Phase I: 1970-87: limits to growth and sustainable development

Connections between development and the environment were first made by the MDBs in the 1970s. In 1971, the World Bank prepared the first MDB handbook linking environmental costs to long-term economic growth as an acceptable trade-off (Gutner 2002, 51, Lee 1985, x); they pioneered analysis of environmental factors in lending operations and conceptualised ‘ways to stabilise the environment so that it could be commercialised and used to promote poverty alleviation’ (Yudelman 1976). In other words, the environment was an input to economic growth, it was only a matter of finding the right level of exploitation. In 1972, the Club of Rome published the influential Limits to Growth, which modelled the consequences of exponential economic and population growth on finite natural resources (Meadows et al. 1972). Limits to Growth sparked debate about whether economic growth and sustainability are compatible as well as a reformist discussion on how best to manage natural resources while improving economic growth. This was a factor in the Inter-American Development Bank (IADB) becoming the first MDB to adopt an environmental policy in 1979.

Global concern over environmental sustainability grew throughout the 1970s and 1980s, spurred by heavily publicised human-made disasters including the 1978 Amoco Cadiz oil spill, 1984 Bhopal gas tragedy, and 1986 Chernobyl nuclear accident (Elliott 2004, 13). Further, the dire environmental consequences of numerous MDB, particularly World Bank, projects started to emerge. One of the most infamous was the World Bank Polonoroeste project paving 1,500 km of highway through the Brazil’s Amazon, which resulted in mass deforestation and immiseration of the local Amerindian tribes (Rich 1994). Thus, environmental factors began to be incorporated into development assistance, though not very well.

Sustainable development emerged as a concept first in the 1980 UN-led The World Conservation Strategy before entering the official communiques of several MDBs, but it was not formalised in lending operations or project evaluations (Lee 1985, ix). The 1987 Our Common Future, the report drafted by the Brundtland Commission, articulated sustainable development as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Brundtland 1987, 43). The Brundtland Report embedded the sustainable development concept in both policy and public discourse, an important step in mainstreaming environmental action (Redclift 2005). It was a key driver for MDBs revising their approach to environmental action throughout the 1990s.

Phase II: 1987-2000: formalising the international climate regime

The decade following the 1987 Brundtland Report saw the steady formalisation of the international climate regime, with the establishment of several environmental agencies. Among the first agencies was the IPCC set up in 1988 to assess existing scientific knowledge of human-caused climate change. The international community established the Global Environment Facility (GEF) in 1992, initially as a pilot programme with the World Bank. The 1992 UN Conference on Environment and Development - called the Rio Earth Summit - led to Agenda 21 outlining a non-binding sustainable development agenda. With the adoption of the UN Framework Convention on Climate Change (UNFCCC) at the Rio Earth Summit, the GEF became the financing mechanism of both Agenda 21 and the UNFCCC (Clapp and Dauvergne 2005, 208). The Kyoto Protocol of 1997, which entered into force in 2005, enacted greenhouse gas (GHG) emissions reduction targets. This was followed by the 2002 World Summit on Sustainable Development and the 2012 Rio +20 Summit.

The 1990s saw the steady formalisation of the environmental governance architecture, with the MDBs gradually aligning their operations to key international statements and agendas. Early on, the MDBs acted because of poor press and NGO pressure due to the significant environmental damage many of their projects were causing. The MDBs thus began to establish organisational departments to address sustainable development, as well as draft operational policy and guidelines. While relatively narrow in focus, the steady formalisation of the international climate regime led many MDBs to begin substantively engaging with environmental issues, framed in the 1990s in terms of sustainable development.

