To understand how the Climate Change Action Plan will drive climate action in countries, we sat down with Bernice van Bronkhorst, the Bank’s Global Director for Climate Change; Genevieve Connors, Practice Manager, Climate Change Advisory and Operations; Vivek Pathak, Director and Global Head of Climate Business at IFC; and Merli Baroudi, Director of Economics and Sustainability at MIGA.
The World Bank Group has a new Climate Change Action Plan (CCAP) to guide its interventions over the next five years. The plan, published today following a discussion with the World Bank Group Board of Directors on June 17, broadly lays out how we will support climate action – both mitigation and adaptation efforts – for our clients – government and private sector – over the coming 5 years.
The CCAP comes at a momentous time. The climate crisis is getting worse and its relationship with poverty and inequality is now clearly visible. Meanwhile, countries are grappling with the COVID-19 pandemic and many face an uneven recovery. This year also offers a major moment for climate diplomacy, with countries being urged to submit more ambitious national climate targets ahead of COP26 in Glasgow. Cities and subnational actors, as well as businesses and investors are also showing clear determination and progress, in reducing their carbon footprint.
For countries at all stages of development, it’s going to be important to reduce the trajectory of global greenhouse gas emissions and boost resilience to mounting climate impacts. A core part of the CCAP will focus on key systems that together generate over 90% of global greenhouse gas emissions – energy; agriculture, food, water and land; cities; transport; and manufacturing – all of which also face significant adaptation challenges.
The Plan also aims to have significantly greater systemic impact. To better understand how the CCAP will support countries, companies and communities to act on climate change, we sat down with Bernice van Bronkhorst, the Bank’s Global Director for Climate Change; Genevieve Connors, Practice Manager, Climate Change Advisory and Operations; Vivek Pathak, Director and Global Head of Climate Business at IFC; and Merli Baroudi, Director of Economics and Sustainability at MIGA.
What is the main objective of the Climate Change Action Plan?
We see climate action as fundamental to alleviating poverty and boosting shared prosperity – a mission that’s at the core of the World Bank Group’s development mandate. Simply put: good development outcomes are at risk from the climate crisis; and conversely, acting on climate can unlock significant economic opportunities for all countries. At its heart, therefore, this CCAP is our concerted effort to support countries and private sector clients to address climate and development challenges together. We think it represents a real paradigm shift for the WBG to advance development in a green, resilient and inclusive way. And it is very much a living document that is designed to be agile and evolve with time and needs.
“We think it represents a real paradigm shift for the WBG to advance development in a green, resilient and inclusive way.”
How will the CCAP help countries be ambitious?
Obviously, every country has its own specificities, but there are some broad trends that will underpin our support: in low-income countries, where emissions are the lowest but climate impacts often the greatest, we expect our support will focus on climate-smart development, so locking in high-carbon development pathways is avoided, as well as on adaptation and resilience. The latter will be a big priority in small island developing states. In middle-income countries, many of which are already high emitters, we anticipate focusing a lot more on accelerating low-carbon development and on supporting a “just transition” to a low-carbon future.
There are two specific fronts that will inform how we support countries through the CCAP.
First, starting from the clearest articulation to date that countries have made for how they see climate action – namely, their Nationally Determined Contributions to the Paris Agreement (NDCs) and their Long-Term Strategies (LTSs), where the latter exist. And yes, it is clear that these current pledges fall short of meeting the “well below 2°C” temperature goals of the Paris Agreement, but we do see these national climate targets as a vital starting point for our support to countries: the floor, but not the ceiling – on which to build more ambition on climate. NDCs are expected to ratchet up over time, so we will intensify our support both on implementation and on developing new, updated ones by 2025; and working with countries on their LTSs.
That means providing funding and technical support so that these national targets are ambitious, comprehensive, and consistent with each other. And it means scaling up public and private finance by translating these national pledges into investment plans that are implemented.
Second, building on this first step, we will be using these NDCs and LTSs to inform our own new diagnostic tool, namely the Country Climate and Development Reports (CCDRs). We think these CCDRs will be a really powerful asset to further mainstream climate in our own operations, lending, and engagement with clients. In effect, the CCDR will offer, for each country, a blueprint for climate priorities. Tailored to specific development priorities and drawing on IPCC scenarios for future emissions, CCDRs will offer insights on the most critical investments needed, the biggest opportunities, as well as the tradeoffs and how these can be managed. We’re really pleased that this diagnostic tool this has got a lot of traction with our colleagues in countries, who already see its value in supporting countries more effectively. And we intend to make the CCDRs public so that other donors, lending institutions or companies can also use them to guide their low-carbon, resilient investments.
“National climate targets [are] a vital starting point for our support to countries: the floor, but not the ceiling – on which to build more ambition on climate.”
You mention working on the “just transition” as part of efforts to support countries’ decarbonization – how is that going to work in practice?
Moving away from coal is central to achieving the goals of the Paris Agreement – there’s no question about that. The Bank Group stopped direct financing of new utility scale coal-fired power projects in 2010; and this is now doubly assured with our announcement on Paris Alignment.
