Topic: world bank

Striking the Balance: Ownership and Accountability in Social and Environmental Safeguards

Sarah Parsons — Thu, 11 Apr 2013 15:05:46 -0400

Executive Summary

Many governments around the world have put in place systems to help ensure that investments in changes such as infrastructure projects, government programs or new national laws do not bring undue harm to their citizens or environment. The effectiveness of these systems in successfully preventing negative impacts varies widely. Developing countries tend to have a particularly difficult time ensuring that investments within their borders meet minimum social and environmental standards. As a result, many financial institutions have established their own policies to help ensure that their investments do not result in harm to vulnerable communities or ecosystems. These policies are generally known as “safeguards.” Although safeguard policies provide vital protection against risks to people and the environment, properly designing and implementing these policies means navigating complex relationships between financial institutions, governments, and the citizens of recipient countries.

The World Bank (the Bank) has been at the forefront among multilateral development banks in developing safeguard policies. In recent decades, the Bank has experimented with different approaches to social and environmental protection. These approaches respond in part to variations in the way in which countries receive money from the Bank, such as investments in projects versus policies. They have also emerged in reaction to the changing global landscape. Some developing countries have become richer and created stronger systems to protect people and the environment. The global community has also realized the value of letting developing countries define their own development path. At the same time, the pressing need to protect our global common goods and most vulnerable communities has become more apparent.

This working paper seeks to help the Bank and other financial institutions take stock of experiences to date and distill lessons for the future. We look at four different approaches to protecting against social and environmental harm: the traditional safeguards approach, which applies to most project lending; the Use of Country Systems approach, which the Bank has applied to some project lending on a pilot basis; the approach used for Program for Results investments, which applies to the Bank’s results-based lending pilot; and the approach used for Development Policy Loans, which applies to loans that support changes to policies and institutions.

While all four of these approaches rely on the rules and institutions of the recipient country, they do so to different degrees. Through an analysis of the strengths and weaknesses of each of approach, we arrive at seven lessons for the World Bank and other financial institutions looking to balance ownership and accountabil¬ity in their social and environmental policies:

Building on country safeguard systems can enhance ownership and incentives for safeguard implementation.
Minimum standards and positive incentives can clarify requirements and encourage countries to strive toward more ambitious social and environmental goals.
Safeguard implementation requires anticipating risks, planning to deal with those risks, managing and monitoring implementation, and responding to harm.
Proper safeguard implementation requires people on the ground to engage, collaborate and problem solve.
Recipient country safeguard systems still need support.
Citizens play a key role in any effective safeguard system.
To successfully balance ownership and accountability, safeguard approaches need to recognize differences among countries, sectors, and projects.

ADVISORY: Mayor Bloomberg and World Bank President Kim Headline Transforming Transportation 2013

James Anderson — Wed, 16 Jan 2013 12:24:38 -0500

The Honorable Michael Bloomberg, Mayor of New York City, and Dr. Jim Yong Kim, President of the World Bank, are scheduled to headline a keynote session at the annual Transforming Transportation conference in Washington, D.C. The session on “Shaping the Future of Urban Transport” aims to galvanize awareness of challenges facing cities and urban transport, share examples and solutions from the World Bank, New York City/Bloomberg Philanthropies, and the World Resources Institute.

The conference is being hosted jointly by EMBARQ—the World Resource Institute’s center for sustainable transport and the World Bank. This is the 10th annual Transforming Transportation, which aims to scale-up and advance the adoption of sustainable solutions in transport and urbanization around the world.

The session will also include remarks by Dr. Andrew Steer, President and CEO, World Resources Institute, and Ms. Rachel Kyte, Vice President for Sustainable Development, World Bank. The session will be moderated by Zanny Minton Beddoes, The Economist’s Economics Editor based in Washington D.C.

The session will focus on the urban challenges in the U.S. and around the globe. Cities everywhere are under increased pressure from rapid population growth, exacerbated by climate change and extreme weather events, such as Hurricane Sandy. Increased motorization is also resulting in negative externalities such as congestion, emissions, and road fatalities. The conference will explore how scaling up sustainable transport will bring the smart solutions to the diverse set of challenges that cities are facing.

WHAT:
Plenary Session with Mayor Michael Bloomberg, Mayor of New York; Dr. Jim Kim, President, World Bank; Andrew Steer, President, World Resources Institute; Ms. Rachel Kyte, Vice President for Sustainable Development, World Bank.

WHEN:
Friday, January 18, 2013

TIME:
9:00 to 10:00 a.m. ET
Note: Registered media should arrive by 08:30 a.m. in order to sign in.

PLACE:
Preston Auditorium
World Bank Headquarters
1818 H Street, NW
Washington, DC

The event will be live streamed. Check “Watch Live” at TransformingTransportation.org

NOTE: Media must register for this event to Alexis O’Brien at aobrien@worldbank.org or tel. (202) 473-2409

For more information, please contact:
Michael Oko, moko@wri.org; (202) 729-7684 (WRI)

WRI’s website: www.wri.org
EMBARQ website: www.EMBARQ.org
Conference website: http://TransformingTransportation.org
Twitter hashtag: #TTDC

Public Financing Instruments to Leverage Private Capital for Climate-Relevant Investment: Focus on Multilateral Agencies

Sarah Parsons — Thu, 06 Dec 2012 10:12:49 -0500

Executive Summary

As private sector investment flows within and into developing countries rapidly increase, the public sector has a unique opportunity to ensure that these flows are directed to meet critical climate change investment needs. This paper informs the use of public funds to leverage private sector investment in climate-relevant projects. It focuses on the public sector’s use of financing instruments, which can help improve the risk-reward profile of climate-relevant projects, especially when combined with a foundation of complementary climate change policies and financial regulations.

This paper draws on the experiences of two types of multilateral institutions responsible for providing or intermediating finance to climate change projects in developing countries: (1) climate funds and (2) development banks. It maps the financing instruments available to various public actors, with a focus on three significant institutions: the Global Environment Facility, the Clean Technology Fund, and the World Bank Group. Future working papers will map the activities of other public institutions, including bilateral, national, and regional development banks; government agencies; and public-private partnership funds.

The results of these working papers will be aggregated into detailed analyses and recommendations that inform the future public provision of climate finance with respect to leveraging private capital.

Findings from this paper for public actors and international mechanisms, like the Green Climate Fund, include the need to:

1. Better tailor the use of public financing instruments and maximize flexibility in the use of these instruments. This includes:

Expanding the use of financing instruments beyond loans to equity and guarantees in order to mitigate specific risks faced by the private sector in different geographies.
Coordinating support for domestic climate change policies and robust financial markets with project finance.
Targeting grant support to markets where access to finance is most challenging and where public finance is instrumental in market development. This includes grant finance to poorer countries with less robust financial markets, as well as for new technologies that cannot achieve commercial returns without initial public support.
Capitalizing international mechanisms like the Green Climate Fund in a manner that allows maximum flexibility in the use of different financing instruments. Specifically, the governments of developed countries should consider providing a reasonable amount of grant funding to the Green Climate Fund and its Private Sector Facility to ensure that a suite of instruments can be used flexibly as needed to most effectively mobilize investments. Loans, equity, de-risking instruments, or investments in other funds will provide a suite of products for the Fund to most effectively leverage private capital in ways that are most appropriate for individual programs or projects.

2. Address internal, institutional barriers to private sector investment; for example, by:

Improving internal coordination and cooperation with the aim of offering a complementary suite of financing options for, or to attract private sector investment into, projects.
Instituting incentives for employees to proactively consider options to increase private sector participation in projects, while maintaining appropriate checks to ensure that private sector activities are not unnecessarily subsidized.
Streamlining fee structures and transaction processing times for all products, but particularly non-loan, non-grant instruments.
Improving tracking and monitoring systems, as well as data transparency and availability to better identify and incorporate best practices in leveraging private capital.
Familiarizing recipient governments with more complex instruments, like guarantees, to enable them to use such instruments when appropriate.

