When the ADB brought its 36 client countries together for a recent strategy consultation, there was a difference in approach to prior gatherings. Instead of the Bank talking mainly to its finance counterparts in governments, environment, planning and other ministries relevant to NDC implementation and financing were in the room as well.
“We wanted to make sure that finance ministries appreciated that there were now national commitments, made in Paris, for which they were going to need to find a provision in budgets,” says Preety Bhandari, Director of the Climate Change and Disaster Risk Management Division at the Asian Development Bank. “That led to some very interesting discussions on policy changes that might be needed to encourage greater private sector engagement.”
The interface between climate, governments and markets is where Bhandari has spent most of her career. Working for some 20 years with The Energy and Resources Institute in India – “the first developing country institute to examine the climate change challenge”, as she points out – she was heavily involved in the creation of the Clean Development Mechanism, “a great introduction to the challenges of involving the private sector, and of creating a global-level agreement.” Moving to the UNFCCC in the early 2000’s, Bhandari was then involved in further ground-breaking work on the architecture of climate finance, including the establishment of the UNFCCC Standing Committee on Finance and the Green Climate Fund. She was also involved in the organisation of COP 8 in Delhi in 2002, the first where climate adaptation was on the agenda alongside mitigation. She joined the ADB in 2012.
There is a real buzz around the Bank on climate financing
“Back then, we were a small co-ordinating unit. Now there is a real buzz around the Bank on climate financing. We were the first development bank to make a commitment to double our climate investment, in 2015 (when Bhandari’s climate change team was also given divisional status), and we have also been quite ambitious and transparent in making a clear commitment to the split of financing between mitigation and adaptation (2:1 within an overall annual target spend of $6 billion). That split was based on an internal assessment of our pipeline, with a good measure of ambition. The $2 billion commitment to adaptation is a big jump from what we have been spending, and we think it sends a really clear signal of our intent.”
The increased ambition on climate spend has in large part been made possible by merging lending operations from a special development fund with the Bank’s ordinary capital resources, meaning more can be committed overall and also to less developed countries. (This is a piece of lateral thinking about accounting treatment of the kind we note think-tanks are urging development banks to do more of.)
Bhandari’s division, which also incorporates disaster risk management, is a support team within the Bank’s Sustainable Development & Climate Change Department. The department covers energy, water, urban, gender, environment and governance themes among others, providing strategic direction to the five sub-regional departments that have the direct client country relationships, as well as the private sector department.
Two-phase Strategy to be finalised in April
The Bank’s new climate change strategy, which will be finalised in April, has two horizons. “We want a longer term engagement with countries, but we realise that there’s a lot to be done in terms of the NDCs in the next few years,” Bhandari says.
Phase 1 of the strategy, which will run to 2023, will be focused on further refining country NDCs to turn them into climate investment plans. “This will include us working with countries to understand where they need external support, and also what we need to change at the Bank to provide that support.” Phase 2, up to 2030, will be the main implementation Phase for these ‘NDCs 2.0’ ”.
The Bank has to work differently. Countries are at different stages and have different ambitions and challenges
“ADB has to work differently,” Bhandari stresses. “Our countries start from very different points in terms of capacity, and have very different ambitions and economic, social and environmental challenges. What’s more, the climate finance landscape is changing, there are a number of non-state actors like cities appearing on the scene, as well as the private sector, which has to be engaged at scale. We really need to become conveners of financing, rather than just providers of some of it. And the NDCs will be the cornerstone of this engagement.”
Five principles …
Bhandari says that there are five principles underpinning the new strategic direction and modus operandi of the Bank.
“First, we need to ensure there is coherence between our sector and thematic strategies at the bank and the climate objectives of our member countries as articulated in their NDCs. We need to be integrating those objectives in our planning exercises.
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The second principle is enabling low carbon transformations, working out how we can shift our investments to allow for that, with our client countries expected to ratchet up their ambitions for reducing emissions in the 2020-2030 period. The third is enhancing support to climate change adaptation, and we want to send a clear signal on that through systematic approaches for climate and disaster risk management and optimising opportunities for adaptation measures in our investments, especially in agriculture, food security, water resources, rural and urban development. The fourth underlying principle is integrating climate change and disaster risk management taking account of likelihood of increased frequency and intensity of weather events, and the fifth is integrating environmental and social issues with climate change actions, so that we can maximise co-benefits.”
