The Green Eureka Moment: Investing and Inventing to Stop Climate Change

By Raluca Anisie, Carbon Impact Analyst and Paul Hailey, Head of Impact, responsAbility Investments AG

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A family bakery in Ecuador that used a green loan from a GCPF investee to buy a more energy-efficient oven. Photo: José Jacomo

In the 3rd century B.C., Archimedes declared: “Give me a place to stand and with a lever I will move the world.” This phrase speaks to the potential of the right tools at the right time, but as anyone who has tried to build flatpack furniture will confirm, not having the right tools can derail any project, however grand.

In 2019, our quest to find and use the right tools to move the world is more urgent than ever. As UNEP stated at COP24, we are the last generation that can stop climate change. This challenge requires a mobilisation of investment on an unprecedented scale, yet enormous gaps remain, especially in the developing world. Filling these gaps will require ground-breaking investment approaches like blended finance, a method that uses public money to improve the risk profile of investments to catalyse private funding. However, tools such as blended products will also need to credibly demonstrate impact to attract and retain public and private investors. Continue reading

Investing in Resource Efficiency – The Economics and Politics of Financing the Resource Transition

By Florian Flachenecker, Junior Economist, OECD, and Jun Rentschler, Economist, The World Bank1

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Various factors are putting increasing pressure on policy makers, researchers, firms and investors to explore pathways towards sustainable and efficient resource management. These factors include: high and volatile resource prices, uncertain supply prospects, rising demand, and environmental pressures. Moreover, rapid technological transitions that are changing lives for the better are also adding to the challenge. The significant increase in renewable energy technologies, such as solar power, electric vehicles and smart-phone use, are improving people’s lives. While these developments are in line with the Sustainable Development Goals (SDGs), they are also driving up demand for critical natural resources.

Resource efficiency investments could help solve these challenges, yielding substantial benefits both economically and environmentally. And yet, global resource efficiency has increased by a mere 1% per year over the past three decades. This is insufficient to counterbalance ever-increasing resource demand. Continue reading

From aid to Global Public Investment: an evolution in international co-operation

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By Jonathan Glennie, independent writer and researcher, and Gail Hurley, Policy Specialist on Development Finance at UNDP


This blog is part of an ongoing series evaluating various facets
of
Development in Transition. The 2019 “Perspectives on Global Development” on “Rethinking Development Strategies” will add to this discussion


arrows-changeIt is time to bring aid to an end.

Gradually, maybe, as a few “pockets of poverty” still persist. But this symbol of global collective action that has lasted seven decades will now, inevitably and as planned, be ended.

That is the common view of almost everyone. Whether you are a member of the general public in a “donor” country, still feeling the effects of an economic downturn, or a citizen of a “recipient” country whose economy feels like it is taking off for the first time in living memory. Whether you believe the aid era has been an unqualified failure and should be ended as soon as possible, or that aid has actually been quite successful in promoting development but has now largely “done its job” and can be rolled back as countries reach “middle income” status. Whether you think the hole left behind by aid can be filled by fairer tax collection or by better-targeted private sector finance, both of which are experiencing growth of historic proportions. Even (perhaps especially) if you are part of the aid industry and are well-practised at repeating the mantra that “our job is to do ourselves out of a job”.

Whatever side of the political spectrum you sit on, you are unlikely to disagree with the notion that aid should be decreased as recipient countries’ incomes rise, bringing to an end an experiment intended to kick-start growth in sluggish contexts, but not to last in perpetuity. With only 34 so-called low-income countries left, the only question left to be discussed is how to manage a good “exit strategy”.

Aid is temporary. Success is when aid is no longer necessary.

That’s what we thought, too. That’s what we were taught. But it’s wrong.