Summary of Developed Country ‘Fast-Start’ Climate Finance Pledges

Maggie Barron — Mon, 26 Nov 2012 15:41:50 -0500

OpenClimateNetwork.org

Visit openclimatenetwork.org for the latest analysis, project info, expert perspectives, and more.

Reiterating a pledge made in Copenhagen in 2009, the Cancun Agreements of December 2010 formally commit developed countries to collectively provide resources “approaching USD 30 billion for the period 2010 - 2012” to support developing countries’ climate efforts. This so-called “fast-start” finance will help developing countries, particularly the poorest and most vulnerable, mitigate (reduce) their greenhouse gas emissions, and adapt and cope with the effects of climate change. These pledges also present an opportunity to build trust between developed and developing countries in the international climate arena, in turn fostering progress towards a comprehensive post-2012 international climate agreement.

WRI has synthesized available information on countries’ pledges and measures they have taken to make the pledged resources available to developing countries. The accompanying table sets out both the amounts and the mechanisms by which funding would be delivered. WRI has also looked at how countries indicate whether their pledges will provide “new and additional” funds compared to what they provide as official development assistance. In-depth analysis on a subset of countries’ fast-start finance contributions is available separately.

This table will be continuously updated as more information becomes available.

Q&A on this Analysis

(Updated on November 26, 2012)

Have developed countries met their fast-start finance pledge?

Based on our research, as of November 26, 2012, 23 developed countries and the European Commission have publicly announced their individual fast-start finance pledges, in addition to the European Union’s collective pledge. These pledges total USD 33.92 billion. While this represents a significant step in the right direction, the extent to which these pledges are consistent with internationally agreed principles for fast-start finance is unclear. The Cancun Agreements mandate that fast-start funds have a “balanced allocation between adaptation and mitigation,” be “new and additional,” be “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States and Africa,” and include “forestry and investments through international institutions.” Because the details of this mandate have not been defined, it is not clear that developed countries’ fast-start finance contributions fulfill these criteria.

Finally, ensuring that pledges are actually delivered will be essential. According to reported information of the pledged funds, USD 28.06 billion has been requested and/or budgeted by the executive bodies of the countries during the fast-start period. In some cases, the legislative bodies have also approved these requests. The actual delivery and implementation of the finance, however, can be complicated to track, and is generally not documented in countries’ fast-start finance reports.

Do the funds have a “balanced allocation between adaptation and mitigation”?

Countries often specify the general objective that their fast-start funds will support. For example, of the USD 1.58 billion mobilized for fast-start by Germany in 2010 and 2011, 48 percent will support mitigation, 28 percent will support adaptation, 21 percent will support REDD+, and 3 percent will support multipurpose activities. In its 2010 fast-start finance report, Germany highlighted the challenges of identifying suitable adaptation projects as the reason for this, and recognized the need to adjust the allocation of funds across the three areas of mitigation, adaptation and REDD+. In the case of both Japan and the United States, a large majority of fast-start finance supports mitigation objectives. The grant-based portion of their contributions, however, gives more balanced consideration to adaptation. Several countries involved in the Interim REDD+ Partnership — a process created parallel to the UNFCCC to ensure effective and sustainable REDD+ (reduced emissions from deforestation and forest degradation) actions over the next few years — have also specified that at least 20 percent of their funds will support REDD+. However, there is no agreed-upon definition among countries of what constitutes a “balanced allocation.”

Are the pledged funds “new and additional”?

“New” funding represents an increase relative to pledges or allocations from previous years. A number of pledges include restated or renamed commitments already made in the past. For example, Japan’s Hatoyama Initiative is a restructuring of the previously announced Japanese Cool Earth Partnership, with some new resources included in the Initiative. Countries such as the United Kingdom and the United States are counting previous commitments to the Climate Investment Funds (CIFs) as part of their fast-start finance pledge. The United States also counts its annual contribution to the Montreal Protocol Fund, a long-standing commitment that dates back more than two decades.

Funds that are “additional” ensure that their delivery does not result in the diversion of funds from other important development objectives. In other words, climate mitigation and adaptation funds should be additional to development aid. Parties to the UNFCCC have not yet achieved consensus on a clear and specific definition of ‘additionality’ that can be applied uniformly to developed country financial pledges. As a result, countries have proposed a variety of methods for defining the additionality of their fast-start finance.

Do the pledges include “investments through international institutions”?

Countries are channeling investments through a mix of multilateral, bilateral, and public-private institutions. Several countries, including Japan and the United States, are channeling a considerable amount of their funds through export credit agencies and other public-private channels. The Climate Investment Funds(CIFs) and the Global Environment Facility (GEF) are the primary multilateral institutions of choice through which other funds will be channeled. The governance of the funds has implications for the effectiveness and perceived legitimacy of the overall climate finance architecture. Developing countries generally prefer that institutions governing finance ensure developing country ownership of funded activities and prioritize funding for climate vulnerable countries. Developed countries tend to emphasize the need to minimize bureaucratic costs and ensure the effective use of resources.

Why is fast-start finance “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States, and Africa”?

Countries under the Convention recognize that developing countries are highly vulnerable to climate change impacts because they have fewer resources to adapt to the effects of climate change, which can include increased droughts and floods, rising sea levels, and greater uncertainty in the agricultural sector. Least developed countries (LDCs) and small island developing States (SIDS) in particular are recognized as needing special consideration due to their extreme vulnerability. For these reasons, developed countries have pledged to prioritize fast start funds for the “most vulnerable countries.” Several countries are channeling their fast start finance through the Least Developed Countries Fund or the Adaptation Fund, many are channeling finance directly to SIDS and LDCs, and Australia in particular states that it will channel about one third of its fast-start finance to SIDS and about one quarter to LDCs.

What types of financial instruments are countries using?

There are several different types of financial instruments countries are using to deliver their fast-start finance, including grants, loans, equity, loan guarantees, insurance, and private investments. Many countries have provided some information on the type of financial instruments used. For example, the US reported providing USD 4.7 billion in grants through Congressional appropriations, USD 2.7 billion in development finance and export credits, which mostly take the form of concessional loans. Norway reports that all of its fast-start finance will be grants. Meanwhile, Japan’s fast-start finance includes grants and loans that meet ODA standards, finance in the form of ‘other official flows’, and may also count leveraged private finance, though this is ambiguous. However, reporting on the type of financial instrument used is neither comprehensive nor consistent. For example, little information is reported on the concessionality of the loans when used.

What are the next steps to ensure clarity on the delivery of climate finance pledges in the future?

The UNFCCC system for developed countries to report on the delivery of climate finance faces several challenges, which limit the utility of available data. For example, countries currently use multiple methods for reporting and often provided insufficient information even where requested. To address this, the Cancun Agreements mandate more frequent reporting by developed countries using an enhanced common reporting format.

While these enhanced reporting provisions will be essential for successful tracking of developed country climate financial flows, they will not be ready in time to provide guidance for reporting on the short-term, fast-start finance. In the meantime, the Cancun Agreements invited developed country Parties to submit information to the UNFCCC secretariat, for compilation, on the resources provided to fulfill their fast-start finance commitment by May 2011, 2012, and 2013. Nine developed countries and the EU submitted their reports on or around the most recent May 2012 deadline. While the Cancun Agreements include reporting provisions for fast-start finance, it does not provide guidance on what these reports should include, resulting in reported information that is neither fully comparable, transparent, nor complete, as is demonstrated by the gaps in information in WRI’s fast-start table, the Open Climate Network’s fast-start finance assessments, and in a report by IIED assessing the transparency of the May 2011 fast-start finance reports. The UNFCCC secretariat hosts a fast-start finance module on its finance portal that enhances the comparability of the reports but it remains limited to information provided by developed country Parties. It also does not capture information available on the faststartfinance.org website or on individual donor or recipient websites, or other sources such as NGOs, the private sector or multilateral development banks.

