By: Kimberly Ramkhalawan
September 16, 2022
Ahead of the COP27 set to take place in Sharm El Sheik, Egypt later this year, IDB President Mauricio Claver-Carone says the bank has taken several initiatives to address risk management and climate change adaptation as two necessary aspects for sustainable development in the region.
During its One Region virtual event, Claver-Carone explored some of the bank’s long-term strategies on how it has been integrating these two areas into the products it continues to offer its member states.
Acknowledging that the region was seeing unprecedented impacts from climate change, rise in sea levels, and droughts, he noted that figures showed that if steps were not taken by 2030, climate change is going to push 300m people a year in Latin America and the Caribbean in extreme poverty.
However, he adds with time not on the region’s side, it required creative and innovative means for ensuring sustainability, and if done right, the path to decarbonization could create 15 million new areas of jobs with plant based food production, renewable energy, construction and manufacturing by the year 2030.
The IDB president went further to put the region at saving $620bn annually by 2050 just by decarbonizing energy and transportation, calling it “a win-win situation generating jobs and saving money”, as with “every dollar invested in resilience whether infrastructure or preparedness, and systemic risk reduction can save up $4 in post disaster response or restructuring”. He says “the region has building blocks to usher in a wave of investment driven by global private sector hungry for opportunity, this can provide the regional public sector with needed momentum to ignite a true sustainability revolution”.
In renewing the commitment, the IDB gave during last year’s COP 26, Claver-Carone says in collaboration with the various partners, the bank is determined to set the pace in this area, and acting and mobilizing the public and private sectors to make this revolution a reality.
As for Climate finance, he says with the private sector arm IDB Invest, six billion was committed and marked a record figure of financing, while the IDB has also set an ambitious goal of reaching 40 percent climate and green financing by 2025 through providing $24bn figure by then.
As part of its development agenda, it is introducing market friendly financing tools that increasingly leverage essential private sector resources, while ESG, Environmental Social Governance assets are on track to exceed fifty trillion by 2025 representing one third of projected global assets under management. He says countries need at least ten percent of that, a figure which represents the GDP of Japan, Latin America and the Caribbean, and forty percent of the planet’s biodiversity, has one of the greatest potentials to capture these funds.
Meanwhile, the IDB has also introduced new ‘natural capital asset class’, tradable on the NYSE, by harnessing the power of the market, countries and companies alike, which can be compensated for positive stewardship of nature. Through IDB Support, Costa Rica is one of the countries set to benefit from this, offering its natural capital assets on the NYSE, and expects Argentina and Honduras to follow.
He added the IDB has also enabled the green bond market. By promoting and harmonizing the green bond market, it increases investor confidence to facilitate what they now call green washing and facilitate green investments in the region.
The IDB President shared that it was now using block chain technology to report on investment performance and development impact of the bond. He says less than a year and a half since its launch, the platform already covers some 80 percent of the region’s markets, representing a total of $34bn dollars.
Other creative financial solutions also include an IDB Invest mechanism to monetize its cost of decarbonization and a range of blue bonds. He noted just last year in Barbados, it approved its first guarantee for a debt for nature swap becoming the first multilateral bank to do this kind of operation.
Another climate action initiative includes its Amazon fund initiative, which has secured a source of funding from the green climate fund that will support adaptation and mitigation of climate change through mitigative bio-businesses.
While the IDB has increased its planning and budget security as part of its financing, it has opted to include a hurricane clause as part of its contingent line of credit for natural disaster emergencies.
However, most critical to the effectiveness of achieving measurables is the planning out of initiatives, which is almost as equivalent to finding the funding needed to carry it out. So far he notes, 21 of its borrowing countries have submitted their nationally determined contributions under the Paris agreement, many of them with support six of the borrowing members have long term strategies.
“One Region, One Commitment: Accelerating the Sustainability Revolution in Latin America and the Caribbean” will take place for the second year.
This year’s event will feature panelists from governments, private sector, academia, and civil society and the six panels will discuss key issues for climate change leading up to COP27 in Sharm El Sheik, Egypt.