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The role of the World Bank in filling gaps in the global risk architecture

Rasmus Heltberg's picture
In the World Development Report 2014 on Risk and Opportunity we discussed the need for collective action to prepare for, mitigate, and cope with risk. Our report called for more systematic risk preparation by households, communities, and nations. It also called for the international community to step in whenever risks cross borders or are likely to overwhelm countries’ capacity to cope. It explained that investing more in ex ante risk management has high pay-offs but tends to be difficult to motivate emotionally and politically.



Yet for the World Bank, the political motivation for engaging in risk management has arrived. The international community has been asking the World Bank to help foster collective action on global risks. For example, a recent report by an Eminent Persons Group set up by the G20 highlighted the need for action, including by the World Bank, to provide public goods, policies and investments to respond to global threats with greater urgency, scale, coherence and impact: “The current scale of activities falls far short of what is needed given the urgency and magnitude of the challenges” (page 43).  The report concluded on gaps and overlaps in responses by the multilateral system and suggested that the World Bank, together with United Nations agencies, take on a formal role in coordinating actions by different parties.

An earlier high-level panel convened by the Center for Global Development also recommended a larger role for the World Bank in providing global public goods.  Their argument centered around the perils to development stemming from systemic risks such as the rapid spread across borders of disease, pollution, financial instability, and armed conflict, as well as on the reach and comparative advantage of the World Bank as a global development cooperative. Nancy Birdsall has also been a vocal advocate for the World Bank to embrace the responsibility of providing development-relevant global public goods, including in this blog post.

One should not misconstrue these calls for action to imply the World Bank has been doing nothing to address global risks. To avert large-scale food insecurity, the Bank helped create the Consultative Group for International Agricultural Research (CGIAR) in 1971, the backbone of the global public agricultural research infrastructure. The World Bank became heavily engaged in resolving the debt crisis in the mid- to late 1980s. IFC helped create the “Equator Principles” in 2003 which 93 financial institutions in 37 countries are using to screen for and manage social and environmental risks in project investments. The World Bank Group (WBG) corporate strategy documents over the years show continued commitment to provision of global and regional public goods.

And the World Bank has been growing its global role in the last few years. It is providing data, knowledge, cooperation platforms, and financing related to managing development-relevant global risks. A cursory list of initiatives launched in recent years gives a sense of quite an impressive flurry of activity. Together with partners, the World Bank is:
  • Partnering with the United Nations on conflict prevention, as documented in the Pathways to Peace report and convening the Fragility Forum to share practical solutions to foster peace and stability
  • Setting up new innovative financing mechanisms for refugees
  • Setting up platforms and financing for adaptation to climate change, including the West Africa Coastal Areas Management Program and co-chairing a new Global Commission on Adaptation
  • Providing increased finance for climate change and seeking to catalyze carbon pricing and evolve carbon markets
  • Continuing earlier work on disaster risk prevention and on innovative financial and insurance products for natural disaster risk that help finance government disaster responses, as detailed in an earlier blog post.
  • Responding to famine emergencies in Africa and Yemen with support of around US$1.8 billion and helping to establish a Famine Early Action Mechanism to formalize links between early warning, financing and implementation for famine prevention
  • Responding to Ebola outbreaks and setting up pandemic insurance
  • Co-chairing a Global Preparedness Monitoring Board with the WHO to monitor the world’s readiness to respond to outbreaks and health emergencies
  • Launching a major push to better understand the opportunities and threats of disruptive technology and to scale up efforts by WBG teams to incorporate disruptive technologies in projects and operations
  • Developing a so-called Global Crisis Risk Platform to coordinate a “pivot to preparedness and prevention.”
Three things strike me from this list. First, while the World Bank is a central player on global development-relevant risks, it does not act alone. Partnerships are central in all these initiatives. Second, traditional economic issues like trade and the financial sector feature far less prominently than, say, health, fragility, and climate change. Arguably, some of the economic issues are covered by other parts of the multilateral system including the International Monetary Fund, the World Trade Organization, and the Basel Committee. With less of a gap, perhaps there is less of an external demand for the World Bank to convene on traditional economic issues.

Third, many of the initiatives on the list are coordination platforms. The World Bank has long been known as a provider of development data, knowledge, and finance, but it is increasingly also a convener of platforms, commissions, and coordination mechanisms among global partners. This is important. In the World Development Report 2014, we underscored the importance of solving collective action problems through proper coordination. The challenge, of course, is to agree on who coordinates whom, and how.

There seems to be demand for the World Bank to take a leadership on convening on many issues. The aforementioned report by the Eminent Persons Group, for example, recommended a formal role for the World Bank in setting up coordination platforms as a way to address the fragmented nature of the global response to many global risks. The World Bank has often been able to attract trust funds to finance parts of its work on global public goods and global issues, an indication of “market demand” from donors.

The challenge ahead for the World Bank and its many partners is to use these convening platforms to facilitate meaningful collective action, stronger global risk management, and, ultimately, better development outcomes. Thus, the stakes are high, with results that enjoy global visibility by the international community. This is why we at the Independent Evaluation Group have embarked on an evaluation of the WBG’s convening power, including engagements on coordination platforms. Our work is ongoing, so it’s too early to report on the findings. We are evaluating how and how well the World Bank and IFC use their convening power. As described in the evaluation Approach Paper, effective convening fosters: (i) shared understanding and changes in attitudes and positions; (ii) shared solutions such as changes in strategies, policies, or standards; or (iii) shared implementation of identified solutions, for example via a financial mechanism. We expect to share our findings internally with WBG management in April 2019 and publicly some months after that.

This is the third in a series of blogs commemorating the fifth anniversary of the 2014 WDR on Risk and Opportunity. Read all the blogs here.
 

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