To build trust with developing country counterparts, developed countries should improve their fast-start finance reporting in the future, for example, by including more comprehensive, comparable and transparent information on the following seven elements in their annual fast-start finance reports: scale, method for determining that the money is “new and additional,” channeling institutions, objective, geographic distribution, status of the pledge, and type of financial instrument.

Athena Ballesteros, Emily Chessin, Kirsten Stasio, and Remi Moncel contributed to earlier versions of this Q&A.

STATEMENT: World Bank "Raises Alarm" of a 4 Degree Hotter World

Michael Oko — Sun, 18 Nov 2012 19:51:06 -0500

The World Bank Group just released a groundbreaking new report on climate change, called Turn Down the Heat, which offers a vivid assessment of what 4 degrees Celsius of global temperature rise would mean for the world.

Following is a statement by Andrew Steer, President, World Resources Institute:

“This report should awaken world leaders out of their slumber on climate change. A 4 degree temperature rise would bring unimaginable costs to people and society. We must take the necessary actions now to stay within 2 degrees or lower of warming.

“The differences between 2 degrees and 4 degrees temperature rise are stark. It took little more than four degrees of cooling to create the Ice Age, so imagine the havoc 4 degrees of warming would create. While the impacts would be uneven around the globe, vulnerable countries and poor people would be hardest hit. Communities already facing economic hardship would face longer droughts and more intense monsoons that disrupt food supply, more diseases associated with warmer temperatures and more pests, and greater water scarcity.

“The World Bank is to be congratulated for raising the alarm on this issue. By doing so they are aligning themselves with the majority of scientific opinion on climate change. It’s worth noting that the World Bank is a financial institution and not prone toward exaggeration. This report, therefore, must not be shrugged off. The World Bank itself can do more to raise ambition through its own financing, including by directing the great bulk of its energy investments toward scaling up renewable energy and energy efficiency. Further, the World Bank can channel more resources toward more projects that will enhance innovation and sustainability, as well as climate resilience.

“As negotiators head to Doha for the climate talks, they must bring a greater sense of urgency and purpose to these negotiations. A 4 degree warmer world can be prevented, but this will require greater leadership and imagination than has been shown to date. All negotiators should re-commit to keep the world within 2 degrees of warming. But we need more than UN negotiators to respond.

“Climate change is one of the great challenges of our generation, and we need to bring the full capacity of governments, businesses, multi-lateral institutions, and civil society to confront these challenges. Around the world, there are numerous examples of how the problem could be solved at low-cost and with high returns. We have no more excuses for inaction.

“The alarm bell on global warming is ringing. Let’s hope world leaders are listening.”

–

Dr. Steer previously worked as the World Bank Group’s Special Envoy for Climate Change.

RELEASE: WRI Welcomes Andrew Steer as New President

Michael Oko — Wed, 22 Aug 2012 10:50:35 -0400

Today, WRI welcomes its new president Dr. Andrew Steer. Steer is a visionary and dynamic leader who brings a wealth of international experience to the Institute. He becomes just the third president in WRI’s 30-year history.

On taking the helm of WRI, Steer said: “Never has it been more important to understand the links between resources – water, soil, atmosphere, climate, biodiversity, energy, minerals – and human activity. And never has it been more imperative that economic decisions fully reflect the true value of these resources. It is only by so doing that we will succeed in eliminating poverty and enhancing lives and livelihoods permanently.”

Most recently, Steer was the Special Envoy for Climate Change at the World Bank, where he helped guide the Bank’s climate change activities in over 130 countries. He also served on UN Secretary-General Ban Ki-moon’s High Level Group on Sustainable Energy for All and on the B20 Board on Green Growth (the private sector wing of the G20).

Former World Bank President Robert Zoellick said, Steer “brings deep technical, policy, and political experience in the field of sustainable development.”

Steer joins WRI at a time of rapid growth for the organization. Over the past several years, WRI has expanded its global reach and is now working in 50 countries, including China, India, and Brazil. Since 2008, WRI’s staff has grown from 160 to 225 people and its operations have expanded from $26 million to $45 million.

James A. Harmon, WRI’s Chairman of the Board, said, “Andrew is a dynamic and gifted leader, with a deep knowledge of sustainability issues and on-the-ground experience in the world’s most rapidly developing economies. As these issues become more urgent, Andrew is ideally suited to lead WRI in achieving its mission.”

Steer is a energetic leader, who brings with experience working in Indonesia, Vietnam and other countries. From 2007 to 2010, he was Director General for Policy and Research at the UK’s Department for International Development (DFID). Steer has a PhD in Economics, and has taught and lectured at several universities.

–

Read Andrew Steer’s welcome message.

Watch a video of Steer talking about sustainability and his vision for WRI.

STATEMENT: Development Banks Announce "Game Changer" for Sustainable Transport at Rio+20

Lauren Zelin — Tue, 19 Jun 2012 23:38:38 -0400

The world’s largest multi-lateral development banks — led by the Asian Development Bank, the World Bank, and others — committed to provide more than $175 billion over 10 years to support sustainable transport in developing countries.

The announcement was made at the UN Sustainable Development Conference in Rio de Janeiro (Rio+20) by the African Development Bank, Asian Development Bank, CAF- Development Bank of Latin America, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, Islamic Development Bank, and the World Bank.

Following is a statement from Holger Dalkmann, director of EMBARQ, the World Resources Institute’s center for sustainable transport:

“This is a game changer for sustainable transport. It will ensure that hundreds of millions of people will have cleaner air, less congested roads, and safer transportation.

“Ten years ago transportation wasn’t even in the discussion; now it’s a major outcome from the world’s preeminent conference on sustainable development.

“Banks are putting their money where it matters — on streets built for people, not just cars. The world’s population is expected to surpass 9 billion by 2050, with more than half living in Asia, mostly in urban areas. At the same time, the rate of vehicle ownership is predicted to skyrocket from around 800 million cars a decade ago to around 2 billion in 2030. These two mega-trends are coming together to create an environment where people must compete for financial, institutional, and physical resources. In response, we need better urban designs; more sustainable transportation modes, like walking, biking and mass transit; and improvements in existing vehicle and fuel technology.

“This investment is not just about improving the way people move from point A to point B; it’s also about providing access and mobility for the poor and improving road safety, not to mention reducing transport-related greenhouse gas emissions. Transport is no small piece of the climate change pie: the sector represents approximately one-quarter of global CO2 emissions.

“Today’s announcement will no doubt encourage other decision-makers, especially national governments, to consider financing transport projects based on social and environmental benefits. It will push sustainability into the core of urban development.

“At the same time, we need to make sure that the money gets invested into the right kind of projects, and that there are sound mechanisms to measure its impact. This will require full transparency and independent monitoring.

“Countries often invest in transportation and infrastructure, but much of that goes into highways. We need to be smarter about where money flows, whether that means creating vibrant public spaces, providing safer infrastructure for pedestrians and cyclists, or building high-tech, low-cost transit systems. Doing this would be a paradigm shift in the way we finance the growth of sustainable cities, similar to what the Asian Development Bank has done with its Sustainable Transport Initiative, a lending and technical assistance program for transport projects in Asia and the Pacific that emphasizes inclusive economic and environmentally sustainable growth.

“EMBARQ, the World Resources Institute’s center for sustainable transport, is a founding member of the Partnership on Sustainable Low Carbon Transport, which helped to catalyze this new financial commitment by the banks.

“Years from now, we may look back at Rio+20 as the moment when transport was pushed to the top of the sustainability agenda.”

