The COVID-19 crisis has hit the Latin America and Caribbean (LAC) region harder than any other region in the world and has brought the need for a resilient and inclusive recovery into sharp focus. Greater digital access—in support of distance learning, digital cash transfers, telemedicine, and online public services—is the cornerstone of this agenda and requires both an ambitious policy and regulatory agenda as well as increased infrastructure investments. This is particularly important as the region gears up for 5G auctions and continues its 4G expansion.
- A stress testing methodology and tool were recently developed to ensure that the economic analyses of World Bank projects properly consider climate and disaster risks.
- When applied to a transport project in India, the methodology demonstrates that the project is robust to even highly pessimistic climate and disaster scenarios.
- If deployed widely, this methodology and tool could help ensure that all investments are designed to be robust and resilient to climate and disaster risks and thereby promote adaptation to climate change.
Climate stressors such as temperature increases, sea level rise, water scarcity, and extreme weather events including droughts, hurricanes and floods, are increasingly posing risks to the health, livelihoods, and wellbeing of households and communities. They disrupt critical services, reduce agricultural productivity, and destroy infrastructure and dwellings with increasing frequency. To minimize the effect on people’s wellbeing, these impacts need to be considered and integrated in all investments and projects, regardless of their sector, nature, and financing. Ideally, no building, factory, transport infrastructure, or any other asset, should be designed and built without considering disaster and climate risks.
This applies particularly to World Bank projects: to maximize development benefits, it is critical to ensure that our investments are robust, throughout their lifetimes, to a changing climate. The World Bank Group’s newly launched Climate Change Action Plan 2021-2025 starts from the premise that climate and development need to be integrated. To help align climate and development, the newly launched Resilience Ratings System provides a simple approach to measure and disclose the extent to which adaptation and resilience considerations have been integrated into project design. The Resilience Rating System is currently being piloted in a number of investment projects supported by the International Development Association, the World Bank’s fund for the poorest countries. The Resilience Rating System provides a rating from C through to A+ along two complementary dimensions: (1) the resilience of the project design – or the robustness of project design to disaster and climate risks, and the confidence the project will perform as expected in spite of these risks; and (2) the resilience through project outcomes – or the project’s broader contribution to building the climate resilience of beneficiaries. These two dimensions are complementary but different. In particular, all projects should be made resilient to disaster and climate risks, while not all projects need to boost resilience (there are many other valid development outcomes).
“To help align climate and development, the newly launched Resilience Ratings System provides a simple approach to measure and disclose the extent to which adaptation and resilience considerations have been integrated into project design.”
To achieve an “A” rating in the resilience of the project design dimension, projects are required to demonstrate that a climate and disaster risk stress test has been incorporated in the project’s economic and financial analysis. Projects are also required to report on how, after risk reduction measures are included, residual risks do not make the project economically or financially unviable (or they at least must disclose the existence of any residual risk).
In this interview, World Bank Climate Change Lead Economist Stéphane Hallegatte and Senior Climate Change Specialist Veronique Morin explain how the climate risk stress testing methodology can support project teams by identifying potential climate and disaster risks to a project and inform decision makers on project robustness.
What is the history behind the Risk Stress Test methodology? What is the methodology designed to do?
The Resilience Rating System has been piloted in more than 20 projects. Early results have demonstrated that incorporating a climate and disaster risk stress test is far from straightforward. To help teams perform such a stress test, the World Bank just released a new report, Integrating Climate Change and Natural Disasters in the Economic Analysis of Projects, which provides a methodology – and a tool – to perform a disaster and climate stress test.
Because future changes in climate conditions are highly uncertain, the methodology does not recommend predicting a revised net present value or rate of return. In particular, for projects with long lifetimes, uncertainties are too large and results would be overdependent on assumptions and hypotheses, and risk creating overconfidence.
Instead, the methodology suggests to perform a stress test as part of a project’s economic analysis using various scenarios ranging from the most optimistic to the most pessimistic, and to identify the conditions under which the project may fail, as well as the consequences in case of failure. A reporting template is then proposed to help decision makers assess the level of residual risks, and therefore the project’s attractiveness and economic feasibility.
Practically, the methodology is designed to highlight the risks to project outcomes and evaluation criteria (such as net present value and benefit-to-cost ratio) over long time horizons, in multiple scenarios and accounting for risks along three dimensions:
- Changes in average climate conditions (e.g., temperature, precipitation);
- Impacts from natural disasters, with historic frequency and intensity (e.g., hurricanes, floods, wildfires); and
- Changes in the occurrence of future disasters due to climate change.
