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It’s Heating Up: Industry Needs Climate-Friendly Policies to Keep Cool and Competitive

Etienne Kechichian's picture


Emiko Kashiwagi / Flickr

Industries account for nearly one-third of direct and indirect global greenhouse-gas emissions, and they will be playing an increasingly important role in achieving the global targets expected to be set at the international climate summit in Paris in December. For example, the cement (5 percent), chemicals (7 percent) and iron and steel (7 percent) sectors account for nearly one-fifth of all global greenhouse-gas emissions, and those sectors have significant potential to reduce those emissions.
 
Tackling climate change by focusing on industries has long been a contentious issue. Some industries claim that regulation will impede economic growth by imposing additional burdens on competitive sectors. In some cases, they have an argument; but, if it is designed well and adapted to the context, a smart and timely intervention can influence a socially and economically positive systemic change.
 
Many businesses themselves, by pursuing cost-effective, long-term, environmentally sustainable production, long ago realized that “going green” can be highly advantageous, and they have been taking a pro-active approach toward addressing the issue precisely because it makes business sense. One group of global business leaders – including Unilever, Holcim, Virgin Group and others – have taken their commitment further by encouraging governments to lend their support for net-zero emissions strategies by 2050.
 
Even in developing countries, companies like Intel are investing millions of dollars in energy efficiency to save on current and future energy costs. The company has already saved $111 million since 2008 as a result of $59 million worth of sustainability investments in 1,500 projects worldwide.
 
  

Source: New Climate Economy 2014; World Bank World Development Indicators 

The sentiment that climate action by both the private sector and the public sector is urgent was also an important theme highlighted by World Bank Group President Jim Kim during January's World Economic Forum conference in Davos. Mitigation measures, such as energy-efficiency policies, have long been seen as a way to improve profits and manage risks. The logic for energy efficiency, a key set of abatement actions by the manufacturing sector, is there.
 
The recent New Climate Economy initiative, produced by the Global Commission on the Economy and Climate, estimates that at least 50 percent – and, with broad and ambitious implementation, potentially up to 90 percent – of the actions needed to get onto a pathway that keeps warming from exceeding 2°C could be compatible with the goal of ensuring the competitiveness of industries.

Sowing the Seeds of Green Entrepreneurship: Startup Bootcamps and Pitching Competitions

Julia Brethenoux's picture

Heading back from a recent mission to Ghana, I felt really proud of what we have accomplished: training 20 of the most promising local clean-tech entrepreneurs through the Green Innovators Bootcamp. The words used to inaugurate the event are still in my head: “This bootcamp is not an end in itself. It’s the beginning of your journey as entrepreneurs.”

Indeed, bootcamps for startups and SMEs – as well as close cousins like Hackathons, Start-up Weekends, and Business Plan Competitions – are an increasingly popular activity used to catalyze innovative ideas and provide entrepreneurs with the tools and resources they need to launch their ventures.

In Ghana for example, infoDev -- a global innovation and entrepreneurship program in the World Bank Group -- organized a two-day training event to help a group of 20 early-stage entrepreneurs assess the feasibility of their business concept, identify their customer base, and refine their business model.
 
Organizing a bootcamp can be very challenging and time-consuming, but, when done properly – read “7 things you need to do to prepare for the perfect bootcamp” – the payoff is big. "Bootcampers" find these initiatives very useful to identify new solutions to the challenges they face to launch their businesses -- mostly access to finance, product development, and marketing. Furthermore, "pitching competitions" and "business contests" offer new entrepreneurs an excellent and safe stage to refine their business pitch -- a key tool of every successful entrepreneur.
 
One of the goals of bootcamps and pitching competitions is to bring together different stakeholders – from entrepreneurs to investors and policymakers – to facilitate the creation of ecosystems in which entrepreneurs can grow and thrive. But is it realistic to expect that bootcamps and similar training initiatives are enough to enable promising entrepreneurs to reach their full potential? The answer is simply: No. Make no mistake: Bootcamps are an exciting tool to create buzz and interest in countries that have little entrepreneurial history and culture. In most contexts, however, there is no follow-through with effective action plans that can keep the momentum going. This not only limits the value of these initiatives, but can also cause harm to a nascent ecosystem.

Cheap money: Addiction and ‘cold turkey’ risks

Erik Feyen's picture

The U.S. Federal Reserve System has taken new steps toward raising interest rates, but there is a disconnect between what the Fed and markets think will happen. What does it all mean for emerging and developing countries?
 
Central banks in developed economies have created an environment of ultra-low interest rates to rekindle economic growth and to battle falling inflation. They’re doing this by keeping policy rates close to zero and “printing money” on an unprecedented scale via a veritable alphabet soup of programs, such as QE, CE, LTRO and TLTRO.
 
These low interest rates have put a lot of pressure on investors, such as pension funds, to generate a decent return, setting off a massive search-for-yield frenzy.
 
This search for yield has created a cash tsunami that has also rolled on the shores of many emerging and developing economies.


 

Greek tragedy: 'Sleepwalking' toward an economic abyss, with eurozone fears pervading the Spring Meetings

Christopher Colford's picture

“All roads lead to Rome” may have been true in ancient times, but policymakers during this Spring Meetings season in Washington have been focused on another classical crossroads: All roads now lead to Athens, as the intensifying eurozone crisis is again stoking fears that Greece may soon “crash out” of the European common currency system – potentially dealing a severe shock to the still-fragile global financial markets.