-ENDS-

For more information on EMBARQ, visit: www.embarq.org.

Note: To schedule an interview, contact: Michael Oko, moko@wri.org.

RELEASE: WRI Names Andrew Steer as New President

Michael Oko — Tue, 13 Mar 2012 23:36:12 -0400

World Bank Economist and Special Envoy for Climate Change to Lead Global Institute Known for Excellence and Impact

The World Resources Institute today named Dr. Andrew D. Steer as its next president. Steer is a highly-recognized leader in economics and environmental issues, who brings a breadth of international expertise to the Institute. Steer will take the helm of WRI, as it celebrates its 30th anniversary of developing solutions to the world’s most urgent environmental and human development challenges.

“Andrew is a dynamic and gifted leader, with a deep knowledge of sustainability issues and on-the-ground experience in the world’s most rapidly developing economies. As these issues become more urgent, Andrew is ideally suited to lead WRI in achieving its mission,” said James A. Harmon, Chairman of WRI’s Board of Directors. “A passionate and eloquent communicator, Andrew will champion the organization’s evidence-based and results-focused approach to build a healthier and more sustainable planet.”

Dr. Steer is currently serving as the Special Envoy for Climate Change at the World Bank, where he helps guide the Bank Group’s climate change activities in over 130 countries. He co-chairs the Strategic Climate Fund and leads the Bank Group efforts with international negotiators and in promoting pro-development solutions to climate change. Steer also serves on UN Secretary-General Ban Ki-moon’s High Level Group on Sustainable Energy for All and on the B20 Board on Green Growth (the private sector wing of the G20).

“I am deeply honored and delighted to be stepping into this role for such an extraordinary organization, with its history of innovative and transformative solutions to environmental and development challenges,” said Steer. “In the coming decade, we will face unparalleled challenges and opportunities, and WRI, with its global focus and high-quality analysis, is ideally equipped to find solutions. I look forward to leading the organization into the next stage of its remarkable history.”

WRI is a global, independent think tank that goes beyond research to put ideas into action, working with governments, companies, and civil society to build solutions to urgent environmental and human development challenges.

Steer arrives at WRI at a key moment in its evolution. In recent years, the organization has been expanding its global presence. WRI has been deepening its engagement in China and India, and is active in 40 additional countries in Africa, Asia and Latin America. Since 2008, WRI’s staff has grown from 160 to 225 people and its operations have expanded from $26 million to $45 million.

“This appointment is great news for WRI and for all who care about environment and development issues,” said Robert B. Zoellick, President of the World Bank Group. “WRI has a distinguished record at the key intersection between development and the natural environment, and I am confident that under Andrew’s able leadership its future impact will be even stronger. Andrew brings deep technical, policy, and political experience in the field of sustainable development. He played a superb role as Special Envoy and helped make the World Bank part of the solution to climate change.”

Steer has held leadership roles at the World Bank and the UK government, including Director of the Bank’s Environment Department, and Bank Country Director for Indonesia and Vietnam. From 2007 to 2010, he was Director General for Policy and Research at the UK’s Department for International Development (DFID). Steer has a PhD in Economics, and has taught and lectured at several universities.

James Harmon also reflected on the passion and dedication of Manish Bapna, WRI’s managing director, who has served as the organization’s acting president since July 2011.

“As acting president, Manish not only helped to sustain WRI; he made it stronger,” said Harmon. “He helped advance the organization’s program goals and enhanced its financial stability, including expanding our engagement in China, India and Brazil.”

Steer will begin his tenure as WRI’s president in August 2012. Until then, Bapna will continue to serve as the acting president.

Steer takes the helm as WRI’s third president, following two highly-respected environmental leaders: Jonathan Lash (president from 1993-2011), now President of Hampshire College; and James Gustave Speth (1982-1993), currently Professor of Law at Vermont Law School.

# # # #

Read an article in the New York Times on the announcement, here.

ADVISORY: Transforming Transportation Event: Scaling Up Sustainable Transport Solutions Worldwide

Lauren Zelin — Fri, 20 Jan 2012 15:36:04 -0500

The 9th annual Transforming Transportation conference will focus on big ideas to scale up sustainable transport in cities worldwide. Over two days, more than 300 global experts will reflect on past successes and ongoing challenges in sustainable transport and urban development, while exploring ways to scale up through innovation. Special attention will be given to financing from private sources, national government programs and international development agencies.

This year’s conference is organized by EMBARQ – the World Resources Institute Center for Sustainable Transport, the World Bank, Inter-American Development Bank, Asian Development Bank, Institute for Transportation Development and Policy, Clean Air Initiative for Asian Cities, and the Partnership for Sustainable Low Carbon Transport.

View the full agenda online: http://www.transformingtransportation.org

KEY MEDIA OPPORTUNITIES

Thursday, January 26, 9:30–10:30 a.m.
Keynote address by Jaime Lerner, former Mayor of Curitiba and former Governor of Parana State, Brazil, on the “Future of the City: Challenges of Scaling Up Good Practices in Urban Transport.”

Thursday, January 26, 10:30-11:00 a.m.
Media availability immediately following the keynote address with Jaime Lerner; Holger Dalkmann, Director, EMBARQ; and Jose Luis Irigoyen, Sector Director of Transport, Water and ICT, World Bank.

Friday, January 27, 9:00-10:30 a.m.
Keynote address by Chris West, Director, Shell Foundation, on “Innovations in Scaling: What Lessons are Available for the Transport Sector?”

Followed by a panel discussion with Ashwin Mahesh, CEO, Mapunity; Kelly Larson, Program Manager, Bloomberg Philanthropies; and Alex Perera, Co-director, Business Engagement in Climate and Technology, World Resources Institute; moderated by Sommer Mathis, Editor, The Atlantic CITIES.

WHERE
The World Bank
Preston Auditorium
1818 H Street NW
Washington, D.C. 20433

Registration required: https://community.wri.org/NetCommunity/tt2012

# # #

For more information or to set up interviews contact:
Lauren Zelin, WRI, Senior Media Officer, (202) 729-7736, lzelin@wri.org
Erica Schlaikjer, EMBARQ, Media Relations Coordinator, (202) 729-7722, eschlaikjer@wri.org

Technology Transfer

Kevin Lustig — Mon, 13 Jun 2011 16:02:40 -0400

Technology transfer refers to the manner in which technologies that reduce greenhouse gas emissions and aid climate adaptation efforts are developed and shared across borders. Developing countries will need more than financial investment to address climate change; they will need new technology for reducing emissions, such as wind and solar power, and adaptation. Technology transfer also requires collaboration and the sharing of knowledge and skills to ensure that emerging economies have the capacity to follow best practices and use the technology to greatest effect.

Technology transfer is key to reaching a global agreement on efforts to fight climate change because it will facilitate emissions reductions and adapting to a changing climate. WRI works with decision makers in both developed and developing countries to ensure that the benefits of innovative clean technology are available around the globe.

PRESS RELEASE: New Paper Lays Out Smart Policies for Renewable Energy Growth

Lauren Zelin — Tue, 24 May 2011 14:15:18 -0400

Offers six principles of smart energy policy for developing countries

A recent report from the Intergovernmental Panel on Climate Change (IPCC) said that 77 percent of the world’s energy could come from renewable sources by 2050, as long as governments adopt the right policies. A new working paper, Grounding Green Power, outlines the key components of smart renewable energy policy in developing countries, focusing on the electrical power sector. The paper, from the World Resources Institute (WRI) and the German Marshall Fund of the United States (GMF), in cooperation with the Heinrich Böll Foundation, suggests priorities for international donors looking to make the most efficient investments in clean energy.

“Helping to build a wind farm is a good thing, but when donors support policies that bring down the cost of renewables, they lay the groundwork for many more wind farms and exponentially more renewable energy projects,” said Lutz Weischer, lead author of the paper and Research Analyst at WRI. “Smart renewable energy policies can drive private investment and create the right environment necessary for long-term growth.”

