I’d like to thank our hosts, the Dubai Electricity and Water Authority, and the University of Cambridge Institute for Sustainability Leadership, for bringing us together to discuss this very important topic: building a sustainable economy. This is a critical concern not just for policy makers, but also for businesses, and for all citizens. And it is imperative if we are to protect the gains we’ve made in development during recent decades, while building hope for a better future.
Today, I’m going to talk about pathways to achieve that better future, to improve the quality of life for people; to unleash private sector creativity and vitality while improving public services; and to create global public goods that make us more secure and prosperous.
First I’m going talk about what is standing in our way to achieve it – the challenges we face are daunting. Yet the Arab world has overcome similar challenges in the past, and we should be optimistic that we will find a way to do it again.
Many challenges today are global in nature. They do not respect borders, and they require international cooperation at many levels to address them. This includes challenges like climate change, pandemics, or violence that spills across national boundaries. Within countries, and between countries, the challenges also include the risks of inequality and polarization of our political and social institutions. It includes the lightning-fast changes in technology which disrupt markets and beyond.
We have a substantial gap in the access to investments in human capital, like education, training, and health care, and these are creating additional strains on our political institutions. Yet in countries like Korea which showed a commitment to education, they have achieved high literacy rates, and dramatic economic gains that are shared widely.
Here in the Middle East and North Africa, we have made great gains in giving children and young adults access education, yet learning outcomes have been disappointing, according to international assessments. Dubai is a notable exception, and your students have scored above the international average. Yet, as World Bank Group President Jim Kim noted in his speech at the World Government Summit in Dubai last month, if we want to achieve those kinds of gains, we have to ensure that early childhood health and experiences make them capable of lifelong learning. Today, too many children in this region are “stunted” by malnutrition, a lack of stimulation, limited early learning – and by exposure to violence and neglect. In effect, children are locked into poverty by their fifth birthday. As you know, the effects of these failed investments spill across borders and can affect us all, and they depress growth and jobs here in the region.
The Middle East and North Africa region also faces the challenge of slow growth, which the World Bank Group estimates was just 2.7 percent in 2016, and 3.1 percent in 2017. This reflects fiscal restraints in some countries and oil production constraints in others. Regional violence has led to mass displacement, loss of life, and destruction of infrastructure. Cross-border spillovers in the form of disrupted trade, fiscal pressures from spending demands related to refugees and security, and loss of revenues from tourism have caused damage to the region and had international ripple effects.
Every day, we can see the impact of regional violence on Arab economies. To be clear, sustainable development doesn’t guarantee peace -- but development failures often lead to extremism, violence, and even war. We see the early warning signs when public and private institutions lose their broad legitimacy. And we see the warning signs when citizens see themselves excluded from economic gains.
These are regional and global challenges, and we must address them together.
Population growth and economic development, aggravated by climate change, will increase pressure on energy and water resources. Both water and energy are essential for economic activity and to sustain economic growth. Both resources are key to sustainable development. And both are scarce. Close to two thirds of the MNA’s people (220 million people) live in areas of high water stress. With few notable exceptions, nearly all MNA countries, including the resource-rich ones, are facing shortages in natural gas to produce electricity and are striving to attract renewable energy investment.
Water and energy are equally vital and inextricably linked: energy (mainly electricity) is needed to pump, treat, transport, and desalinate water. Conversely, significant amounts of water are needed in almost all energy generation processes. With demand rising for both resources and increasing challenges from climate change, water scarcity can threaten the long-term viability of energy projects and hinder development. High energy consumption fueled by low energy prices can further threaten the depletion of the water aquifer, encouraging further water pumping.
Therefore, one key area of leadership of the UAE is enhanced engagement in water and energy efficiency. A number of solutions are being developed to address these challenges. Integrated planning can make the most of these two essential and scarce resources. The Dubai Electricity and Water Authority (DEWA) has achieved impressive progress in this area, delivering sustainable electricity and water services at a world-class level of reliability, efficiency and safety. The Dubai Clean Energy Strategy 2050 aims to provide 75 percent of Dubai’s energy from clean energy sources by 2050. In its pursuit of being water and energy efficient DEWA is installing smart meters across the Emirate. DEWA has also contributed to the decline of renewable energy costs, breaking the record for the lowest prices below 3 US cent per KWh. Based on such achievements, by 2030, the target is for one hundred percent of the desalinated water production using clean energy. Meanwhile, one has to acknowledge the remarkable achievement in reducing losses in water and electricity distribution in Dubai and the UAE.
As you know, the World Bank Group is very active in this space. Through its Thirsty Energy initiative, the World Bank helps countries better understand current issues at the water-energy nexus and address them through integrated planning that ensures sustainable development of both resources.
