an essential instrument in achieving the SDGs

National development finance institutions (DFIs) are now establishing themselves as essential instruments for achieving the Sustainable Development Goals (SDGs), particularly in terms of climate action and the environment, underlines the World Bank in a report .

With assets totaling $19 trillion and representing more than 10% of global annual investments, national DFIs exert considerable influence in favor of green finance initiatives around the world, notes the financial institution international.

However, this sector only constitutes a small part of their overall loans and investments, and most of them are still at the beginning of their transition, says the same Source.

The World Bank report studied a sample of 22 institutions and analyzes current trends, while offering several recommendations to “green” their portfolios.

Beyond their direct lending activities, domestic DFIs can experiment with blended finance mechanisms and credit enhancement instruments that help overcome barriers to green financing, such as longer recovery times and the risks associated with this. type of project.

To mobilize even more private climate capital, national DFIs can build pipelines of “bankable” projects by offering project preparation and technical assistance services, notes the report.

They can also market, test and promote promising green policies and financing instruments, notes the document, adding that these institutions are often the first entities in their country to issue green bonds, thus demonstrating the feasibility of these instruments to possible private issuers.

Efforts to develop green finance must be guided by ambitious objectives and rely on rigorous reporting processes, says the report.

Much like financial institutions in general, investments and loans of domestic DFIs are exposed to climate and environmental risks such as floods and droughts, the document highlights.

Going forward, national DFIs will need to collaborate more with governments, international organizations and other stakeholders to experiment with new concepts that can catalyze green finance, the Bretton Woods report says.

“And, as countries expand their activities to meet these financing needs, they will need to ensure the effective management of DFIs, including appropriate legal and supervisory frameworks and good institutional governance and management practices. risks,” notes the document.

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