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Energy Cafe Rebalancing Climate Finance
The transition towards a low-carbon economy requires the fundamental reallocation of financial capital from current technologies towards green innovation. The role of public financing by Multilateral Development Banks (MDB) is a largely unexplored area. In this paper, we provide novel evidence on the climate financing practices of MDBs and their long-term climate consequences. We find that the majority of MDB climate finance is for mitigation projects and is concentrated in a small number of relatively wealthy countries. We establish that MDBs' climate financing is positively correlated with countries' greenhouse gas emissions but not with their vulnerability to climate risks. Our numerical simulations show that moving towards more equal funding of innovative mitigation-adaptation projects can substantially lower global climate vulnerability. We also find that rebalancing MDB funding towards adaptation projects and technologies can reduce vulnerability for an additional 2.5 billion people, without a significant change in the annualized growth rate of emissions.