1: What legacy does Suma Chakrabarti leave at EBRD? How has EBRD met challenges of sustainability during his time?
Good morning or good afternoon, wherever you may be!
To answer your question in one sentence, a key part of my legacy at the EBRD has been putting climate and environmental action at the very core of our activity.
A commitment to promote ‘environmentally sound and sustainable development’ was made explicit at the Bank’s founding.
When I arrived in 2012, it was already a global leader at financing green investments, most notably through the private sector.
In fact, I remember Andrew (Steer) telling me before I even started that the EBRD was indeed doing a good job on climate and sustainability.
But what has happened since has taken things to a completely new level.
We’ve done this in four main ways:
- In terms of strategic approach, by setting ourselves clear ambitions and focussing hard on mainstreaming climate and environmental action
- By emphasising the link to our mandate, defining ‘green’ as a key ingredient in the transition to sustainable market economies
- Operationally by developing a range of financing products to scale up mitigation, adaptation and environmental finance beyond climate
- And, finally, building up policy activity to develop new green business opportunities
The results speak for themselves. Between 2012 when I arrived at EBRD and 2019:
- annual green finance almost doubled from €2.4 billion in 2012 to €4.6 billion in 2019;
- the green finance ratio increased from 27% of €8.9 billion to 46% of €10.1 billion
- climate adaptation finance more than trebled to half a billion euros;
- and beyond the investment numbers, carbon emissions reduction linked to our green activity over this period are estimated to amount to 53 million tonnes per year. That’s the equivalent of the annual emissions of countries such as Bulgaria, Hungary, Norway or Portugal.
A key moment in my Presidency on the green front was the ministerial summit on climate finance in Lima in 2015, ahead of COP21 in Paris.
Leo [Martinez-Dias], I think you were there.
This was when we launched our first Green Economy Transition approach and set the target of green finance amounting to 40 per cent of overall investment by the end of this year.
At the time this was viewed as extremely ambitious for an MDB.
So where are we now after four full years of our Green Economy Transition?
- We have already achieved a green finance ratio above 40 per cent twice. First in 2017 and then in 2019 reaching a record level of 46 per cent.
- In fact, we achieved an average ratio of green finance of 40 per cent instead of just a point target for the end of this year. That proved that with enough focus and determination we could really scale up our green finance. The private sector share of that is close to two thirds.
- These results have been achieved through a continuous mainstreaming of green finance across countries, regions and sectors. For example, over these four years, the green finance ratio of our activity in Ukraine increased from 39 per cent to 64 per cent. In South Eastern Europe it doubled to 48 per cent. And in urban infrastructure, an area in which WRI is very active thanks to the Ross Centre for Sustainable Cities, our activity reached over 90 per cent green.
In the short time left to me, I would also mention how we have:
- Overseen the end of investment in coal and put decarbonisation at heart of policy.
- We will no longer finance thermal coal mining or coal-fired electricity generation.
- We will also stop funding any upstream oil exploration, and will not finance upstream oil development projects except in rare and exceptional circumstances, where such investments reduce greenhouse gas emissions.
- And we continue to innovate. For example, last autumn we issued the world’s first climate resilience bond, worth US$ 700 million.
As a final dimension of my legacy, I would hope that the focus on energy efficiency will be enhanced and soon.
If we are to meet the challenge of remaining within 1.5 degrees of global warming, then energy efficiency is key.
The EBRD has a unique range of energy efficiency financing products and we must build on this across sectors, in industries, in buildings, in cities, in transportation and in the energy sector itself – globally.
2. What challenges and opportunities does Suma Chakrabarti see for the EBRD and other multilateral development banks, now and looking ahead?
First and foremost, the world is of course in the depths of the worst unforeseen crisis of my – relatively long – lifetime.
Have we reached the depths yet? We don’t know.
And the coronavirus pandemic comes on top of the climate emergency.
A climate emergency which is frightening and urgent.
A year of lower emissions will not make a difference without a decisive turn to a low carbon future.
Huge sums of money are now being poured into the recovery from the impact of Covid-19.
One burning question is how we can use those funds to best effect.
We have heard a lot about the importance of “not wasting the crisis”, of “building back better”, and of making sure that spending on recovery also targets a low-carbon future.
We agree, of course.
But it would be a serious error to consider spending on greening the global economy as no more than an optional add-on to the real business of economic recovery.
The truth is that green must be at the very centre, not on the periphery, of the recovery planning we do now.
Even pre-coronavirus, the world was clearly not on track to deliver the Paris targets.
The next stage in achieving Paris Agreement goals requires a level of international cooperation across borders and a degree of steady political leadership that sadly has not been much in evidence during this pandemic.
The MDBs are a very important part of the multilateral system.
A high point of my Presidency was presenting the 2025 climate objectives for the MDB system to the UN Secretary General’s Climate Action Summit in September last year.
