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World Bank falls short in recognising climate risks - researchers

Source: World Resources Institute - Fri, 4 Apr 2014 16:34 GMT
Author: Manish Bapna and Milap Patel, WRI
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A group of people hide from the rain under umbrellas on a flooded street in a small residential area in Colombo, Sri Lanka, May 17, 2010. REUTERS/Andrew Caballero-Reynolds
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After becoming president of the World Bank in2012, Jim Yong Kim committed to incorporating sustainability more fully into the institution’s work. Kim has specifically drawn the link between poverty and climate change, saying: “If we don’t confront climate change, we won’t end extreme poverty, and we’ll leave an awful legacy for our own children and grandchildren in the process.”

However, new World Resources Institute analysis shows that while the World Bank has successfully addressed a number of important economic and social risks in its projects, it is falling short in recognizing climate risks. As the World Bank refreshes its long-term strategies, this is a key moment to bring climate change - and more broadly, sustainability - to the forefront of its investment agenda.

Assessing the World Bank’s Current Landscape

In a new assessment, WRI reviewed a sample of 60 World Bank projects approved between January 2012 and June 2013. In addition to analyzing how World Bank projects identified and assessed climate change issues, we also examined broader sustainability issues such as poverty and human development, social and environmental risks, and client-country governance.

The results were a mixed bag. On the positive side, more than two-thirds of the Bank’s projects directly identified low-income and vulnerable groups as beneficiaries. Moreover, 82 percent of projects included environmental and social assessments, in compliance with the World Bank’s current safeguard policies.

However, we observed major limitations in the way the Bank addresses climate change in its projects. Out of 60 Bank projects from our assessment, only 25 percent included features that took climate change risks into account. This shortfall could leave communities vulnerable to extreme weather, sea level rise and other climate impacts - impacts that threaten to undermine the World Bank’s efforts to eliminate poverty.

The recently released second installment of the Intergovernmental Panel on Climate Change’s Fifth Assessment Report has made it clear that the impacts of climate change are already “widespread and consequential” across every continent, creating significant risks for communities around the world. Even fewer World Bank projects - only 12 percent - assessed the potential greenhouse gas emissions associated with their development, thus failing to assess and invest in low-carbon alternatives.

Individual Projects Are Rising to the Sustainability Challenge

But while it may be falling short on integrating climate change mitigation and adaptation into project development, it’s clear that the Bank has the in-house skills and capacity to thoroughly consider the long-term social and environmental effects of its investments. Our assessment uncovered examples of investments that successfully prioritized climate issues from the outset. For example:

  • Plans for the Metro Colombo Urban Development project in Colombo, Sri Lanka, acknowledge that the metro area is highly vulnerable to flooding today. Flooding in the future will be exacerbated by climate change and projected sea level rise. Because there were no detailed flooding probability projections for the city of Colombo, the team designing the project estimated the potential impacts of climate change through modeling carried out for other Asian cities. This assessment helped the project team identify flood damage reduction options - such as improvements to flood and drainage management infrastructure - that account for potential risk from major climate change-related events. Designers also used the assessment to feed into a cost-benefit analysis that accurately reflected the avoided harm from the investments.
  • The São Paulo State Sustainable Transport project in Brazil conducted an analysis of projected CO2 emissions and emissions reductions associated with various project components, including road rehabilitation and upgrading an inland waterway transport system. Designers conducted this analysis even in the absence of a standardized approach towards calculating emissions in transport projects (at the time of appraisal). Through this analysis and the sense of urgency shown by using best available tools, the borrower and the project team were able to signal commitment and adherence to the State of São Paulo’s low-carbon growth strategy.

These individual examples demonstrate that the effective use of available data and deployment of innovative greenhouse gas measurement tools can help ensure that the Bank’s investments prioritize aspects of sustainable development - namely, building resilience to and mitigating climate change. However, for these kinds of practices to become institutionalized, the World Bank should more comprehensively reassess the way it factors sustainability into its investments.

The World Bank’s Changing Structure: Opportunities for Advancing Sustainability

The good news is that the World Bank is currently in a time of transition, creating an opportune moment for the institution to more fully incorporate sustainability into its project planning. The World Bank Group approved a new corporate strategy in October 2013, featuring two new goals: ending extreme poverty by reducing the percentage of people living on less than $1.25 a day; and promoting shared prosperity by fostering income growth for the poorest 40 percent of every country’s population.

Important safeguard policies, such as those that protect communities and ecosystems from the potential harm associated with investments, are being reviewed and updated. In order to truly set projects on a sustainable development path, creating or integrating a climate change component into these policies and not viewing them as an additional burden will be a required part of the current sustainability paradigm.

The World Bank is also developing a new model to replace its current procedures for engaging countries in a strategic manner. This is an important opportunity to better integrate the risks associated with climate change into investment planning in all of the Bank’s borrower countries. Countries that are charting out their “green growth” agendas should be supported by the Bank with GHG assessments in all relevant projects. And all investments should be made with an accounting of the possible impacts of climate change – on communities and ecosystems, as well as on the projects themselves.

This is also an important moment for the international development community. Over the last 14 years, development bank investments have been in part shaped by the United Nations’ Millennium Development Goals (MDGs). The next generation of these goals is being designed right now and will emphasize integrating sustainability into the global development agenda. These new “Sustainable Development Goals” are expected to replace the MDGs in 2015. The World Bank can more fully align its activities with this evolving agenda and respond to what will be a growing demand from countries for investments in sustainable development projects like the example from Brazil presented above.

Creating climate-resilient, prosperous communities will require action from a variety of stakeholders - from national governments to local officials to development banks. The World Bank can do its part by making climate change considerations as an essential factor in its investment decisions.

Manish Bapna is the executive vice president and managing director of the World Resources Institute (WRI), and Milap Patel is a research analyst for WRI’s Sustainable Finance Program. This blog first appeared on the WRI website.

Download WRI’s full assessment of the World Bank’s portfolio.

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