PRC Article

MDB investment can support climate-resilient COVID-19 recovery in developing countries

Authors: Deborah Murphy, IISD and Prabin Man Singh, PRC

The 2019 coronavirus disease (COVID-19) pandemic has resulted in disruptions to and a weakening of the global economy in 2020. This health crisis and its economic impacts have demanded the attention, management and resources of both Multilateral Development Banks (MDBs) and developing country governments. The NAP Global Network reports adaptation to climate change may not be a priority in the short term for some governments and mobilizing resources for adaptation may be challenging as governments grapple with the added expense of COVID-19 responses, revenue loss and increased debt.

While MDB and developing country government attention on adaptation finance may have taken a backseat to COVID-19 responses in 2020, it is critical that economic recovery programs incorporate adaptation and climate resilience. The impacts of climate change are increasingly evident. The five-year period from 2016 to 2020 is expected to be the warmest on record, contributing to such impacts as disappearing Arctic ice, rising oceans, and more droughts and floods. In Nepal, extreme rainfall in 2020 caused 445 flooding and landslide incidents that claimed about 430 lives and displaced more than 5,000 people. This flooding, combined with the COVID-19 pandemic that has infected over 185,0000 people and claimed more than 1,000 lives in Nepal as of early November 2020, has severely disrupted economic activity. Economic recovery programmes for Nepal require additional financing from both domestic and international sources.

MDBs are at the forefront of addressing the challenge of the pandemic in many developing countries, and have committed hundreds of billions of dollars in loans and grants to first help tackle the health emergency and then move toward stimulus measures for economic recovery. In Nepal, the Asian Development Bank has provided grant funds of US$ 3 million for COVID-19 emergency response and a US$ 250 million concessional loan that is focused on social protection for the poor and vulnerable and economic support especially for affected small businesses. The World Bank has provided a concessional loan of US$ 29 million for COVID-19 emergency response and a grant of US$ 10.85 million for a school sector response to COVID-19. In addition, the World Bank has approved almost US$1 billion in concessional loans in 2020 to sectors that are critical to an effective COVID-19 economic recovery, including agriculture, urban development, energy, trade, forestry and strengthened financial sector stability.

A key lesson emerging from our research project, “Mobilizing Development Finance for Adaptation” is that adaptation must remain at the forefront in MDB and developing country government planning and programming. The Prakriti Resources Centre is working with the International Institute for Sustainable Development (IISD) to examine opportunities to scale up financing for adaptation from the perspective of developing countries and MDBs. The African Centre for Technology Studies (ACTS) in Kenya and Libelula in Peru are also research partners of this project that is funded by Canada’s International Development Research Centre (IDRC).

Our preliminary research tells us that sustainable recovery to the COVID-19 pandemic means that investment decisions taken today need to incorporate a longer-term perspective that promotes infrastructure, urban, and agricultural systems that are climate resilient. Additionally, crisis response needs to stress the importance of access to the environmental determinants of health – including water and sanitation, and nutritious food – and addressing the expected impact of climate change on these sectors. In the short term, this includes ensuring that MDB investment in COVID-19 recovery accounts for adaptation priorities; as well as highlighting the contribution that adaptation finance can make toward national social and economic development goals.

Raju Pandit Chhetri, Executive Director of PRC, highlighted the linkages between Nepal’s COVID-19 recovery response, the country’s emerging adaptation priorities, and World Bank programming. He remarked that, “The World Bank is supporting Nepal to develop an adaptation investment plan. It is critical that this plan be linked to and support national processes to develop Nepal’s National Adaptation Plan and to update the country’s Nationally Determined Contribution (NDC).” Chhetri further explained that the updating of the NDC and development of the NAP offers opportunity to guide adaptation action in the country’s pandemic response. But a critical factor in scaling up MDB support for adaptation is that the request that come from developing country governments. Government officials responsible for adaptation need to be engaged in discussions with MDBs; and MDB officials need to learn from and draw on country-led adaptation processes to identify priority actions.

While adaptation may appear to less of a priority during the COVID-19 pandemic, the climate emergency is not diminishing. MDBs and the Government of Nepal can work together to factor climate adaptation needs in COVID-19 recovery investments that promote inclusive, climate-resilient and sustainable systems and communities that encourage economic and social development.