These include an annual climate finance objective of US$ 65 billion by 2025, a doubling of climate adaptation financing and a private sector mobilisation target of US$ 40 billion.
The MDB system can, and indeed needs, to work better.
It has to, if we are to deliver the SDGs and our commitments under the Paris Agreement.
Why isn’t the system working at its best now?
Shareholders (and the G20 Eminent Persons Group) have redoubled calls for the MDBs to act more coherently as a system.
But a key constraint is that system’s rigidity when it is organised by geography.
The world cannot afford a situation whereby scarce skills are artificially confined to one region and denied to others.
Now is the time for a bold approach to optimise the system’s impact.
Such an approach would better mirror the technical expertise and competencies needed to deliver on the rightfully broad and all-encompassing areas covered by the SDGs.
The need for this joined-up thinking is clearest in Africa.
It has the greatest needs.
Africa is also furthest away from achieving the SDGs.
At the same time, Africa is a vibrant, youthful continent which stands on the cusp of real and lasting progress.
A fully effective MDB system would support the private sector development, essential to realising this opportunity, by deploying the skills of all its component parts to seize the moment.
I do hope that the EBRD’s shareholders will take this message on board in the months to come (when I will no longer be the Bank’s President).
The MDB system, as it stands, is also risk-averse.
In the face of the scale of the challenges the world faces, it is worth exploring whether we have struck the right balance between safeguarding resources and the spirit of “get up and go” which we all need.
The role of the MDBs should be to support countries and clients in raising their own standards.
But if the culture is one of zero tolerance for mistakes, it will be hard work even to stand still.
We must be both brave and accountable.
Here are a few other ideas for enhancing and improving the MDB system.
- End the tyranny of excessively conservative capital policies. We could move to modern capital management and base our approaches on risk weighted capital, rather than nominal. For the EBRD that would free up another €2 billion in lending a year.
- Our greatest impact comes through the capital we provide to our partner banks which they on-lend multiple times. When we loosen their capital constraints of partner banks through either the provision of capital or capital relief through guarantees, impact would be enhanced many times over. Blending with donor resources would multiply that impact even more.
- We should challenge ourselves to do more with new investors looking for impact; new instruments such as thematic funds and new uses of old instruments like guarantees.
- And increasing capital across the MDB system would increase that impact in a cost-effective manner too.
3: What advice does Suma Chakrabarti have for development practitioners in civil society? How can the finance, research and NGO/CSO communities work together more effectively?
As part of my legacy as President, I hope that the EBRD’s new Green Economy Transition approach will soon be approved.
It contains two important concepts relevant here: networks and systems thinking.
Over my now quite long career in development and public service, I have observed time and time again how important networks are.
Networks unite talented people with different expertise and skills to generate transformative ideas and impact.
I witnessed this dynamic in action as a member of the Global Commission on the Economy and Climate.
It combined the power of analytics represented by WRI and Lord Stern with the political and business influence of figures such as Felipe Calderon, Ngozi Okonjo-Iweala and Paul Polman.
The result is a clear storyline about the growth story of the 21st century and a simply structured roadmap.
I am delighted to have the opportunity to pursue my involvement with the Global Commission.
Convinced of the power of networks, I will also be joining the Clean Growth Leadership Network.
It gathers together world class entrepreneurs, business people, engineers, scientists, academic researchers and policy leaders to work on raising living standards while reducing environmental impact.
It does so by promoting sustainable economic growth through innovation and clean technology
Systems thinking is also key to addressing complex challenges.
This is particularly true of the most fundamental systems challenge confronting us, climate change.
Issues are interconnected and resolving any single one requires consideration of the impact on others.
The current pandemic provides a sharp illustration of the connections between health, economics, social issues and politics.
From the perspective of networks and systems thinking, the NGO and CSO communities play a key role in terms of:
- Pure knowledge, be it scientific, technical or economic;
- Forcing connected systems thinking in a world that is increasingly divided up by sector and specialisms;
- Facilitating the connection between global thinking and local action;
- Connecting environmental and social issues and developing strong advocacy to influence political and financial policy.
From the perspective of finance:
- Our relationship with the NGO/CSO communities is now better articulated. CSOs need to keep pushing, finance needs to keep listening.
- But the relationship between finance and research is uneven. They operate within different timeframes. We need applied research, which can accelerate deployment.
- NGOs, particularly think tanks such as WRI or WWF, have a key role to play. They combine analytical power with influence. It is no coincidence that this event today, one of the highlights of my last week as President, is taking place under your auspices.
The relationship between WRI and an MDB, such as the EBRD, provides an excellent example of effective articulation around specific action agendas.
Climate finance with Leo;
Cities and sustainability with Ani and the Coalition of Urban Transitions;
Energy, including buildings energy efficiency, with Jennifer and the NDC Partnership.
The progress of our relationship reflects both our common agendas for action and the increasing capacity of an organisation such as WRI to engage, develop and influence.
It is most impressive.
Thank you very much.