgenerally•Strengthenfinancialincentivesforprivateinvolvelocalpublicgoods.Furthermore,low-income­participation.NDFIscouldofferblendedfinance,communities,whicharemostinneedofthesetypesofcreditenhancement,orothertargetedmeasuresinvestments,tendtohavelowaccesstocapital(Worldtostimulateprivateinvestmentsinadaptation.Bank2022).UsingNDFIs’resourcestoaddresstheseTheseshould,however,bedesignedonacase-challengescouldbekeytounlockingprivateinvest-by-casebasistoaddressthespecificfinancingmentsandcouldgenerateimportantdevelopmentchallengesofdifferentadaptationandresiliencebenefitsforEMDEs.Thefollowingexamplesdemon-projects.stratehowNDFIscouldscaleupadaptationandresil-•Encouragetheuseofinnovativefinancingmecha-ienceinvestments:bnisms.Capacitybuildingandtechnicalassistancecouldbeprovidedtohelpinvestorsandproject•Supportthegovernmentinlong-term­adaptationdevelopersleveragenewfinancinginstrumentsinvestmentplanning,buildingonprioritieslaidforadaptationandresilience.coutinacountry’sNationalAdaptationPlanandNDC.ThissupportwillhelpidentifypriorityNote:EMDEs=emergingmarketsanddevelopingeconomies;NDC=NationallyDeterminedContribution;NDFI=NationalDevelopmentFinancialInstitution.a.Forexample,theGlobalCommissiononAdaptationestimatedthatinvestingUS$1.8trilliongloballyinfivetargetareasfrom2020to2030couldproduceUS$7.1trillionintotalbenefits,andspendingUS$800milliononearly-warningsystemsindevelopingcountriescouldreduceclimate-relateddisasterlossesbyUS$3billiontoUS$16billionperyear.b.TheexamplesbuildontherecommendationsfromWorldBank(2021a).c.SeveralexamplesareofferedbytheInternationalInstituteforSustainableDevelopment(IISD2023).AccesstointernationalclimatefinancingisespeciallyimportantforsmallerNDFIs,particularlythoseoperatinginlow-incomecountrieswithshallowcapi-talmarketsandfiscallyconstrainedgovernments.Giventheiruniquepositionasabridgeamonginternationalclimatefinancing,thegovernment,andlocalmar-kets,NDFIsarewellplacedtoactasanintermediaryforblendedfinancingtoToolkitsforGreeningNDFIs37BOX4.5OpportunitiesforNDFIstoleveragecarbonmarketstoenableprivateinvestmentsCarbonmarketsaregrowingasmanycountriesandTostimulatethesupplyofcarboncredits,NDFIscorporationsintendtousecarboncreditstowardmayprovidetechnicalassistancetohelpparticipatingtheirclimatepledges.Someestimatessuggestthatfirmsadoptcredibletransitionplansandtargets,aswellcarbonmarketsundertheParisAgreementcouldastodevelopsolutionstogeneratecarboncredits.ForgrowtoUS$300billionperyearby2030anduptoexample,thisworkmayinvolvesettingupinstitutionalUS$1trillionperyearby2050(IETAandUniversityprocessesforvalidatingandverifyingthequalityofofMaryland2021).transitionplansandtargets.Itmayalsoinvolvesettingguidanceandprocessestoassessthequalityandinteg-NDFIscouldplayanimportantroleinstimulat-rityofcarboncreditsgeneratedbyparticipatingfirms.ingthedemandandsupplyofcarboncredits.TheWorldBankisdeepeningitsengagementwithNDFIsAlthoughcarbonmarketscouldenableinvestmentstostimulatecarbonmarkets.Forexample,tostimu-andenhancetheviabilityofclimateaction,c­arboncreditlatedemand,theWorldBankissupportingNDFIstradingalsofaceschallengesthatarepartlyduetotheandotherstate-ownedFIsinthedesignoffinancialfactthattheytakeplacewithinahighlyheterogeneousinstrumentsthatleveragecarbonmarketstoraiseandfragmentedglobalmarket.Today,numerouscarbonadditionalinvestmentsandenhancethereturncreditmarkets,registries,andexchangeplatformscoex-­profileforgreenfinancinginstruments.Thisworkistglobally,eachwithitsownspecificationsandqualitymayinvolvecombiningcarboncreditswithotherstandards,makingitdifficultforcompaniestoselectfinancialinstruments,suchasgrants,labeledoptionstomonetizetheircarboncredits.Thefragmen-bonds,concessionalloans,orguaranteestoaddresstationincarboncredittradingrulesandinstitutionskey­barriersassociatedwithclimateinvestmentsleadstowidepricedispersion,addinguncertaintytothe(Srinivasanetal.2023).priceoutlookforcarboncreditsellers.Note:FI=financialinstitution;NDFI=NationalDevelopmentFinancialInstitution.aggregateandoptimizetheuseofdifferentsourcesofcapital(forexample,con-cessional,nonconcessional,andprivateequity)tomaximizetheefficiencyandimpactofallcapitalavailableforgreeninvestments.Despitethesepotentialbenefits,accessinginternationalclimatefundscouldberesource-intensiveandcomplex.Forexample,strictrequirementsmayexistforsocialandenvironmentalsafeguards,withwhichNDFIsmustcomplytoaccesstheseclimatefunds.Toaddressthesechallenges,governmentsandinter-nationalpartnerscouldprovidetechnicalsupporttohelpNDFIscomplywithinternationalclimatefundingrequirements.C&EFINANCIALRISKMANAGEMENTNDFIsshouldintroduceholistic,althoughproportionate,approachestoaddressC&Efinancialrisks,drawingonguidancefromglobalprinciples.AbetterandmoresystemicunderstandingofC&Efinancialrisksisanimport-antfirststeptoinformingC&Eriskmanagementpractices.NDFIsshouldadoptcomprehensiveC&Eriskmanagementapproachesthatconsiderrisksfromboththefinancialriskangle(thatis,thefinancialrisksthatC&Efactors38GreeningNationalDevelopmentFinancialInstitutionsposetotheirportfoliosandbalancesheets)aswellastheimpactangle(thatis,coveringpotentialrisksgeneratedbytheirinvestmentandlendingpracticesandassessmentsattheloanoriginationlevel[oftenconsideredaspartofESRM;alsorefertothe“C&EFinancialRiskManagement”sectioninc­hapter3foradiscussionofthetwoapproaches]).RecognizingthenascencyofC&EriskmanagementpracticesformanyNDFIs,thefollowingdiscussionprioritizesaselectionofcriticalstepstoenhancecurrentpracticesrelatedtotheconsider-ationoffinancialrisks.RiskmanagementframeworkscanaddresstheimpactsandeffectsofC&Econsiderationsonprojectperformanceaswellasonthefinancialperformanceofinstitutionalportfolios.ManyNDFIshavealreadyimplementedsystemstoadministerC&ErisksattheprojectlevelaspartoftheirESRMsystems.Inaddition,accesstomultilateralfundsrequiresapplicationofprojectsafeguardframeworksasdefinedbythemultilateralcommunity(forexample,WorldBanksafeguards[WorldBank2017],performancestandards[IFC2012]).ThesecanfocusonmitigatingthenegativeimpactsofaC&Eproject,which,inturn,couldaffectthatproject’sfinancialperformance.Institutionsincreas-inglyareapplyingmorecomprehensiveframeworksthatconsiderC&Erisksandopportunitiesregardlessoffundingsource.AdoptingframeworkstoaddresstheimpactsofC&Efinancialrisksonaninstitution’sbalancesheetandportfolioisanemergingpractice.GlobalstandardscansupportNDFIs’adoptionofinternationalgoodprac-ticesforaddressingC&Efinancialrisks.Notably,theBaselCommitteeonBankingSupervisionPrinciplesforEffectiveManagementandSupervisionofClimate-RelatedFinancialRisks(BCBS2022)hassetexpectationsforbanksandsupervisors.Theseprinciplesdescribeexpectationsabouthowbanksshouldcoverclimaterisksingovernanceandstrategy,theinternalcontrolframeworkacrossdifferentlinesofdefense(creditorigination,riskfunction,andinternalaudit),theriskmanagementprocess,capitalandliquidityadequacy,reporting,andscenarioanalysis.Inmanycases,theseprinciplesalsocanapplytoNDFIs,proportionatetothenature,scale,andcomplexityoftheiroperationsandtheoveralllevelofrisktowhichtheyareexposedandarewillingtotake.ExistingriskmanagementframeworkscanhelpNDFIsintegrateC&Erisksintocreditoroperationalriskprocesses(IADB2021),aswellasintolong-termstrategies,governancearrangements,andtheriskmanagementframeworksthemselves.NDFIsmustassessandestimatetheimpactofC&Ephysicalandtransitionrisksontheirinvestmentandcreditportfoliosovertheshort,medium,andlongterm.NDFIsshouldconsiderappropriatemitigationmechanisms,includingpotentialinvestmentlimitsonexposedsectors.Forward-lookingassessments,suchasscenarioanalysisandstresstesting,canhelpNDFIsbetterunderstandtheimpactofC&Efinancialrisksontheircreditandinvestmentportfolios.Asimplifiedapproachmayinvolveassess-ingexposuretosectorsorregionsvulnerabletophysicalandtransitionrisksbyobtainingdataonthesectoralandregionaldistributionofassets.Amoreadvancedapproachmayinvolveaclimatescenarioanalysisorstresstest.4Insuchtests,avarietyofclimate,economic,andfinancialmodelsarecombinedtoestimatetheimpactofclimatescenariosonlossesandcapital.Thescopeandgranularityofstresstestsdependonavailabledataandmodels.Climateriskassessmentsandstresstestscanhelpidentifymaterialrisksandprovideinsightsintovariousriskchannels.Regulatorsandsupervisorsmayrequestusingtheoutcomesofsuchexercisesovertime,includingininternalcapitalToolkitsforGreeningNDFIs39andliquidityadequacyassessments.Infinancialsectorslessadvancedin­managingC&Erisks,NDFIscouldactasafirstmoverbyimplementing­forward-​lookingC&Eriskassessmentstodemonstratethefeasibilityandvalueofsuchassessmentstootherprivatesectorfinancialinstitutions.SuchassessmentscouldalsoincreaselocalFIs’awarenessoftheimpactoflocalC&Eriskhotspots(forexample,high-carbonsectorsorflood-proneareas)onportfolios.Detailedandcutting-edgeexamplesofhowtoconductaclimateanalysiscanbedrawnfromnationalregulators(forexample,theEuropeanCentralBankandFinancieradeDesarrolloNacionalinColombia),globalentities(suchastheFinancialStabilityBoardandtheNetworkforGreeningtheFinancialSystem,whichalsoprovidesscenarioinputs)andworkdonebymultilateralssuchastheWorldBankandtheInternationalMonetaryFund(forexample,refertoECB2022;IMFandWorldBank2022;andWorldBank2021b).TheseeffortscouldbesupportedbyharmonizingandobtainingrelevantdataneededforC&Eriskassessments.NDFIsshouldensurethattheirdataaggregationcapabilitiesandinternalreportingframeworkscanmonitormate-rialC&E-relatedfinancialrisks.NDFIsshouldenhancetheavailabilityandqualityofdataneededtoimproveriskassessments.Forexample,NDFIscouldconsidercollectingmoregranulardataonclients’GHGemissions(includingdatafromlistedandnonlistedcompanies)andgeospatialdataonclients’oper-ations(forexample,locationofmainproductionfacilities).Informationfromlocallyavailablenatural-catastrophemodelscouldalsoimprovethephysicalriskscenariogeneration.NDFIsshouldfurtherdeveloptheirinternalcapacitytoassessandman-ageC&Eriskseffectively.ItwillbeimportantforNDFIstoadoptadynamicapproachandbeflexibletoadoptnewandrapidlyevolvingpractices.C&Eriskassessmentsshouldbeupdatedregularlybecausedataavailabilityandmethodologiesarerapidlyevolving.OnecriticalchallengeidentifiedbyNDFIs(seethe“C&EFinancialRiskManagement”sectioninchapter3)istheneedformoreexpertisewithandunderstandingofC&Erisks.Toaddressthisgap,tailoredcapacity-buildingprograms,whichcouldpotentiallylever-agesupportfromMultilateralDevelopmentBanksorotherinternationalpartners,couldbeprovidedtobuildinternalknowledge.EvidencesuggeststhatNDFIsmayalsobesignificantlyexposedtonature-relatedrisks,whichrequiresenhancedriskmanagement.TheFinanceforBiodiversityInitiativeestimatesNDFIs’“dependencyrisk”(thatis,theshareofactivitiesthatdependonnatureandecosystemservices)tobeapprox-imately40percentoftheirtotalassets.Inaddition,the“natureatrisk”fromlendingactivitiesisestimatedatUS$800billionannually,whichisbasedonthevalueofthepotentialdamagetonatureresultingfromdeforestationandwateruseifinvestmentsarecarriedoutwithouteffectivesafeguardstomiti-gatesuchharm.5Moreover,manyNDFIsdonotapplybiodiversitysafeguardsininvestmentdecisions,relyinginsteadonnationalenvironmentalimpactassessmentsthatoftenfallshortofinternationalbestpracticesinbiodiversityriskmanagement.MoreworkmaybeneededforNDFIstounderstand,measure,andmanagethenature-relatedrisksintheirportfolios,includingtheirimpactsanddepen-denciesonnature.Scalingupfinanceinnature-basedsolutionsandmainstream-ingbiodiversityconsiderationsacrossstrategies,analysis,andoperationswillhelpreducedependenciesandmitigatetheserisks.40GreeningNationalDevelopmentFinancialInstitutionsC&EDISCLOSURESANDREPORTINGNDFIsshouldenhancetheirC&Edisclosureandreportingpractices,whichareimportantmeanstofacilitatecommunicationwithclients,beneficiaries,andotherstakeholders.BuildingontheTaskForceonClimate-RelatedFinancialDisclosures(TCFD)recommendations,NDFIsshouldworktowardpublishingmeaningfuldisclosuresontheimplicationsofC&Erisksandopportunitiesfortheiroperations,aimedatprovidingdecision-useful,forward-lookinginforma-tionthatcanbeincludedinmainstreamfinancialfilings.Inparticular,NDFIsshoulddisclosethekeyC&Eriskstowhichtheyareexposed;theorganization’sgovernancearoundC&Erisksandopportunities;theactualandpotentialimpactsofC&Erisksandopportunitiesonitsactivities,businessmodel,and(long-term)strategy;andhowtheNDFIidentifies,assesses,andmanagesC&Erisks,includingthemetricsandtargetsituses.Disclosureframeworksshouldembedtheconceptofcompletemateriality(ordoublemateriality),coveringthefinancialimpactofclimate-relatedrisksontheonehandandtheimpactofbanks’activitiesonbothclimateandsocialfactors(inside-outperspective)ontheother.Furthermore,giventheimportanceofnature-relatedandbiodiversityrisksandfinanceforNDFIs,theyarealsoencouragedtoengagewiththeTaskforceonNature-RelatedFinancialDisclosures(TNFD).TheTNFDfollowsastructuresimilartothatoftheTCFDandcanhelpNDFIsincorporatenature-r­elatedrisksandopportunitiesintotheirriskmanagementandstrategicplanningprocesses.Moreover,NDFIsshouldfamiliarizethemselveswithimpendingglobalsustain-abilitydisclosurestandardsfromtheInternationalSustainabilityStandardsBoard(ISSB),whichwassetupundertheInternationalFinancialReportingStandards.TheISSBpublisheditsglobalsustainabilitystandardsin2023,whichhaveimplicationsforNDFIs’reportingovertime.NDFIsshouldaimtoimprovethequality,transparency,andconsistencyofgreenfinancing–trackingmethodologies,includingmethodologiesthattracktheamountofprivatefinancingmobilized.Asnotedinthe“GreenFinancingSourcesandUses”sectioninchapter3,NDFIsfollowdifferentclimatefinance−trackingmethodologies,whichmakesitdifficulttotracktheirclimatefinancing.NDFIsshouldbuildinternalcapacityandintroduceformalprocessestotracktheirgreenfinancingvolumes,whichcanhelpassesstheirprogressinachievingtheirC&Eobjectives,andtoreportthisinformationbothinternallyandexternally.Toassesstheeffectivenessoftheirgreenfinancing,NDFIscanworktogethertoharmonizeclimatefinance−accountingmethodologies,includingthosedesignedtotracktheamountofprivatefinancingmobilized.Methodologiesfortrackingclimatefinancingshouldbealignedwithglobalgoodpracticesandnationalgreentaxonomieswhererelevant.NOTES1.Inthiscontext,policyandregulatorypredictabilityarekeybecauseNDFIsneedclarityaboutwhatsectorsandtechnologiesarebeingprioritizedtoreachcountries’NationallyDeterminedContribution(pertheParisAgreement)andotherC&Egoals.2.Scope1coversemissionsfromsourcesthatanorganizationownsorcontrolsdirectly.Scope2areemissionsthatacompanycausesindirectlywhentheenergyitpurchasesandusesisproduced.Scope3encompassesemissionsthatarenotproducedbythecompanyToolkitsforGreeningNDFIs41itselfandarenottheresultofactivitiesfromassetsownedorcontrolledbythembutratherarebythoseforwhichitisindirectlyresponsible,upanddownitsvaluechain.3.ThesetoolsincludetheIntegratedBiodiversityAssessmentTool;footprintingthroughtheBiodiversityFootprintFinancialInstitutionstool;theGlobalBiodiversityScore;ortheExploringNaturalCapitalOpportunities,RisksandExposuretool.4.Aclimatestresstestisaforward-lookingfinancialriskassessmentconsistingofseveralsteps:(a)theidentificationofseverebutplausibleextremeweatherscenariosthataretai-loredtothecountrycontext,(b)anassessmentofexpectedeconomicdirectandindirectimpactsbyusingcatastrophemodelsandadaptedmacroeconomicmodelingframeworks,and(c)anassessmentoffinancialimpactsusingfinancialstresstestmodelingtotranslateeconomicandfinancialimpactsintofinancialsoundnessindicators(forexample,capitaladequacyratio,probabilityofdefault).5.FinanceforBiodiversityInitiative(2021).NotethattheFinanceforBiodiversityInitiativeusesthedefinitionofPublicDevelopmentBanks,whichisslightlynarrowerthanNDFIs.BIBLIOGRAPHYBCBS(BaselCommitteeonBankingSupervision).2022.PrinciplesforEffectiveManagementandSupervisionofClimate-RelatedFinancialRisks.Basel,Switzerland:BCBS.Benoit,P.,A.Clark,andM.Schwarz.2022.“DecarbonizationinState-OwnedCompanies:LessonsfromaComparativeAnalysis.”JournalofCleanerProduction355:131796.https://doi.org/10.1016/j.jclepro.2022.131796.Clark,A.,andP.Benoit.2022.GreenhouseGasEmissionsfromState-OwnedEnterprises:APreliminaryInventory.NewYork:ColumbiaUniversity.ClimateScenarioAnalysisProgram.n.d.https://2degrees-investing.org/resource/pacta/.CoalitionofFinanceMinistersforClimateAction.2021.IntroductiontoCommitmentsandMeasurementMethodsforPrivateFinancialSectorPortfolioAlignmentwiththeParisAgreement.Washington,DC:CoalitionofFinanceMinistersforClimateAction.CPI(ClimatePolicyInitiative).2022.GlobalLandscapeofClimateFinance:ADecadeofData.SanFrancisco,CA:CPI.ECB(EuropeanCentralBank).2022.ClimateRiskStressTest.Frankfurt,Germany:ECB.FinanceforBiodiversityInitiative.2021.AligningDevelopmentFinancewithNature’sNeedsEstimatingtheNature-RelatedRisksofDevelopmentBankInvestments.https://www​.naturefinance.net/wp-content/uploads/2022/09/Estimating-the-nature-related-risks-of​-­development-bank-investments.pdf.GFANZ(GlasgowFinancialAllianceforNetZero).2022.Net-ZeroTransitionPlanning.NewYork:GFANZ.GranthamResearchInstituteonClimateChangeandtheEnvironment.2022.NetZeroTransitionPlans:ASupervisoryPlaybookforPrudentialAuthorities.London,UK:LondonSchoolofEconomicsandPoliticalScience.Gutierrez,E.,andT.Kliatskova.2021.NationalDevelopmentFIs:Trends,CrisisResponseActivities,andLessonsLearned.Washington,DC:WorldBank.IADB(Inter-AmericanDevelopmentBank).2021.AGuidebookforNationalDevelopmentBanksonClimateRisks.Washington,DC:IADB.IDFC(InternationalDevelopmentFinanceClub).2022.ToolboxonIntegratingBiodiversityintoStrategiesandOperationsofDevelopmentFinanceInstitutions.https://www.idfc.org​/­wp-content/uploads/2022/06/idfc-toolbox-biodiversity.pdf.IETA(InternationalEmissionsTradingAssociation)andUniversityofMaryland.2021.ThePotentialRoleofArticle6CompatibleCarbonMarketsinReachingNet-Zero.https://k5x2e9z8.rocketcdn.me/wp-content/uploads/2023/09/IETA_WorkingPaper​_­ThePotential​RoleofA6CompatibleCarbonMarketsinReachingNetZero_2021.pdf.IFC(InternationalFinanceCorporation).2012.“PolicyonEnvironmentalandSocialSustainability.”IFC,Washington,DC.https://www.ifc.org/content/dam/ifc/doc/mgrt​/sp-english-2012.pdf.42GreeningNationalDevelopmentFinancialInstitutionsIISD(InternationalInstituteforSustainableDevelopment).2023.InnovativeFinancialInstrumentsforClimateAdaptation.Winnipeg,Canada:IISD.IMF(InternationalMonetaryFund).2022.FinancialStabilityReport.Washington,DC:IMF.IMF(InternationalMonetaryFund)andWorldBank.2022.BankStressTestingofPhysicalRisksunderClimateChangeMacroScenarios:TyphoonRiskstothePhilippines.Washington,DC:IMF.McKinseyandCo.2016.FinancingChange:HowtoMobilizePrivateSectorFinancingforSustainableInfrastructure.http://newclimateeconomy.report/2015/wp-content/uploads​/­sites/3/2016/01/Financing_change_How_to_mobilize_private-sector_financing_for​_­sustainable-_infrastructure.pdf.ODI(OverseasDevelopmentInstitute).2020.SecuringClimateFinancethroughNationalDevelopmentBanks.London:ODI.Srinivasanetal.2023.LeveragingCarbonMarketstoEnablePrivateInvestment.OMFIFSustainablePolicyInstituteBlog.https://www.omfif.org/spijournal_winter_23​_world-bank/.UNEP(UnitedNationsEnvironmentProgramme).2022.EmissionsGapReport2022:TheClosingWindow—ClimateCrisisCallsforRapidTransformationofSocieties.Nairobi,Kenya:UNEP.UNEPFI(UnitedNationsEnvironmentProgramme–FinanceInitiative).n.d.Net-ZeroBankingAlliance.https://www.unepfi.org/net-zero-banking/.WorldBank.2017.“WorldBankEnvironmentalandSocialFramework.”WorldBank,Washington,DC.https://thedocs.worldbank.org/en/doc/837721522762050108​-0290022018/original/ESFFramework.pdf.WorldBank.2021a.EnablingPrivateInvestmentsinClimateAdaptationandResilience.Washington,DC:WorldBank.WorldBank.2021b.Not-So-MagicalRealism:AClimateStressTestoftheColombianBankingSystem.Washington,DC:WorldBank.WorldBank.2021c.WorldBankGroupClimateActionPlan2021–2025:SupportingGreen,Resilient,andInclusiveDevelopment.Washington,DC:WorldBank.https://www​.worldbank​.org/en​/publication/paris-alignment.WorldBank.2022.AchievingClimateandDevelopmentGoals:TheFinancingQuestion.Washington,DC:WorldBank.WorldResourcesInstitute.2021.HowBanksCanAccelerateNet-ZeroEmissionsCommitments.Washington,DC:WorldResourcesInstitute.https://www.wri.org/insights/banks​-paris-alignment-net-zero-finance.WWFandTheBiodiversityConsultancy.2021.PublicDevelopmentBanksandBiodiversity:HowPDBsCanAlignwiththePost-2020GlobalBiodiversityFramework.Paris:WWFFrance.5ConclusionsandKeyRecommendationsBACKGROUNDNationalDevelopmentFinancialInstitutions(NDFIs)playakeyroleinthe­provisionofgreenfinancingbymobilizingprivatecapitalandfosteringthedevelopmentofgreenfinancingmarkets.NDFIsarethemainprovidersofgreenfinancinginlow-incomeandmiddle-incomecountries(LICsandMICs),reflectingtheircapacitytoprovidelong-termfundingandsupportforriskierprojects.Furthermore,NDFIscancatalyzeprivatesectorfinancingthroughrisk-sharingmechanismssuchasco-financinginstruments,creditenhance-ments,or­partialcreditguarantees.Innumerouscases,NDFIshavepilotedinnovativegreenfinancingproducts—forexample,greenbonds(NacionalFinancierainMexico)andsustainability-linkedloans(BrazilianDevelopmentBankinBrazil).Inthedevelopmentofgreenproducts,NDFIscanhelpstandardizecontractsandsetproductstandardsandspecifications.NDFIscanbuildcapacityatdifferentstagesoftheprojectcycleand,inmanycases,canprovidetechnicalassistancetoclientstogreentheiroperations.Theycanalsoleadbyexampleinthedevelopmentoftaxonomies(forexample,theFideicomisosInstituidosenRelaciónconlaAgricultura[FIRA]inMexicohasdevelopedataxonomyfor­agriculturalactivities),climatedisclosures,andclimateandenvironmental(C&E)riskmanagement,aswellassharethelessonslearnedfromthesepracticeswithprivatefinancialinstitutions.CURRENTSTATUSOFGREENOBJECTIVESResultsfromaWorldBanksurveyindicatethatmostNDFIshaveadoptedgreenobjectivesandhaveincorporatedC&Econsiderationsintotheiropera-tions,althoughtheoperationalizationofthoseobjectivescanbestrengthened.MostNDFIssurveyedhaveadoptedgreenobjectives,withintheirexistinglegal­mandates;however,fewhavesetconcretetargetsinrelationtotheParisAgreement’sNationallyDeterminedContributions(NDCs)objectives.Mostinstitutionshavegreenfinancingtargetsandexclusionsfornongreenactivities.4344GreeningNationalDevelopmentFinancialInstitutionsOnlyone-thirdofNDFIssurveyedhavecreatedhigh-levelcommittees,sus-tainabilitydirectorates,orspecialunitsfocusedonC&Easpects.Onlyabouthalfreportedtheirshareofgreenassets,andtheaverageislow,at14percentofthecreditportfolio,primarilyformitigationprojects.Theuseofgreendebtinstru-mentsandgreenfundaccreditationsisnotgeneralized.Fewinstitutionstrackprivates­ectorfundingmobilizedforgreenpurposes.FACTORSIMPEDINGSCALINGUPGREENFINANCINGNDFIshaveidentifiedseveralfactorsimpedingthescalingupofgreenfinancingactivities.Themainobstaclesincludeinadequateclimatepolicies,fundinggaps,lackofcapacityandawarenessofC&Eissuesbothinthefinancialandreal­sectors,andthecostandcomplexitiesofgreenprojects.WORKINGTOWARDGREENOBJECTIVESNDFIscantakearangeofactionsinfourbroadcategoriestomobilizefinancingtowardgreenobjectivesandmanageC&E-relatedfinancialrisks(refertotable5.1):1.Developingthegreengovernanceandstrategicframework,2.ScalingupfinancingtomeetC&Eobjectives,3.AssessingandmanagingC&Erisks,and4.Enhancingclimate-relateddisclosuresandreporting.ActionstogreenNDFIsshouldbesupportedbyanenablingpolicyenviron-ment.EstablishingambitiousnationalC&Etargets(forexample,undertheNDC)anddevelopinglegislationandplanstosignalthegovernment’slong-termcommitmenttothegreenagendaareimportant.Policiessuchascarbonpricing,sectoralregulationsandaligningbroaderfiscalandeconomicpolicies(for­example,removingdistortivefossilfuelsubsidiestoimprovethecommercialcaseforgreenprojects)canfurthersupportapolicyenvironmentconducivetogreenNDFIs.Developinganationalgreentaxonomycanhelptoensureacom-monunderstandingofwhateconomicactivitiescanbeconsideredasbeingalignedwithC&Eobjectives.Forfinancialsectorauthorities,itisequallyimport-anttodevelopthesupervisoryandregulatoryreformstofacilitatethemanage-mentofC&Erisksandtodeveloppolicyactionstodeepengreenfinancingmarkets.1GovernmentsandfinancialregulatorscanalsosupportNDFIstoclosethefundinggap,particularlyinLICsandMICs.GovernmentscouldincreasetheprovisionofguaranteestofacilitateNDFIaccesstomultilateralfundingandinternationalcapitalmarketsforprioritygreenprojects,ifdebtsustainabilityconsiderationspermit.Governmentsandfinancialregulatorscanalsoimple-mentpoliciestofostercapitalmarketdevelopmentandlong-termfinance,pro-vidingNDFIswithmoreoptionstoleveragetheirowncapitalwithlong-termfunding.Astheyscaleupoperationstomeetgreenfinancingneeds,NDFIsmustenhancetheirefficiencyandensureeffectivemanagementandpropersupervi-sion.Regardlessoftheirmandates,NDFIsshouldfocusoncomplementingtheprivatesectorandcrowdinginprivateinvestorstoprovidefinancialsolutionstoConclusionsandKeyRecommendations45TABLE5.1OverviewofkeypolicytoolkitstogreenNDFIsCATEGORYTOOLKITOBJECTIVEEXPECTEDOUTCOMEDevelopingtheDevelopaninternalstrategy,includingIdentifyshort-,medium-,andlong-termAlignoperationsandgreenquantitativeandqualitativetargets,clearprioritiestomanageC&Erisksandincentiveswiththegovernanceandmilestones,andactionplans,toaddresskeymobilizegreenfinancing.country’sC&Egoals,strategicC&ErisksandopportunitiesandmobilizeincludingNDCandframeworkprivatesectorfundingforgreenprojects.long-termstrategy.DevelopaninternalgovernanceframeworktoEnsurelong-termcommitmenttothedeliveroncommitmentslaidoutintheagenda,anddefinerolesandinternalstrategy,includingmakingboard-responsibilitiestoensurethatthelevelcommitments,assigningindividualobjectivesintheinternalstrategywillberesponsibilities,andintegratingC&Erisksandmet.opportunitiesintotheinstitution’spoliciesandriskappetitestatement.ScalingupSupportthedevelopmentofapipelineofEnhancetheavailabilityofgreenprojectsImproverisk-financingtobankableprojects,includingprovidingthatmeetprivateinvestors’riskandreturnadjustedreturnsofmeetC&Etechnicalassistance,raisingawareness,andpreferences.greeninvestments,objectivesstandardizingapproachesandprojectandcatalyzenewpreparationfacilities.Stimulateprivatesectorfinancingformarketsforgreenclimateaction.growth.Developinnovativeapproachestoaddressmarketbarriersforprivatesectorgreeninvestments.ImproveaccesstoconcessionalfundsandEnsureavailabilityoffundstosupportgrantsthroughinternationalclimatefundsclimateinvestments.(forexample,GCF).DeepengreenfinancingmarketsandcarbonEnsuretheavailabilityoffundstosupportmarketsbyactivelyparticipatinginthemorclimateinvestments,andraisetheprofileconductingcapacitybuildingandpiloting.ofgreenfinancingmarkets.AssessingandAdoptriskmanagementframeworksthatEnhancetheawarenessandunderstandingEnhancethemanagingC&EconsiderC&ErisksandopportunitiesoffutureC&Erisksunderdifferentawarenessandriskscomprehensively.Conductforward-lookingscenarios.understandingofassessmentstounderstandhowC&ErisksC&Erisks.translateintofinancialrisks.ImprovedataaggregationcapabilitiesandImprovethegranularityandrobustnessofinternalreportingframeworkstoharmonizeC&Eriskassessments.andobtainrelevantdataforC&Eriskassessments.BuildinternalcapacitytoeffectivelyassessEnsureC&ErisksaremonitoredregularlyandmanageC&Erisks.overtime.IntegrateC&ErisksintoexistingriskEnsureadequatemeasuresareinplacetomanagementframeworks.managethekeyC&Efinancialrisksthathavebeenidentifiedthroughriskassessments.EnhancingImplementclimate-financingtrackingImprovethequality,transparency,andImprove­climate-relatedmethodologies,includingthoseforprivateconsistencyofclimatefinancedata.transparency,anddisclosuresandfinancingmobilizedthroughNDFIavoidgreenwashing.reportinginvestments.EnhancedisclosureofandreportingonC&EEnhancemarkettransparencyandtherisks.understandingofC&Erisksandopportunities,inlinewithinternationalstandards,toguaranteecomparableandconsistentinformation.Source:Tableoriginaltothispublication.Note:C&E=climateandenvironmental;GCF=GlobalClimateFund;NDC=NationallyDeterminedContribution;NDFI=NationalDevelopmentFinancialInstitution.46GreeningNationalDevelopmentFinancialInstitutionsidentifiedunderservedsegmentsorprojectswhilepreservingfinancialsustain-ability.Afocusonservicingcredit-constrainedviableborrowersshouldbekeytoclosingthefinancinggapandprovidingadditionalitytotheprivatesector,whileensuringthatprivatesectorfinanceisnotcrowdedoutandneteconomicimpactismaximized.Althoughsubsidizedfundingforgreenprojectsmaybejustifiedbylargepos-itiveexternalities,thefocusonfinancialsustainabilityensuresthatsubsidizedlendingwillnotbetheinstitution’sprimaryfocus,thepotentialforcrowdingouttheprivatesectorwillbelimited,thescopeforcorruptionwillbereduced,andinnovationwillbefostered.NDFIsshouldbeeffectivelymanaged,andtheincen-tivesofmanagementandstaffshouldbealignedwithinstitutionalobjectivesthrougheffectivecorporategovernance,riskmanagement,andmechanismstoevaluateinstitutionalperformance.FinancialsupervisoryauthoritiesshouldensurethatNDFIsareproperlysupervisedandoperateonalevelplayingfieldinrelationtoprudentialregulationsandcompetition.IncasesinwhichtheenvironmentdoesnotsupportNDFIeffectiveness,operatinginasecondtierthroughotherfinancialintermediariesandraisingfundsininternationalcapitalmarketsmaybeadvisable.ExperiencefromFIRAinMexicounderlinesthescopeforsecond-tierinstitutionstobecomemarketreferentsforgreenfinancing.Toimproveefficiency,governmentscouldincentivizethegreeningofstate-ownedNDFIsbyintegratingC&Eandprivatecapitalmobilizationconsider-ationsintoNDFIs’mandatesormissionsandaligningincentivesthroughouttheinstitutionthrougheffectiveshareholdingfunctions.Governmentagenciesexertingtheshareholdingfunctiononstate-ownedNDFIscouldfurtherincen-tivizeC&EactionbyensuringthatmandatesorstrategiesincorporateC&Eandprivatecapitalmobilizationobjectives;bysettingkeyperformanceindicatorsongreeninvestments,NDCcontributions,andcapitalmarketmobilization;andforgreenpurposestobereportedtotheshareholdersandpubliclydisclosed.LinkingremunerationpoliciesandperformanceevaluationofmanagementbasedonthoseindicatorswouldfurtheralignincentivesthroughtheinstitutiontodevelopgreenproductsandtoembedC&EconsiderationsinNDFIs’opera-tions.Theseactionscombined,whilerespectingtheoperationalindependenceoftheinstitutions,wouldpromptNDFIstomeetobjectivesbydevelopinggreenfinancingproductsandincorporatingC&Eintotheiroperations.Insomeinstances,thiscourseofactionmayrequirestrengtheningthewaygovernmentsmanagetheirNDFIsinlinewithOrganisationforEconomicCo-operationandDevelopmentguidelinesoncorporategovernanceofstate-ownedenterprises(OECD2015).MDBSUPPORTFORNDFIsBasedonthekeyprioritiesandchallengesoutlinedinthisreport,theWorldBankandotherMultilateralDevelopmentBanks(MDBs)canprovidetargetedsupporttoNDFIs.First,MDBscanprovidefundingsupport—includingloans,investments,andguaranteesinlocalcurrencydenominations—toNDFIsseek-ingtogreentheiroperationsandtopilotnewgreenproducts.Inaddition,thisassistancecanincludeknowledgesharingandtechnicalassistanceforNDFIstobuildtheircapacityinC&Eriskmanagementandgreenfinancing,includingsupporttoobtainclimatefundsaccreditation,andtoenhancetheoverallConclusionsandKeyRecommendations47corporategovernanceinstate-ownedNDFIs,includingsupportforgovernmentshareholdingunits.Furthermore,technicalassistanceisessentialforthegovern-mentandfinancialsectorauthoritiestocreateanenablingenvironmentforgreeningNDFIs,includingsupportiveC&Epolicies,policiestosupportcapitalmarketdevelopmentandgreenfinancing,anddesignandimplementationofgovernmentprogramstocreateawarenessofC&Eissuesintherealsectorandincentivizegreeninvestments.Finally,MDBscanmonitorprogressandsharebestpracticesongreeningNDFIoperationsthroughdatacollection,research,andknowledge-sharingplatforms.NOTE1.Forfurtherguidanceforfinancial-sectorauthorities,seeWorldBank(2021).BIBLIOGRAPHYOECD(OrganisationforEconomicCo-operationandDevelopment).2015.OECDGuidelinesonCorporateGovernanceofState-OwnedEnterprises.Paris:OECDPublishing.WorldBank.2021.ToolkitsforPolicymakerstoGreentheFinancialSystem.Washington,DC:WorldBank.APPENDIXACharacteristicsofNDFIs,fromSurveyResponsesBACKGROUNDTheWorldBanklaunchedasurveyongreeningNationalDevelopmentFinancialInstitutions(NDFIs)inJanuary2022withtheobjectivetoexploretheirroleinthegreenagenda.Thesurveyincludedquestionsonthefollowing:•NDFIs’high-levelcommitmentstothegreenagenda;•Provisionandtrackingofgreenfinancing;•Sourcesoffunding,includingaccesstogreenfunding;•Managementofclimate-relatedandenvironmentalrisks;and•ChallengesandaspirationsforgreeningtheNDFIs.ThedetailedquestionsareprovidedintableA.1.Thesurveywassentto27NDFIsthatarethelargest,asmeasuredbytheirassets,orthatareregionalleadersintheclimateandenvironmentalagenda.TheselectionensuredcoverageofdifferentgeographicalregionsandNDFIs’officialmandates.SURVEYRESPONSESResponseswerereceivedfrom22NDFIs,withwidegeographicalandincome-levelcoverage.Ofthe22NDFIs,thedistributionbyincomelevelisasfollows:3arefromhigh-incomecountries,13arefromupper-middle-incomecountries,4arefromlower-middle-incomecountries,and2arefromlow-­incomecountries.EightNDFIsarefromLatinAmerica,4arefromEuropeandCentralAsia,5arefromEastAsiaandPacific,3arefromAfrica,and2arefromSouthAsia.Ninedonothaveofficialmandatesconfinedtoaspecificmission.Othershavesector-spe-cificmandates:5inagriculture;3inmicro,small,andmediumenterprises;2inlocalgovernment;2inexportsandforeigntrade;and1ininfrastructure(Xuetal.2021).Together,thesurveyedbanksaccountforapproximately9percentofglobalNDFIassets.AlistofrespondentsispresentedintableA.2.INTERPRETINGTHERESULTSWheninterpretingthesurvey’saggregateresults,itisworthconsideringthedrawbacksofthesurvey’sdesign.ThesurveywassenttoapreselectedgroupoflargeNDFIs.Theselectionwasbasedonthesizeofthedevelopmentfinancial4950GreeningNationalDevelopmentFinancialInstitutionsinstitutionaswellastoensurewidegeographic,income-level,andmandate­coverage.Inaddition,NDFIswereselectedbasedontheiractivitiesinpursuingagreenagenda.Therefore,theresultsarenotnecessarilyrepresentativefortheuniverseofNDFIs,asotherNDFIsmightbelessactiveinthegreenfinancingspace.Instead,theseresultscanshowcasethebestpracticesofNDFIsindevel-opingandpursuingagreenagenda.TABLEA.1“GreeningNDFIs”questionnaireMODULENO.QUESTIONRESPONSEDETAILS1.GeneralPleaseprovidedetails.1NameofyourinstitutionPleaseprovidedetails.informationPleaseprovidedetails.2Doesthemandateand/ormissionofyourinstitutionYes/NoPleaseprovidedetails.2.Greenfinancingincludegreen,climate,orenvironmentalobjectives?Pleaseprovidedetails.Pleaseprovidedetails.3HasyourinstitutiondevelopedastrategytogreenYes/NoPleaseprovidedetails.itsportfolio?Pleaseprovidedetails.4HasyourinstitutionmadeanypublicpledgesorYes/Nocontinuedcommitmentstoalignitsactivitieswithinternationalornationalclimate-relatedandenvironmentalgoals(forexample,ParisAgreement,NationallyDeterminedContributions[NDCs])?5DoesyourinstitutiontrackgreenfinancingvolumesYes/Noacrossitsactivities?6DoesyourinstitutionuseaclassificationsystemtoYes/Notag/identifygreenprojectsandactivities?7IsyourinstitutioninvolvedinthenationalclimateYes/Nofinancingprocessandtheimplementationofthecountry’sNDCsorotherbroaderclimate/greenfinancingpolicydiscussions?8DoesyourinstitutionhavespecificgreenfinancingYes/Notargets?9DoesyourinstitutionexcludefinancingforspecificYes/No(nongreen)projects?10Whataretheshareandabsolutevolumesofgreenassetsinyourcreditandinvestmentportfolios?Ifpossible,pleaseprovideabreakdownofclimate-­relatedfinancingandfinancingforbroaderenvironmentalobjectives.Pleaseprovideanestimateifnotavailableornottracked.GreenassetsincreditportfolioShare(%)GreenassetsincreditportfolioTotalvolumeGreenassetsininvestmentportfolioShare(%)GreenassetsininvestmentportfolioTotalvolume11Whatistheabsolutevolumeoffinancingforclimatemitigationversusclimateadaptationprojects?Whatisthepercentageofclimatefinancingthatgoestowardmitigationversustowardadaptation?Pleaseprovideanestimateifnotavailableornottracked.TotalvolumeofclimatemitigationfinancingTotalvolumePercentageofclimatefinancingthatgoestowardShare(%)climatemitigationTotalvolumeofclimateadaptationfinancingTotalvolumePercentageofclimatefinancingthatgoestowardShare(%)climateadaptationCharacteristicsofNDFIs,fromSurveyResponses51TABLEA.1,continuedMODULENO.QUESTIONRESPONSEDETAILS12WhatarethemainsectorsthatyourinstitutionisPleaseselectallthatfinancingtomeetitsclimateandenvironmentalapply:objectives?