“Early results have demonstrated that incorporating a climate and disaster risk stress test is far from straightforward.”
How can the methodology be implemented?
The report provides step-by-step guidance for considering and incorporating climate risk stress testing into a project’s economic analysis, and general and sector-specific climate and disaster information resources to support the analysis. To assist with the implementation of the stress testing, an accompanying Excel-based Risk Stress Test (RiST) Tool has been developed to illustrate how the three components of climate and disaster risks can be incorporated in a project’s economic analysis, how climate and disaster impacts can be reflected in components of project costs and benefits, how decision metrics can be evaluated under alternative climate scenarios, and how key assumptions and inputs (such as the discount rate) may change the results of the analysis. Moreover, the tool can help determine threshold conditions under which a project may become economically undesirable and thereby help project teams identify possible risk reduction measures. A series of short one to three-minute training videos are provided to demonstrate the applicability of the RiST tool.
Are there any examples of how the methodology has helped project teams identify possible climate and disaster risks and evaluate project robustness?
Illustrative applications are provided for projects in energy, transport, water infrastructure, and agriculture. One of these projects is the Integrated Transport Project in the state of Meghalaya, India. This project aimed to improve transport connectivity and efficiency and modernize transport sector management. Given that Meghalaya is in one of the wettest regions in the world, the analysis accounted for climate risks by estimating the impact on the costs and benefits of the project of changes in average conditions (i.e., temperature and rainfall patterns) and natural hazards (i.e., landslides and flooding), considering current and future frequency and intensity. The analysis demonstrated that even with a pessimistic baseline scenario (assuming delays in implementation and increase in costs) and a high-end climate impact scenario, the project is still anticipated to generate a positive Net Present Value, even though the expected net benefits can be halved by disaster and climate risks.
Beyond the result of the analysis, the implementation of the stress test guided the team in its exploration of possible disaster and climate risks and provided important information to help assess the project’s economic feasibility, therefore contributing to proper climate and disaster risk management and reduction, and increasing our confidence in the project’s ability to deliver its expected results in spite of today’s and tomorrow’s climate risks.
When COVID-19 hit, Indigenous peoples feared for the lives of their elders and the survival of their cultures. Despite lockdowns, there seemed to be a surge in territorial invasions, contributing to the ensuing spread of the virus in their remote communities. Many were without water, sanitation and days away from the closest health clinics. Indigenous leaders called for help to mobilize food, water, soap, PPE, thermometers, and tests. Surprisingly, some of the most desperate stories were coming from Indigenous communities that, prior to the pandemic, had in many cases fared better economically, given their links with tourism, external markets, and informal urban employment. Relief efforts were also difficult. The rollout of emergency response programs often indirectly excluded Indigenous Peoples through eligibility requirements, such as electricity bills, and delivery mechanisms, such as urban grocery stores.
Much of the infrastructure built in the last century—which people need to thrive: energy, transportation, sanitation, hospitals, and schools—has been significantly carbon intensive. And the world needs much more infrastructure in the coming years as the population expands, urbanization increases, and the ambitions of people to improve their livelihoods grow. In the face of an intensifying climate crisis, unless we quickly develop ways to deliver a new generation of infrastructure that is sustainable, it will be impossible to meet our national and global decarbonization goals in line with the Sustainable Development Goals and Paris Agreement commitments.
The world has come a long way since Edward Jenner injected a 13-year-old boy with the relatively less severe cowpox virus in 1796, producing a single blister, and then with actual smallpox, producing no disease. In doing so, he provided scientific evidence that vaccination with a mild form of a disease can save people’s lives, paving the way for a striking advance in medicine.
From that pivotal moment over two hundred years ago, human health has improved considerably. Hundreds of millions of children are immunized today against a variety of diseases from smallpox to polio that used to cause widespread death and disability. By 1979, smallpox, a disease which killed 30% of those it infected, was declared eradicated. And polio is now endemic in only three countries.
A country’s capacity to deliver vaccines saves children’s lives
WHO-UNICEF data since 1980 shows progress in child immunization in low-income countries such as Mozambique. For example, only 25% of children had received all three doses of the polio vaccine (POL3) in 1985. With mass immunization, Mozambique reported its last wild poliovirus case in 1993. Immunization with MCV2 (two doses of measles-containing vaccine) has increased sharply in recent years, from 36% when it was introduced in 2016 to 85% in 2019, with the support of Gavi.
