• In fiscal year 2020, the World Bank Group allocated nearly $21.4 billion to climate-related investments, surpassing its climate-finance target for the third year in a row.
• Bank Group climate finance exceeded $83 billion over the 5 years that the first Climate Change Action Plan (2016-2020) was in effect.
• Three country snapshots illustrate ways in which climate change considerations were integrated into projects in Malawi, Bangladesh and Tunisia.
Facing a Development Challenge Like No Other
As countries struggle with COVID-19, they are also being hit by worsening climate impacts. Already, 2020 looks set to be the hottest year on record, potentially bringing more droughts, floods, and intense storms. All countries — particularly the poorest and most vulnerable — could face the compound impacts of climate change and COVID. Recently, India and Bangladesh were hit by the Category 5 Hurricane Amphan, forcing authorities to handle the competing goals of evacuation and social distancing to keep communities safe.
The World Bank Group is committed to supporting developing countries as they respond to the challenges of a changing climate. For the third year in a row, Bank Group lending for climate-related investments exceeded the target of 28%, reaching 29% or $21.4 billion in Fiscal Year 2020. Total World Bank Group climate finance amounted to more than $83 billion over the five years that the Climate Change Action Plan (2016-2020) was in effect.
During the 2020 fiscal year, the Bank Group identified opportunities for low-carbon, climate-resilient development, and provided supporting advisory services, technical expertise and financial resources. The Group expanded its efforts beyond sectors more traditionally identified with climate action — such as climate-smart agriculture and renewable energy — to new frontiers. This includes first-of-its kind innovation in the circular economy, targeted digital development interventions to improve climate resilience, macro-fiscal interventions strengthening regional trade and development with climate-relevant investments, and embedding climate considerations within COVID economic recovery packages.
Climate Finance in Action: Country Snapshots from 2020
Malawi is a small, densely populated, landlocked country in Southern Africa highly vulnerable to climate hazards, including dry spells, seasonal droughts, intense rainfall, and floods. In a country where agriculture remains the lifeblood of the economy, climate change-induced shocks have dire consequences for food security, overall growth, and efforts to break the cycle of poverty.
In 2020, the World Bank financed the Malawi Watershed Services Improvement Project, the first in a series of projects supporting the government’s efforts to restore landscapes, improve water security and agricultural productivity. The project aims to increase the adoption of sustainable landscape management (SLM) and to improve watershed management using a range of approaches: (i) performance-based grants aimed at restoring 95,000 ha of degraded landscapes; (ii) matching grants for 200 farmer groups and 60 agri-enterprises to enhance agricultural-based livelihoods and boost household incomes; (iii) advisory services and capacity building on SLM practices, including climate-smart agriculture practices and silvicultural techniques, targeting approximately 15,000 people. The project will also initiate a social marketing campaign to encourage farmers to practice sustainable land management, support local-level participatory land-use planning, pilot a market-based mechanism for selected watershed services (such as provisioning and regulating services), ensure the development of enabling infrastructure, and improve climate information services to inform decision-making.
The project is expected to directly benefit 350,000 people, the majority of whom are small-holder farmers. It will restore 95,000 hectares of degraded landscape in the middle and upper Shire River Basin, with 68% of funding for the project supporting climate change actions, also known as “climate co-benefits.”
Bangladesh ranks among the top 10 most climate-vulnerable countries in the world, recently making headlines when over a quarter of the country was flooded due to torrential rains. In addition to floods, the country also faces challenges of erosion, landslides, and sea-level rise. COVID-19 caused further, major disruptions in the country’s economy.
The Bangladesh Private Investment and Digital Entrepreneurship Project will accelerate the country’s economic recovery in the aftermath of the pandemic by promoting job creation, private investment, and environmental sustainability in participating economic zones and software technology parks.
More specifically, the project aims to strengthen the technical functions of the Bangladesh Economic Zones Authority (BEZA) and help establish BEZA as an effective partner to local stakeholders as well as leading international investors. To achieve these goals, the project will focus on: promoting good governance and institutional strengthening; catalyzing sustainable industrial development through investments in climate and disaster resilient infrastructure, renewable energy and energy efficiency improvements; and encouraging private investment in skills and green production through a grant program. This project demonstrates how non-traditional climate sectors can support long-term climate needs and complement ongoing national climate action; 47% of the funding for the project directly supports actions to combat climate change.
Tunisia is highly vulnerable to natural disasters including urban, river and coastal flooding, extreme heat, wildfires, and acute water insecurity — all of which could increase in frequency and intensity and hinder the country’s economic development and efforts to alleviate poverty.
The Tunisia First Resilient Recovery Development Policy Financing project is a first of-its kind COVID-19 recovery operation that integrates climate and sustainability in economic recovery. The program aims to protect the poor, including vulnerable households and firms, and accelerate reforms to improve the resilience and post-pandemic recovery potential of the Tunisian economy and society.
The program has the following goals: i) integration of climate responses to natural disasters, including reforms to social safety nets; ii) collection and harmonization of climate vulnerability information; iii) promotion of resilience and adaptation to climate change; iv) improvement of service continuity during extreme climate events; and v) facilitating renewable energy generation.
This program signals how climate-related activities (or prior actions) can be integrated into development policy operations. While 14.4% of the project’s funding will go to climate-related actions or climate co-benefits, accounting for its direct climate finance contributions, its expected impact in improving climate resilience is substantial. This project is particularly notable for its interventions that aim to deliver and support systemic, economy-wide climate action.
These snapshots are a small sample of climate action that the Bank has financed over the last fiscal year. Looking ahead, the Bank Group is committed to boosting its support for countries to take ambitious climate action by increasing financing for adaptation, leveraging private sector finance, and supporting increased systemic climate action at the country level.
To support increased client demand for post-COVID recovery and economic stimulus packages that emphasize climate or sustainability action, the Group is developing more effective advisory, analytical, and knowledge services to engage clients and support task teams on climate. These resources will help countries respond to the unprecedented humanitarian and economic crisis precipitated by the pandemic as well as be better prepared for future crises. The Bank is committed to supporting countries as they navigate the current moment and to providing the financing and technical expertise to rebuild their economies in a resilient and sustainable manner.
Source: World Bank