•Power•Transport•Building•Industry•Landuse•Agriculture•Other,pleasespecify:13Whoarethemainactors/clientstowhomyourinstitutionisprovidinggreenfinancing?14Totheextentpossible,pleaseprovidedetailsontypeoffinancingandfinancialinstrumentsyourinstitutionemploysforgreenfinancingobjectives.15AreyoutrackingthelevelofprivatefinancingthatisYes/NoPleaseprovidedetails.mobilizedbyyourfinancingactivities?16AreyoucollaboratingwithsubnationaldevelopmentYes/NoPleaseprovidedetails.bankstochannelfinancingtothelocallevel?17Whatarethe(3–5)keychallenges/barrierstoscalingupfinancingforclimateandenvironmentalobjectives?Pleaseelaborate.3.Sourcesoffunding18Towhatnationalsourcesoffundingdoyouhaveandpricingaccess?19Towhatinternationalsourcesoffinancedoyouhaveaccess?20Doesyourinstitutionhaveaccesstonationaland/orYes/NoPleaseprovidedetails.internationalcapitalmarkets?21Hasyourinstitutionissuedagreenbond?Yes/NoPleaseprovidedetails.22Hasyourinstitutionissuedasustainability-linkedYes/NoPleaseprovidedetails.bond?23IsyourinstitutionaccreditedbyinternationalclimateYes/NoPleaseprovidedetails.funds(suchastheGreenClimateFund)?24Whatproportionofyourclimate-relatedportfolioissubsidized(thatis,pricedatbelowcostoffunding,administration,creditrisk,andtargetreturnoncapital)?25Ifpartofyourclimate-relatedportfolioissubsidized,whatisthesourceofthesubsidy(forexample,budgetarysubsidies,internationalclimatefunds,multilateralfunding,orcross-subsidizationfromotherportfolioactivities)?continued52GreeningNationalDevelopmentFinancialInstitutionsTABLEA.1,continuedMODULENO.QUESTIONRESPONSEDETAILS4.Climate-relatedand26Doesyourfinancialinstitutionexpectthatclimate-­Yes/NoIfyes,pleaseexplainenvironmentalriskrelatedandenvironmentalfinancialriskswillaffecthowandoverwhatmanagementitsbusinessmodel(overtheshort,medium,andtimeframes.Ifno,longterm)?pleaseexplainwhynot.27Hasyourinstitutionassessedtheimpactofclimate-Yes/NoPleaseprovidedetails.relatedandenvironmentalfinancialrisksonitsportfolio(overtheshort,medium,andlongterm)?28HasyourinstitutionintegratedtheconsiderationofYes/NoPleaseprovidedetails.climate-relatedandenvironmentalfinancialriskintoitsgovernancearrangements?29Isyour(long-term)strategyincorporatingclimate-Yes/NoPleaseprovidedetails.relatedandenvironmentalfinancialriskconsiderations?30Istheconsiderationofclimate-relatedandYes/NoPleaseprovidedetails.environmentalfinancialriskembeddedinyourriskmanagementframeworks?31DoesyourinstitutionconductscenarioanalysisorYes/NoPleaseprovidedetails.stresstestingtoassessclimate-relatedandenvironmentalfinancialrisk?32Doesyourinstitutionreportonclimate-relatedandYes/NoPleaseprovidedetails.environmentalrisk(forexample,inlinewiththeFSBTaskForceonClimate-RelatedFinancialDisclosuresrecommendations)?33Doesyourinstitutionuseanyspecifictargets,tools,Yes/NoPleaseprovidedetails.ormetricstoassessclimate-relatedandenvironmentalfinancialrisk?34WhatdataareyouusingtoinformyourclimateriskPleaseprovideanyanalysis?specificdatagapsyouhaveidentified.35Whatarethe(3–5)keychallengesinidentifying,assessing,monitoring,managing,anddisclosingclimate-relatedandenvironmentalfinancialrisk?Pleaseelaborate.36Doesyourinstitutionhaveasystemtoadministerandmanageenvironmentalriskscreatedbyitsportfolio,includingthroughtheapplicationofenvironmentalsafeguards?5.Otherissues37Whatarethemainactionsyouplantoundertakefor“greening”yourinstitutioninthenext1–5yearsrelatedto(a)scalingupfinancingtomeetclimateandenvironmentalobjectives?(b)identifying,assessing,monitoring,managing,anddisclosingclimate-relatedandenvironmentalrisks?38Arethereotherrelevantissuesrelatedto“greening”yourinstitutionthatyouwouldliketoshare?6.Contact39Nameoftheperson(s)responsibleforfillingoutthe­informationquestionnairePositionEmailTelephonenumberSource:Tableoriginaltothispublication.Note:FSB=FinancialStabilityBoard;NDC=NationallyDeterminedContribution;NDFI=NationalDevelopmentFinancialInstitution.CharacteristicsofNDFIs,fromSurveyResponses53TABLEA.2ListofNDFIssurveyedNO.NDFICOUNTRYOFINCOMELEVELOFMANDATEHEADQUARTERSCOUNTRYOFHEADQUARTERS1BancodeInversiónyComercioExteriorArgentinaUMICFLEX2BangladeshKrishiBankBangladeshLMICAGRI3BrazilianDevelopmentBankBrazilUMICFLEX4FinancieradeDesarrolloNacionalColombiaUMICLOCAL5CorporaciónFinancieraNacionalEcuadorUMICMSME6KreditanstaltfürWiederaufbauGermanyHICFLEX7NationalBankforAgricultureandRuralDevelopmentIndiaLMICAGRI8PTSaranaMultiInfrastrukturIndonesiaLMICINFRA9IndustrialBankofKoreaKorea,Rep.HICMSME10KoreaDevelopmentBankKorea,Rep.HICFLEX11NacionalFinancieraMexicoUMICMSME12FideicomisosInstituidosenRelaciónconlaAgriculturaMexicoUMICAGRI13BancoNacionaldeObrasyServiciosPúblicosMexicoUMICLOCAL14BancoNacionaldeComercioExteriorMexicoUMICEXIM15LandbankPhilippinesLMICAGRI16DevelopmentBankofRwandaRwandaLICFLEX17DevelopmentBankofSouthernAfricaSouthAfricaUMICFLEX18BankforAgricultureandAgriculturalCooperativesThailandUMICAGRI19ExportCreditBankofTürkiyeTürkiyeUMICEXIM20TürkiyeSinaiKalkinmaBankasiTürkiyeUMICFLEX21TürkiyeKalkinmaveYatirimBankasiTürkiyeUMICFLEX22UgandaDevelopmentBankUgandaLICFLEXSource:Tableoriginaltothispublication.DataonmandatearefromXuetal.2021.Note:Flexible(FLEX)meansthatofficialmandatesarenotconfinedtoaspecificmission.IfanNDFI’smandateisnotflexible,themandateisfurtherclassifiedaccordingtoitssectoralorclientfocus,includingruralandagriculturaldevelopment(AGRI),promotingexportsandforeigntrade(EXIM),infrastructure(INFRA),localgovernment(LOCAL),andmicro,small,andmediumenterprises(MSMEs).HIC=high-incomecountry;LIC=low-incomecountry;LMIC=lower-middle-incomecountry;NDFI=NationalDevelopmentFinancialInstitution;UMIC=upper-middle-incomecountry(WorldBankclassifications).BIBLIOGRAPHYXu,J.,R.Marodon,X.Ru,X.Ren,andX.Wu.2021.“WhatArePublicDevelopmentBanksandDevelopmentFinancingInstitutions?QualificationCriteria,StylizedFactsandDevelopmentTrends.”ChinaEconomicQuarterlyInternational1(4):271–94.APPENDIXBNDFICaseStudiesFIDEICOMISOSINSTITUIDOSENRELACIÓNCONLAAGRICULTURA(MEXICO)ThissectiondiscussestheFideicomisosInstituidosenRelaciónconlaAgricultura(FIRA)inMexico,includinganoverviewoftheinstitutionanditsgreenstrategyandgovernance,greenfinancingsourcesanduses,climateandenvironmental(C&E)riskmanagement,andclimate-relateddisclosuresandreporting.InstitutionaloverviewFIRAiscomposedoffourtrustfundsadministeredbyBanxico,thecentralbankofMexico.FIRA’smainobjectiveistofacilitateandpromotegreaterfinancingofagriculturala­ctivitiesbyfinancialinstitutions,includingagribusinessandotherrelatede­conomicactivitiesinruralareas.Theinstitution’smainbylawsdonotmentionsustainabilityorclimate-relatedgoals;however,itsmissionis“topro-mote,untilitiswellestablished,aninclusive,sustainable,andproductiveagri-foodandruralsector.”1FIRAprovidesloansandcreditguaranteestofinancialinstitutions(FIs)operatingassecond-tierinstitutions,aswellastechnicalassistancetorural­producersandagriculturalfinancialintermediaries.Approximately60percentofthetotalagriculturalcreditinMexicooriginatedbycommercialbanksis­supportedbyFIRA.GreenstrategyandgovernanceFIRA’sInstitutionalProgram2020–24considerstheNationalFinancingProgramforDevelopmentandtheUnitedNationsSustainableDevelopmentGoals(SDGs)toformulateitsgoalsfortheperiod.Onegoalisto“contributetothedevelopmentofaresponsibleandsustainableagricultural,forestry,andfishingsector.”2Toattainthatgoal,asustainabilitystrategywasdesignedwiththreebasicpillars:toavoidenvironmentalharm,tofinancegreenprojects,andtocatalyzesupportforgreenfinancing(refertofigureB.1).FIRAisnotpartofMexico’sformalprocesstotrackormakedecisions­regardingtheNationallyDeterminedContributions(NDCs)pertheParisAgreement,anditdoesnothaveas­pecificreductiontargetassigned.Nevertheless,FIRA’sactivitiesaimtosupportthenationaleffortstoreducegreenhousegases5556GreeningNationalDevelopmentFinancialInstitutionsFIGUREB.1SustainabilitystrategybasicpillarsFIRA’sInstitutionalProgram,2020–24PriorityobjectivesFinancialinclusion1.NottoharmtheenvironmentProductivity•ReduceFIRA’senvironmentalfootprint•EnvironmentalandsocialrisksSustainabilityoftheagriculturalsectoradministrationsystems•Participationinsustainabilityinitiatives2.Contributetothesolution•Projectfinancing3.Involveothers•GreenbondissuanceSource:FIRA’sInstitutionalProgram2020-24,https://www.fira.gob.mx/Nd/ProgramaInstitucional2020.pdf.Note:FIRA=FideicomisosInstituidosenRelaciónconlaAgricultura.(GHGs)andtoadapttotheeffectsofclimatechange.Also,FIRAisactivelyinvolvedinothersustainability-r​elatedfinancialinitiatives,suchastheUnitedNationsGlobalCompact,theSustainabilityCommitteeoftheMexicanBankAssociation,andtheConsultativeCouncilforGreenFinance,allofwhichsup-porttheNDCs’goalsthroughitsactivities.In2019,FIRAsignedtheSustainabilityProtocoloftheMexicanBankAssociation,whichrequiresthatFIs’higherdecision-makingbodiesareinvolvedinC&Eissues.Aworkinggroupcomposedoftheheadsofthedif-ferentFIRAdepartmentsinvolvedinenvironmentalissuesperiodicallyreportstotheTechnicalCommittee,thehigherdecision-makingbodyatFIRA.FIRAsetsannualtargetsforitssustainabilityportfolio(thatis,sustainableinvestmentconcepts[ICs]).For2022,FIRA’ssustainabilitytargetwas14,200millionpesos(approximatelyUS$700million).FIRAdoesnothaveaspecializedexclusionlistbasedongreentargets.Nevertheless,initscreditdecisions,FIRAreliesonandconsidersthecurrentnationalenvironmentalandsocial(E&S)legislation.FIRAplanstocontinueworkingwithdevelopmentpartnerstodesignsus-tainablefinancialproductsandprogramsfinancedinpartwithgreenbondstoimproveitstaxonomyandclimateriskmanagementsystemsandtoobtainbetterclimateinformationtouseitmoreactivelyinitscreditprocesses,aswellastomakeitavailabletotheFIsandtheproducersaccreditedbythoseFIs.FIRAwillcontinuetoworktoreducethedirectimpactsofitsactivitiesontheenviron-ment,suchaslowerenergyandwaterconsumptioninitsofficesandreducedpaperconsumption,amongotheractivities.GreenfinancingsourcesandusesAttheendofDecember2021,FIRA’ssustainabilityportfolioamountedto14,247millionpesos(approx.US$700million),35percenthigherthanthetargetannualamountfortheyearbefore.Itssustainableportfolioaccountsfor5.9­percentofFIRA’sloanportfolioand,bytypeofproject,isasfollows:NDFICaseStudies57environmentallysustainableagriculture,80.2percent;efficientuseofwater,6.4percent;energyefficiency,3.6percent;andrenewableenergy,9.8percent.FIRAhasdevelopedafewspecializedsustainablefinancingprogramswiththesupportofseveralInternationalFinancialOrganizations(IFOs).Examplesincludethefollowing:•ThePro-SostenibleProgram,whichprovidesaninterestratesubsidy(cashback)tofinalborrowersofsustainableprojectsusingdonorfunding;•TheEnergyEfficiencyProgram,inwhichFIRAprovidesatechnologicalguarantee,payingthedifferencebetweenestimatedandrealizedsavingsfromtheadoptionofenergy-efficienttechnologiesusingGreenTechnologyFundResources;and•ThePROINFORProgram,throughwhichFIRAsupportsFIs’loanstosmallforestproducersandprovidesthemwithtechnicalassistancesotheycanadoptsustainableproductionpractices.FIRAalsohasseveralcreditguaranteeschemesdevelopedwithothernationalentitiessuchastheNationalForestFundandtheCreditGuaranteeFundfortheEfficientUseofWater.Withthosepublicresources,FIRAoffersahigherguar-anteeforsustainableprojects(65percentversusthestandard40−50percentguarantee)atnoadditionalcost.FIRAhasidentifiedseveralchallengestobeaddressedbeforescalingupgreenfinancingprogramswithIFOs:•Lackofcommondefinitionsforgreenprojects,•Multipleobjectivesforsustainabilityprojectsthathamperimplementation,•Lackofhomogeneousreportingstandardsongreenbenefits,•Lackoflegislationorguidelinesongreenfinancingtopreventgreenwashing,and•Highsupervisionandverificationcostsofgreenprojects.FIRAfundsitselffromitsownequityresources,IFOs’loans,andissuesof­securitiesinthedomesticmarkets.Theinstitutiondoesnotreceivebudgetarysubsidiesorfundingfromthecentralbanktoprovidesubsidizedlending.FIRAhasissuedthreegreenbonds(2019,2020,and2021)amountingto8,000millionpesos(US$390million)supportingmorethan1,300agriculturalprojects.Greenbondshavebeeningreatdemand,buttheinterestratehasbeenaboutthesameasthatformoretraditionalbonds.FIRAhasnotyetissued­sustainability-linkedbondsandisnotdirectlyaccreditedbyanyinternationalclimatefund.However,thebankhasaccessedsomeoftheinternationalclimatefundsthroughotherIFOs,suchastheInter-AmericanDevelopmentBank(IADB),AgenceFrançaisedeDéveloppement(AFD),orKreditanstaltfürWiederaufbau(KFW).C&EriskmanagementFIRAdoesnotexpectthatclimateconsiderationswillchangeitsbusinessmodel,butitrecognizestheimpactofclimatechangeonagriculturalproductionandthecontributionofagriculturetoclimatechange.FIRA’screditriskmodelsdonotincludeclimatechangeconsiderations,mainlybecauseofalackofstatisticalinformation.Currently,notargets,tools,ormetricshavebeenspecifiedtoassessC&Efinancialrisksembeddedintheriskmanagementframework,andnoregu-larclimatestresstestingisconducted.58GreeningNationalDevelopmentFinancialInstitutionsNevertheless,FIRAparticipatedinaDroughtStress-TestingToolstudyin2017todeterminehowincorporatingdroughtscenariosbyFIshaschangedriskperceptionfortheirloanportfolios.FIRAalsoiscurrentlyparticipatinginastudytoidentifythephysicalrisksinthecreditportfolioofFIsinLatinAmericausingclimatemodelsandclimatescenariosoftheIntergovernmentalPanelonClimateChangereports.Preliminaryresultsidentifywaterscarcity,morefre-quentdroughts,loweragriculturalproductivityformaincrops,andmoreextremeandintenseclimateeventsasthemainrisks.Theseexerciseswouldhelpinformthestrategytomanageclimate-relatedfinancialrisks.FIRA’smainchallengesinidentifying,assessing,monitoring,managing,anddisclosingC&Efinancialriskincludethefollowing:•Lackofaccesstoinformationaboutpotentialquantitativeeffectsofclimatechange,•Aportfolioofmanysmallprojects,•Lackofthepropercompetenciestoassessenvironmentalandclimaterisksofthefinancialprojects,and•Difficultycommunicatingtothefinancialintermediarieswithwhomtheyoperateandtothesmallproducersandagribusinessestheimportanceof­climaterisks.FIRAhasdeveloped,withthesupportoftheIADB,anE&Sriskanalysis­system(SistemadeAdministraciondeRiesgosAmbientalesySociales[SARAS])tofac-torsocialandenvironmentalanalysisandinformationintoitscreditdecisions.SARASisbasedontheEquatorPrinciplesandtheEnvironmental,HealthandSafetyGuidelinesoftheInternationalFinancialCorporation(IFC).SARAS’sanalysisisappliedtoallloansaboveUS$10millionfundedwithFIRA’sresources(inlinewiththeEquatorPrinciplesguidelines).Anexclusionlistforsmallerloansisunderconsideration.SARASanalysisisbasedoninformationcollectedfromproducers.FIRAdoesnotanalyzehowinstitutionstowhichtheylendadministerenvi-ronmental,social,andgovernance(ESG)risks,asthebankbelievesthatthelackofregulationonthetopicdoesnotgiveitastrongrationaletodoso.FIRAhasneverrejectedaloanforclimatereasons,butithasformulatedconditionstoaddressthoseconcerns.However,insomecases,intermediarieshavedecidedtofundthoseprojectswiththeirownsources.Climate-relateddisclosuresandreportingFIRAhasdevelopedataxonomytotrackgreenfinancingvolumeswiththe­supportoftheAFDandalsohasbenefitedfromEuropeanUnionresourcesfromtheLatinAmericanInvestmentFacility.Thetaxonomyidentifies55ICsthatmitigatetheadverseeffectsofagriculturalactivitiesontheenvironment.TheFIs’loanssupportedbyFIRA’sresourcesonthose55ICsconstituteitssustain-ableportfolio,whichisclassifiedintofourareas:environmentallysustainableagriculture,waterefficiency,energyefficiency,andrenewableenergy.Amongthose,29ICscontributetoachievelowerGHGemissionsandarepartofits­mitigation-financingportfolio.ThetaxonomyisbasedonAFD’ssustainabledimensions.WithAFDsupport,FIRAisdevelopingamethodologytoidentifywhatcouldbeconsideredclimateadaptationfinancing.Thestudyhasidentified88ICswithpositivecontributionstowardachievingahigherclimatechangeadaptationofNDFICaseStudies59agriculturalactivities.ThestudyalsoexaminedwhetherprojectswerelocatedinmunicipalitiesconsideredbytheMexicanenvironmentalauthorities(theNationalInstituteofEcologyandClimateChange)tobevulnerabletoclimatechange.Basedonthisstudy’spreliminaryresults,FIRA’syearlytotalvolumeofclimateadaptationfinanceisestimatedatapproximately7,000millionpesos(approximatelyUS$350million).FIRA,asasecond-tierinstitutionoperatingthroughFIsbyusingloansandcreditguarantees,tracksthelevelofprivatefinancingcrowdedinbyitsactivities,includinggreenactivities.FIRAdoesnotreportonC&EriskinlinewiththeTaskForceonClimate-RelatedFinancialDisclosures(TCFD)recommendations.Nevertheless,FIRAreportsallsustainability-relatedinformationinthe“MemoriasdeSostenibilidad,”ayearlyreportpublishedbyFIRAthatfollowstheGlobalStandardsforSustainabilityReporting.FIRA’swebsitehasanESGsection.Inaddition,FIRAhasstartedreportingusingthestandardsoftheSustainabilityAccountingStandardsBoard,whichidentifytheminimalsetoffinanciallymaterialsustain-abilitytopics.KOREADEVELOPMENTBANK(THEREPUBLICOFKOREA)ThissectiondiscussestheKoreaDevelopmentBank(KDB)intheRepublicofKorea,includinganoverviewoftheinstitutionanditsgreenstrategyandgover-nance,greenfinancingsourcesanduses,C&Eriskmanagement,andclimate-­relateddisclosuresandreporting.InstitutionaloverviewTheKDB,whichhasacoremandatetosupportKorea’ssustainablegrowth,isafullystate-ownedbankfoundedin1954tosupportKorea’sdevelopmentand­policyagendas.Keyprioritiesincludedeepeningsupportforsmallandmediumenterprisesandenablingbalancedeconomicdevelopmentacrossregions.Althoughclimatechangeandenvironmentalprotectionarenotexplicit­mandates,bothareimplicitlycoveredinKDB’sbroadermandatetosupportthecountry’ssustainablegrowth.GreenstrategyandgovernanceKDBhaspublishedseveralcommitmentstothegreenagenda,includingpledgestoengagewiththeprivatesectortosupportclimateinvestmentsandbuildtech-nicalexpertiseonkeytopicssuchasGHGaccounting,climateriskassessments,andcarbonmarkets.Beyondthesebroadcommitments,KDBhasdevelopedaninternalgreenfinancingstrategywiththegoaltosupportthegovernment’sNDCand2050carbonneutralitytarget.Akeyobjectiveofthisstrategyistoincreasetheshareofgreenfinancingto16.8percentofKDB’stotalannual­financingby2030.Inaddition,KDBhasestablishedguidelinesforcoalfinancingandhaspub-lishedthisinformationonitswebsite.Theseguidelinesprohibittheinstitutionfromsupportingtheconstructionandoperationofnewcoal-firedpowerplants(KDB2019).KDBalsoactivelyparticipatesininternationalinitiativestodemonstrateitscommitmenttothegreenandsustainabilityagenda.Forexample,asafounding60GreeningNationalDevelopmentFinancialInstitutionsmemberoftheInternationalDevelopmentFinanceClub(IDFC),KDBactivelyengageswithotherfinancialinstitutionsonkeytopicsrelatedtoclimatefinanc-ing.ItalsosignedtheUnitedNationsGlobalCompactin2007.KDBiscurrentlydefiningitsinternalgovernanceframeworktomanageC&Eissues.TheKoreaDevelopmentBankActstatesthatKDB’sbusinessoperationsincludeprovidingfundsforthedevelopmentofthefinancialindustryandnationaleconomy,suchasfosteringnewgrowthengineindustriesandfacilitat-ingsustainablegrowth.KDBdoesnothaveaseparateESG-relatedorganizationwithinitsboardofdirectors,buttheESGPlanningDepartmentactsasacontroltowerforpromotinggreenfinancing.KDBalsohasaSustainabilityCommitteethatenablesabank-widecollaborationandproducesdetailedactionplansforpromotingESGvaluesandgreenfinancing.GreenfinancingsourcesandusesKDBleveragesthelabeledbondmarketaswellasdomesticandinternationalpublicfundingtosupportgreeninvestments.Since2017,KDBhasissued15greenbondsand11socialbondsinthedomesticandinternationalmarketthroughMarch2022,raisinganequivalentofUS$6.7billion,whereasduring2021,itfundedanequivalentofUS$2.8billionthroughissuinggreenorsocialbonds,representing5.1percentofKDB’stotalfundingthatyear.Intheinternationalmarket,KDBissueditsfirstgreenbondunderthe2017GreenBondFramework,whiletheother9greenbondswereissuedunderthe2019SustainableBondFramework(KDB2022).Theproceedsfromthegreenbondswereprimarilyleveragedtosupportrenewableenergyandcleantransportprojects,andKDBreportedthatthesebondswouldsupportthegenerationof3,368GWhofcleanenergyand177,744electricvehiclesannually.Notonlydidtheissuanceofgreenbondsmobilizetherequiredfinancingforgreeninvestments,italsohassupportedthedevelopmentofthecountry’sgreenfinancingmarketsbyraisingtheprofileanddemonstratingthefeasibilityofgreenbondswithpotentialissuers.Inthedomesticmarket,3.7trillion(equiv-alenttoUS$3billion)ofgreenbondshavebeenissueduptoMarch2022.Beyondthelabeledbondmarket,KDBhasaccesstoanationalclimatefundestablishedbythegovernmentaspartofsupportingthecountry’sNDCand2050carbonneutralitytarget,aswellastheGreenClimateFund(GCF),accred-itedsince2016.Forexample,theClimateActionFund,newlylaunchedin2021,hasprovided130billioninthesameyearforKDB’snewgreenfinancingpro-gram(KDBNet-ZeroProgram).FortheGCF,anaccreditedentityinitiallyapprovedinDecember2016andreaccreditedinMay2022,KDBhasaccesstotheGCFfundsinpursuitofincreasingclimateactionsindevelopingandemerg-ingmarkets.GCFhasrecommendedthatKDBdeploytheGCFfundsinmarketsotherthanKorea,asthecountryisconsideredsocioeconomicallyadvanced.KDBtargetsgreeninvestmentsinsectorsthathaveahighfundinggapbutarekeytoachievingKorea’scarbonneutralitygoal.Beyondthegreentaxonomy,thegovernmenthasdevelopedasetofpredefinedcriteriatoidentifygreeninvest-mentsthatshouldbeprioritizedforaGreenNewDeal.Thesecriteriaarenowbeingusedby4ministriesand11publicFIs,includingKDB,toidentifyprioritygreeninvestments,covering77itemsalsorelatedtothegreentaxonomy.Toavoidcrowdingouttheprivatesector,investmentshavetargetedprojectsthatarenotcommerciallyviable(forexample,early-stageinvestmentsinnascenttechnologysolutionssuchascarboncaptureandstorageandgreenhydrogen).NDFICaseStudies61KDBsupportsprivatesectorclimateactionbyofferingcreditenhancementsforgreenprojects,conductingdemonstrationinvestments,andincreasingtheprivatesector’sreadinesstoparticipateinclimatepolicies.Tocrowdinprivatecapital,KDButilizesfundingfromthenationalclimatefundtocoverfirstlossesofprivatesectorgreeninvestments.KDBalsolowersinterestratesforcertaingreenprojectstoincreasetheattractivenessoftheseinvestments.Inaddition,KDBconductsdemonstrationinvestmentsforgreenprojectstobuildatrackrecordandincreasetheprivatesector’sconfidenceininvestmentareaswithwhichtheyarelessfamiliar.Furthermore,KDBbolsterstheprivatesector’sparticipationinthelabeledbondmarketbyarranging,underwriting,andinvestingingreenandsustainablebonds.In2021,forthefirsttimeinKorea,KDBissuedthreeprimarycollateral-izedbondobligations(P−CBOs)backedbyprivatelyplacedESGbondsissuedbymicro,small,andmediumenterprises(MSMEs).TheseP−CBOtransactionsbackedcorporatecapitalinvestmentsingreenprojectsandmarkedamilestoneinanESGbondmarketdominatedbypublicofferingsfromlargeandpubliccompanies,extendingthereachtoMSMEsandprivateplacements.Finally,KDBplaysakeyroleinfacilitatingtheprivatesector’sparticipationinthegovernment’sclimatepolicyinstruments.Forexample,KDBandfiveotherbanksareresponsibleforpilotingtheapplicationoftheKoreanGreenTaxonomy.KDBhasalsoactedasamarketmakerforanationalemissions-­tradingplan,withthegoalofstimulatingmarketliquiditybysimultaneously­sellingandbuyinginthemarket(InternationalCarbonActionPartnershipICAP2019]).C&EriskmanagementInJanuary2017,KDBsignedtheEquatorPrinciplesandestablishedenviron-mentalandsocialriskmanagement(ESRM)policiesandguidelinesforprojecttransactionsinlinewiththeseprinciples.KDB’sESRMprocessfollowsseveralkeysteps:1.Identification,toidentifyrelevantprojects;2.Categorization,tocategorizeprojectsaslow,medium,orhighrisk;3.Review,toassesscompliancewithEPrequirements;4.Financingdocumentation,toincorporatecovenantsontheclient’sE&S­undertakingintofinancialdocuments;and5.Monitoringandreporting,tovalidatecontinuedcompliance.KDBhastakeninitialstepstofurtherintegrateclimatechangeintoitsriskmanagementframework.ESRMisusuallydistinctfrompoliciesandprocedurestomanageclimaterisksbecauseclimateriskmanagementrequiresforward-­lookingassessments,suchasscenarioanalysisorstresstesting,toestimatethefutureimpactoftheserisksoninvestmentandcreditportfolios.KDBhasnotyetfullymainstreamedclimateriskmanagementpracticesinlinewiththeBaselCommitteeonBankingSupervision(BCBS)Principlesonclimaterisks(BCBS2022).Nonetheless,since2021,KDBhasbeenworkingtodevelopaclimateriskanalysisinlinewiththeBCBSrecommendations.Asastartingpoint,KDBhasconductedanassessmenttoevaluateKDB’sexposuretoclimatetransitionrisks.62GreeningNationalDevelopmentFinancialInstitutionsAnassessmentofphysicalriskshasnotyetbeenconductedbecauseKDBis­waitingforsupervisoryguidanceonthetopic.Beyondriskassessments,KDBhasalsodevelopedaninnovativeapproachtointegrateacapitalbufferfortransitionrisks.3Movingforward,severalchallengescouldlimitKDB’sabilitytomanage­climaterisks:•Datalimitationsand•Lackofsupervisoryguidanceonclimatescenarioanalysisandriskmanagement.Climate-relateddisclosureandreportingKDBisdevelopinganinternalframeworkfortrackingandreportingongreenfinancing.Inadditiontopublishingitsgreenandsustainablebondframeworksandrelatedimpactreportsfromthefirstquarterofeveryyearonitswebsite,4KDBisdevelopingaframeworkfortrackinggreenfinancingamountsbasedontheNationalGreenTaxonomy.Bypilotingthistaxonomy,KDBhasidentified69economicactivitiesthatcanbeconsideredgreeninlinewiththecountry’scarbonneutralitytargetandotherenvironmentalgoals(suchaswaterconserva-tion,biodiversity,andpollutionprevention).Thisworkformsthebasisfortrack-inggreenfinancingandassessingprogresstowardKDB’starget,whichistodedicate16.8percentofitsfinancingtogreeninvestments.KDBhasregulardisclosuresofE&Srisks,butdisclosureofclimaterisksislimited.KDBhaspublishedannualreportsonitsimplementationoftheEquatorPrinciplessince2018.ThereportsincludeinformationonitsESRMprocessandprojects’exposuretoE&Srisks.Whiledetaileddisclosureandreportingonclimaterisksremainslimited,KDBintendstoadopttheTCFDframeworkby2024.TÜRKIYESINAIKALKINMABANKASI(TÜRKIYE)ThissectiondiscussestheTürkiyeSinaiKalkinmaBankasi(TSKB)inTürkiye,includinganoverviewoftheinstitutionanditsgreenstrategyandgovernance,greenfinancingsourcesanduses,C&Eriskmanagement,andclimate-relateddisclosuresandreporting.InstitutionaloverviewTSKB,Türkiye’sprivatelyowneddevelopmentandinvestmentbank,wasestab-lishedin1950withthesupportoftheWorldBankandtheCentralBankofTürkiye.TSKBsupportsTürkiye’ssustainablegrowthwithcorporatebanking,investmentbanking,andadvisoryservicesprovidedtocustomersasafirst-andsecond-tierlender.Intheenvironmentalandrenewable-energysectors,thebankranksasnumberoneinthenumberofprojectsfinancedinTürkiye.ItisalsotheleadingbankinTürkiyeinpromotingnewinitiativesforscalingupgreenfinancing,aswellasinestablishinggovernancearrangementsanddevelopingmethodologiesforC&Erisks.Inaddition,TSKBraisesawarenessonclimatechangeviatheGreenSwanPlatform,whereithaspublished“ClimateReview”reportsforthepast2years.5NDFICaseStudies63GreenstrategyandgovernanceTSKB’smissionisfocusedonsustainabledevelopmentobjectivesandcreatingvaluefortheinclusiveandsustainabledevelopmentofTürkiyethroughfinanc-ingandadvisorysolutions(TSKB2022a).TSKBstarteditssustainabilityjourneyinthe1980swithintegratingenvironmentalfactorsintoloanevaluationpro-cesses.Inthe1990s,thebankoffereditsfirstloanforenvironmentalprojectstothemarket,andinthe2000s,itbeganprojectfinancinginrenewableenergy(TSKB2022d).Astheconceptofsustainabilitywasgainingimportanceonaglobalscale,TSKBestablishedtheEnvironmentalManagementSystemin2005andtheSustainabilityManagementSystemin2012toshapeallbusinesspro-cesseswithasustainabilityapproach,includingevaluatingandmanagingE&Srisksfromlendingactivitiesandtheinstitution’soperationalservices(includingmaintainingitscarbon-neutralbankingactivities),financingenvironmentalprojects,informingallstakeholdersaboutsustainabilityissues,anddisclosingtothepublicinformationregardingtheE&Simpactmanagementprocessesandvaluecreatedviathefinancingactivities(TSKB2022c).TSKB’smissionisoperationalizedwithintheSustainabilityPolicyadoptedin2012andupdatedin2022.ThispolicyconsiderstheE&SimpactsofTSKB’sactivities,includingtheeffectsofclimatechangeoneconomicandsocialwelfareandgrowth(TSKB2022e).In2021,TSKBenactedtheClimateChangeMitigationandAdaptationPolicytocomplementtheSustainabilityPolicytopubliclycom-municatethebasicprinciplesofclimatechange.Amongotheractions,TSKBiscommittedtoconsideringmitigationandadaptationtoclimatechangeinallitscreditactivitiesandinternaloperations(TSKB2022b).ThismitigationandadaptationisaddressedinthreemainpillarswithinthescopeofitsSustainabilityStrategy:1.SupportingTürkiye’ssustainabledevelopmentmodel,2.Playinganactiveroleintacklingclimatechange,and3.ContributingtoTürkiye’sindustrialtransitiontoalow-carboneconomy.C&EconsiderationsareintegratedinTSKB’sgovernancearrangements.TSKB’sorganizationalstructureforsustainabilityinvolvestheboardofdirectorsandtheExecutiveCommitteeandcomprisesallemployees.Theboardofdirectorsguidesthebank’soperationsinlinewithitssustainabilitystrategy.Allsustain-abilitywork,includingcoordinationofactivitiesandbusinessplans,isc­onductedbytwomainpillars:1.TheSustainabilityCommittee,establishedin2014andconsistingoffourmembersoftheboardofdirectorsaswellasthechiefexecutiveofficerandthreeexecutivevicepresidents,and2.TheSustainabilityManagementCommittee,chairedbythechiefexecutiveofficerandledbythreeexecutivevicepresidentswiththeheadsofworkinggroupsfromthedepartmentsresponsibleforrollingoutsustainabilityactivi-tiesthroughoutthebank.ElevenworkinggroupsareundertheManagementCommittee,eachaddressingdifferentsustainabilityareas,includingtheClimateRisksWorkingGroupestab-lishedin2020,whichconsistsofthreesubgroupsthatworkonphysicalrisk,transitionrisk,andscenarioanalysis.64GreeningNationalDevelopmentFinancialInstitutionsTSKBsetstargetsforgreeningitsactivities.Ratherthanusinggreen­financingterms,asthereisnocommongreentaxonomyinTürkiyeyet,thereareparameterssuchasratioofSDG-linkedloansandratioofloanscontributingtoC&ESDGs.AsannouncedinoneofitsClimateRiskReports(TSKB2021b),TSKBaimstohavea90-percentshareofSDG-linkedloansanda60-percentshareofC&ESDG-linkedloansinthetotalportfolioby2025.Inaddition,TSKBintendstolimittheshareofpowerplantsgeneratingelec-tricityfromnonrenewablesourcesto5percent.WithinthescopeofitsClimateChangeMitigationandAdaptationPolicy,TSKBhasdeclareditwillnotfinancegreenfieldcoal-firedthermalpowerplantsandcoal-mininginvestmentsforelec-tricitygeneration.Foritsdirectimpact,TSKBaimstoreduceitsScope1emissionsby42percentby2030andby63percentby2035.Thebankalsocommitstocon-tinuesourcing100percentrenewableelectricitythrough2035andtohavezeroScope2emissions.ForScope3emissions,inearly2022TSKB’semissionsassoci-atedwithlendingactivitieswerecalculated,verified,andpublishedtransparentlyforthefirsttimeintheTurkishfinancialsector.TSKBhassubmittedthesci-ence-basedtargetstotheScience-BasedTargetsinitiativeforvalidationandisrun-ningtheproceduresfortheUnitedNations(UN)Net-ZeroBankingAlliance.TSKBiscommittedtoaligningitsactivitieswithinternationalandnationalC&Egoals.TSKBplaysanactiveroleinnationalandinternationalinitiativesinthefieldofsustainability(forexample,UnitedNationsEnvironmentProgramme[UNEP]FI,UnitedNationsGlobalCompact,GlobalReportingInitiative,andIDFC).In2019,TSKBjoinedtheUNEPFIPrinciplesforResponsibleBankingasafoundingsignatoryaspartofitssustainablebankingactivities.6Initsactivities,TSKBconsiderstheobjectivesandrecommendationsoftheParisAgreement,NDCs,andTCFD,amongothers.Forexample,theClimateChangeMitigationandAdaptationPolicyannouncesthesetupoftargetsandimplementationofnecessaryactionstoachieveGHGemissionsinlinewiththelong-termgoalsoftheParisAgreement.TSKBhasset1.5°C-alignedGHGreduc-tiontargetsforScope1emissionsfor2030and2035,whichcontributetotheParisAgreement’sgoals.Furthermore,TSKBadoptedtheSDGsoftheUnitedNationsin2015,report-ingonitsdirectorindirectcontributiontoall17SDGs.TSKBalsosupports­climatechange–relatedactivitiesandeffortsathigh-levelglobalmeetings,suchasintheUNConferenceoftheParties(2021).Atthenationallevel,TSKBactivelyparticipatesinforumsonsustainabilityissues.Forexample,itisinvolvedinthepreparationoftheGreenDealActionPlanofTürkiyebytheMinistryofCommerceandotherworkinggroups(forexample,CleanEnergy,ZeroWaste,SustainableProduction,andConsumption)intheirrelatedministries;intheSustainabilityWorkingGroupwithintheBankingRegulationandSupervisionAuthority;withtheSustainabilityCommitteewithintheBanksAssociationofTürkiye;andinworkshopsontheClimateAdaptationActionPlanbytheMinistryofEnvironment,UrbanizationandClimateChange.TSKB,alongwithitssustainabilityadvisorycompanyEscarus,wasalsoanactivememberoftwosubcommitteesoftheClimateCouncil—GHGReductionandGreenFinanceandCarbonPricing—whichwasheldinFebruary2022inKonya.TSKBandEscarusrepresentativesprepareddraftrecommendationsofthecommitteeswiththecooperationofotherparticipants.NDFICaseStudies65TSKBhasidentifiedseveralchallengestoscalingupitsgreenfinancing:•Theregulatoryenvironmentisstillunderdevelopment,andnostandardiza-tionexistsfordisclosures,taxonomy,datacollection,andsoforth.•FIsoftenfaceinsufficientfinancialresources.Eventhoughthedemandforresource-efficientinvestmentandrenewable-energyprojectsishighandcanbefurtherincreasedbyproperlyraisingconsumerawareness,accesstothelong-termfundingessentialforprojectandinvestmentfinancecanbelimited.•Themacroeconomicenvironmentisnotalwaysconduciveforlong-terminvestment.Fightingclimatechange,supportingthetransitiontoacarbon-​freeeconomy,andensuringinclusivesocialdevelopmentwillcontinuetobeamongTSKB’sstrategicprioritiesintheupcomingyears.Inthiscontext,TSKBwillcontinuetocooperatewithDevelopmentFinancialInstitutions(DFIs)toprovidelong-termthematicfundingandtoshiftitslearningcurve,aswellastoincreaseitscapacityviatechnicalassistanceprograms.GreenfinancingsourcesandusesCurrently,TSKBdoesnotpubliclydisclosevolumesofgreenassets;italsodoesnottrackclimateadaptationfinancing.Vialendingactivities,thebankmainlysupportssevenSDGs,includingcombatingandadaptingtoclimatechange.TheshareofSDG-linkedloanshasreached93percentoftotalloans.LoanslinkedtoC&ESDGsaccountfor61percentofloans,andthesehavecontributedtoareductionof12.2milliontonsofCO2emissionsperyear(TSKB2021b).Initsloanportfolio,powergenerationhasthelargestshare,at39.7percent,withrenewableenergy—mostlywind,geothermal,solar,andbiogasorbiomassresources—accountingfor89percentofthepowergenerationportfolio.TSKBoffersseveralfinancialproductsforgreenfinancing:conventionalloans(working-capitalloans,longer-termloans),projectfinanceloans,and­second-tier(orAPEX)loansorthematicon-lendingtootherFIs.Inaddition,thebankprovidestechnicalassistanceandconsultancyservicestoitsclientsviaEscarus(TSKBSustainabilityConsultancy),forexample,onthematicbondi­ssuances.Asoftheendof2021,theshareofinvestmentloanswithinthetotalloanportfolionarrowedto62percent,whiletheshareof­working-capitalandAPEXloansreached32percentand6percent,respec-tively.Theincreasein­working-capitalloanswasassociatedwithaddressingtheliquidityneedsofMSMEsadverselyaffectedbytheCOVID-19pandemic.Inaddition,TSKBrecentlyintroducedanSDG-linkedleasecertificateinlinewithitsgreentransformationeffortsincapitalmarkets.TSKBplanstofurtherdevelopvariousthematiccreditlines(projects)withthemesrelatedtothecircu-lareconomy,thepromotionofgreendeals,climatechangeadaptation,andthecreationofemploymentviagreengrowth.TSKButilizesdomesticandinternationalfundingsources,withESG-linkedfundingreaching80percentintotalliabilities.AlthoughTSKBdoesnotacceptdeposits,itdoesborrowfromdomesticandinternationalmoneyandloanmar-kets,internationalcapitalmarkets,andinternationalFIsandDFIs.Eighty-ninepercentoftheliabilitiesconsistofforeign-exchangeliabilities,withthemajorityofthesebeingmedium-andlong-termfundsobtainedfromabroadinforeign66GreeningNationalDevelopmentFinancialInstitutionscurrency,includingundertheguaranteeoftheMinistryofTreasuryandFinance.DFIfundingisinstrumentalforextendinglong-term,reliablefinancingtoeligi-bleprojects.In2021,100percentofinternationalborrowingwasESG-focused.Inaddition,TSKBislistedatBorsaIstanbulwithamarketvaluereachingUS$308millionin2021.FundingthroughDFIaccountsfor67percentofTSKB’sfundingstructure.TSKBworkscloselywiththeWorldBank,IFC,theEuropeanInvestmentBank(EIB),theAsianInfrastructureInvestmentBank,AFD,KFW,theJapanBankforInternationalCooperation,theChinaDevelopmentBank,theEuropeanBankforReconstructionandDevelopment,andothers.TSKBhasdemonstratedleadershipinissuinggreenorsustainablebondssince2016.TSKBhadthreegreenorsustainablebondissuances,foratotalofUS$1.05billion.Thefirstbondissuancewasin2016,followedbyasustainablesubordinatedbondissuancein2017andasustainablebondissuancein2021.FundsobtainedthroughbondsareusedtofinancegreenandsocialprojectsinlinewiththeSustainableFinanceFramework.TSKBsubmitsanImpactReporttoitsinvestorsannuallytoprovidethemwithinsightintotheeffectsoftheproj-ectsfinancedthroughthefundsfromthebondissuances.Inaddition,apartfromsustainablebilateralborrowingagreements,TSKBfundingincludessyndicatedloanstiedtoanESGratingandsustainabilityperformancecriteria.In2021,thesyndicatedloanswerelinkedtosustainabilitycriteria,namelythegenderpaygap,anexitfromcoalfinancing,andCOVID-19financingthemes.C&EriskmanagementTSKBexpectsthatC&Eriskswillaffectitsbusinessmodelanddefinesclimaterisksandopportunitiesfromtheinternationallyrecognizedperspectiveofphys-icalandtransitionrisks.TSKBexaminesdirect(focusesontheeffectsofclimatechangefromTSKB’soperationsandactivities)andindirect(focusesontheeffectsofclimatechangefromTSKB’sproductsandservices,aswellasitsloanportfolio)risksandopportunities,havingmetricsandtargetsforboth.Forexam-ple,TSKBmonitorsitsScope1,2,and3emissionsandmeasuresitselectricity,naturalgas,water,andpaperconsumption,aswellastheamountofitsglass,plastic,andpaperwaste.TSKBhascalculatedScope3emissionsofcompaniesthatarefinancedbythebankandoperateincarbon-intensiveindustries(forexample,nonrenewablepowergeneration,cement,iron,andsteel).7Theseloansaccountedfor7.5percentofTSKB’s2021year-endportfolio,wheretheemis-sionscalculatedaccountedfornearly70percentofthewholeloanbook.Forindirectimpact,TSKBmonitorsthefollowingkeyperformanceindicators:thenumberofrenewableenergyprojectsfunded,thetotalinstalledcapacityofrenewable-energyprojectsfunded,itsshareinTürkiye’srenewableenergy,thecontributiontothereductionofCO2emissions,theshareofelectricitygenera-tionintheloanportfolio,theshareofrenewableandnonrenewableenergyintheelectricitygenerationportfolio,andtheshareofsustainability-themedloans.Climate-relatedrisksandopportunitiesareidentifiedintheshort,medium,andlongterm;theireffectsontheorganization’sactivities,strategy,andfinan-cialstructureareanalyzed,andactionableplansareprepared.Since2005,TSKBhasbeenquantifyingtheE&Srisksinherentineveryprojectaswellasfromitsownoperations.TSKBidentifiesimpactsandmanagesrisksfromitsownopera-tionsviatheInternationalOrganizationforStandardization(ISO)14001EnvironmentalManagementSystemcertification.ThebankaimstoreduceNDFICaseStudies67emissionseveryyearandhasbeenoffsettingitscarbonfootprintforremainingemissionssince2009throughbuyingGoldStandardcarboncertificates.TSKBevaluatesandmanagesE&SimpactsfromitslendingoperationsusingitsEnvironmentalandSocialRiskEvaluationTool(ERET),appliedtoallproj-ectssince2007.ERETratesprojectson5criteriaunder35headings.8ThebankalsoconsiderstheGHGemissionsandenergyandresourceefficiencydimen-sionsofitsfinancedprojects.Theresultsofsuchevaluationsareconsideredintheprojectassessment,financing,andinvestment-monitoringprocesses.CustomersthentakemeasurestopreventormitigatenegativeE&SimpactsaswellasdraftEnvironmentalandsocialmanagementPlans.TSKB’sEngineeringTeam,whichalsoincludesasocialspecialist,regularlymonitorstheperfor-manceofclientsinmanagingtheE&Simpacts,inlinewiththeE&SActionPlans.TSKB’sassessmentofphysicalandtransitionrisksarisingfromclimatechangeandtheirintegrationintoallloanprocessesareongoing.InadditiontoERET,in2022,TSKBdevelopedanin-houseassessmenttoolformeasuringthephysicalandtransitionrisksinfinancedprojectsandcompaniesandintroducedmitigationplansfortheserisksintheloanallocationprocess.TheworkallowsTSKBtobeawareoftheserisksatanearlystagetomitigatetheclimate-relatedcreditriskandnegativesubstantivefinancialimpacts.Thistooliscurrently­integratedintoTSKB’screditevaluationcriteria,andtheevaluationresultsaresubmittedtotheCreditCommittee.TSKBplanstointegrateclimatechange–relatedrisksintoitsloanevaluation,allocation,andmonitoringprocessesbytheendof2023.Thebankevaluatestheimpactofclimatechangeonitsportfolio,withsce-narioanalysisandstresstestingcurrentlyunderdevelopment.Climate-relatedrisksareidentifiedthroughasector-basedheatmapthatwillbeusedasabasisforscenarioanalysisandstresstesting.In2020,69percentofthecashloanport-foliowasidentifiedasbeingathighormediumriskintermsofphysicalriskand38percentintermsoftransitionrisk.9Inaddition,TSKBusescasestudiesforsectorsthatareprevalentinitsportfolioandarevulnerabletoclimatechange(forexample,hydroelectricpowerplantsforphysicalrisk,thecementindustryfortransitionrisk).Scenarioanalysisandstresstestingarestillworksinprogress,andmethodol-ogiesaretobefurtherdeveloped,withamoredetailedassessmentofassetresil-ienceagainstclimaterisksplanned.Scenarioanalysisandstress-testingtoolswillbeusedtoidentifythepotentialconsequencesofclimate-relatedrisksandopportunitiesunderdifferenttimeconstraintsandconditions,withtheresultsincludedinbusinessprocessesandstrategicplanning.TheScenarioAnalysisSubworkingGroupusesdifferentscenarioanalysespreparedbyrespectableinstitutions(suchastheInternationalEnergyAgency,IntergovernmentalPanelonClimateChange,andWorldResourcesInstitute)tofurtherevaluateandinte-gratetheresultsintotheirclimateriskscenarioanalysis.Inaddition,TSKBfocusesonthetargetsTürkiyedevelopsinitsclimatepolicies.Themaindifficul-tiesfacedaredataavailabilityandthecurrentuseofmethodologiesthatdonotallowhistoricaldatatoinformthefuture,thereforeweakeningthepredictabilityofclimaterisks.Climate-relateddisclosureandreportingTSKBmonitorsandclassifiesitsportfoliousingtaxonomybasedonsectorandtheme.Althoughanationaltaxonomyisplannedtobedevelopedbythe68GreeningNationalDevelopmentFinancialInstitutionsendof2023,TSKBusesitsowntaxonomy,with11sectorsidentifiedforloantagging:renewableelectricitygeneration;nonrenewableelectricitygeneration;electricitypowerdistribution;naturalgasdistribution;agricultureandlivestock;themanufacturingindustry;theservicesector;finance;constructionandcon-tracting;retail;andtelecommunications,informationtechnology,andmedia.10Somesectorsarealsodividedintosubsectors.TSKBmonitorsitsgreenportfolioandprovidesdisclosuresinlinewithTCFD.TSKB’ssustainabilityreportingpracticestartedin2009andhasevolvedintointegratedreportingin2016.Since2018,TSKBhasillustrateditsstrategy,targets,performance,valuecreationplan,andimpactsdrivenbyitsoperationsviaitsIntegratedAnnualReports,whichareverifiedbyanauditor.Thebankpubliclydisclosesinformationonclimate-relatedrisks.In2021,andforthefirsttimeintheTurkishfinancialsector,TSKBissueditsfirstclimateriskreportpre-paredinlinewithTCFDrecommendations.ThebankalsodisclosesitspracticesandinitiativesannuallyviatheCarbonDisclosureProjectreports.DEVELOPMENTBANKOFSOUTHERNAFRICA(SOUTHAFRICA)ThissectiondiscussestheDevelopmentBankofSouthernAfrica(DBSA)inSouthAfrica,includinganoverviewoftheinstitutionanditsgreenstrategyandgovernance,greenfinancingsourcesanduses,C&Eriskmanagement,andclimate-relateddisclosuresandreporting.InstitutionaloverviewDBSA,aleadingDFIinAfrica,wasestablishedin1983andiswhollyownedbythegovernmentofSouthAfrica.DBSA’smandateistopromoteeconomicgrowthandregionalintegrationforsustainabledevelopmentprojectsinSouthAfrica,theSouthernAfricanDevelopmentCommunity,andSub-SaharanAfrica.Thebankdoesthisworkbymobilizingfundingforprojectsthatbuildsustainableinfrastructureacrossthecontinent.DBSAismandatedtoinvestpredominantlyinSouthAfrica,with40percentofitsinvestmentbookgearedtowardinfrastructureintherestofAfrica.Theclientbaseincludesmunicipalities,theprivatesector,state-ownedenterprises,sovereigns,andpublic-privatepartnerships.GreengovernanceandstrategySeveralframeworksandstrategiesareguidingDBSA’sactivitiesingreenfinanc-ing.In2021,DBSAapprovedtheJustTransitionInvestmentFrameworktoguidethebank’sapproachtosupportthedrivetobecominggreener.Thisframe-workwillsupportinstitutionalactivitiesforaJustTransitioninalignmentwiththeParisAgreementaspartofitspathwaytobecomingnet-zeroby2050.TheframeworkalsoinformsDBSA’sIntegratedSustainableDevelopmentApproach(ISDA).Theobjectiveofdevelopinganintegratedapproachistomainstreamgreeninitiativesacrossthebanktoensurethatitmeetsglobalgoodpracticestandardsacrossallsectorsandfinancingactivities,includingusingamandatoryassessmentthroughouttheinvestmentapprovalprocessandutilizingenhancedappraisalmethodologiesandtools,suchasE&Ssafeguards.NDFICaseStudies69Withits“StatementonNet-Zero,”DBSApubliclyannouncedin2021itscom-mitmenttoplayinganactiveroleinaJustTransitionthatachievesnet-zeroemissionsby2050.ThisstatementisanimportantsignaltoshowcaseDBSA’saimtosupportthefinancingoftheimplementationofglobal,regional,andnationalinitiativesrelatedtothelow-carbontransition.11Forexample,thisworkincludesalignmentwithSouthAfrica’sNDCthroughtheimplementationofdedicatedclimateprograms.12SeveralgovernancearrangementsandcommitteesareinplacetosupportDBSA’sC&Eobjectives.Throughitsgovernancestructures,includingtheboardofdirectors(anditssubcommittees),InvestmentCommittee,andtheInfrastructureDeliveryandKnowledgeCommittee,DBSAensuresthatC&Efactorsareconsideredininvestmentdecisions.Aclearcommitmenthasbeenmadefromthetop,akeyfactortosupportDBSAindeliveringonitsclimateandgreenfinancingcommitments.Overall,thenumberoffull-timestaffdirectlyresponsibleforimplementingDBSA’sgreenandclimate-financingactivities,aswellasC&Eriskmanagement,hasbeenenhanced.Tofurthersupporttheagenda,DBSAhasestablishedadedicatedClimateandEnvironmentalFinanceUnitthatprovidesdedicatedadvisory,investment,andimplementationsupporttoaccessfundsfromclimate-financingmechanismssuchastheGlobalEnvironmentFacility(GEF),GCF,andsoforth.Theaccredi-tationwithGEFandGCFallowsDBSAtoleverageitsfundstosupportitsC&Eobjectives.PartnershipwiththevariousC&E−­financingmechanismsfurtherhelpsthebankbenchmarkandimprove,amongotheraspects,itsfiduciarydutyandenvironmentalandsocialstandards(ESS).frameworksagainstinternationalstandards.TheESGUnitisresponsibleforundertakingE&Sduediligence,mon-itoring,policy,andframeworkdevelopmentaswellassupportingthedevelop-mentandimplementationofthebank’sISDA.OtherrelatedtechnicalcommitteesincludetheJustTransitionStrategyCommitteeandtheSocialandEthicsCommittee,whichensureadequatereport-ingonenvironmentalindicatorsandeffectiveapplicationofDBSA’sESS.Moreover,severalinternalclimateandESG-related-trainingandcapacity-­buildingprogramsareupskillingDBSAstafftoenhanceeffectiveISDAimplementation.GreenfinancingsourcesandusesIn2018,DBSAsetatargetofatleast30percentofallitsinvestmentscontributingtoclimategoals.Thispercentageissubdividedintoa70-percenttargetformiti-gationanda30-percenttargetforadaptation.DBSAiscurrentlyreviewingthetargetsintheJustTransitionInvestmentFramework’sdevelopmentandexpectsthatnewandmoreambitioustargetswillbesetaspartofthereviewprocess.Thedevelopmentofclimate-financingtargetsenablesDBSAtodefineits­commitmentstowardnationalandinternationalclimatechangepoliciesandcommunicateitsintentionstoitsshareholdersandstakeholders.Moreover,allDBSAclimateprogramsaredesignedtocrowdinprivateinvestmentforlow-­carbonenergyandcleanwaterinfrastructure,usinglimitedpublicfunds.Forexample,theClimateFinanceFacility(CFF)targetistoreachanoverallportfo-lioprivatefinanceleverageratioof1:5.DBSAhasbeentrackingitsgreenfinancingvolumesforthepast5yearsandrecentlyhascompletedagreendeepdivetoobtainamoredetailedunderstand-ingofitsloanbook.ThegreendeepdiveusedtheIDFCtaxonomytodetermine70GreeningNationalDevelopmentFinancialInstitutionstheportionoftheDBSAportfoliothatiscarbon-intensive,green,oruncatego-rized.ThisstudywillbeusedtoplantheJustTransitionStrategyandtargets,aswellastomonitorthebank’sportfoliocomposition.MostofDBSA’sgreenloansareforclimatemitigationprojects,mainlyinrenewableenergy.DBSAisalsoactivelyfinancingenergy-efficiencyprojectstosupportemissionsreductionsthroughoutSouthernAfrica.Asmallportionofthegreenloansisdirectedtowardfinancingclimateadaptationprojects,point-ingtothechallengesinfindingbankableadaptationprojects.Othergreenproj-ectsarerelatedtowater,waste,biodiversity,andagriculture.DBSAcandrawonnumeroussourcesofnationalandinternationalfundingforitsC&Eactivities.NationalfundingsourcesincludecommitmentsfromSouthAfrica’sNationalTreasuryandvariousnationalclimateprograms.Attheinternationallevel,DBSAhasreceivedsupportandcreditlinesfromdifferentMultilateralDevelopmentBanks,includingtheWorldBankandtheEIB,aswellasbilateralpartners.DBSAwasaccreditedbytheGEFin2021andhasbeen­reaccreditedbytheGCFforasecondtermuntilOctober2027.Tocomplementthesefinancingsources,DBSAenteredthegreenbond­marketin2021.DBSA’sfirstgreenbondwasissuedin2021throughaprivateplacement.This€200millionbondwassupportedbytheAFDandisstructuredinalignmentwithDBSA’sGreenBondFramework.13Theproceedsofthisfirstissuancewereusedmainlyforfinancingandrefinancingrenewable-energy­projects.Thisgreenbondwasexternallyverifiedandcontributedtoprovingthebusinesscaseforrenewablesintheregion.Asecondgreenbondwasalsolaunchedin2021,againissuedthroughaprivateplacement.TheproceedsoftheUS$210millionissuancewereusedtorefinancerenewable-energygenerationandtransmissionprojects,inadditiontoaddingtoDBSA’spoolofliquidityforfuturegreenpowergenerationprojects.DBSAiscurrentlydevelopingan­integratedSustainabilityBondFramework,whichaimstoguidetheissuanceofbothsustainabilityandsustainability-linkedbondsinthefuture.Differentinstrumentsareofferedtosupportscalingupgreenfinancing,includingcreditenhancementsandgrants.SupportedbytheGCF,DBSAlaunchedtheCFF,alendingfacilitydesignedtoincreaseclimate-relatedinvest-mentinSouthernAfricabyaddressingmarketbarriersandfocusingonblendedfinancemechanismsandcreditenhancements,suchassubordinateddebtandtenorextensions.CFFisthefirstprivatesectorclimate-financingfacilityinAfricausinga“greenbankmodel,”withtheaimtode-riskandincreasethe­bankabilityofclimateprojectstocrowdinprivatesectorinvestment.Also­supportedbytheGCF,theEmbeddedGenerationInvestmentProgrammeoffersacreditsupportmechanismthatenablesfundingofembedded-generationrenewable-energyprojectsthroughtheprovisionofriskcapitalforprojectsimplementedbyprivatesectorentitiesandlocalmunicipalities.Besidesfinancialinstruments,DBSAprovidesprojectpreparationsupporttofurtherfacilitatethedevelopmentofgreenbankableprojectsandclimate­programs.ThroughitsaccreditationwiththeGCF,DBSAcanaccessprojectpreparationfundingtobuildapipelineofprojects.TheGCFProjectPreparationFacilityGranthelpsthebankundertakevariousprojectpreparationactivities—includingfeasibilitystudies,ESGstudies,andadvisoryservices—tosupportfinancialstructuring.Todate,DBSAhassuccessfullyusedProjectPreparationFacilityGrantsupportfromtheGCFtodesigninnovativeclimateprograms,includingenergyefficiency,municipalsolidwaste,andwaterreuseprograms.NDFICaseStudies71DBSAcitesseveralinterlinkingchallengesinhibitingthescalingupofgreenfinancing:•Reportingrequirementsforgreenprojectscanbeonerous,requiring­sufficientcapacitytoeffectivelymonitortheseprojectsandpresentinga­significantbarrierifreportingandthelevelofcapacityforsimilarnongreenprojectsisnotneeded.•Pipelinedevelopmentandthebankabilityofprojectsarekeyissuesempha-sizingtheneedformoresupportattheprojectpreparationstage.Evenwherede-riskinginstrumentsareavailable,projectsmaynotbebankableowingtoalackofcapacityandexpertisetodevelopbankableprojects.•SeekingaccreditationandsubsequentlyaccessingconcessionalfinancingfromtheglobalclimatefinancemechanismsoftheUnitedNationsFrameworkConventiononClimateChangeisalong,cumbersomeprocess,withrequire-mentsthatcanbechallengingtoimplementpractically,leavinggreen­financingopportunitiesuntapped.Mobilizingfinanceforclimateadaptationfromthesemechanismsischallenging,especiallyintheabsenceofreadilyavailableclimatedata.Furthermore,thelackoflendingoptionsusinglocalcurrencywiththesemechanismscanresultinrisksduetoexposuretohighforeignexchangeratesandcostlyhedgingstructures,furthercomplicatingprogramimplementation.C&EriskmanagementDBSAhasastrongE&Smanagementsystem.Impact-relatedE&Sriskassess-mentsareacorecomponentofDBSA’sprojectappraisal,negotiation,disburse-ment,andmonitoringprocesses.In2021,DBSAformalizeditsenvironmentalappraisalframeworkforprojectassessments.Thisframeworkentailsasoundanddetailedapproachtoassessenvironmentalrisksthroughoutthedue­diligenceprocess,withworkongoingtoalsointegratebiodiversityframe-works.Theappraisalframeworknowalsoconsidershowclimate-relatedriskscanimpactlendingactivities.High-riskprojectsarerequiredtoundergoamoredetailedassessmentandprovideassociatedtargetandmetricsmonitoring.FurtherworkisplannedtointegratetheconsiderationofC&EfinancialrisksintoDBSA’sactivities.Theinstitutiondemonstratesawarenessofthepotentialimpactsofclimate-relatedrisksonitsbusinessoperations,identifyingthephys-icalandtransitionriskstowhichitcouldbeexposed,aswellasthepotentialassociatedreputationalrisks.Standardizationandformalizationoftheconsider-ationofC&EfinancialriskshasbeenidentifiedasonepriorityundertheISDA.Tomanageandmitigateclimateriskmoreeffectively,DBSAisworkingtointe-grateclimateriskintotheexistingEnvironmentalandSocialManagementSystemandDevelopmentResultsReportingFramework.Theinstitutionalsoisconsideringtheincorporationofclimate-relatedrisksandvulnerabilitiesintothedeal-pricingprocess.Tosupportthedevelopmentofinternalandexternalcapacityandintegrateclimate-andnature-relatedrisks,vulnerabilities,andopportunitiesintoits­systems,DBSAisengagingwithitspartnerDFIsandexternalstakeholders.Onekeychallengeistheavailabilityofinformationondevelopmentresultsandbase-linedatarequiredtomonitorandmitigateC&Erisksandvulnerabilities.72GreeningNationalDevelopmentFinancialInstitutionsClimate-relateddisclosureandreportingAlthoughDBSAisseekingalignmentwithTCFDrecommendations,ithasnotyetissueditsownclimate-relateddisclosure.However,DBSAisreviewingitsexistingClimateChangePolicyFrameworkanddevelopinganewtoolkitto­promoteTCFDandotherglobalstandards.TheintentionistodevelopmorestandardizeddisclosureandreportingpracticesthatarebetteralignedwithTCFDandtosupporttheintegrationofclimateriskintoDBSA’sactivitiesmorebroadly.GreenfinancingreportingandtrackingarebasedonDBSA’sDevelopmentResultsReportingFramework.ThisframeworkisalignedwithinternationalgoodpracticeandcoverstheTCFD,theTaskforceonNature-RelatedFinancialDisclosures,andtheNationalTreasury’sgreenfinancingtaxonomy,aswellasthereportingrequirementsofpartnersandfunders.DBSAalsohasusedtheIDFCtaxonomytoclassifyprojectsundersectorsandsubsectors.Thisclassificationincludesclimateadaptation,mitigation,andotherenvironmentalactivities.Thelatterincludesprojectsrelatedtowater,biodiversity,andintegratedwastemanagementthatpromotethegreeneconomyandsustainabilitybuthavenosignificantordirectclimateadaptationormitigationobjectivesorco-b­enefits.DBSAhasdevelopedtheDevelopmentResultsReportingFramework,aflexible,responsivetooltoenablethebanktoeffectivelyreportonitsdevelopmentandimpactresults,includinggreenfinancing,SDGs,climate,gender,andothersustainabilityreportingrequirements.NOTES1.SeethemissionstatementonFIRA’swebsite:https://www.fira.gob.mx/Nd/Vision​MisionValores​.jsp.2.SeeFIRA’sInstitutionalProgram2020-24:https://www.fira.gob.mx/Nd/Programa​Institucional2020.pdf.3.KDBhassetaside0.7trillionasacapitalbufferfortransitionrisksaspartofits2022riskmanagementframework.ThecapitalbufferwasestablishedbasedonatransitionriskstresstestthatestimatedtheprobabilityofdefaultundertheNet-Zero2050scenariooftheNetworkofCentralBanksandSupervisorsforGreeningtheFinancialSystemframework.4.Theimpactreportsincludedetailedinformationonthefunctionsandimpactofthegreenbonds(forexample,typeofgreenprojectssupported,amountdisbursed,andestimatedtonsofCO2reduced)(forexample,refertoKDB2022).5.TSKB(TürkiyeSinaiKalkinmaBankasi)ResearchReports.https://www.tskb.com.tr/en​/research-reports/economic-research/climate-review.6.TSKBinitiatedcarbon-neutralbankingpracticein2008andbecameasignatorytotheIDFCClimateDeclarationin2015,totheUNEPFIPrinciplesforResponsibleBankingin2019,andtotheSustainableandResilientGlobalRecoveryandBiodiversityDeclarationsin2020.7.RefertoTSKB(2021b,79).8.Themodelrateselectricityconsumption,waterconsumption,andGHGemissionlevelstomeasuretheimpactofprojectsonclimatechangeandtheircontributiontoadaptation.9.RefertoTSKB(2021a).10.RefertoTSKB(2021a).11.SeeDBSA’sStatementonNetZero:https://www.dbsa.org/press-releases/dbsa-statement​-net-zero.12.TheseprogramsincludetheClimateFinanceFacility(CFF),EmbeddedGenerationInvestmentProgram,andWaterReusePrograms.TheCFFfocusesonspecificclimateinvestmentopportunitiesbasedonacountry’sneedsandsectoralpriorities.TheprogramaimstoalignandadaptitsinvestmentfocusinaccordancewiththeprimarymitigationandadaptioninterventionsoutlinedintherespectiveNDCsforeachtargetcountry.NDFICaseStudies7313.TheGreenBondFrameworkreceivedaSecondPartyOpinionStatementfromCarbonTrustassessingitsalignmentwiththeGreenBondPrinciples(seeevaluationreport:https://www.dbsa.org/sites/default/files/media/documents/2021-03/Evaluation%20of%20the%20DBSA%20Green%20Bond%20Framework%20and%20Green%20Bond​.pdf).BIBLIOGRAPHYBCBS(BaselCommitteeonBankingSupervision).2022.PrinciplesfortheEffectiveManagementandSupervisionofClimate-RelatedFinancialRisks.Basel,Switzerland:BCBS.https://www​.bis.org/bcbs/publ/d532.pdf.ICAP(InternationalCarbonActionPartnership).2019.KoreaNames“MarketMakers”toIncreaseLiquidity.Berlin,Germany:ICAP.https://icapcarbonaction.com/es/node/641.KDB(KoreaDevelopmentBank).2019.GuidelinesforCoalFinancing.https://www.kdb.co.kr​/CHGLIR05N00.act?_mnuId=IHIHEN0028&JEX_LANG=EN.KDB(KoreaDevelopmentBank).2022.InvestorNewsletter.https://www.kdb.co.kr​/CHGLIR05N00.act?_mnuId​=IHIHEN0028&JEX_LANG=EN.TSKB(TürkiyeSinaiKalkinmaBankasi).2021a.ClimateRiskReportonTaskForceonClimate-RelatedFinancialDisclosures.https://www.tskb.com.tr/i/assets/document/pdf​/TCFD-eng-2021-05-24.pdf.TSKB(TürkiyeSinaiKalkinmaBankasi).2021b.ImpactOrientedSustainableDevelopment:TSKBIntegratedAnnualReport2021.https://www.tskb.com.tr/uploads/file/tskb-2021​-integrated-report.pdf.TSKB(TürkiyeSinaiKalkinmaBankasi).2022a.“AboutUs.”https://www.tskb.com.tr/en​/about-us.TSKB(TürkiyeSinaiKalkinmaBankasi).2022b.ClimateChangeMitigationandAdaptationPolicy.https://www.tskb.com.tr/i​/assets/document/pdf/TSKB%20Climate%20Change%20Mitigation%20and%20Adaptation%20Policy.pdf.TSKB(TürkiyeSinaiKalkinmaBankasi).2022c.“SustainabilityManagementSystem.”https://www.tskb.com.tr/en/services/sustainable​-banking/strategy-and-management​/sustainability​-management-system.TSKB(TürkiyeSinaiKalkinmaBankasi).2022d.“SustainableBanking.”https://www.tskb.com​.tr/en/services/sustainable-banking.TSKB(TürkiyeSinaiKalkinmaBankasi).2022e.“SustainabilityPolicy.”https://www.tskb.com​.tr/en/services/sustainable-banking​/our-policy/tskb-sustainability-policy.ECO-AUDITEnvironmentalBenefitsStatementTheWorldBankGroupiscommittedtoreducingitsenvironmentalfoot-print.Insupportofthiscommitment,weleverageelectronicpublishingoptionsandprint-on-demandtechnology,whichislocatedinregionalhubsworldwide.Together,theseinitiativesenableprintrunstobeloweredandshippingdistancesdecreased,resultinginreducedpaperconsumption,chem-icaluse,greenhousegasemissions,andwaste.WefollowtherecommendedstandardsforpaperusesetbytheGreenPressInitiative.ThemajorityofourbooksareprintedonForestStewardshipCouncil(FSC)–certifiedpaper,withnearlyallcontaining50–100percentrecycledcontent.Therecycledfiberinourbookpaperiseitherunbleachedorbleachedusingtotallychlorine-free(TCF),processedchlorine–free(PCF),orenhancedelementalc­hlorine–free(EECF)processes.MoreinformationabouttheBank’senvironmentalphilosophycanbefoundathttp://www.worldbank.org/corporateresponsibility.NationalDevelopmentFinancialInstitutions(NDFIs)arecrucialformobilizingtherequiredfinancing,includingfromprivatesources,toreachcountries’climateandenvironmental(C&E)objectives.Fundingneededtoachievecountries’C&Egoalsisinthetrillionsofdollars,withmanycountriesalsofacingsignificantfiscalandeconomicconstraints.NDFIsarewellpositionedtoovercomethemarketbarriersassociatedwithgreeninvestmentsandcatalyzeprivate-sectorfinancing.ThemainpurposeofGreeningNationalDevelopmentFinancialInstitutions:Trends,LessonsLearned,andWaysForwardistoexaminethecurrenttrendsandrecommendpolicyactionsfor“greening”NDFIs.ThisreportidentifieskeystepsNDFIscantaketocatalyzefinancetowardcountries’C&EobjectivesandmanageC&Erisks.TheassessmentofNDFIs’C&EpracticesisbasedonareviewofkeyelementsofNDFIoperationsandtheirinstitutionalsetup.TheworkdrawsfromtheresultsofasurveyconductedbytheWorldBankofgreeningpracticeswithinNDFIsbasedincountriesinarangeofregionsandincomelevels,aswellasonin-depthcasestudiesoffourNDFIs:LosFideicomisosInstituidosenRelaciónconlaAgricultura,KoreaDevelopmentBank,TürkiyeSinaiKalkinmaBankasi,andDevelopmentBankofSouthernAfrica.ISBN978-1-4648-2031-1SKU212031