Challenges and Opportunities for Multilateral Organizations

Just five years ago, only 4% of all public and private climate finance (estimated in USD500 bi) was flowing into the adaptation bucket. Last year, the World Bank broke a record of ‘climate-related investments’ totaling USD 31.7 bi - a 19% increase from previous year, - and very close to reach adaptation/mitigation parity, with 49% of the resources invested in adaptation. But despite the advances, UNEP’s Adaptation Gap Report 2022 shows that funding adaptation will take from five to ten times more resources as 2020 adaptation investment level of USD 29bi.  The parochial framing that merely increasing the share of adaptation share is narrow-minded. Adaptation cannot increase at the cost of cutting down mitigation investments. Rather, multilateral organizations - such as the World Bank- must increase overall climate investments manyfold even to stick below 2oC+. For that to happen, imagination is required to lead a transformational change on how adaptation and climate investments overall are conceptualized by global donors and funds.

It's imperative that global climate investments increase exponentially to meet climate targets. Playing status quo will only lead to tangible, yet vastly insufficient increments. But what are the challenges?  Lying underneath of seemingly operational constraints – as borrowers’ failure to provide adequate risk assessments, financial statements, and loan warranties – there are deeper levels that need to be assessed to understand what limits radical transformative changes leading to direct climate finance to its goal.
When the World Bank was created after WWII, it was a beacon to end poverty in the world. Back then, and until very recently, the linkage between poverty, vulnerability and climate change hasn’t yet really crystallized. Recently, the vocabulary of “shared prosperity” and “sustainability” were tweaked in to include, yet indirectly, the overall menacing effects of climate change. This fragmented view leaves alone the comprehensiveness and overall determinant ultimatum posed by climate change: it cannot be sliced and packed into different categories – climate change is overarching, cross-cutting, transversal, and holistic.  To select projects, the World Bank project cycle includes the development of a   Country Partnership Framework (CPF) to agree investment priorities with borrowing  countries. CPFs already mirrors a boxed view coming from federal governments that ignores interlinkages among fiscal policy, innovation, employment, and climate change.  In fact, the vocabulary of “climate change” is hierarchically and epistemologically inferior to the language of “fiscal responsibility”, which often subject LDCs to present primary surplus to keep investment grade, strangulating State capacity to invest. If seen as a “cost”, “risk” or “threat” climate investments, and in adaptation overall, will not triumph over the climate emergency.  The Word Bank has invested billions of USD in key large infrastructure projects, many of them with high multiplying effect on investments and wages.  Climate investments must be seen as the highest priority to income inequality by generating abundant fluxes of capital to developing nations, that will need a never-seen investment levels to adapt. 

 Investment with high multiplier potential must be prioritized, leveraging family’s ability to consume and firms to invest. The growing demand for power – and electricity overall – presents invaluable investment opportunities for inclusive mitigation.  Early alarm systems and green areas in cities can assist population to endure heat waves. Rain gardens can slow down devastating floodings that costs billions a year to repair. Roof solar panels and wind power input on the grid can mitigate CO2 emission from dirty energy sources.  But it’s not only about that – all those investments have integrated, holistic effects on health and education outcomes, with high social multiplying factors and widescale societal gains, including positive effects on equity. The economic and social multiplying effects of climate investments must be taken seriously into consideration. If those effects are appraised, in consonance with fair discounted risks for future losses, exponential grow in climate finance can be anticipated. Imagination is needed to unpack the hierarchical relation between the vocabulary of climate change and the language of fiscal responsibility.  Acknowledging fragmentation in the climate investment glossary and taking a holistic approach - that does not subject climate finance to fiscal policy and the need for fiscal surplus - are key to crystallize the nuanced understanding of climate investments as integrated solutions to tackle poverty and vulnerability. Hopefully, unveiling such ruptures between transformations in the way climate finance is conceptualized can foster radical, transformative changes leading to just climate action.  

Author: Marcelo-Sette Mosaner, https://www.linkedin.com/search/results/all/?fetchDeterministicClustersOnly=true&heroEntityKey=urn%3...