We can learn from one another to help solve the world’s toughest challenges, exchanging knowledge and personnel. Some challenges, such as climate change, require us to work together as global partners.
Certainly one mechanism is through our multilateral institutions, like the World Bank Group. We are governed by a board representing 189 countries, both donors and recipients.
Here in the Middle East and North Africa, our strategy is to focus squarely on our evident challenges, with the goal of promoting peace and social stability. The strategy is built around four pillars:
● First, we are working with our partners to renew the social contract – built on greater citizen trust, protecting the poor and vulnerable, inclusive and accountable service delivery, and a stronger private sector that can create jobs and opportunities for MENA’s youth;
● Second, we are promoting regional cooperation – particularly around regional public goods and sectors such as education, water, and energy so as to foster greater trust and collaboration across MENA countries;
● Third, we are working to achieve greater resilience from refugee and migration shocks;
● And finally, reconstruction and recovery – through a dynamic approach that brings in external partners, leverages large-scale financing, and move beyond humanitarian response to longer-term development when conflict subsides.
Countries will be in the lead for this strategy, and we will rely heavily on partnerships with national, regional, and global actors, especially the Islamic Development Bank.
With respect to financing, the WBG will continue to expand its investment in the region, but in addition to our own funds, the core focus will be on leveraging and mobilizing global resources to meet the extraordinary financing needs of the region through innovative mechanisms.
Last November, the World Bank Group announced our Middle East and North Africa plan to confront climate change, doubling the portion of financing dedicated to climate action, up to about US$1.5 billion per year by 2020, and helping countries adapt to the new climate reality.
In addition to our regional work on climate, we are helping countries to become more resilient to all kinds of shocks, to help refugees, and to begin reconstruction and recovery. The MENA Concessional Financing Facility, an innovative approach to addressing the Syrian refugee crisis, has been expanded to become a Global Facility to address displacement crises in any middle-income country in the world. The new Global Concessional Financing Facility will provide nearly $2 billion dollars of concessional financing to middle-income countries hosting refugees, and is already leveraging nearly $700 million dollars in concessional.
The recently launched World Bank Guarantee Facility is another innovative financing mechanism for the region. Using guarantees from donor countries, so far we have raised an additional $450 million dollars of funding for Iraq and $150 million dollars for Egypt.
But turmoil and instability are not limited to this region.
Other innovative finance ideas include: the private sector window for IDA, our fund for the poorest nations; and the Asset Management Company for our private-sector arm, the IFC. These new mechanisms are relevant to countries in this region, and are designed to focus on the challenges they’re facing today, and in the future.
Now I’d like to talk about how individual businesses can respond -- while sustaining their workers and their profits, and helping the communities where you work and live.
The business case for sustainable development is based on the understanding that business and social values are strongly linked and that business efforts to improve lives and strengthen local communities can also have long-term benefits to bottom-line profits.
A recent global report by Deloitte showed that when companies are able to articulate a clear purpose that can be linked to the global Sustainable Development Goals (or SDGs), the entire organizational culture and delivery model is improved, providing a compass for the way business is being conducted.
Let me give you a couple of examples.
GSMA is an association which represents the interests of nearly 800 mobile operators worldwide. Its members have committed to support the SDGs, and have developed indicators to assess their progress. They’ve implemented over 100 initiatives through its GSMA Mobile for Development program. One of these is the Humanitarian Connectivity Charter which supports Mobile Network Operators in improving preparedness and resilience among mobile networks in the face of natural and man-made disasters.
Another example is the company called “TRINE”, which is a crowd-investing model for financing solar energy solutions. TRINE provides electricity to communities that cannot bear the upfront costs themselves, while delivering a financial return for investors.
There have been multiple studies on why companies invest in sustainable development, and why they don’t. One frequently cited motivation was the need to adhere to industry norms of transparency, traceability, or environmental responsibility. The more readily measurable and the more immediate the issue, the more highly motivating it is.
Encouraging the private sector to invest in the SDGs has not been easy. For instance, uncertain performance expectations and evolving disclosure regimes hamper small- and medium-sized enterprises from impact investment efforts.
There is a clear need for a robust, transparent reporting framework that allows companies to report on financial and non-financial performance. That framework must also support the private sector and investors in their effort to combine profit maximization with the pursuit of long-term economic, social, and environmental objectives.
Despite these challenges, more and more companies are teasing out the incentives for greater investment in the SDGs. Financial and asset-management institutions are seeking to provide positive incentives to companies that incorporate sustainability, long-term thinking, and environmental, social, and governance (or ESG) performance criteria in core business models – by allocating assets accordingly. Such a move would go a long way toward promoting long-term progress on the SDGs. Institutional investors with long histories of ESG investments, such as the California Public Employees’ Retirement System (CalPERS), are being joined by a growing number of their peers. Some are even opting to divest from any company with exposure to industries or business practices that present sustainability challenges.
