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    • Opinion
    • Development finance

    Opinion: Country-owned strategies are essential for global progress

    It may come as a surprise that country-owned, comprehensive strategies for low-carbon, climate-resilient development paths do not currently exist.

    By Nancy Lee // 24 July 2023
    In the midst of the discussions about the substantial gaps in finance for development and climate investments, there is a crucial missing piece that hampers our ability to achieve success: integrated strategies for low-carbon, climate-resilient development paths owned by the countries themselves. It may come as a surprise that such comprehensive strategies do not currently exist, despite the urgent and growing challenges we face in both climate and development. Instead, the relevant components are scattered across different initiatives. We have country strategies established separately with individual multilateral development banks, nationally determined contributions, or NDCs, for reducing emissions under the Paris Agreement, country-led Just Energy Transition Partnerships that primarily focus on the energy sector but can struggle to secure adequate funding, and the Country Climate and Development Reports, or CCDRs, produced by the World Bank to integrate climate and development analysis which are not strategies and do not establish targets or commitments. This isn’t working. Instead, what we need are comprehensive strategies that outline country commitments and priorities that merit external support and specify the role of the MDBs and other development partners in financing and enabling success. Success would be defined by achieving outcomes determined by each country, rather than simply measuring the amount of financial input. These strategies would be grounded in MDB-supported evidence and analysis of how to effectively combine climate and development objectives and would also — for larger countries that significantly contribute to global greenhouse gas emissions — consider the local and global benefits and costs of mitigation investments. Why country-owned strategies will be key to development outcomes First, having country-owned strategies would address concerns of borrowing countries, namely that rich shareholders, who bear significant responsibility for climate change, are forcing them to abandon their own development plans in favor of other countries' climate goals. For major emitting countries, a unified strategy would help donors identify and support investments that have the greatest impact on reducing greenhouse gas emissions. Second, having country-owned strategies would establish a single set of policy and investment commitments from each country, deserving of collective support from MDBs. Countries that fulfill these commitments would be ensured a predictable and regular flow of budget support from MDBs, along with financing for cost-effective investment projects. This would eliminate the burden of navigating complex and sometimes contradictory policy conditions attached to multiple loans from different MDBs, which borrowing countries find burdensome and time-consuming and independent evaluators find ineffective. Third, by focusing on clearly defined climate and development outcomes rather than financial inputs, this type of unified strategy would enable countries to choose priorities and transform key sectors, rather than attempting comprehensive reforms across their entire economies — an unrealistic endeavor for most nations. Finally, these strategies would also help MDBs be more effective and accountable. Unified country-owned strategies would drive more productive oversight from MDB boards, shifting the focus from merely approving individual loans to assessing whether countries are achieving their desired outcomes. Collaboration among MDBs would also be greatly enhanced, breaking down existing silos and facilitating joint responsibility for achieving common outcome targets. MDBs would be held accountable for their roles in attaining these targets. This collective responsibility would encourage MDBs to work together, aligning their project standards and sharing the costs and risks. Achieving transformative outcomes often requires a mix of public and private funding. Both the sovereign and nonsovereign arms of MDBs would need to succeed together, as failure from one could impact the overall success. Critics may point to some of the risks of this approach. For example, governments may face challenges in reaching internal agreements on priorities and commitments under a unified strategy. MDBs and other development partners, each with their own interests, would need to collectively agree to support this strategy. Borrowing countries would need to respect the integrated development and climate analysis provided by MDBs when making decisions about their priorities, and many governments would likely require technical support for strategy development and implementation. Defining country performance requirements also presents its own difficulties: They must be well-designed to achieve desired outcomes and specific enough to be verifiable. Moreover, it would be politically challenging for MDBs and other development partners to collectively decide that requirements have not been fulfilled and to withhold financing accordingly. None of this will be easy, but it’s all necessary. A unified strategy is crucial for bringing together countries' development and climate goals, obtaining external support, tracking progress locally and globally, and making the multilateral development banks and development partners responsible for working together. These conditions are essential for success at both the country and global levels. We don’t just need more MDB finance, we need it deployed through strategies that bring all key groups — governments, MDBs, private investors, civil society — together in pursuit of a common goal.

    In the midst of the discussions about the substantial gaps in finance for development and climate investments, there is a crucial missing piece that hampers our ability to achieve success: integrated strategies for low-carbon, climate-resilient development paths owned by the countries themselves.

    It may come as a surprise that such comprehensive strategies do not currently exist, despite the urgent and growing challenges we face in both climate and development. Instead, the relevant components are scattered across different initiatives.

    We have country strategies established separately with individual multilateral development banks, nationally determined contributions, or NDCs, for reducing emissions under the Paris Agreement, country-led Just Energy Transition Partnerships that primarily focus on the energy sector but can struggle to secure adequate funding, and the Country Climate and Development Reports, or CCDRs, produced by the World Bank to integrate climate and development analysis which are not strategies and do not establish targets or commitments.

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    ► Devex Invested: Climate finance will take center stage at COP 28

    ► Opinion: Strengthening the MDB system to meet the climate challenge

    ► Opinion: Make climate finance inclusive for just transition to net zero

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    The views in this opinion piece do not necessarily reflect Devex's editorial views.

    About the author

    • Nancy Lee

      Nancy Lee

      Nancy Lee is a senior policy fellow and Director for Sustainable Development Finance at the Center for Global Development. Her work at CGD focuses on the role and performance of multilateral development banks and development finance institutions, mobilizing private development finance, blended finance, sovereign debt restructuring architecture, public-private infrastructure finance, and gender lens investing. Previously, she served as the deputy chief executive officer of the Millennium Challenge Corporation, as the CEO of the Multilateral Investment Fund (now the IDB Lab) at the Inter-American Development Bank, and before that as a deputy assistant secretary at the U.S. Treasury Department.

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