"Climate co-benefits as a metric has been an extremely effective way of articulating how climate and development actually work together. In some sectors, this connection is already quite evident: investments in agriculture that also boost the resilience of farming communities or in transport that encourage low-carbon mobility normally generate higher co-benefits. But we’re also making a concerted effort to boost co-benefits in other Practice Groups and using the corporate target to mainstream them much more widely across all our development work."
What is the history behind climate co-benefits?
The World Bank formally announced the “28% co-benefits by 2020” target in the run up to the landmark COP21 in Paris – it was a key goal of the Bank Group’s first Climate Change Action Plan, adopted in April 2016, designed to support countries to deliver on their national goals under the Paris Agreement on climate change.
Addressing climate change has become one of the central narratives and policy backbones of the institution’s recent commitments as part of the IBRD capital increase and IDA’s past and current replenishments, with co-benefits featuring as the key metric in how the Bank Group supports countries address climate change. This is especially important because we know that climate change impacts the poorest and most vulnerable and poses a major threat to good development outcomes.
The target itself continues to evolve: in December 2020, Bank Group President David Malpass announced a new, more ambitious target of 35% climate finance over the next five years.
Why is the World Bank’s target for 2021-2025 set at 35%, and not at 100%?
We do get asked this a lot, but the current methodology just doesn’t work that way:
First, in the projects that do generate climate co-benefits, the current methodology only captures the share of financing that is directly tied to climate action. For instance, say the Bank is supporting a road development project. The team leading the project would look at boosting the overall resilience of the road, for instance, ensuring that it can withstand heavy rainfall or storm surges. The entire road project therefore may be fully “climate-proof,” but only the portion of finance dedicated to the needed drainage measures would count as climate co-benefits.
Similarly, many of our projects in the health sector, for example, are likely to have a profound impact on the climate resilience of a population. But the cost of climate activities that will climate proof the healthcare system tends to be a fraction of the cost of purchasing medical equipment, building hospitals and clinics, setting up the healthcare system, or, for COVID-19, purchasing vaccines. In other words, while small amounts of financing can generate substantial climate impacts, by design climate co-benefits will only measure those small amounts.
Second, not all World Bank projects can actually generate co-benefits. Although we’ve made significant progress in integrating climate considerations in sectors not traditionally associated with climate action, some policy lending and health, education, and social protection programs simply will not generate co-benefits. As a multilateral development bank, we have to respond to our client’s development needs first and foremost. We do work with our clients to explore all available opportunities to integrate climate considerations into their development and planning.
"The 35% target is a deeply ambitious one given the economic development and per capita income levels of our client countries, compounded by challenging economic recoveries from the COVID-19 pandemic. It’s an important signal of our commitment to put climate at the heart of our development work."
Where does the methodology come from and how do you use it?
The calculation for climate co-benefits is based on the joint Multilateral Development Bank methodologies for tracking climate finance in adaptation and mitigation (published in the annual Joint Report on Multilateral Development Banks' Climate Finance). The methodologies are refined regularly. For instance, a new methodology for climate mitigation finance is being reviewed with the aim to commence tracking in 2021.
Throughout the project preparation cycle, regional climate teams and we in the Climate Change Group’s Advisory and Operations team work together with project teams and sector experts, and other supporting units across the Bank, to ensure that climate considerations are reflected in project design. Once the project is finalized and goes to the Board of Directors for approval, we provide a final assessment of co-benefits.
Our rigorous internal consultation and review process ensures that the methodologies are applied consistently. And we publish a list of all projects that have been tagged with co-benefits annually (see for instance our FY19 data).
Are adaptation and mitigation co-benefits measured differently?
For mitigation activities, a one-ton reduction of CO2 emissions has the same impact regardless of where the activities are located, and it is possible to define lists of typical activities that support a path to low-carbon development.
On the other hand, adaptation activities are project- and location-specific – the adaptation needs of one project may be different from another project depending on their location and vulnerability to climate change. Unlike mitigation activities, it is not possible to produce a standalone “list of adaptation activities” that can be used under all circumstances. So when we prepare to assign adaptation co-benefits, we ask the following three questions and look for the evidence in the project design:
You might think that mitigation co-benefits are assigned more easily based on this explanation. But the list of mitigation activities goes through rigorous technical review to make sure that we capture activities that contribute to long-term emissions reduction and enable a low carbon development trajectory for countries.
Despite their different approaches, both methodologies track and report climate finance in a granular manner. In other words, the climate finance reported covers only elements or proportions of projects that directly contribute to or promote adaptation and/or mitigation.
What else should we measure?
Climate co-benefits is an important metric. It tells us how much finance supported climate action – including projects that mitigate climate change, such as solar development, or projects that promote adaptation, such as rehabilitation of drought-affected farmland. And there is no doubt that setting a climate finance target drove us even harder to consider climate change across a range of development interventions, with the result that we have successfully mainstreamed climate action throughout our projects.
But co-benefits do not tell the whole story of these efforts. New metrics strive to go beyond measuring climate inputs to measuring the climate impacts and outcomes of our projects. For example, all IDA projects with at least 20% climate co-benefits must now include at least one climate-related indicator to help us gauge the climate impact of our investments and give us the confidence that what we are investing in is resulting in climate action on the ground. We are also piloting a new Resilience Rating System to rate how well a project plans for climate risk and builds the resilience of people. These new metrics strive to go beyond climate co-benefits and move towards an approach that better articulates the total value proposition of the Bank’s climate action. The development and consolidation of these next generation metrics is an important objective for the Climate Change Group in the coming months.
