By Joe Dickman and Eirini Pitta
Countries have a desperate need to limit the health, economic, and social damages wrought by the COVID-19 pandemic. Over one million people have lost their lives. Businesses are struggling to survive the global recession triggered by COVID-19, and people are losing jobs and livelihoods, leading to increased hunger and poverty.
As policymakers scramble to respond to the pandemic and ensuing economic crisis, they are also designing recovery packages that can pave the way for a more resilient, ecologically sustainable, and equitable future. Climate finance can play an important role in these efforts.
The fallout from COVID-19 has drastically changed the context in which efforts to combat climate change are taking place. Climate and other development-related finance must adapt to stay relevant and effective in supporting the critical needs of countries within this context. Maximizing the economic, social, environmental, and institutional impacts of climate-related investments is more critical than ever.
The Climate Investment Funds’ (CIF) extensive implementation experience across a range of sectors offers important lessons for how climate-related investments can support COVID-19 recoveries. A new learning brief (see here for summary and full report) from the CIF Evaluation and Learning Initiative highlights specifically how investments in three key areas – green economy, policies and institutions, and support to vulnerable populations (see graphic at bottom) – can help countries’ pandemic recovery efforts.
Here are 7 key lessons emerging from CIF’s experience:
1.Investments in clean energy create millions of jobs while strengthening key sectors of the economy to assist recoveries.
Economic modeling estimates that CIF’s Clean Technology Fund (CTF) portfolio is contributing to at least five million person-years of employment and over USD40 billion in additional economic value-add. This kind of job creation and increased economic activity can help boost economies that are reeling from the pandemic. Renewable energy investments can also increase energy security and strengthen local supply chains, as seen in CIF’s experience in Morocco. Stimulating markets in distributed clean energy (such as rooftop solar in India) and energy efficiency (as in Turkey and elsewhere) can likewise support businesses and households adversely affected by the economic recession, through greater energy productivity and reduced costs.
2.Climate resilience investments can stimulate economies and generate employment, as well as prepare countries for future shocks.
CIF’s experience in countries such as Mozambique and Niger shows that investments in climate-resilient infrastructure and climate-smart agriculture can not only boost employment and stimulate local economies, but also support remote populations and smallholder farmers adversely impacted by shocks such as the pandemic through increased market access, improved crop productivity, and greater food security.
3.Investments in sustainable forestry can generate economic returns and employment for COVID-19-affected communities, alongside environmental and climate benefits.
Unlocking natural capital investments can deliver important social, economic, and environmental outcomes. This is significant given that about 1.6 billion people globally rely on forests for food, income, and livelihoods. While there is a significant gap between the potential for sustainable forestry investments globally and the reality on the ground, concessional finance can help by de-risking investments and building capacity. As seen in CIF experiences in Mexico and Laos, this helps remote, forest-based communities – many of which are being devasted by COVID-19 – with more secure jobs and income.
4.Climate-friendly policy reforms can be advanced by coupling large-scale investments with technical assistance in the context of COVID-19 recovery lending.
CIF’s experience demonstrates that coupling large-scale financial investments with policy and regulatory support can create the necessary incentives and capacity for climate-related reforms. Kazakhstan provides a good example, where CIF-supported technical assistance led to an upgraded renewable energy law with a feed-in tariff mechanism. Combined with concessional finance to address market liquidity issues, these efforts helped attract new investments of over USD1 billion. A programmatic approach to investment planning deepens these linkages between policies and investments.
5.Institutional strengthening efforts can help governments and financial institutions to support effective COVID-19 recoveries, while mainstreaming climate action.
Institutional strengthening of key national ministries or agencies through technical assistance and capacity building, as in CIF programs in Zambia, Brazil, and Mexico, can help governments to orchestrate effective responses to both COVID-19 and the climate crisis. Strengthening the capacity of local governments at the provincial, district, and community levels reinforces front-line efforts to combat these challenges. Finally, channeling financing through national and local financial institutions can strengthen the financial sector, crowd in private sector investment, and help climate-friendly investments and services to reach smaller-scale businesses and households hit hard by the pandemic.
6.Climate-related investments can improve health, livelihoods, and other socioeconomic outcomes for vulnerable households and communities disproportionately impacted by COVID-19.
Both the COVID-19 pandemic and the climate crisis are exposing and deepening persistent inequalities. Without dedicated efforts, these twin crises will continue to have worsening impacts for the world’s most vulnerable populations. Climate-related short-term livelihoods and cash-transfer programs can offer immediate relief. For example, a Payment for Ecosystem Services scheme in Burkina Faso significantly increased food and livelihood security for at-risk populations, while increasing forest cover. Investments in low-carbon energy access, sustainable transport, and clean cookstoves can also improve health and other outcomes in poor communities. In Honduras, for example, CIF funds are supporting mobile solar-powered peripheral clinics, increasing access to essential health services in light of new COVID-19-related demands.
7.Dedicated support to indigenous peoples, women, local stakeholders, and other vulnerable or marginalized groups can reduce COVID-19 impacts and foster more inclusive green recoveries.
CIF’s Dedicated Grant Mechanism (DGM) for Indigenous Peoples and Local Communities (IPLCs), an innovative USD80 million program designed by and for IPLCs, is a powerful example that is generating compelling outcomes related to inclusion, livelihoods, and forest preservation. Prioritizing gender equality and local stakeholders in climate as well as pandemic responses can also enhance local benefits and produce broader development outcomes relevant to both crises.
Going forward, institutional policies and practices mandating greater attention to these areas, as well as transformational change, development impacts, and just transition, can support more equitable, inclusive, and sustainable COVID-19 recoveries.
Building on its track record and lessons learned the CIF has positioned itself once again at the frontier of climate action through the development of new investment programs in the areas of Integration of Renewable Energy into Power Systems, including Energy Storage, Accelerating the Coal Transition, Climate-Smart Urbanization, Natural Capital, and Decarbonized Industry. These will play a key role in supporting developing countries in ensuring a green and resilient recovery.
CIF’s implementation experience over the past decade demonstrates that climate investments can contribute immensely to countries’ COVID-19 recovery efforts, by supporting governments to simultaneously advance socioeconomic development and climate goals. The extent to which future investments can optimize these contributions will not only help determine our collective ability to address climate change, but it will also drive the ability to implement green recoveries that reduce harm in the near term and pave the way for a more sustainable, prosperous future for all.