Multilateral development banks (MDBs) ramped up climate finance to record levels in 2025, reinforcing their role in supporting climate‑resilient and sustainable economies, according to a new report from the European Investment Bank (EIB).
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Total climate finance across MDB operations rose 19 per cent between 2024 and 2025 to nearly US$163 billion, with low and middle‑income countries receiving almost US$103 billion – a 21 per cent jump in just one year.
MDBs are international financial institutions that fund development projects and provide technical expertise, and include institutions such as the World Bank and Asian Development Bank.
Adaptation funding, long seen as a lagging pillar of climate finance, grew even faster as support for climate resilience in poorer countries increased 31 per cent to US$35 billion, edging MDBs closer to the estimated US$42 billion a year needed by 2030.
The World Bank remains the workhorse of climate finance for developing economies. It provided about US$49.9 billion of climate funding to low‑income and lower‑middle‑income countries in 2025, far more than any other MDB.
The bulk of climate finance for poorer countries went to Latin America and the Caribbean (US$22.7 billion), followed by Africa (US$18.4 billion), South Asia (US$16.0 billion), East Asia and the Pacific (US$13.5 billion), and the Middle East (US$10.4 billion).
The World Bank provided about US$49.9 billion of climate funding to low‑income and lower‑middle‑income countries in 2025. Image: EIB
Private capital mobilisation linked to MDB climate operations reached US$116 billion, including US$35 billion in low‑ and middle‑income markets, underscoring the banks’ catalytic role in crowding in investment in the “critical decade” for climate action.
Civil society groups argued that the rise in MDB climate finance is positive, but the bigger totals do not automatically translate into the right kind of support for poorer countries.
Mariana Paoli, climate finance lead at Oxfam International, said the current MDB model still prioritises mobilising private investment into commercially focused projects, while communities’ most critical needs — adaptation, resilience, loss and damage, and a just transition away from fossil fuels — require public, grant‑based finance.
“The risk is that we celebrate record volumes while overlooking the quality and distribution of that finance. If climate finance is not reaching the people and sectors that need it most, then bigger numbers alone will not deliver climate justice or build resilience where it is urgently needed,” Paoli told Eco-Business.
World Bank retreat weakens MDB ambition?
The record‑high spending comes just weeks after the World Bank announced it would abandon its flagship climate target, a goal that required 45 per cent of its lending to deliver climate benefits by 2025.
The climate pullback of the Washington, DC-headquartered multilateral could drag climate ambition across the MDB system, said advocates.
In a commentary released on 3 July, Bertha Argueta Tejeda, senior policy and advocacy officer for climate justice at European Network on Debt and Development (Eurodad) and Rebecca Thissen, global advocacy Llad at Climate Action Network (CAN) International, said that the World Bank’s decision has “direct consequences” for the collective MDB goal to provide US$120 billion annually for climate finance in emerging economies by 2030, which was announced in November 2024 at COP29.
“Since the World Bank was expected to be a major contributor to this target, scaling back its own fixed commitment puts significant strain on its ability to deliver. This also places pressure on other banks like the Asian Development Bank (ADB), the European Investment Bank (EIB), and the African Development Bank (AfDB) to fill the gap,” Tejeda and Thissen said in the statement.
“With global climate action so reliant on MDB funding, this decision has also left a lot of uncertainty about the banks’ role in the future,” they added.
They argued that the World Bank’s retreat from its climate target should prompt a rethink of the MDB‑centric architecture for climate finance, calling for renewed emphasis on Multilateral Climate Funds (MCFs) such as the Green Climate Fund, Adaptation Fund, Global Environment Facility and the new Fund for Responding to Loss and Damage, which provide a higher share of grant finance, have more representative governance, give Global South countries greater decision‑making power and are better placed to support locally led climate solutions.
The new collective quantified goal on climate finance (NCQG) finalised at COP29, made up of public finance provided directly by governments and money from MDBs, and the Baku to Belém Roadmap to US$1.3 trillion at COP30, effectively shifted focus away from bilateral channels and shifted these funds towards MDBs, they said.
“Yet proponents of an expanded role for the MDBs did not adequately address the apparent contradiction between advocating for greater reliance on these institutions and the growing evidence of their climate retrenchment,” read the statement.
“Even if MDBs’ climate finance lending were to continue under different headings, the symbolic and practical pushback against climate priorities remains deeply concerning for climate vulnerable regions, which need predictable finance at scale,” it added.