Phase III: 2000-10: from sustainability to climate change

The 2000s began with a highpoint of international collaboration - the launch of the Millennium Development Goals (MDGs) - but ended in a breakdown of inter-state cooperation with the failure of the 2009 COP-15 Copenhagen Summit to set emissions reduction targets. Two significant changes for the MDBs occurred. First, as outlined in Chapter 4, the MDGs became a unifying framework for the MDBs and Goal 8 was ‘to ensure environmental sustainability,’ which institutionalised it in the development banks (Alston 2005). In 2000, to better accommodate sustainable development and the MDGs, the GEF adopted a new policy giving the regional development banks (RDBs) access to GEF funding. This later expanded to include some sub-regional and specialised development banks, so there are now eight MDBs among the GEF’s implementing agencies. The World Bank’s Country Assistance Strategies - country-level diagnostics proposing loan schedules - began to ask sustainability questions from 2001 (Shyamsundar et al. 2001, 3).

The second significant development, identifiable from the late 2000s, saw the MDBs become key players in addressing climate change. With the collapse of COP-15 from stalled inter-state cooperation compounded by the spike in protectionist policies following the 2008 Global Financial Crisis (GFC), climate action lost priority for many countries, but this created more space for non-state actors in climate leadership. 2009 was a turning point for the MDBs; they demonstrated a concerted acceleration of interest in climate change adaptation, mitigation, and

Climate finance 235 resilience, taking on the idea of climate-smart development and not just sustainable development (Lipper and Zilberman 2018).

Phase IV: 2010-20: adaptation, mitigation, and resilience

The 2010s saw accelerated concern for climate adaptation (purposive changes to better cope with climate change), mitigation (stabilisation or reduction of GHG emissions), and resilience (building infrastructure and services to better withstand climate shocks) (Ayers et al. 2014, Henstra 2012, Janetos et al. 2012). The rhetoric turned from environmental factors are relevant to development to climate change shapes development. During the 1990s, multilateral and bilateral climate finance had tended to be short-term funding for ad hoc projects. By the 2010s, it involved longer-term and more substantial investments (Peake and Ekins 2017, 833-4). The World Bank nearly doubled annual allocations between 2012 and

2018 and other MDBs increased from the mid-decade too.

The 2015 Paris Agreement and SDGs are the lodestars of current MDB climate finance, broadly aligning their lending, policy, and normative actions. A joint Climate Change Finance Statement released by several large MDBs in September

2019 showed their common approach: commitment to increase climate finance allocation over time; catalysing private finance; supporting the Paris Agreement; strengthening climate finance transparency reporting; and, transitioning operations away from fossil fuel projects (AfDB, AsDB, AIIB, et al. 2019). The priorities are clearly for more finance and more private sector finance.

The Paris Agreement entered into force in November 2016. Its centrepiece is the Nationally Determined Contributions (NDCs), the emissions reduction and adaptation commitments of countries. The Agreement outlined the need to build cooperative networks through the MDBs and climate financing mechanisms to achieve the NDCs (Peake and Ekins 2017, Sharma 2017). Many MDBs joined the NDC Partnership Agreement and built their own NDC advisory platforms: IADB launched NDC Invest in 2016, the African Development Bank (AfDB) unveiled the African HDC Hub in 2017, and the Asian Development Bank (AsDB) established NDC Advance in 2018 as a technical assistance platform. Other MDBs, such as EIB and CDB, have not developed their own platforms but incorporate measures to ensure lending operations align with recipient NDC strategies (Wright et al. 2018). Many MDBs also work with the Green Climate Fund (GCF), proposed in 2009 and established in 2011. It is the world’s largest climate fund and was mandated to limit or reduce GHG emissions in developing countries and adapt vulnerable societies to climate change. It works through national and multinational implementing bodies including 11 MDBs.

The SDGs complement the Paris Agreement and the discursive shift from sustainability to climate action. The link between them is that global temperature increases above 1.5°C would make impossible the achievement of many of the SDGs and lead to worsening inequalities and a greater likelihood of conflict and humanitarian issues (IPCC 2018). The SDGs are much more comprehensive than the MDGs in their climate awareness and even imply that ‘[ejconomic growthcan no longer be attained at the cost of the environment’ (AsDB 2019, viii), but they do not go as far as suggesting that there is a trade-off between the two and they put a great deal of faith in technological fixes. While global agreements now indicate that ignoring anthropogenic climate change is no longer an option, the selfish retroliberal agenda has seen more and more states walk away from international agreements.

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