Corruption Risks Loom Large over Financing of Green Infrastructure

Governments and public international organizations are making a concerted effort to provide large amounts of money to reduce emissions of greenhouse gases (climate mitigation) or adapt to the effects of climate change (climate adaptation). But there is a significant risk that the infrastructure projects where much of this climate financing will need to be targeted will be undermined by corruption—from bribery and kickbacks to fraud and embezzlement. The threat is increased by the scale of the climate financing being provided and the speed with which the required projects need to be completed. Corruption concerns could also deter responsible private sector investors from providing much-needed financing. Since there is only “one shot” at getting this right, the stakes are very high. Accordingly, public international organizations that lead on climate finance and anticorruption efforts, including the International Monetary Fund (IMF), multilateral development banks, the Organization for Economic Cooperation and Development (OECD), and the United Nations, need to make preventing corruption in climate finance a much higher priority and take urgent steps, working with governments and the private sector, to address this threat before the bulk of the financing is committed. Climate activists and civil society anticorruption movements should strongly encourage and support these efforts. This Policy Brief identifies key corruption risks that threaten climate infrastructure financing and the best practices that can alleviate these risks. As a means of putting these best practices in place, this Policy Brief advocates that the IMF’s Resilience and Sustainability Trust should provide a mechanism to help coordinate reform in this area. This new trust complements the IMF’s existing lending toolkit by providing financing to vulnerable low- and middle-income countries—about three-quarters of the IMF’s membership—to address longer-term challenges, including climate change and pandemic preparedness.