World Bank: “There can be no development without climate action”
Qatar Today, Doha
We are beginning to see the far-reaching consequences of the historic Paris Agreement which, through trickledown effects, has spelt strategic shifts for almost every type of organization. The World Bank, as the most important development bank globally, is certainly no exception. In fact, it is becoming increasingly clear that goals of sustainable development and poverty alleviation cannot be met unless climate change is addressed simultaneously. “After COP21, we produced a climate action plan that talked about how we are going to implement our pledge to increase the share of climate benefits from 21% of our portfolio to 28%, with the objective of reaching $29 billion a year by 2020,” says John Roome, Senior Director for Climate Change at the World Bank. “The key premise of the plan was that you can’t separate climate action from development action. The kind of projects you need to combat climate change – for example, installing renewable energy or introducing climate-smart agriculture – are the same kinds that are needed in order to give people access to basic needs like electricity and food. These activities are completely intertwined.”
Therefore it’s not surprising that the World Bank’s donors are seeking a commitment that their funds will be used to mainstream Nationally Determined Contributions (NDCs) into the overall development process. Most countries looking at expanding renewable energy, are doing so in a way that will increase access to the disadvantaged. Low carbon transport will reduce greenhouse gas emissions but it also can reduce congestion in cities, improve travel times and improve quality of life. Development that doesn’t take into consideration the realities of climate change is ultimately doomed to fail; in contrast, funds that are available for development projects can be reoriented in ways that are climate-smart. “It is true that in the short term it will cost more to build climate resilience into the projects. But in the longer term, the cost will be recovered.”
With climate action so critical, there is no time to waste and there are too many countries that need help to make this leap sustainably. So every bit of climate financing helps. Every last million is important. How does the World Bank’s finance fit into all the other funds in operation – the Green Climate Funds and Global Environment Facility(s) of the world? Who goes where for what? “Each institution has its own procedure and process of allocating funds to different countries. We at the World Bank have capital allocations depending on the size of the country, how vulnerable or poor it is, its credit worthiness, etc.,” says Roome. “How we spend that money is determined by the dialogue between our teams and the central government in establishing priorities - called the Strategic Country Diagnosis. In developing these priorities, we take into account climate action in reference to what is in the country’s Nationally Determined Contributions (NDC). GCF and GEF operate in different ways. While there is no attempt to ensure some big allocation agenda, we do work very closely with the GCF (which is also under the UN umbrella) to coordinate the money they have available with what we have available so that we can blend financing to get as much leveraging as possible in bringing in more private sector financing,” says Roome.
Leveraging is a key emphasis of the World Bank’s Climate Action Plan, Roome says. “Internally, some of the targets we have set are not around just how much of our own money we spend but how well we use that money to crowd in other investments. Energy teams are no longer judged on direct financing for renewable energy but on how successfully they bring in investment from other sources. We have to start thinking about how we can use public money not to fully finance renewables but instead to de-risk investment in them. Cover only what is needed from public money to crowd in private sector investment; just small amounts of money to ensure a guarantee/insurance mechanism that can offset risks. This will have better impact.”
For Qatar, increased private sector engagement is presented as a panacea for all the interconnected challenges linked to diversification. Success has hitherto been patchy. While the Qatari situation might be unique, Roome says attracting private sector investment boils down to a few basics, irrespective of the context. “We have to ensure that there are opportunities for companies to make reasonable returns, after taking into account the risks. So it’s a case of identifying the risk factors and addressing them. Often it is just a perception of risk.” But the sheer scale of work that needs to be done could be an incentive in itself. Over the next 15 years, the world will need to invest $90 trillion in infrastructure, Roome says. That is more than double the total investment that has gone into infrastructure throughout the course of human history. “A very large chunk of that is going to go into urban infrastructure – roads, buildings, transportation. How do you ensure that these are energy efficient and constructed in a way that is consistent with a low carbon footprint?” he says. This needs new skills, new materials called into service, offering a whole bunch of opportunities for future entrepreneurs.
The Arab angle
A couple of months ago, the World Bank launched a dedicated climate action plan focused on the Middle East and North Africa region, one of the world’s climate-vulnerable regions. A whopping two-thirds of the population live in already water-stressed areas which will be further affected by the projected temperature increase and rainfall reductions. Apart from this, the rising sea level will also impact 25 million people across the region. “And those who will suffer through the worst of this are the poorest sections of the population who live off agriculture, a vast majority of whom depend exclusively on the monsoons,” says Hafez Ghanem, Vice President of the World Bank MENA, while highlighting the region’s vulnerability.
It is to address this that the World Bank MENA has reaffirmed a series of commitments, according to Ghanem;
- To increase the proportion of financing in the region that is going to climate change – from 18% to 30% by 2020 – that’s $1.5 billion of additional funding per year focused on climate action.
- To focus on mitigation but also emphasise that much more needs to be done on the adaptation front, with an increased share of climate finance. For example, trying to help smallholder farmers embrace new types of climate resilient agriculture and put in place a social protection framework, like insurance programmes, to protect them.
- To work with governments in the region on policy reform and help them implement policies that are climate-friendly through analysis and advice.
- To bring in more financing from the private sector that supports mitigation and adaption
- To support regional cooperation and collective action across the Arab region, especially in the areas of water availability and creation of energy markets.
In the GCC, Ghanem says, the World Bank’s support comes not in the form of funds but rather advice, especially on mitigation issues and water desalination technologies. “The Gulf countries are not looking for financing. What they are working on with the international community is knowledge sharing, exchange of experiences. They already have ambitious programmes in place; now what is needed is to develop innovative approaches to financing to realise those programmes,” he says.
Picture credit: The World Bank Group
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