… Backed by five action areas
Alongside the five principles are a further five “action areas” as Bhandari refers to them. These are: developing supporting policy frameworks for ambitious climate action; helping countries access all forms of climate finance and acting as a convener of co-financing; promoting the use of climate-friendly technologies, even though these might be more expensive, and changing the Bank’s procurement system accordingly. The fourth action area is developing knowledge solutions and providing capacity development support for climate services, preparation work such as cost/benefit analyses and readiness for climate finance; The final action area is to strengthen the Bank’s partnership approach and networks, to leverage the complementary strengths of relevant institutions.
Recognising the growing role and influence of non-state actors, ADB’s urban sector group is developing a strategic framework to work with cities. “We want to be able to engage with them on creating end-to-end solutions,” Bhandari says, “not just project by project basis.” The Bank also wants to work with knowledge institutions. Its private sector operations will be massively expanded, and are expected to reach some $4 billion by 2020, with major expansions in funding for infrastructure, agribusiness, climate change and renewable energy, and inclusive business. Committed to increasingly go ‘green,’ eight out of ten of the Bank’s private sector energy projects in 2016 were in clean energy, exceeding $1 billion in investments.
This, though, is in the context of a recent Bank report estimating that infrastructure needs in the Asia Pacific regions will exceed $22.6 trillion through 2030, or $1.5 trillion per year, if the region is to maintain growth momentum. The estimate rises to over $26 trillion, or $1.7 trillion per year, when climate change mitigation and adaptation costs are incorporated.
An example of how climate adaptation can add to costs is the Bihar New Ganga Bridge Project in India, for which ADB provided a $500 million loan and which will see a new road bridge constructed across the Ganges River and an integrated road network in the state of Bihar. A bank-to-bank bridge design was recommended over the alternative of building two smaller bridges and a connecting expressway, which was deemed to be more vulnerable to flooding. $200 million of the project cost is considered as addressing climate adaptation.
Overall, Bhandari says, the Bank estimates that climate proofing can add 2-6% of infrastructure costs – an estimate, at the high end, that accords with the 6% we have heard from another development bank.
Resiliency goes much further than just climate proofing
“Resiliency, though, goes much further than just climate proofing,” Bhandari notes. “And there is a variety of actions that can be labelled as adaptation, ranging from climate proofing to transformational development. For example, in a climate-smart agriculture project, the Bank could be looking not just investments for better irrigation, water conservation, improved tillage but also access to better seed varieties that build in long-term improvements in food security and weather-indexed crop insurance.”
Asked about the issue of the Bank’s risk policy (we recently covered this issue in light of a number of think-tank reports), Bhandari very reasonably referred me to her Strategy, Treasury and Risk Management colleagues, but noted that “as part of our strategy and policy framework we are going to be looking at the efficacy of different financial instruments in moving forward the climate objectives. That’s part of our action agenda, to figure out what is working well and what needs to change.”
In concluding our discussion, Bhandari points to the horizon on which the Bank is now fixed. “I think we are the first to take this much longer-term view. Rather than just stopping ourselves at 2020, our horizon is to 2030, looking at addressing the key global agendas and engaging with our client countries on this basis. We are dovetailing the climate strategic framework into the overall corporate strategy of the Bank up until 2030, so when that emerges in a little while you will see that sustainability and resiliency are absolutely at the core of that strategy. That’s quite a shift for the whole region.”
Preety M. Bhandari is currently the Director for Climate Change and Disaster Risk Management Division of the Sustainable Development and Climate Change Department (SDCC) at ADB, and also serving as Technical Advisor for Climate Change and Disaster Risk Management thematic group. She is responsible for providing policy and strategic direction to ADB’s climate change program and also leads the work on climate finance, with a particular focus on accessing finance from the Climate Investment Funds (CIFs) and the Green Climate Fund (GCF). Coordination of ADB’s activities in disaster risk management is also part of her portfolio.
Prior to joining ADB, she was heading the Finance, Technology and Capacity Building Program of the secretariat of the UN Framework Convention on Climate Change. She led the support to the international negotiations on climate finance, which culminated in the launch of GCF and the Standing Committee on Finance. She coordinated the establishment of the Technology Mechanism under the Convention, which includes the Climate Technology Centre and Network.
She has also worked as the Director of the Policy Analysis Division at TERI (The Energy and Resources Institute) in India.
She has over 28 years of experience in environment, climate change and sustainable development, having worked on projects across Asia, and in multicultural and diverse organisations. She is on the editorial board of Climate Policy and has in the past served as a member of the core group on climate change, established by the Government of India to assess India’s strategy for the UN climate change negotiations.