The World Bank Group's renewable/energy efficiency portfolio reached over $3.3 billion in FY09, a 24% increase from the previous year.
The Climate Investment Funds (CIFs) with pledges of over $6.3 billion, are stimulating new low carbon or carbon resilient work in more than 20 countries.
October 26, 2009
IFC’s solar investment strategy focuses on investments across the entire value chain from solar materials to manufacturing projects in Russia and China One year after the Strategic Framework for Development and Climate Change (SFDCC) was endorsed at the Annual Meetings, Washington DC, there are multiple signs that climate action at the World Bank Group has ramped up from what was already a significant work program.
The Strategic Framework was developed through extensive consultations with stakeholders that included developing country clients, development partners (UN agencies, regional development banks, bilateral donors), the private sector, and civil society. It articulates the Bank Group’s approach to carry out its core mandate of poverty reduction within the new reality of a changing climate.
"In just one year, the SFDCC has demonstrated the Bank Group potential to combine its capabilities in knowledge and innovation with extensive experience in development and finance to serve client countries", said Katherine Sierra, Vice President for Sustainable Development at the World Bank.
Country Impact – Where it Counts
As a result of the Framework, over 60% of Country Assistance Strategies in fiscal year 2009 address climate-related issues. The SFDCC promotes work with the other Multilateral Development Banks (MDBs) in assisting countries incorporate adaptation and mitigation programs into their development plans. It focuses on rolling out innovative financial instruments and building new partnerships, adding value even as countries debate the new financial architecture post-2012.
Adaptation is at the center of the Bank Group’s support to developing countries. Programs range from adaptation in arid and semi-arid lands in Kenya, Yemen, and India to dealing with the impact of rapid glacier retreat in the Andes“The SFDCC approaches solutions through country-led plans while staying within the broader framework provided by the United Nations Framework Convention on Climate Change (UNFCCC)”, said Warren Evans, Director of the Environment Department at the World Bank. “As President Robert Zoellick has said, we are in many ways the blue-collar workers of climate action, helping countries to see what works, and how, and then sharing that learning with others.”
Latin America and the Caribbean client countries were among the first to scale up their engagement with the Bank Group in addressing climate change. This started with analytical work to understand the impacts of climate change, but now the region exemplifies how the full suite of Bank Group products, instruments, and capabilities can be used to address the growing threat of climate change. The region’s climate change portfolio includes 130 activities ranging from innovative catastrophic insurance schemes to concessional finance for clean technology, totaling $2.5 billion.
Countries in the Middle East are focusing on adaptation measures like modernizing irrigation, supporting farmers’ access to technology, and increasing institutional capacity. For its part, the South Asia Region has a diverse set of priorities across countries – for example, assisting India in the development of weather-based crop insurance. In Africa, many countries are focusing on integrating climate resilience and land use; in Ethiopia, for instance, there is a project promoting community-driven land and watershed management.
Leveraging Finance
One of the most important concerns among client countries was the financing and learning gaps between now and a post-2012 global climate change agreement. Recognizing that poverty reduction, economic growth, and climate change must be addressed in tandem, the Climate Investment Funds (CIFs) were approved in 2008. The idea was to open the opportunity to blend funding for climate solutions with other already-available resources, thereby leveraging substantial additional resources. The CIFs, with pledges of over $6.3 billion, are stimulating new low carbon or carbon resilient work in more than 20 countries.
The CIFs have two components: The Clean Technology Fund (CTF) and the Strategic Climate Fund (SCF). These provide the architecture through which concessional financing may be available quickly and flexibly for low carbon growth and climate resilient activity.
The CIFs demonstrate how a sum of money can be used to leverage resources several times over. The first private sector project to be approved was the Mexico Private Sector Wind Development project with an initial investment of $15.6 million that went on to leverage $120 million. Some of the other projects include an `intelligent’ power grid management system in Turkey and a bus rapid transit corridor in Egypt.
The Bank Group's renewable/energy efficiency portfolio reached over $3.3 billion in FY09, a 24% increase from the previous yearThe increased focus on climate is reflected in increased funding for cleaner, greener sources of energy. Financing for renewable energy and energy efficiency by the Bank Group rose 24% in the last financial year to reach more than $3.3 billion, an all time high. Such financing now represents more than 40% of annual energy commitments by the Bank Group, and the aim is to move this to 50% of all energy commitments within two years.
The International Finance Corporation (IFC), the private sector branch of the Bank Group, recorded its highest-ever financing in renewable and energy efficiency, crossing $1 billion last year. IFC’s solar investment strategy focuses on investments across the entire value chain from solar materials to manufacturing projects in Russia and China. Under its new strategy, IFC has focused on early stage, highly innovative clean technology companies. A carbon finance advisory product was launched to build capacity at local banks and facilitate more investment in smaller emission reducing projects.
Mobilizing Finance for Adaptation
Adaptation is at the centre of the Bank Group’s support to developing countries as it is critical to sustaining and furthering development gains in these countries. The poorest countries will be the hardest hit and, even with mitigation efforts, there will be a need to avoid the unmanageable effects of climate change. "SFDCC stresses the need for working towards closing the gap in knowledge, experience and finance between adaptation and mitigation. It is very encouraging to see how the regions are scaling-up assistance to the adaptation agenda’’ notes Kseniya Lvovsky, Program Manager for Climate Change at the World Bank.
Programs range from adaptation in arid and semi-arid lands in Kenya, Yemen, and India to dealing with the impact of rapid glacier retreat in the Andes. These programs integrate a menu of financing options available from several sources, such as IDA, IBRD, GEF, the Least Developed Countries Fund (LDCF), the Special Climate Change Fund (SCCF), and bi-lateral co-financing.
The second CIF component, the Strategic Climate Fund (SCF), aims to mainstream climate resilience into core development planning of client countries. The first of these programs, the Pilot Program on Climate Resilience (PPCR), has already been launched. Work is underway in nine countries to identify and start activities under this program, supported by $600 million in grants. The PPCR is also setting up a Forest Investment Programs and a Scaling up Renewable Energy for the Poor program in low-income countries.
Carbon Finance and Market Innovation
The Bank Group continues its pioneering work in carbon finance, currently managing 10 funds and two facilities, with $2.3 billion in committed funds, of which over $1.9 billion is tied to emission reductions purchase agreements. Two new facilities, the Forest Carbon Partnership Facility (FCPF) – for reduced emissions from deforestation and forest degradation (REDD) – and the Carbon Partnership Facility (CPF) – for programmatic and sector-wide intervention – are further broadening the scale and duration of carbon finance for developing countries.
There are 37 REDD Country Participants with three countries having submitted REDD readiness proposals.
Knowledge Sharing and Policy Research
To bridge the knowledge gap on the impacts of climate change, the Bank Group has made an effort to support client countries in assessing climate change risks. The rich body of work also informs the process of international negotiations. The 2010 World Development Report on climate change showed how a `climate smart’ world was possible if the world decided to `act now, together and differently’.
The Economics of Adaptation study identified global costs for adaptation in order to cope with changes as a result of 2 degree warming. There are numerous on-going regional studies – for example, one dealing with climate risks and food security in Bangladesh.
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