Grounding Green Power identifies the key components of smart energy policies and draws conclusions from on-the-ground experiences in 12 developing countries. The recommendations were based on a workshop with representatives from Brazil, India, Indonesia, Kenya, Mexico, Morocco, Mozambique, South Africa, Sri Lanka, the Philippines, Tanzania and Thailand.

Thomas Kleine-Brockhoff, GMF Senior Director for Policy Programs said, “No two countries are the same, but by convening actors from so many developing countries we have been able to discern best practices that apply across countries. This paper should help the international community as it seeks simultaneously to achieve the goals of development cooperation and reduce the risk of climate change.”

The working paper outlines six principles of smart renewable energy policy that are necessary to achieve transformative deployment at scale, based on the 12 international case studies. According to the authors, a smart renewable energy policy should be:

Comprehensive – strives to create an enabling environment including power sector regulations, investment and financing conditions, suitable electric grid infrastructure, and technical capacity.
Based on clearly defined objectives – includes technology deployment, energy access and economic development goals, in addition to added power generation.
Welcoming to private investment – leverages private investment by promoting attractive and predictable market conditions.
Cost-effective – calls for careful policy decisions that avoid over subsidization of renewables, while removing incentives for fossil fuels.
Supportive of innovation – improves performance, reliability, safety and cost of renewable technologies, to take innovation beyond the lab.
Transparent, accountable and participatory – takes into account the principles of good electricity sector governance, including transparency, accountability, and stakeholder participation.

The paper is intended for audiences including bilateral and multilateral development agencies (the World Bank, bilateral financial institutions, and export-credit agencies); existing multilateral climate funds (Global Environmental Facility and Clean Technology Fund); as well as the new Green Climate Fund; and other international organizations like the International Renewable Energy Agency.

The full working paper is available here.

“Grounding Green Power; Bottom-up perspectives on smart renewable energy policy” was co-authored by Lutz Weischer, Davida Wood, Athena Ballesteros, Xing Fu-Bertaux, of the World Resources Institute and published by the German Marshall Fund of the United States in cooperation with the Heinrich Boell Foundation and WRI.

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The World Resources Institute (WRI) is a global environmental think tank that goes beyond research to put ideas into action. We work with governments, companies, and civil society to build solutions to urgent environmental challenges. (www.wri.org)

The German Marshall Fund of the United States (GMF) is a non-partisan American public policy and grantmaking institution dedicated to promoting better understanding and cooperation between North America and Europe on transatlantic and global issues. GMF does this by supporting individuals and institutions working in the transatlantic sphere, by convening leaders and members of the policy and business communities, by contributing research and analysis on transatlantic topics, and by providing exchange opportunities to foster renewed commitment to the transatlantic relationship. In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 through a gift from Germany as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has six offices in Europe: Berlin, Paris, Brussels, Belgrade, Ankara, and Bucharest. GMF also has smaller representations in Bratislava, Turin, and Stockholm. (www.gmfus.org/)

The Heinrich Böll Foundation is affiliated with the German Green Party. As part of the Green political movement it has developed worldwide as a response to the traditional politics of socialism, liberalism, and conservatism. The main tenets are ecology and sustainability, democracy and human rights, self-determination and justice. HBF places particular emphasis on gender democracy, meaning social emancipation and equal rights for women and men. As a green think tank and an international policy network, the Heinrich Böll Foundation is active in ecology, democracy and human rights worldwide with 30 offices across the globe. (www.boell.de/service/home.html)

The World Bank Group, Palm Oil, and Poverty

Beth Gingold — Tue, 22 Mar 2011 12:11:01 -0400

The World Bank Group should aim to achieve and measure poverty reduction, not palm oil investments.

In March 2011, the World Bank Group (WBG)’s President Robert Zoellick is expected to decide whether to lift a global moratorium on WBG palm oil investment. The moratorium was instituted as a result of the findings of a 2009 internal audit (PDF, 4.5 Mb). The audit was triggered by civil society concerns regarding an International Finance Corporation (IFC) investment in a major palm oil company in Indonesia.

His decision will be based on a review of a revised version of this draft of “The World Bank Group Framework and IFC Strategy for Engagement in the Palm Oil Sector.” The strategy document is IFC’s response to this letter and is the result of an extensive public consultation process.

Palm Oil and Public Consultations

The World Resources Institute (WRI) was an active participant and “lead discussant” in the public consultation process. WRI’s input was informed by our experience from Project POTICO. This project aims to promote sustainable palm oil production on degraded land in Indonesia in accordance with the principle of free prior and informed consent and the principles and criteria of the Roundtable on Sustainable Palm Oil (RSPO). WRI is currently receiving funding from the IFC’s Biodiversity and Agricultural Commodities Program (BACP) to support related work. The IFC is not responsible for the implementation or administration of the project.

The WBG’s engagement in the palm oil sector has potential to contribute to poverty reduction and social and environmental sustainability if country- and project-specific IFC and World Bank strategies are designed and effectively implemented to achieve this mission.

If the WBG removes the moratorium on palm oil investment, it is critical that issues such as the treatment of free prior and informed consent are addressed on an institutional level, and that country- and project-specific strategies be guided by clear measurable objectives, informed by relevant research, implemented with appropriate staff incentives, and measured according to its long term success in achieving poverty reduction.

Agreement on Palm Oil Potential

Despite the focus of the media on the palm oil “controversy” and “debate”, which often pits proponents of “development” against those concerned with deforestation and human rights, many voices in the private, public, and civil sectors have recognized the potential of the palm oil sector to contribute to poverty reduction. Many groups have expressed agreement with key points detailed in the WBG strategy document such as:

Palm oil is the world’s most traded and most affordable cooking oil as well as a versatile product with many uses.
Oil palm, the crop that is used to produce palm oil, has a higher yield of vegetable oil per hectare than any other major oil crop.
Palm oil production has contributed to economic benefits such as government revenues, profits for companies, employment, and raised incomes for smallholders. In Indonesia—the world’s largest producer—the industry generated US$12.4 billion in foreign exchange from palm oil exports in 2009, and supports millions of jobs and opportunities for rural farmers.
Many of the negative consequences that have been associated with the sector can be avoided when rights of local people are recognized, land use planning considers long term social and environmental impacts, and companies follow improved practices such as those required for certification by the Roundtable on Sustainable Palm Oil.

In the recent public consultations, many stakeholders agreed that some form of IFC and World Bank engagement could contribute to poverty reduction. Many participants expressed continuing willingness to engage with the IFC and World Bank, noted ongoing improvements in the process, and welcomed revisions to the second draft such as increased focus on poverty and smallholders and emphasis on coordination between the World Bank and IFC.

Potential Challenges for Poverty Reduction

Whether this poverty reduction potential can be achieved will depend on how decisions are made regarding when and how to engage or invest in particular countries, programs, or projects. Investing in the palm oil sector should be viewed as one possible means to achieve poverty reduction, not a goal in itself.

As noted by many stakeholders, and acknowledged in the WBG document, different countries and policy contexts will require different responses by both the IFC and World Bank. For example, countries in Africa and Latin America—such as Ghana or Colombia—have relatively small industries with growth potential with their own opportunities and challenges, some similar and some quite different from those in Indonesia.

As acknowledged by the strategy, the “impacts of oil palm depend on where and how it is developed.” Information from the public consultation and research conducted by the World Bank demonstrate that under some conditions IFC investment in the palm oil sector is unlikely to reduce, and may increase, poverty. For example:

Investment in some business models may not result in poverty reduction. According to a World Bank analysis of district level data in Indonesia, only smallholder production—not production by private estates—is positively correlated with poverty reduction.
Investment in some business models may increase poverty. Large-scale land acquisition for agriculture has resulted in loss of livelihoods and increased poverty (PDF, 3.5 Mb) where the regulatory and policy environment did not recognize existing rights to land and natural resources or support sustainable practices.
In some countries the prospect of IFC financing may provide little leverage for improving company practices. For example, in Indonesia the palm oil sector is already “largely self-financing” according to the government (PDF).

