Distinguished co-chairs, members of the panel, your excellences, ladies and gentlemen, friends and colleagues,
There is no need to debate the reality of climate change. The scientific consensus of the last few years has brought climate change over the planning horizon for all countries. The science is absolutely clear and is understood almost everywhere. The impacts are being felt now. And in fact, the economics are compelling. A dollar invested in early warning can save $30 in the cost of relief and reconstruction after a disaster.
The costs are already punishing, especially for small island developing states. It is only the politics globally and nationally that are in doubt. As the Secretary-General of the United Nations and World Bank Group President Jim Yong Kim have said, 2014 must be the year of climate action. As Mary Robinson highlighted, in less than one month from now, heads of state and CEOs will meet in New York to confirm their commitment to take action on climate change.
The question we’ve been asking at The World Bank Group is, what does leadership look like at the beginning of the 21st century? What are leaders doing that will alleviate the burden that is already being felt in countries such as this? Countries, we hope, will describe how they’re re-tooling their economies with smart policies that put a price on carbon, that get the finance flowing, that drive efficiency through energy and transport and appliances and buildings. And set targets for renewable energy as part of an energy mix. Each country – developed, fast growing, and emerging – can pull the fiscal and economic and macroeconomic levers of policy and send clear signals to the private sector to drive investment away from the dirty and towards the clean.
With that kind of public policy intent, companies can describe how they take climate risks and how they seize opportunity and how they are changing their business planning. And it’s not theoretical; because we can point to countries at every stage of development that are already doing this. Together, if they all line up, you can start to see the momentum that is desperately needed for countries like these, in this region.
So we hope that at the Climate Summit there will be announcements about climate across many sectors, but we sincerely hope that there will be material announcements on the things which are absolutely profound and matter most in terms of how we manage our economies.
And there is a real need for policy coherence. You can’t dump your old car in the Pacific and then spend development assistance trying to clean the air. You can’t not tax carbon and then struggle to raise the dollars needed for development assistance and climate finance that will invest in resilience.
You could expand this to local programs and reduce the amount that has to be spent in the region by multilaterals and bilaterals. We simply cannot afford to keep spending money the way we do. It has been small island developing states that have been pointing this out for years. I hope we in The World Bank Group have begun to listen and have started to change the way that we work.
When it comes to resilience, we have been working with you to build resilience by strengthening countries’ and communities’ capacity to withstand the financial shocks that come from extreme weather events, to deal with the impacts of climate change and natural disasters, and to bounce back and recover quicker.
Our approach to resilience is from the reef to the ridge. We try to work with small island states to promote your private sector investment in sustainable jobs and the competitiveness that will keep your economies alive. From fisheries to tourism, we see investment opportunity despite the risk associated with the long-term trends.
At the same time, we are trying to ensure that disaster and climate resilience, as well as food and energy security, are fully integrated into your development plans. And to match the need you have to do that, we have from the 1st of July made disaster and climate risk screening a mandatory component of all of our lending into countries such as small island developing states. We hope and urge all other multilateral donors to do the same.
In the Caribbean, we focus on competiveness, on debt reduction, strengthening governance, in order to reduce vulnerability to climate and disaster risks. The debt conversation and the climate conversation are in fact the same conversation when we think about climate from a resilience point of view. The EU and others have talked about the Caribbean Catastrophe Risk Insurance Facility (CCRIF), which we are so proud to be a part of. It pools hurricane and earthquake risk for 16 Caribbean countries – soon to be joined by a number of neighboring Central American countries. And just a few months ago, in addition, we issued a three-year, US$30 million cat bond linked to disaster risk in the member countries. If a disaster strikes, the principal of the bond will be reduced and the insurance pool will receive a payout in the same amount – it essentially allows us to provide reinsurance to the CCRIF.
This kind of financial innovation is essential. The mechanism set up in the Caribbean was the first of its kind. Now, thanks to a similar solution, six Pacific island countries can also buy catastrophe insurance coverage as much as 50 percent cheaper than if they did it on their own. This year, Tonga was the first to receive a payout, following Tropical Cyclone Ian. For a partial payment of the premium, around $10,000, Tonga has received payments totaling over $1 million out of the facility, and they received the first payments within two weeks of the disaster. This is a very smart investment in resilience. This is a very smart investment in risk.
This insurance pool is part of a broader Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI). With the assistance from both the EU and Japan, we’ve also helped map more than 2 million buildings at risk across the region – from Apia to Majuro – enabling better disaster and climate risk planning.
Building on the success in the Caribbean and the success in the Pacific, we can now build the same kind of approach to disaster risk assessment and financing in the Indian Ocean. And we are already seeing results with strengthened improvements of post-disaster budget mobilization and execution.
So right now, more than 20 percent of our work with small islands is on programs that directly address climate and disaster risks. Over the past four years, our support has averaged US$145 million just for resilience. That’s going to increase to $190 million this year and go up. But we’ve heard from you, that it is not just the increase in the funds that matters most. In some cases, it is not really about the money. It is about how the money is made available. You’ve been very clear in telling us that you need the funding to be easily accessible and funding that is not fragmented in ways that further tax your capacities and your resources.
We are cognizant of this. We understand the burdens on a country like Samoa, which is now managing 14 different projects on climate and disaster resilience. The Solomon Islands is managing 22. So, I hope that we’ve heard you; you have generic issues of resilience, but you’re also special. You don’t want new windows – we have to build on the windows of financing that are already available. We have to consolidate, and we have to streamline, and then we have to scale up. You need it now.
I think that we completely understand that there is no financial, economic, social, or human benefit to not investing in resilience now. In fact, the residual risk simply goes up, and the cost of investment in reconstruction and resilience simply goes up, too. So the burden of management and of organization has to be more on us than on you. We would like to build on our existing program working with our partners to scale up small island states’ resilience, to meet the increase needs of small island nations.
What we are trying to do is not a new initiative but to build on what we have already done, to cut through the red tape, to make it easier, faster, and simpler to access funding to deal with resilience and climate change. One way to think about it is that if we are successful and we can inject investment into resilience now it will, in addition, ready you for the eventual flow of funds from the Green Climate Fund and other climate finance sources. We hope that this initiative will help pool donor resource available now, reduce your transaction costs, allow for economies of scale across countries, and lay the groundwork for direct country access to global climate funds.
You can think of it as perhaps your one-stop shop to deal with the real impacts of climate change. We are going to have to come together to make this work: small island states, donors, and the development community. We sincerely believe at The World Bank Group that it is the time and it is the place to join hands and, as you have asked us to do, form the partnership that will make this happen.
We are confident that with your support we can step up, we can mobilize, and we can streamline, and we can inject the resources where you need them to those who need them most.