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Maximising the public-private investment multiplier

By Alain de Janvry and Elisabeth Sadoulet, Professors at the University of California at Berkeley and Senior Fellows at the FERDI
 

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At the FERDI-IDDRI conference on “Development, Climate and Security” held in Paris on January 15, 2018, Barbara Buchner from the Climate Policy Initiative reported on the state of global climate finance flows for mitigation and adaptation. She made two points. First, finance is under-invested to combat climate change if the COP21 target in temperature increase is to be met. Second, private investment’s role in complementing public investment in climate finance is large, with an estimated 2/3 private for 1/3 public in current total contributions. This stresses the fundamental part private investment can play in meeting the COP21 objectives, particularly at a time when governments face multiple demands on public expenditures.

With public investment targeted to induce private investment, this raises the issue of public investment’s effect as a private investment multiplier. A useful way of thinking about the under-investment issue is consequently how to target public investment to maximise the public-private investment multiplier.

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Electricity for all in Africa: Possible?

By Bakary Traoré, Economist, Sébastien Markley, Statistician, and Ines Zebdi, Research Assistant, OECD Development Centre 1 


Explore the 2017 African Economic Outlook: Entrepreneurship and Industrialisation in Africa for more on this subject


Electricity-in-Africa-shutterstock_563620138For decades, access to electricity has been a serious challenge in Africa. It still is. 600 million Africans are not connected to an electrical network. African businesses cite electricity amongst the two most severe constraints on their operations (Enterprise Surveys, 2016). Twenty-five of the 54 countries in Africa, including Nigeria, South Africa, Ghana and Senegal, deal with frequent power crises characterised by outages, irregular supply and surging electricity costs. These are symptoms of insufficient generation capacity and a lack of infrastructure.

Despite these sobering facts, a number of recent initiatives signal that major improvements may be underway. The impetus to act is driven by the benefits Africa can reap by investing in electrification. Such benefits go far beyond direct job creation in energy infrastructure, as important as that is. Several pieces of evidence (Jimenez [2017], Torero [2014], van de Walle et al. [2013]) suggest that household electrification also increases job opportunities by carving out more time for work and enabling rural micro-entrepreneurship. We see three reasons for hope that Africa is on the path to greater electrification – provided certain conditions are met.

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Broadening financing options for infrastructure in Emerging Asia

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By Kensuke Tanaka, Head of Asia Desk, and Prasiwi Ibrahim, Economist at Asia Desk, OECD Development Centre 


Learn more about this timely topic at the upcoming
1st International Economic Forum on Asia
Register today to attend on 14 April 2017!


Kensuke-Prasiwi-AsiaForumAgreeing on the need for new infrastructure is one thing; finding a sustainable way to finance it is another. According to the ADB, an estimated USD 26 trillion (or USD 1.7 trillion per year) will need to be invested in infrastructure in its developing member countries1  between 2016 and 2030 if these economies are to maintain their growth momentum, eradicate poverty and respond to climate change2  .Given the scale of investment needed, countries in the region will not have sufficient funds to meet demand. Indeed, financing infrastructure investment has been a considerable challenge for the region. Political factors can further complicate financing when they lead to the inefficient allocation of public funds. How best to finance infrastructure is, therefore, a key concern for policy makers in the region.
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How China’s Rebalancing Affects Africa’s Development Finance … and More

By Helmut Reisen of Shifting Wealth Consulting and former Head of Research at the OECD Development Centre

 

Africa-globe2015 has been a challenging year for Africa. Average growth of African economies weakened in 2015 to 3.6%, down from an average annual 5% enjoyed since 2000. Total financial flows have decreased 12.8% to USD 188.8 billion, including UNCTAD estimates for foreign direct investment. Africa´s tax-GDP ratio tumbled to 17.9%, down from 18.7% in 2014.

Three core factors have underpinned Africa’s good economic performance since the turn of the century: high commodity prices, high external financial flows, and improved policies and institutions. Now, China´s decline in investment and rebalanced growth is depressing commodity prices and producing headwinds for Africa. Such macroeconomic headwinds for net commodity exporters also imply that Africa’s second pillar of past performance — external financial inflows — have suffered as well.

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