Many of these challenges are not unique to the palm oil sector but rather depend on the IFC and World Bank’s institutional approaches to strategy and project implementation. Many problems can be avoided by following IFC’s existing performance standards with appropriate safeguards, and by effective coordination with the World Bank and host country governments. However, some of these issues have not yet been addressed on an institutional level (for example through the Performance Standards Review process)—such as the treatment of free prior and informed consent.

Both the institutional organization of the IFC and its standard monitoring and evaluation (M&E) tools encourage the separate treatment of “economic benefits” on one hand and “social and environmental costs” on the other. This institutional approach does not explicitly acknowledge that economic, environmental and social sustainability are key parts of poverty reduction, or sufficiently address equity concerns related to the distribution of costs and benefits among different groups. In addition, past experience (PDF, 4.5 Mb) has shown problems in implementation resulting from inappropriate staff incentives and insufficient training.

Recommendations for the World Bank Group

If the WBG removes the moratorium on palm oil investment, it is critical that country- and project-specific strategies include the following:

Application of relevant research and decision-making tools. Relevant research would need to address the following questions on an appropriate country and project level: Which models result in poverty reduction? What investment needs are not met by the private sector and could be addressed by IFC investment? What necessary policies are or are not in place and how are they implemented? A new “risk analysis tool” proposed in Annex XII of the WBG document may help address these questions.
Clear measurable objectives aligned with the WBG’s mission. Objectives should aim to achieve poverty reduction, not investment in a particular sector.
Clear roles and responsibilities for the World Bank and IFC. To ensure cooperation, mechanisms for coordination and communication should be established at the outset.
Suitable measures of success. M&E tools should measure indicators related to poverty and social and environmental sustainability. Current standard tools focus on measuring financial returns and positive development impacts, while negative development impacts—such as loss of livelihoods of local people and local environmental degradation—are treated separately as “social and environmental risks” to be mitigated. Local communities are not included as stakeholders under the IFC’s standard economic performance indicators.
Appropriate staff incentives and support. Staff incentives should be aligned with poverty reduction and social and environmental sustainability goals, and not based on financial returns. Staff members also need appropriate training and support, including incentives to cooperate and coordinate across teams and institutions.
Room for improvement. Any effective strategy should explicitly include processes that allow flexibility to continually improve and receive and incorporate feedback. The recent public consultation process, which demonstrated increasing transparency and continued openness to civil society inputs, can provide a positive basis for further improvements.

World Bank Energy Strategy Must Address Energy Poverty and Climate Change

Athena Ballesteros — Thu, 10 Mar 2011 13:37:58 -0500

In consultations, a range of countries and interest groups have called for an energy strategy that supports sustainable development.

The World Bank is in the final stages of drafting a new energy strategy due late April 2011. The strategy has drawn so much attention because of its potential to address two major challenges confronting developing countries – energy poverty and climate change. While the strategy could be an opportunity for the institution to tackle both challenges simultaneously, some stakeholders are concerned that it may sway too much in one direction, addressing one challenge while undermining the other.

To balance these differing opinions, the World Bank embarked on an eight month consultative process with input from client and donor countries, civil society, the private sector, and others (see Box 1). We studied the reports of the consultations carefully to distill important messages emerging from the process. There appears to be some areas of resounding agreement, while in other areas, differing perspectives emerged. The overarching message delivered to the World Bank is a demand for investments in the energy sector that produce sustainable development outcomes.

Box 1: Consultations on World Bank Energy Strategy

From January to August 2010, The World Bank embarked on a consultative process with donors, clients and other stakeholders. The process included:

31 Countries
56 in person meetings
170 written submissions
2100 participants from government, regulatory bodies, academia, civil society, the private sector and other groups for more information visit www.worldbank.org/energyconsultations

Areas of Agreement

Many stakeholders have prompted the World Bank to shift its focus to small-scale, distributed, renewable energy-based generation technologies such as solar home lighting systems or village micro-grids powered by run-of-river mini hydropower systems. Such technologies can directly address the largely unmet energy needs of the 1.5 billion poor without access to electricity, particularly in rural areas. This message was consistently delivered in various parts of the world. For example:

At the meeting in Nairobi, the private sector called for a focus on renewable technologies due to the abundance of resources on the continent, while government participants pointed to its cost-effectiveness in the long-run. Participants from academia and think tanks highlighted the efficacy of decentralized renewable energy systems in meeting the economic and social needs of the poor.
Similarly, in Laos, non-governmental organizations pointed to the impacts of the export-oriented hydropower project (Nam Theun 2) on the resource-dependent poor. Participants from the private sector and the public utilities recommended that future energy investments focus on tapping local renewable resources, including solar and hydropower, to meet the income-generating needs of the poor within the country.
In the Netherlands, the government expressed a preference for the World Bank to avoid commercially viable centralized generation projects, while Dutch private sector and NGO participants pointed out that decentralized generation would have the greatest poverty reduction impacts.

Such consensus also emerged from diverse interest groups and countries on the value of the World Bank investing in energy efficiency, supporting integrated resource planning in the energy sector and across sectors, and modernizing household fuels for cooking and heating.

Areas of Disagreement

The areas where stakeholders diverged have been familiar issues of contention on the World Bank Board. In some cases, differences of opinion between interest groups within the same country came to light. One of the most hotly contested issues was the World Bank’s role in fossil fuel lending. For example:

In Bangladesh, participants from the private sector, public utilities, and some members of parliament argued strongly against any prohibitions on the continued development of their abundant domestic coal resources, as they see it as a constraint on the country’s development goals. In contrast, the Bangladeshi government expressed a preference for developing low carbon energy sources and using coal-based resources only in exceptional cases.
In consultations with African energy ministers, South Africa argued against the World Bank discontinuing lending for fossil fuel-based projects claiming that they have no viable alternatives for baseload power vital to their pursuit of economic growth and industrialization. Instead, they prefer to see the World Bank invest in cleaner coal technologies, while simultaneously investing in renewables.
Among stakeholders in Europe, there remained concerns that continuing World Bank investments in carbon intensive fuel technologies would counteract its efforts to mitigate climate change, leading to demands for a definitive phase out of fossil fuel lending.

Similarly, there were other issues that elicited a spectrum of responses including energy subsidy reform, financing additional costs of lower carbon projects, and large scale hydropower dams.

Our Recommendations for the World Bank

The World Bank’s leadership may find it challenging to balance all the diverse interests in one strategy document. However, what they can do is put in place a set of procedures that will allow them to objectively evaluate trade-offs and make investment decisions that support the sustainable development priorities of their clients. Such procedures, as we have argued earlier, should include:

Undertaking options assessments to investigate and transparently disclose the full range of energy options available to meet a client country’s demand before moving forward with any investment. Such assessments should be based on integrated planning processes at appropriate levels (regional, national or sub-national) that take into account resource availability and use in the energy and other sectors.
Valuing the net costs of shifting to low-carbon alternatives through the use of GHG Accounting tools to calculate the volume of emissions from projects as well as the use of pricing methods, such as market prices or shadow prices, to calculate the value of reducing or avoiding emissions in alternative options. This will help the World Bank assess the additional resources required from climate change funds to buy down the higher costs of lower carbon options. On a broader level, GHG accounting will also help the institution manage and reduce the emissions of its overall investment portfolio.
Engaging stakeholders in inclusive and transparent processes when making investment decisions to ensure equitable, pragmatic and sustainable outcomes.
Adopting robust environmental and social standards for energy investments, particularly large hydropower given its serious ecological and social footprint. Although designed for the private sector, many of the environmental, social, and human rights standards articulated in the draft IFC performance standards would provide a strong basis for safeguards at the World Bank. The energy strategy would also need to articulate standards for providing accessible means for dispute resolution for affected stakeholders.

