The China-led Asian Infrastructure Investment Bank and other new multilaterals are becoming an important part of the development finance landscape. How they answer these five questions will have far-reaching implications.
Blog Posts: multilateral development banks
Leaders at COP20 can explore a range of sources for financing low-carbon urban development including multilateral investment banks, private investors, and innovative initiatives like the Nationally Appropriate Mitigation Actions or climate-themed bonds.
One of the biggest successes from 2009’s COP 15 conference was securing funding for climate change adaptation and mitigation in developing countries. Donor nations agreed to “provide new and additional resources […] approaching $30 billion for the period 2010–2012, with balanced allocation between adaptation and mitigation.” They also committed to mobilize $100 billion a year by 2020.
But the agreement left a key question unresolved: how should funding be “balanced” between adaptation and mitigation? Should the funding balance be 50/50 between adaptation and mitigation or should it based on each country’s needs? Should funding include both private and public sector investment? These are some of the questions that negotiators will need to address during COP 19 in Warsaw.
But whatever they decide as being a “balanced commitment,” one thing is clear: finance for adaptation needs to increase in the coming years.
U.S. public financing for overseas coal-fired power is likely coming to an end.
That’s the clear signal from the U.S. Department of Treasury’s announcement earlier this week. At institutions like the World Bank, where the United States is the largest shareholder, this decision holds real significance.
Few countries are unaffected by China’s overseas investments. The country’s outward foreign direct investments (OFDI) have grownfrom $29 billion in 2002 to more than $424 billion in 2011. While these investments can bring economic opportunities to recipient countries, they also have the potential to create negative economic, social, and environmental impacts and spur tension with local communities.
To address these risks, China’s Ministry of Commerce (MOFCOM) and Ministry of Environment (MEP)—with support from several think tanks—recently issued Guidelines on Environmental Protection and Cooperation. These Guidelines are the first-ever to establish criteria for Chinese companies’ behaviors when doing business overseas—including their environmental impact. But what exactly do the Guidelines cover, and how effective will they be? Here, we’ll answer these questions and more.
The High-Level Panel on the Post-2015 Development Agenda provided a welcome injection of energy and ambition into the future of development with its final report released last week. While the details will be parsed over the coming months, the report’s recommendations were at once bold and practical. The Panel sees that the promise of a world free of extreme poverty is within reach, and achieving this vision requires that sustainability and equity should be at the core of the global development agenda.
While there have been many such calls to move the world onto a more sustainable and equitable development path, if the Panel’s proposals are to be truly acted upon, the results would be transformational.
With that in mind, let’s look at how the report stacks up against the four “issues to watch” that we highlighted last week:
1) Will sustainability be on the margins or at the center of the post-2015 agenda?
This was a clear winner, as the Panel recognized that environmental sustainability and poverty eradication are inextricably linked. The report identified sustainable development as one of five essential “transformational shifts.” Unlike the Millennium Development Goals (MDGs), which relegated the environment to just one of eight goals, the panel offered four goals--on energy, water, food, and natural resources--that directly connect human well-being with care for the planet.
Ensuring that development projects benefit both people and the planet is becoming more and more of a priority.
Environmental and social impact assessments (ESIA) have been in use for decades to consider the effects of projects such as dams, highways, and oil and gas development. Over the years, ESIAs have evolved to cover both environmental and social impacts, including health and human rights.
However, the assessments often study social or environmental factors separately from one another, missing the many ways in which they interact.
In 2012, important financial institutions--the International Finance Corporation and the Equator Principles Financial Institutions--took a welcome step towards promoting a more holistic approach to impact assessment, requiring their clients to address ecosystem services as part of their due diligence.
Incorporating the concept of ecosystem services into ESIA can ensure that affected stakeholders, project developers, financial, and governmental institutions understand the full scope of a proposed project’s impacts on people and the environment. But as I recently learned at the annual conference of the International Association for Impact Assessment (IAIA) two weeks ago, there’s a lot of uncertainty about what the concept of “ecosystem services” really means and how it can be applied to conducting impact assessments. It’s a good time to clear up confusion on this critically important yet complex issue.
