The global development community needs to devote a lot more time to financing climate and the Sustainable Development Goals and less on building new frameworks, according to Kevin Rudd, president of the Asia Society Policy Institute and former Australian prime minister.
Rudd has been involved in a number of climate negotiations, including what he characterized as a particularly difficult one in Copenhagen in 2009. Despite global leaders being locked away for days, they failed to reach agreement on a climate treaty. That would have to wait until December 2015 in Paris. The resulting COP21 agreement should go into effect shortly, as countries continue to ratify it in preparation for the next global climate conference in Marrakech, Morocco.
“We’ve had our hallelujah moment, we’ve celebrated and it’s important to celebrate policy successes. In this domain, they haven’t been coming fast, frequent or fruitful,” Rudd told a group of business and nonprofit sustainability professionals at the BSR Conference in New York on Tuesday.
Now, he said, it’s time to move past those congratulations and tackle some of the remaining challenges, most importantly — finance.
“Unless money is brought to the table to make change happen in the significant decisions which governments and others make on the nature of energy supply, on the nature of energy use then frankly we are simply building castles in the air,” Rudd said.
Financing these changes can’t be left to the United Nations or for that matter the World Bank and other development banks, because they just don’t have enough money, he said. The answer lies in private finance, he said.
Devex caught up with Rudd after his speech for an exclusive interview on what’s needed to unlock more private capital for climate finance, what the role of the development community can play, and China’s growing role in fostering global development. Here are excerpts from that conversation, edited for length and clarity.
You told audiences today that one of the keys to unlocking additional private finance is to make deals bankable. You suggested that World Bank Group’s Multilateral Investment Guarantee Agency, which has been trialing guarantees at a small scale, needs to expand. Can this facility be scaled enough to meet the need? Do other agencies or instruments need to step in as well?
I have a very conservative approach to these things. MIGA has a small but proven track record, so let’s try expanding it. If that doesn’t work, then of course it’s time to innovate. But I think there’s a reasonable buy-in from global private finance [as] to the efficacy of what MIGA does. It’s in the World Bank, and [both] the World Bank and the U.N. [have] part of the joint global charter to actually make sure the Sustainable Development Goals are delivered.
So that’s my conservative approach: go with the institution which is at the center of the SDG delivery program and the mechanism it’s currently got. But, to be blunt, it’s got to operate at scale.
You said you often hear that a key obstacle to attracting more private finance into issues such as climate change is the the need for a list of deals. Are more intermediaries needed?
What I know for a fact is that the multilateral development banks themselves have that as part of their software: basically bringing to the point of financing projects which would otherwise not meet global private finance.
Again through the work of the International Finance Corp., they’ve already done some work in doing that conjointly with private finance. So I would say the first contribution could be through the normal project development mechanisms through the MDBs, but secondarily, for them to partner with the major global private finance institutions on doing that at a much wider scale.
I go back to the conservative point that within the delivery chain of the SDGs, the World Bank has a core mandate, therefore it already has experience in producing bankable projects. Let’s do it at scale. And do it at scale with a collaborative approach between the MDBs together with the AIIB [Asian Infrastructure Investment Bank], together with global private finance. It’s a skill set which is quite specific, but it can be done.
What can the global development community do to help push action on climate change issues and climate finance in particular?
I think if the global development community halved the number of conferences that it had on where to go next with the SDGs and quintupled the number of conferences on how [to] deliver finance, we’d be in much better shape. People seem to by instinct avoid the subject, because it’s hard and it’s bottom line. It’s very easy to be aspirational in the development community, the hard stuff is finding the cash, whether it’s for normal development projects or this category of projects in particular related to climate.
I go back to my thesis, finance is key. We should not be frightened of it, because there’s a mutuality of need here. In the development community it’s producing bankable products. From the banking community, it’s because their list of investment opportunities right now is thin in a growth-challenged world and an interest rates market [in which] they’re not producing a revenue stream for the trillions of dollars currently locked up in financial institutions.
The private sector needs to play a part in climate action. What do global corporations need to do? What sort of mechanisms or regulations are needed?
What I would do is have a peer review mechanism across the corporates themselves who have made commitments, so they’re all held to their words. There’s nothing like a bit of peer pressure between governments but also between corporates once they commit to a certain form of action. You can call it naming and shaming on a global scale, or naming and encouraging on a global scale. How do we produce a whole new world of Unilevers who do the right thing both in terms of their individual carbon footprints, their individual sustainable development policies against the supply chain and the exploitation of labor and the full dimensions of sustainability? And, how is that transparently reported and how is it measured against public commitments given? I’ve said before what are the three things that need to be done: sustain political pressure, sustain corporate pressure, find finance.
You mentioned climate seems to be the one thing China and U.S. agree on. How can the dialogue be improved for global development? There are obviously ongoing tensions, but is there room for collaboration?
Of course there is. What I find interesting is that both countries have discovered that global collaboration on climate change is not going to do them any harm — it, in substance, can do both countries good. And reputationally, it will improve the functionality of the multilateral system as well in these areas.
Let’s go to sustainable development more broadly. What’s encouraging is the Chinese are now beginning to commit funds to the multilateral aid agencies. That has not been the case historically, and Xi Jinping is talking about a new Chinese multilateralism not simply by replicating AIIBs around the world but through the existing U.N. institutions.
I think there is a further opportunity for the U.S. and China to work on revitalizing the U.N. and what it does in these domains. The first good signs of that is what the Chinese are now doing in terms of funding the agencies. Remember that China, because of the size of its economy, is becoming one of the largest contributors to the U.N. and within a decade will be at least the second largest contributor. Therefore the largest and second largest contributors to the U.N. multilateral system should make the system work.
What will it take to make that happen?
You don’t need to invent new institutions, but if you look at the existing humanitarian development institutions, they’re all strapped for cash. Look, one example is right now in the midst of the Syrian civil war and the humanitarian disaster which has killed half a million people. The U.N. special appeal for Syria currently stands 52 percent subscribed, and why on earth is that the case? If we have new Chinese leadership in that domain and in others it really helps.
As a Devex Impact associate editor, Adva leads coverage of the intersection of business and international development. From partnerships to trade and social entrepreneurship to impact investing, she enjoys exploring the role the private sector and private capital play in development. Previously, she has worked as a reporter at newspapers in both the U.S. and South Africa. Most recently, she has been ghostwriting a memoir for a former child slave and NGO founder in Ghana.
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