We believe that the writing on the wall is clear – stakeholders across countries and interest groups would like the World Bank to devise an energy strategy that supports sustainable development in developing countries. It is imperative that World Bank leadership not dismiss the often polarizing debates as unnecessary noise, but instead hear the clarion call for meaningful reform in defining the institution’s role in promoting a sustainable energy future.

Tom Nagle is a research intern for the International Financial Flows and the Environment project at WRI. He is also pursuing a Masters degree in International Relations and Environmental Policy at Boston University focused on the nexus of energy and economic development.

The Road to the Green Climate Fund

Athena Ballesteros — Mon, 14 Feb 2011 16:59:22 -0500

This post originally appeared on the World Bank blog Development in a Changing Climate

The UN Climate Talks in December 2010 concluded with a set of decisions known as the Cancun Agreements, which included the establishment of the Green Climate Fund (GCF). Having been involved in many of the negotiating sessions, I know that this fund is seen by many, particularly developing countries, as an opportunity to create a ‘legitimate’ institution for delivering scaled-up finance to address climate change.

However, there remains significant skepticism on whether or not this Fund could deliver adequate and predictable resources in a timely manner. Much work has yet to be done before the Green Climate Fund could become a reality.

Getting organized

In Cancun, the COP decided to set up a Transitional Committee (TransComm) and entrusted it with the task of developing the operational documents for the GCF and making recommendations to the COP in Durban. The Transitional Committee will include representatives from 25 developing countries and 15 developed countries. Some countries have announced their nominations, while others are still in the process of finalizing.

The delay comes as no surprise of course. Nominations within regional groups remain a highly contentious and political issue. With limited seats countries are grappling to ensure they have a voice in the body that will design the Fund. I’ve heard the mix of skills and expertise on finance, climate and, development represented in the individuals nominated and they vary from country to country.

The initial meeting of the committee will be jointly convened by the Government of Mexico and the Executive Secretary of the UN Framework Convention on Climate Change in March 2011. That first meeting will have to decide the rules of the road for the Transitional Committee, everything from its terms of reference to the participation of observers to the design of a new registry that will record actions taken by developing countries, and the financial support provided by developed countries.

Already civil society organizations are asking for mechanisms to ensure participation. This is important to ensure transparency in Transcomm’s processes. The private sector and representatives of international organizations, MDBs and UN agencies all want to be involved. The question is how Mexico and the UNFCCC secretariat will manage the process of selecting observers since the TransComm is yet to develop guidelines and operational procedures at its initial meeting.

Expectations for Durban

In developing its recommendations for COP-17 in Durban, the TransComm will develop the operational documents of the GCF that address a range of different issues (see box). By Durban, it is unlikely that the TransComm will be able to address all these issues in full detail. Neither should it attempt to do so. One of my main concerns is determining who eventually gets to elect the GCF Board.

Transitional Committee Terms of Reference

Legal and institutional arrangements
Fund Board Rules of Procedure
Financial instruments, funding windows and access modalities
Complementarity with other funds and institutions
Role of secretariat
Independent performance evaluation
Standards, safeguards and accountability
Expert and technical advice mechanisms
Stakeholder input and participation

The TransComm can make sufficient progress by Durban if it focuses its work on:

developing a shared vision of the GCF’s objectives, scale and scope,
putting in place the institutions that will manage the GCF, such as the GCF Board and the secretariat, and
defining the relationship between the GCF and the COP.

For other questions, such as how countries can directly access funds, the financial instruments and models to be used, and mechanisms to ensure environmental and social standards – all important issues - the TransComm may only manage to agree on principles and develop guidelines for the Board to further develop the detailed rules after Durban.

If the GCF is to have adequate and predictable resources to carry out its mandate, then countries will need to commit to long-term and scaled-up finance to the Fund. Unfortunately, we’ve lost all other text pertaining to sources. In the Cancun Agreements, Parties noted the report of the High Level Advisory Group on Climate Change Financing, established by the UN to explore options for innovative sources for long-term finance.

I believe it is important to set realistic expectations and anticipate that designing and making the GCF operational will take some time. Funds won’t start flowing immediately. The international community therefore needs to find a way to finance the gap as many of the vulnerable developing countries and those least able to cope are already suffering from the devastating impacts of climate change.

Power, Responsibility, and Accountability: Re-Thinking the Legitimacy of Institutions for Climate Finance

Maggie Barron — Tue, 14 Dec 2010 12:27:05 -0500

Executive Summary

The 2009 Copenhagen Climate Summit left unresolved major questions about how to fund lowcarbon development in developing countries. In a high-level political declaration—the “Copenhagen Accord”—developed countries agreed to “provide new and additional resources … approaching USD 30 billion for the period 2010–2012” and to a goal of jointly mobilizing USD 100 billion a year by 2020 from both public and private sources, to address the needs of developing countries. As the negotiations on a global climate deal continue, disagreement remains on how much of these funds will come from public or private sources and whether these billions should be delivered through new or existing institutions. There is also heated debate over whether a single centralized institution or a decentralized approach that coordinates international, regional, and national institutions would be more effective.

Although there are many variations in government positions, broadly speaking, developed countries favor a substantial role for existing institutions, such as the multilateral development banks (MDBs) that they have funded and led for the past 60 years. Developing countries prefer new institutions, arguing that existing ones favor the interests of contributor countries and have failed to deliver on promises to support poverty alleviation and sustainable development. The ongoing negotiations on a global climate deal reflect this “northsouth” gulf. Despite these differences, one thing is clear: if the institutional arrangements entrusted with managing new flows of climate finance are to succeed in raising the required resources and in investing these resources effectively, they will need to be perceived as legitimate by both contributors and recipients.

Institutional Arrangements for Climate Finance: Power, Responsibility, and Accountability

Box A. Dimensions of Power, Responsibility, and Accountability in the Design of a Climate Finance Mechanism

Power: The capacity—both formal and informal—to determine outcomes

How will the financial mechanism’s governance structure distribute voice and vote between and among contributors and recipients?
What role will the United Nations Framework Convention on Climate Change’s (UNFCCC) institutions, including the Conference of the Parties, play in guiding the financial mechanism?
To what extent will contributors be able to determine funding priorities by placing conditions on the resource mobilization and allocation process?
How influential will the secretariat and management staff of the financial mechanism be in determining project design and selection?
Will advisory groups, civil society observers, and local communities play a role in determining how the financial mechanism operates?

Responsibility: The exercise of power for its intended purpose

Are the financial mechanism’s standards, program priorities, and eligibility criteria strong enough to ensure its resources are invested fairly and effectively?
How do cost-sharing formulas (e.g., incremental, marginal, transformative costs) allocate responsibilities between contributor and recipient countries, and between the financial mechanisms and recipient countries?
To what extent are national institutions and local civil society entrusted with ensuring the effective design and implementation of investments?

Accountability: The standards and systems that ensure power is exercised responsibly

How does the financial mechanism measure, evaluate, and incentivize results?
Are effective environmental and social safeguards in place to ensure the investments do no harm?
How are fiduciary duties and financial management standards supported and enforced?
Are grievance and inspection mechanisms in place to ensure that standards are followed?

The full report seeks to ground the debate on the future of climate finance in an objective analysis of existing efforts to finance climate mitigation and adaptation in developing countries. The authors step back from the question of which institutions should be entrusted with new flows of climate finance to examine instead how governments can design a climate financial mechanism in a way that is widely perceived as legitimate. We identify three crucial dimensions of legitimacy: power, responsibility, and accountability (see Box A). While these three dimensions interrelate and overlap, we have found them to provide a useful analytical framework to analyze and guide choices in institutional design.

