Opening statement by Masatsugu Asakawa, President, Asian Development Bank, at the President's press conference at the 56th Annual Meeting, 2 May 2023, Incheon, Republic of Korea
Good morning and thank you for joining us today.
I would like to first thank the Republic of Korea for hosting our meetings here in Incheon.
In recent years, war, disease, and economic hardship have taken a terrible toll on human welfare. The most alarming challenge facing our region is the worsening impact of climate change. This threatens the existence of countless species, including our own.
And so, the world must take bold and urgent action. The Asian Development Bank, and other multilateral development banks, have a critical role to play. They should be leaders in mobilizing financing and expertise for climate action. ADB recognizes that it must do more with the substantial resources that we manage. Placing climate action at the top of the development agenda is crucial.
As I have said before, the global battle against climate change will be won or lost in Asia and the Pacific. Since 2000, more than 40% of climate-related disasters occurred in Asia and the Pacific. Over 3.5 billion people have been affected, with close to one million deaths. By 2050, another 1 billion people living in urban areas in our region will suffer from harmful air pollution and heat stress.
In addition, the developing member countries of the Asian Development Bank have experienced physical losses worth billions of dollars due to climate-related events. In 2020 alone, the region faced a disaster loss of $67 billion. If we don’t act, the increase in annual losses will outpace the region’s GDP growth.
This is why ADB is taking bold climate action. We aim to deliver $100 billion in climate finance to our developing member countries between 2019 and 2030. We will fully align all our operations with the Paris Agreement by no later than 2025. We will expand our investments in renewable energy options, and we will not invest in coal.
Today, I am pleased to announce another major step in our climate action agenda. We are launching a new program that will dramatically expand our capacity to respond to climate change.
This new program is called IF-CAP: the Innovative Finance Facility for Climate in Asia and the Pacific. IF-CAP is a global first in its scale and scope. It will transform climate finance in two ways.
First, IF-CAP will change the way we do business. The region needs trillions in investment to combat climate change. To help reach that level, we need to maximize our capital in new ways. IF-CAP will multiply ADB’s lending capacity through leverage. This will allow us to crowd in substantially more resources from the private sector, and other investors who share our commitment to climate action.
Let me explain. The program is based on the use of financial guarantees from our partners. By guaranteeing a portfolio of ADB’s sovereign loans, they will help to shoulder some of the loss in case of a credit event in one of our borrowers. This is a groundbreaking arrangement because it will reduce the capital ADB needs to hold for credit risk, freeing up capital for a substantial increase in lending to climate projects. Every dollar of guarantee into IF-CAP will result in the capacity to make new loans.
Let me emphasize the significance of this innovation. It is a fundamental shift from the traditional “one dollar in, one dollar out” facilities at MDBs, because of its multiplier effect. We aim to bring in approximately $3 billion for IF-CAP, which can unlock up to $15 billion of new ADB climate projects. This will allow ADB to significantly accelerate climate action and achieve more ambitious results.
Second, IF-CAP will change the way we address climate change. Climate change demands innovative and all-encompassing solutions. IF-CAP will provide this. It will be the first ADB financing vehicle to serve as a one-stop shop for climate finance. This will make climate action across sectors and regions possible. And it will support both infrastructure and reforms that address climate changes issues.
This gives us the power to address climate change everywhere, and anywhere, that it is needed. IF-CAP financing will support both mitigation projects, to reduce greenhouse gas emissions, and adaptation projects, to build resilience to the impacts of climate change.
I am very proud of our work with our IF-CAP partners: Denmark, Japan, the Republic of Korea, Sweden, the United Kingdom, and the United States. I look forward to introducing them at our formal launch of IF-CAP on Thursday.
Again, I am thankful to the Republic of Korea for hosting our Annual Meetings this year, and for its unique contribution to IF-CAP: Korea is the only non-Annex I country under the UN Framework Convention on Climate Change to serve as a founding partner of IF-CAP.
Let me end by pointing out that a leveraged guarantee mechanism for climate finance has never been attempted by a multilateral development bank. IF-CAP is a another clear example of ADB’s strong and innovative work as the Climate Bank for Asia and the Pacific. And I believe it will transform the way we do development.
Let me stop here. I look forward to answering your questions.