ADB released $100 B in new funding to assist Asia and the Pacific in addressing climate crisis

In order to address the overlapping, concurrent crises in the region, the Asian Development Bank (ADB) on Friday approved capital management reforms that will free up $100 billion in new funding capacity over the next ten years.

The ADB stated in a statement that the increase in funds will be further leveraged by mobilizing domestic and private capital to increase from the billions needed to address the climate crisis to trillions.

The statement claims that the reforms were implemented through an update to the Capital Adequacy Framework (CAF) of ADB.

They increase the bank’s annual new commitments capacity by about $10 billion, or about 40%, to more than $36 billion.

By maintaining ADB’s overall risk appetite and optimizing its prudential level of capitalization, the expansion is made possible.

A countercyclical lending buffer is also created by the reforms to assist ADB developing member countries (DMCs) that may experience unanticipated crises.

The measures are intended to guarantee that ADB maintains its AAA credit rating and its capacity to provide DMCs with funding at reasonable costs and with lengthy maturities. They will allow ADB to provide up to $360 billion of its own financing to its DMCs and private sector clients over the next ten years.

Through the introduction of a recovery plan that would stop capital erosion during times of financial stress, the reforms further protect ADB’s AAA credit rating. Every three years, ADB’s capital adequacy framework is reviewed.

“These important reforms will significantly expand ADB’s ability to support a broad range of critical development efforts across Asia and the Pacific, including greater concessional resources for our vulnerable members,” said ADB President Masatsugu Asakawa.

He claims that ADB’s decision today is a response to the demand that multilateral development banks (MDBs) use their resources more efficiently and more quickly.

In the context of the existential threat posed by climate change, he claimed that these resources will assist the region in meeting basic needs, addressing gender inequality, and managing a complex set of overlapping crises.

“This extra lending power will be extended and leveraged further by renewed efforts to mobilize private and domestic capital and maximize the impact of our work,” he added.