We review the governance structures, operational procedures, and records to date of 10 international and national financial mechanisms, with reference to these core dimensions of legitimacy, to draw lessons for future institutional arrangements (see Box B). We place special emphasis on the experiences with the Global Environment Facility (GEF), which, in operation since 1994, is the longest serving operating entity of the United Nations Framework Covention on Climate Change (UNFCCC) financial mechanism. In addition to the GEF, we review experiences from the Multilateral Fund for the Implementation of the Montreal Protocol, in operation since 1990, which is often referred to as a model for future funds. The remaining funds reviewed are much newer and yield more insights with regard to design, rather than operation.

We recognize that perceptions of the legitimacy of a financial mechanism are inherently subjective and that this subjectivity is revealed in the very different preferences expressed by contributor and recipient countries. We believe, however, that if governments were to discuss the dimensions of legitimacy more explicitly, the stakes and the trade-offs would become more apparent, and a more shared understanding on how to design a legitimate financial mechanism would emerge. We believe that the failure, thus far, to address the distribution of power, responsibility, and accountability more explicitly has led to a proliferation of financial mechanisms that are underfunded, which in turn leads to calls to create new mechanisms.

We recognize that perceptions of a financial mechanism’s legitimacy will also depend upon an institution’s performance—its demonstrated capacity to commit funding to investments that reduce greenhouse gas emissions and build resilience to climate change. Most of the climate financial mechanisms studied have not been operating at a scale or for a time period that would allow a full assessment of their performance. We nonetheless seek to make recommendations that could improve the design and the performance of new and existing climate financial mechanisms.

We conclude that a new global deal on climate finance is likely to significantly redistribute power, responsibility, and accountability between traditional contributor and recipient countries. Most significantly, the power of emerging economies to control climate finance mechanisms will grow, as will their responsibility and accountability for the performance of these institutions. In light of the dramatic changes in global politics and the global economy in past decades, this redistribution seems both long overdue and necessary to provide the basis for a successful global partnership on climate finance.

Conclusions and Recommendations

This is a dynamic time for climate finance, as the international community struggles to craft mechanisms that are perceived to be legitimate by all UNFCCC Parties and that are capable of funding climate-related activities efficiently and at scale. Our analysis of established and new climate financial mechanisms and the current UNFCCC negotiations leads us to conclude the following:

Change is coming. A new global deal on climate finance will likely reinterpret the principles that in the past have guided the design of climate finance mechanisms in a way that significantly redistributes power, responsibility, and accountability between traditional contributor and recipient countries.
A new balance of power, responsibility, and accountability could enhance recipient country ownership. Greater representation of developing countries on the governing bodies of international financial institutions more generally, and climate finance mechanisms more specifically, should help ensure greater emphasis on the national and local “ownership”—and thus the effectiveness—of climate finance investments.
A new understanding of how to balance national interests with global responsibility and accountability is required. This will require assurance that nationally driven investments contribute to global benefits in the form of net emission reductions and that investments protect the most vulnerable countries and communities.
New financial mechanisms—at both the global and the national level—are necessary. If the international community raises the scale of public finance necessary to move developing countries onto a low-carbon, climate-resilient pathway, the capacity and the creativity to spend these resources well will necessitate the creation of one or more new financial mechanisms at the global level and multiple nationallevel institutions.
Existing institutions must also be reformed. The scale of the climate change challenge and of the scale of the funding necessary to respond to that challenge will also necessitate the reform of existing financial institutions, many of which have been supporting fossil fuel–led growth and have yet to mainstream concerns about the impacts of climate change into their strategies.
Current negotiating positions reflect deep historical and ideological divisions—particularly between developed and developing countries—that will need to be overcome by building trust and experimenting with new kinds of relationships. Developed countries have been keen to build on existing financial institutions they have shaped and traditionally controlled. Developing countries are wary of these same institutions, which they see as historically having advanced contributor interests and theories of development, through both the formal and informal exercise of donor power.
At the international level, the choice between reforming traditional development agencies, such as the GEF, U.N. Development Programme (UNDP), the U.N. Environment Programme (UNEP), and MDBs, and creating new financial mechanisms will raise issues of institutional economy and effectiveness. In order to generate a greater sense of trust and ownership, backers of existing agencies may have to accept a degree of duplication of existing capacity through the creation of new mechanisms—particularly where significant gaps in capacity are identified—and to accept strengthened lines of accountability of climate finance mechanisms to the UNFCCC Conference of the Parties (COP). On the other hand, those calling for the creation of new institutions may need to concede that it may waste precious resources to replicate the staff and services provided by existing agencies.
Balancing the roles of international and national institutions will also involve trade-offs. Traditional development agencies have gained the trust of contributors by putting in place systems to both measure and manage impacts of their investments. Developing country recipients, however, have been frustrated by the bureaucracy and the focus on generic rather than country-specific concerns that these systems can generate. Many developing countries will likely struggle to convince contributors that their national institutions have the capacity to manage large-scale development finance without the support of development agencies. Notably, a number of developing countries are taking steps to build and strengthen this capacity and will need support to do so.
Delivering climate finance at scale, at least in the short term, will likely involve multiple mechanisms, both new and reformed. This is true because of the complex politics of the international negotiations and the differing views of legitimacy held by contributors and donors. The urgency and complexity of delivering funds at scale argues for moving forward, at least in the near term, with the institutions that we have, and investing in the strength and quality of COP guidance and national planning processes to ensure coordination and coherence. This experience should then guide the design and operation of the new institutions that will become necessary as the scale of resources grows.
Low-carbon, climate-resilient development is an unexplored frontier for all countries and has potential risks as well as benefits. While high standards will have to be developed and maintained to ensure emissions fall and the vulnerable are protected, climate finance will necessarily entail experiments with new policies and technologies that will need to be watched closely for unintended environmental and social impacts.
Policymakers must agree on ways to diversify the sources of climate finance and to de-link them from the levers of informal power. If existing institutions are to meet evolving standards of legitimacy, then their fundamental governance structures, as well as their operational procedures, will need to be reformed to give greater voice to developing country recipients. If formal grants of power are to lead to the effective exercise of that power, the international community must also make greater efforts to identify sources of revenue, such as new levies or longterm commitments, that are independent from the discretion of contributor governments.
It is necessary to build the capacity of non-state actors and civil society to monitor climate finance governance. Civil society groups at all levels can and are playing an important role in monitoring and influencing decision-making within climate finance funds. But they need to occupy such spaces more effectively than they have to date by monitoring and engaging in more inclusive decision-making processes with technical rigor and authority. However, “representation” of nonstate actors can be a very difficult issue—civil society is diverse with widely differing views.
Near- and medium-term climate finance should focus on strengthening national institutions. A next generation of climate investments should promote the responsibility of recipient countries by strengthening the national institutions that will implement mitigation and adaptation activities and by ensuring their transparency and accountability to citizens within countries, as well as to the international community. While it is important that development agencies provide technical support to national institutions, they should work in closer partnership with national stakeholders. It will be particularly important to engage with stakeholders outside of government, including the private sector, independent research institutions, and civil society. Such collaborations can help ensure climate finance proposals more appropriately reflect national circumstances and priorities.
It is important to draw from the lessons learned from decades of development finance to build national institutions that reflect universally accepted principles of good governance. Traditional finance and development institutions have decades of experience—both good and bad—in translating internationally agreed upon agendas into national and local investments. National institutions should draw from these experiences and be designed and supported to operate in accordance with universal principles of good governance. Strong provisions for accountability should be put in place, including sound fiduciary management, anticorruption measures, and grievance mechanisms and inspection procedures that ensure compliance with environmental and social standards and safeguards.