. Immunization gains in Mozambique have contributed to the reduction in child mortality from 266 deaths per 1,000 live births in 1980 to 74 in 2019. Immunization also has broader benefits for society including better student attendance and learning in school. That’s why we do not hesitate to get our children immunized.
The COVID-19 vaccines are critical to keep adults alive and healthy
Today, our greatest challenge is to restart economies and prevent adult deaths and illness from COVID-19 (coronavirus). But can we take 20, 30 or 40 years—or even five years—to achieve the required level of COVID-19 vaccination in our countries? How long can we wait to get to herd immunity, a scenario in which enough people are vaccinated to stop the spread of the disease even if some aren’t vaccinated?
As I wrote earlier, hundreds of thousands of people are being pushed into poverty in Mozambique because of this crisis. . The latest evidence shows that a more contagious Delta strain of the virus is rapidly becoming dominant in Mozambique as the country enters its third wave, with over 100 deaths in the first 10 days of the month of July, more than the total deaths occurred during the months of May and June combined.
As African governments are trying hard to increase the supply of vaccines coming in, the World Bank has joined the effort. To that end, we have recently approved a $100 million grant in support of Mozambique’s efforts to expand its current COVID-19 vaccination campaign. The funds are being utilized to acquire, manage, and deploy COVID-19 vaccines. This will enable the purchase of approximately seven million doses of COVID-19 vaccines, the single largest contribution for Mozambique’s vaccination efforts thus far.
However, we will have to do more to ensure that people want to take the vaccines. All the vaccines are effective in preventing death and severe forms of the disease in the population. Data shows that if infected, fully vaccinated people have a lower viral load than unvaccinated people and are less likely to develop severe forms of the disease or die from Covid-19. Increasing vaccine literacy is critical, and everyone with any sphere of influence, small or big, can do more to spread accurate information. The vaccines will work to save lives and reopen society only if enough people take them, and if countries can deliver them efficiently.
Despite decades of effort, there are still weaknesses seen even in routine immunization. As Cassocera et al noted in their report on forty years of immunization in Mozambique, national immunization coverage remains below 90%, and Zambézia, Nampula, and Tete provinces have continuously reported low coverage. In some, such as Cabo Delgado, there have been inconsistencies over time.
What needs to be done to gear up for COVID-19 vaccine deployment
We need to learn from the lessons of 40 years.. Even as global supply issues persist, we have to tackle domestic issues around vaccines. It’s not just about finding the money to procure enough doses—an investment that will yield rich returns for the economy—but also about deployment.
A lot needs to be done quickly, from identifying cold chain gaps and closing them, to reducing the rate of vaccine wastage, ensuring adequate distribution of vaccines and related supplies to health facilities, training health workers, and opening effective channels of communication with citizens to ensure that both shots are taken on time in cases where it is a two-dose vaccine.
While it may look like we are ready on paper, the process of vaccine delivery can suffer multiple roadblocks. The diagram below shows the various aspects of vaccine management that countries have to quickly strengthen. The World Bank and other development partners are helping countries gear up.
We also know that many countries are experiencing further waves of COVID-19 and that variants are a cause for concern. In addition to vaccination, health systems need to be prepared with hospital beds, oxygen and other supplies, equipment, and know-how on how to tackle cases that require urgent medical attention. We cannot afford the loss of lives and livelihoods that unpreparedness will result in.
While the pandemic is an event of terrible proportions, this generation of children and teenagers should be able to look back on it later as a point after which public health really changed for the better on a historic scale. We have a good shot now at making the world a much safer place for our children.
Economic inclusion programs help boost the income and assets of the world’s poorest individuals and households with a “big push” of coordinated interventions. So far, the policy discussions surrounding these programs have focused on their sticker price, cost-effectiveness, and affordability. While the total cost of these programs is an important data point, a closer examination of program costs through a cost analysis also plays an important role in shaping program design decisions.
New mechanism builds on Gavi COVAX Advance Market Commitment (AMC) cost-sharing arrangement
WASHINGTON, July 26, 2021 – COVAX and the World Bank will accelerate COVID-19 vaccine supply for developing countries through a new financing mechanism that builds on Gavi’s newly designed AMC cost-sharing arrangement. This allows AMC countries to purchase doses beyond the fully donor-subsidized doses they are already receiving from COVAX.