A new analysis of the energy finance provided by multilateral development banks (MDBs) from 2014 through 2017 shows that much work remains to properly finance the needs of the world’s poorest communities with the least access to reliable energy sources.
Overall, the MDBs are not financing energy access at nearly a sufficient level to meet the needs of energy-poor communities. On a mostly positive note, the energy access finance that is being provided is being directed to many of the communities that need it most (though targeting could be improved even further). But even so, energy access is not reflected as a priority for the MDBs, despite their claims that they would like it to be so.
The key findings of the report include:
- The MDBs are not channeling enough of their energy finance to access for the poor:
- Less than 20% of MDB energy finance from 2014 through 2017 (an average of just USD 3.6 billion per year) went to projects aimed at advancing energy access primarily for poor and/or rural communities;
- Only 2% of energy finance went to off-grid and decentralized energy solutions that are most likely to close the access gap in rural areas. MDBs spent an average of less than 2% of the USD 36 billion of total annual investment needed to properly finance off-grid and mini-grid solutions;
- Just 1.6% of MDB energy finance went to clean cooking solutions, with an annual average of just USD 312 million, compared to the USD 4.4 billion in yearly investment needed; and
- Only 12% of MDB support for the “enabling environment” had components to advance energy access for the poor.
- On the plus side, over 50% of MDB energy access finance went to countries with the largest access gaps:
- Over 65% of energy access finance went to the countries with the largest number of people without access; and
- Nearly 50% of access finance targeted sub-Saharan Africa, the region with the greatest share of the global population without energy access.
- However, energy access is not reflected as a priority in energy approvals or reported outcomes:
- Over 90% of MDB finance for fossil fuels was not aimed at advancing energy access for the poor, despite these fossil investments being frequently justified in the context of providing energy access; and
- The MDBs do not apply a harmonized framework to track finance for energy access or its outcomes, despite energy access being a main pillar / principle in the energy strategies of each institution assessed in this report.
Given these findings, the report also offers recommendations to improve the state of energy access financing at the multilateral development banks.
Recommendations for multilateral development banks:
- Direct at least one-half of annual energy finance to projects focused on advancing energy access for the poor and/or rural areas;
- Integrate off-grid, distributed renewable energy and clean cooking solutions for access into projects, so that these solutions receive at least one-third of MDB energy finance; and
- Set quantitative targets for energy access and collectively track energy access finance and its outcomes.