The international development community can also support these efforts, including by sharing quality data, and convening businesses to share best practices. More fundamental to the World Bank Group’s work, we are helping to create and maintain a stable and fertile regulatory business environment which can help businesses get started, grow, create jobs, and contribute to their national and global development goals. And of course, we are de-risking and co-financing projects with the private sector to encourage growth and create jobs.
To better sequence our interventions, we’ve developed a “cascade approach” to investment decision-making to encourage private sector participation, while leveraging and preserving scarce public dollars for critical public investments. If commercial financing is available, that is the preferred course. If it is absent, we try to address market failures. If those efforts are unsuccessful, we use utilize risk instruments and our own matching capital to try to encourage private investment. Finally, if absolutely necessary, then public and concessional financing will be used.
One example of private sector investment in the SDGs occurred this past week. The World Bank issued bonds that for the first time directly link returns to the performance of companies advancing global development priorities set out in the Sustainable Development Goals, including gender equality, health, and sustainable infrastructure. The equity-index linked bonds raised a total of 163 million Euros from institutional investors in France and Italy. The return on investment in the bonds is directly linked to the stock performance of companies included in the Solactive Sustainable Development Goals World Index.
The private sector has the opportunity to become a financier, shifting trillions of dollars of its capital toward helping achieve the SDGs. As I mentioned earlier, financial and asset-management institutions can provide positive incentives to such companies through the use of environmental, social, and governance (ESG) performance criteria in core business models.
Fortunately, many companies already fit this description. A 2016 CEO study conducted by the United Nations Global Compact and Accenture showed that many business leaders already see solving “societal challenges as a core element in the search for competitive advantage.” And almost half of all CEOs surveyed believe that “business will be the single most important actor in delivering the SDGs.”
According to a recent report published by Moody’s, interest in investments relating to climate change and sustainable development by institutional investors has grown rapidly in recent years. This trend toward sustainable investment will undoubtedly accelerate.
The Business and Sustainable Development Commission found that the returns are enormous for investments that support the Sustainable Development Goa. The commission said that these investments open up new opportunities and big efficiency gains; drive innovation; and enhance reputations.
The Commission identified several actions business leaders can take to capture their share of these economic gains, including incorporating the goals into your company strategy, rebuilding the social contract, and working with peers in your sector to drive the transformation into these new markets such as food and agriculture, which needs to feed a growing world population. Other suggestions include working with policy-makers to accurately price natural and human resources to even out these costs among all businesses, so that the costs, for example, of maintaining clean water and preventing pollution are shared. Finally, they suggested business activism in supporting longer-term sustainable investments, particularly in infrastructure, rather than seeking short-term gains.
I want to dwell on this point of seeking short-term gains, particularly in the financial sector, which. We all know the impacts of the failures of our financial system during the crisis in 2008-2009 – with the complicity of regulators and policy makers in dozens of countries. In terms of development, that short-term thinking and cavalier regulation slowed and reversed decades of hard-won gains in poverty reduction -- and, let me be blunt, it killed people. For those that are riding in the third class berths in the ship, when the boat takes on water, they are the first to drown. Those are the extreme poor, especially the young, the elderly, those who, due to their economic isolation, their lack of skills to adapt, found no safety net to catch them -- neither family nor government -- and they drowned in the financial crisis tsunami.
All of these ambitions must be brought to the local level. Each of us must ask the question, “what is my personal contribution to achieving the SDGs?” For Dubai and for Middle East and North Africa, I turn to the remarks made recently by HRH Sheikh Mohammed bin Rashid, who said we are not bound by the cages of history. He called for reviving our values, and applying the lessons of the past to rebuild Arab civilization. We can be optimistic about this prospect, because we have done it before -- and because we have the people, the resources, and the power to do it. What is required, Sheikh Mohamed, said is better management of our governments, economy, resources, and infrastructure.
We can shape that destiny, we can rebuild Arab civilization, and we can contribute to the noble Sustainable Development Goals, if work together – businesses, government, multilateral institutions, foundations, NGOs, educators, all of us. This is all within our grasp, if we pursue a common vision, build stable and efficient institutions, invest in our people, and pursue peace with as much passion as we do conflict.
The UAE has shown how it can transform itself within a few decades, investing in its people, creating wealth, and literally reaching toward the stars (with its Mars program). In the years ahead, we will need vision not just from our highest government representatives, but also from all of you here in this room. Your government offices, your businesses, your communities, your nations need your skills and your passion to realize a world that is more prosperous, more secure, and more just.
Thank you very much.