Within our lifetimes, the world could be free of widespread, extreme poverty, replaced instead with shared prosperity and environmental and fiscal balance. That was the vision World Bank President Jim Yong Kim outlined at his first Spring Meetings in Washington, D.C. last week.
In a period of economic uncertainty, social exclusion, and climate and environmental crises, these goals hold immense promise. At the same time, for an institution already grappling with its redefined role in the coming decades, the Bank’s current capacity to support this vision will be tested.
The Common Vision for the World Bank Group that was approved by the World Bank’s Development Committee on April 20th includes two goals the Bank will work towards:
alleviating extreme poverty by dropping the percentage of people living on less than U.S.$ 1.25 a day to 3 percent by 2030, and
promoting shared prosperity by fostering income growth of the bottom 40 percent of the population in every country
These two core goals are supplemented by the Bank’s understanding that they cannot be achieved without credible action to ensure environmental sustainability, especially on climate change.
The private sector is a crucial partner in advancing sustainable development, and bilateral aid agencies are grappling with ways to learn from and leverage the activities of companies and markets. As the worlds of business and of aid increasingly intersect—and as development budgets are reined in even as demands on them grow—the pressure is to do more in partnership with the private sector. The real challenge, though, is to do better.
This was the headline message from a recent roundtable discussion with representatives from nine bilateral donor agencies and invitees from the private sector, co-organized by WRI and the International Institute for Environment and Development (IIED) in London (see notes from the roundtable).
Both sides desire a strengthened relationship. Donor agencies see the private sector as an indispensable partner for improving the effectiveness and efficiency of aid. Agencies are looking for important sources of ideas, technology, and financing to scale up development solutions.
One example is the Africa Enterprise Challenge Fund (AECF), which is funded by the Australian, British, Danish, Dutch, and Swedish aid agencies. AECF is improving livelihoods of poor people in rural Africa by supporting innovation and new business models to help small-scale farmers adapt to climate change and promote investment in the generation of low-cost, clean, renewable energy.
Private sector actors seek clearer policy signals and more consistent support from donor agencies, particularly in understanding and navigating local politics. They also seek opportunities to develop new products and new markets, benefiting from the “de-risking” role that the public sector can play.
This year has been one of those worst-of-years and best-of-years. In its failures, there are signs of hope.
An unprecedented stream of extreme weather events worldwide tragically reminded us that we’re losing the fight against climate change. For the first time since 1988, climate change was totally ignored in the U.S. presidential campaign, even though election month, November, was the 333rd consecutive month with a global temperature higher than the long-term average. A WRI report identified 1,200 coal-fired power plants currently proposed for construction worldwide. The Arctic sea ice reached its lowest-ever area in September, down nearly 20 percent from its previous low in 2007. And disappointing international negotiations in June and December warned us not to rely too much on multilateral government-to-government solutions to global problems.
But 2012 was also a year of potential turning points. A number of new “plurilateral” approaches to problem-solving came to the fore, offering genuine hope. A wave of emerging countries, led by China, embraced market-based green growth strategies. Costs for renewable energy continued their downward path, and are now competitive in a growing number of contexts. Bloomberg New Energy Finance reports that global investment in renewable energy was probably around $250 billion in 2012, down by perhaps 10 percent over the previous year, but not bad given the eliminations of many subsidy programs, economic austerity in the West, and the sharp shale-induced declines in natural gas prices. And the tragedy of Hurricane Sandy, coupled with the ongoing drought covering more than half of the United States (which will turn out to be among the costliest natural disasters in U.S. history) may have opened the door to a change of psychology, in turn potentially enabling the Obama Administration to exhibit the international leadership the world so urgently needs, as many of us have advocated.
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