Investing In Sustainability
Under the new leadership of Dr. Jim Yong Kim, the World Bank Group continues to reinvent itself to meet the challenges of global development. That reinvention will continue this Saturday, when the Board of Governors is expected to endorse a new strategy for the institution. If properly implemented across the Group, the strategy could help boost the institution’s contribution to equitable and sustainable development. Two areas of focus will be especially important, including how the Group handles its work on climate change and selects its investments.
The new strategy centers on implementing the institution’s 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 bottom 40 percent of every country’s population. The strategy emphasizes that securing these goals in the long-term requires sustainable use and management of our natural resources and planet. The goals are meant to focus the World Bank Group’s efforts on both social equity and environmental sustainability.
The new goals are ambitious and admirable. But in order for the Bank to play the transformative role President Kim envisions, it will need to funnel its human and financial resources toward activities that directly support the poor and away from those that do not.
Emphasis on Climate Action
The new strategy positions climate change as one of five cross-cutting themes for the institution. These themes will support 14 new “global practices” (see box). It is encouraging that the strategy views climate change as relevant to all sectors of the World Bank Group’s work. The challenge will be to ensure that the cross-cutting nature of climate change strengthens rather than dilutes focus on the problem.
Despite the World Bank Group’s emphasis on climate risks in recent years, investments have yet to fully consider climate impacts. A draft report from WRI looking at 40 investments in the World Bank’s 2012 portfolio suggests that 90 percent did not assess the likely greenhouse gas emissions from these investments, while only 22 percent looked at the risks to the investment’s success arising from the impacts of climate change. These results suggest that the Bank has not systematically made consideration of climate risks part of regular operational procedures.
WRI has found, too, that those responsible for understanding and monitoring the environmental and social risks associated with investments are often over-stretched.
To truly accomplish its two goals, the institution’s climate change plan must be more than just words on paper. The Group will need to dedicate sufficient staff and resources to ensure that climate change becomes a central focus for the institution.
The new strategy aims to employ greater selectivity and focus to achieve the institution’s two goals. The strategy also calls for the institution to be less afraid of risk. It envisions multi-sector engagements with longer time-frames and higher-risk profiles than most current investments. For example, the institution plans to reformat its country-level engagement to ensure that resources are used to tackle the most pressing problems facing developing countries. The aim of the new model is to use evidence-based analysis to diagnose, prioritize, and overcome the major challenges facing countries, as well as more effectively capture lessons learned.
Greater focus will help the World Bank Group pool its resources and provide higher-quality services to borrowing countries and their citizens. Greater selectivity, though, will require greater care to ensure that investments support the institution’s goals of inclusive and sustainable development. Early results from a WRI assessment suggest that only about half of assessed projects clearly demonstrate that they address the specific needs of poor and vulnerable populations. The Bank must carefully analyze project risks and potential long-term results—and recognize that all risks are not equal. Risks to vulnerable people and ecosystems must be minimized if the twin goals are to be reached.
With around 10,000 employees worldwide and a budget of more than $30 billion, the World Bank Group has the potential to make significant change in the world. The Group’s new strategy provides an encouraging blueprint, but it will only yield positive action with the right follow-through. The next step is to provide the resources and commitment necessary for equitable and sustainable development.