It’s not just about stopping financing, however. The economics of these investments are already sending a strong message about stranded assets. Instead, it’s about making sure that entire communities are not stranded as part of the low-carbon transition. The CCAP talks about “a carefully managed and equitable approach, including safety nets and support to find new jobs or build new skills for the green economy”. Around the world, we need to engage workers in fossil fuel industries – individuals with families, homes, plans for the future – who we need to keep at the center of planning so that they also benefit from the new climate economy of the future.
ur own support to countries will include helping policymakers to develop clear roadmaps to increase the welfare of people and communities, promote new jobs in the private sector, as well as social safety nets, and economic growth for affected regions, and much more.
What is the role of the private sector in the transition?
The private sector is a key driver. It’s private companies that produce goods, manage supply chains and accelerate innovation. Financial institutions oversee trillions of dollars of investible capital that will boost the new climate economy. But to mobilize this capital in emerging economies for green investments and essential improvements in innovative technologies like battery storage, offshore wind or green hydrogen, we need governments to create the right regulatory and enabling environments.
“We need to engage workers in fossil fuel industries – individuals with families, homes, plans for the future – […] so that they also benefit from the new climate economy of the future.”
We need multilateral development banks (MDBs) to support the creation of bankable projects. And finally, we need partners to help provide public resources and blended concessional finance to de-risk private investments and reduce the cost of innovating. IFC, for instance, will apply a climate lens across all regions and industries in which it operates. It will work to achieve the highest possible impact, helping to accelerate the adoption of green finance and development of capital markets, and working with private companies – including SMEs – to integrate climate change risks and opportunities into their supply chains.
Tell us a bit more about the announcement on Paris Alignment? What does it mean and why is it significant?We define alignment in the CCAP as the “provision of support to clients in a way that is consistent with low-carbon and climate-resilient development pathways, aligned with the objectives of the Paris Agreement, and consistent with client countries’ NDCs, LTSs, or other national climate commitments”.
In practical terms, aligning our financing flows with the Paris Agreement is about ensuring all our operations actively advance or do not hinder attainment of these goals. This is very significant because it makes us mainstream climate into all our development work. We already count our climate finance– previously referred to as co-benefits – as a share of our total financing. We’ve set ourselves an ambitious target on that front, to go from 26% achieved on average over the last 5 years to 35% over the coming period. Beyond accounting for our climate finance – a metric that accounts for the share of project finance that actively mitigates or adapts to climate change – everything we do will be aligned with the objectives of the Paris Agreement. Effectively, this applies a climate lens to all sectors, including in areas like education, health or social protection which are not traditionally associated with climate action and can never generate high climate finance.
So far this sounds like a lot of work on the mitigation side. But the CCAP also sets a target on adaptation and aims to make that a priority. Tell us more about that.
Even as we invest aggressively in mitigation, we already have to live with of the fast-growing impacts of climate change. So there’s no question that we have to invest in adaptation on an equal footing with efforts to decarbonize: under the CCAP, at least 50% of our climate finance (IBRD and IDA) will support adaptation.
Our financing for adaptation has been steadily rising over the past 5 years. In 2019, we delivered more than half of all finance for adaptation provided by MDBs. We expect to support investments in preparedness and weather-related data – high-quality forecasts, early warning systems and climate information. We will work to deal with floods and droughts. And we will endeavor to build more climate-responsive social protection systems, so that communities have the ability to respond earlier and recover faster from climate impacts. The World Bank and IFC also recently published a blueprint for action for governments to help overcome the barriers and mobilize private sector investment for adaptation.
But direct financing alone will not be enough to meet adaptation needs, so we are going to ramp up work with development partners and through capital markets to crowd in finance for adaptation investments. And we have committed to significantly improve our own metrics to go beyond measuring the resilience of our own operations towards thinking about how our investments build the resilience of communities.
Over the last few months, as the CCAP was being finalized, there were requests to take on board feedback from a wide range of stakeholders. Did you get external inputs and how were those incorporated into the final document?
Again, we see this as a living document that will evolve over time based on the needs of our clients, as well as other inputs.
We did seek external inputs on the CCAP and were hugely grateful to receive comments and feedback across a range of perspectives – from global climate influencers, to the private sector, to policy-makers, UN counterparts, research and academic institutions and civil society organizations. We received over 500 comments – some posted publicly here, others shared directly via email – in multiple languages (French, Spanish, Arabic, Japanese, Russian, and Chinese). To everyone who did send us your comments, we add our sincere thanks to this public acknowledgement.
“We see this as a living document that will evolve over time based on the needs of our clients.”
We heard you and read every single comment that came in. We believe that the full CCAP reflects many of the key concerns raised. For instance, it is clear on how the Bank Group will support countries to decarbonize their economies, with detail on how we intend to support the just transition. The CCAP is also clear on Paris Alignment and what that means for future energy investments. Adaptation and resilience also feature much more prominently; as do nature-based solutions, which can support both mitigation and adaptation outcomes.
And finally, we will engage more widely as it gets operationalized. This is a collective effort – and we look forward to a collective engagement as we strive to tackle one of the most defining challenges of our time.
Climate Change Action Plan (2021-2025)
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