Chapter 2 | THE CLIMATE ACTION PLAN
The aim is to strengthen operational actions for more climate-resilient investments. The plan is aligned with other MDBs’ climate initiatives and sets clear targets. The CAP was informed by a comprehensive review of the OPEC Fund’s 2019-2021 portfolio, during which climate finance represented 17 percent of the total budget for approved pro- jects. The plan calls for the OPEC Fund to increase its climate finance contributions to at least 25 percent by 2025 and at least 40 percent by 2030 of all new approved financing. To achieve these targets, the CAP focuses on three key areas: a. Support climate diagnostics, planning and policies; b. Promote transformative climate investments 10 ; and c. Drive innovative climate finance solutions for the private sector. The CAP expands on each of these areas with actionable items and technological innovations that can be implement- ed in partner countries to address the impacts of climate change. As part of its support for climate policy and diagnostics, the OPEC Fund has pledged to assist partner countries in re- viewing and updating their national climate policies, includ- ing NDC reports, long-term strategies under the Paris Agree- ment and other regulatory and legislative instruments for managing climate change. When necessary, the OPEC Fund provides grant-funded technical assistance and resources to help countries develop climate risk profiles and prioritize climate measures in partnership with other MDBs, develop- ment finance institutions and development sector actors. The OPEC Fund aims to promote transformative public and private investments in key sectors such as energy, infrastruc- ture, agriculture, food, water and sanitation. Historically, the OPEC Fund’s climate contributions have been concentrated in the energy, water and agriculture sectors. Support to
these sectors will continue under the CAP with an eye to- ward increased impact. For instance, the OPEC Fund is pri- oritizing large-scale renewable energy projects and energy efficiency initiatives such as advanced transmission and dis- tribution technologies. Climate-smart agriculture is another key focus, promoting efficient irrigation, drought-resistant crops, reducing losses and increasing carbon sequestration. The OPEC Fund is also participating in commercially viable transformative projects in the transport sector and smart city initiatives, integrating low-carbon pathways in infra- structure design. Through nature-based solutions, the OPEC Fund is help- ing to conserve ecosystems while building infrastructure and promoting livelihoods. Transformative climate action is envisaged through a combination of sovereign and non- sovereign financing, leveraging OPEC Fund grants, trust funds and partnerships with other institutions to maximize impact and mobilize private sector funding 11 . The OPEC Fund continues to work in conjunction with other partner institutions where relevant and to prioritize projects that crowd-in private sector funding, either within the con- text of the funded project or in the context of replication of the project. The CAP also proposes investing in climate bonds, the proceeds of which will be used to finance mitiga- tion and/or adaptation investments. The OPEC Fund is striving to develop innovative financing solutions to mobilize private capital for sustainable and re- silient infrastructure and low-carbon innovation. Recogniz- ing the critical role of the private sector in achieving climate change objectives, the OPEC Fund is exploring the possibil- ity of providing financing through on-lending mechanisms for low-carbon and green projects. The OPEC Fund is ex- ploring engagement with the Climate Bond Initiative 12 on climate bonds issued by the private sector. 13
10 Transformative climate investments focus on key sectors to reduce emissions or taking adaptive measures. So in case of energy, transformative climate investment will imply global transition to low carbon energy that is resilient to climate change and extreme events. In urban cities, transformative investments will imply improving urban air quality; decarbonizing urban energy systems; promote green and resource-efficient buildings and infrastructure; promote integrated solid-waste management and circular-economy approaches; improve urban transportation; and improve the coverage, efficiency and resilience of urban water supply, sanitation and wastewater treatment. 11 Partnerships for blended finance with agencies offering concessional financing 12 https://www.climatebonds.net 13 As part of this process, the OPEC Fund may also consider supporting the issuance of such bonds in cooperation with other development partners.
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