{"id":254009,"date":"2023-07-29T20:54:42","date_gmt":"2023-07-29T15:24:42","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=254009"},"modified":"2023-08-31T10:15:03","modified_gmt":"2023-08-31T04:45:03","slug":"how-world-bank-group-can-scale-climate-finance","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/how-world-bank-group-can-scale-climate-finance\/","title":{"rendered":"How World Bank group can scale climate finance"},"content":{"rendered":"\n

Source<\/strong>: The post is based on the article\u00a0\u201cHow World Bank group can scale climate finance<\/strong>\u201d published<\/strong> in Business Standard <\/strong>on\u00a029th<\/sup> July 2023<\/strong>.<\/p>\n

Syllabus: <\/strong>GS 3 \u2013 Environment<\/strong><\/p>\n

Relevance: <\/strong>measures needed by World Bank in <\/strong>scaling climate finance.<\/p>\n

News:<\/strong> The World Bank has faced criticism for its insufficient efforts in addressing climate change. However, transforming the Bank into the world’s leading institution for climate-related initiatives presents challenges.<\/p>\n

What are the challenges present?<\/strong><\/h2>\n

The Bank’s governance is heavily influenced by the US and Europe, and the main shareholders are reluctant to offer significant new contributions to increase the Bank’s capital.<\/p>\n

What measures can be taken by the Bank to tackle global carbon emission?<\/strong><\/h2>\n

There is a need to focus on the largest emitters <\/strong>because the top 35 global emitters account for around 90% of yearly greenhouse gas emissions.<\/p>\n

Hence, the World Bank needs to raise more capital from<\/strong> its current borrowers who are among the top global polluters, to address mitigation challenges.<\/p>\n

However, this shift in focus could be seen as diverting from the Bank’s primary mission of poverty eradication.<\/p>\n

How can the World Bank mobilize more capital for climate related activities as well as for poverty eradication?<\/strong><\/h2>\n

The Bank needs increased contributions from Global North<\/strong> to the International Development Association (IDA) for providing adaptation finance to the poorest nations.<\/p>\n

The Bank should simultaneously focus on supporting 20 of its current borrowing countries<\/strong> (excluding China and Russia), which are among the world’s top 35 emitters.<\/p>\n

These countries require additional funding to facilitate their respective energy transitions.<\/p>\n

However, one of the barriers to achieving the climate agenda with the bank is the<\/strong> International Bank for Reconstruction and Development’s (IBRD) rating-agency regulations on leverage levels.<\/p>\n

Therefore, implementing a shift from loans to guarantees could have served the purpose; however, it has also been hindered by staff resistance.<\/p>\n

Hence, IBRD may not be the best organization to scale up the Bank’s climate ambition. Two other agencies of the Bank are better suited for the task.<\/p>\n

Which agencies are suited for the Bank\u2019s climate agenda?<\/strong><\/h2>\n

Multilateral Investment Guarantee Agency (MIGA):<\/strong> It makes much more economical use of shareholders\u2019 capital compared to IBRD. For instance,<\/strong> it makes good use of shareholders’ money by underwriting $17 in guarantees for every $1 in equity.<\/p>\n

It could stretch its capital even further by employing credit enhancement and partial guarantee products and being more open to risk.<\/p>\n

Hence, the Bank should focus on increasing MIGA’s risk and expanding its capitalization instead of prioritizing IBRD to mobilize climate finance.<\/p>\n

International Finance Corporation (IFC):<\/strong> It could raise third-party equity financing at scale without straining its own balance sheet by expanding its asset management business.<\/p>\n

IFC Asset Management Company manages 13 funds with modest assets of only $10 billion. It has the potential to scale up this business to <\/strong>handle hundreds of billions of dollars.<\/p>\n

IFC has the capability to raise third-party equity capital<\/strong> from global insurance companies, pension funds, and sovereign funds. It can efficiently manage a large pool of assets with modest contributions from its own balance sheet.<\/p>\n

Thus, IFC should strive to become a leading equity fund manager and fund-of-funds manager, specifically for climate mitigation investments in emerging markets.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on the article\u00a0\u201cHow World Bank group can scale climate finance\u201d published in Business Standard on\u00a029th July 2023. Syllabus: GS 3 \u2013 Environment Relevance: measures needed by World Bank in scaling climate finance. News: The World Bank has faced criticism for its insufficient efforts in addressing climate change. However, transforming the… Continue reading How World Bank group can scale climate finance<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,59,216],"class_list":["post-254009","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-environment","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":{"total":4,"cached_at":"","cached_date":1699956493},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/254009","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=254009"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/254009\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=254009"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=254009"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=254009"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}