“The discussions about Greece have pervaded every meeting” during this fast-forward week of finance and diplomacy, said the United Kingdom’s Chancellor of the Exchequer, George Osborne. That viewpoint was reinforced by a studious chronicler of the Greek drama’s daily details, Chris Giles of The Financial Times, who asserted – in an unusually dismissive swipe – that “the antics of Greece dominated the Spring Meetings of the International Monetary Fund and World Bank.”

The Greece-focused anxiety was palpable to many Spring Meetings attendees, judging by the number of corridor conversations and solemn sidebars that dwelled on the eurozone drama – especially on the Fund’s side of 19th Street NW. While most forums and panels on the Bank’s side of the street focused on the progress of many developing countries, events at the Fund seemed consumed by the policy contortions within Greece's faltering economy, as Meetings-goers monitored every tremble of their text messages to follow the week’s the week’s staccato bulletin-bulletin-bulletin news of Greece’s financial flailing.

“The mood is notably more gloomy than at the last international gathering,” said Osborne, “and it’s clear . . . that a misstep or miscalculation on either side [of the Greece negotiations] could easily return European economies to the kind of perilous situation we saw three to four years ago.” Having received a $118 billion bailout in May 2010 and a second package of $139 billion in October 2011, Greece is now at an impasse with its creditors: the IMF, the European Central Bank and the European Commission. A new government in Greece – having denounced the loan conditions reluctantly accepted by its predecessor governments – is debating how, or whether, it should comply with lenders’ pressure for far-reaching reform. Greece's foot-dragging has exasperated the lenders even as Greece envisions a potential third bailout program.

As the Greek tragedy unfolds, the doleful observation of Wolfgang Münchau in the FT seems all too apt: “Until last week, discussions with Greece did not go well. That changed when the circus of international financial diplomacy moved to Washington for the Spring Meetings. Then it became worse.”

Institutional Investment in Infrastructure (“In3”): A view from the bridge of a development agency

Jordan Z. Schwartz's picture


Note: The first advisory council meeting of the new Global Infrastructure Facility was recently convened at the World Bank Group headquarters in Washington, D.C.

Suddenly, it seems impossible to walk through London, Washington, New Delhi or Nairobi without bumping into a conference on institutional investors in infrastructure. The G20 has discovered the link along with their business counterparts at the B20. So too has the World Economic Forum, the OECD, the United Nations and the international financial institutions. Match the long-term liabilities of pensions and insurance plans with long-term assets, the mantra goes, and the infamous infrastructure gap will close.  Win-win.

If only life were so easy. 

We are reminded of the old expression, “If your grandmother had a beard, she’d be your grandfather.” In this case: If infrastructure were perceived by investors as a truly stable, risk-adjusted investment, it would already be able to attract the financing it needed. There would be no gap.

In truth, some institutional investors found their way into infrastructure assets as far back as the 1990s and have been cautiously growing their investments, attracted by the long-term demand, steady growth and regulated returns. A few of the Canadian pensions and Australian super-annuation funds invest 10 to 12 percent of their assets in infrastructure, while equity funds that focus on infrastructure and related businesses in emerging markets, such as IFC’s Asset Management Company, are growing on the tide of this burgeoning market.

To date, the pensions are mostly exposed in equity investments in the regulated utilities of Europe, North America and Australia, while the funds are focusing on higher-risk, higher-return investments around the edges of infrastructure — in gas platforms and mobile licenses, in telecom towers, in container terminal operators or in the occasional power plant.

The real test of patience and stability will come when debt and debt-like products from the broader range of institutional investors begin flowing into large-scale, basic service infrastructure — transport, power, water and sanitation and the backbone of telecom services. And since infrastructure is highly leveraged — typically 70 to 80 percent debt in the capital structure — the broader infrastructure financing gap will not be closed until this happens.

A few questions surround these ambitions: 
 
  • Why would a development institution care so much about "In3"?
  • What are the hindrances to this happening?
  • What are we doing about it?

Closing the gender finance gap: Three steps firms can take

Heather Kipnis's picture
Despite eye-opening market potential — women control a total of $20 trillion in consumer spending —  they have somehow escaped the notice of the private sector as an engine for economic growth.  Women are 20 percent less likely than men to have an account at a formal financial institution. Yet a bank account is the first step toward financial inclusion.

Why is it important for the private sector to help with this first step?
 
In increasingly competitive global markets, companies are searching for ways to differentiate themselves, to deepen their reach in existing markets and to expand to new markets. Greater financial access for women would yield a growing market opportunity with phenomenal profit potential for companies. The size of the women’s market, and the resulting business opportunity, is striking:
 
  • Business credit: There is a $300 billion gap in lending capital for formal, women-owned small businesses. Of the 8 to 10 million such businesses in 140 countries, more than 70 percent receive few or no financial services.
  • Insurance Products: The Female Economy, a study in the Harvard Business Review, reported that the women’s market for insurance is calculated to be worth trillions of dollars.
  • Digital payments: Women’s lack of cellphone ownership and use means that millions cannot access digital-payment systems. Closing the gap in access to this technology over the next five years could open a $170 billion market to the mobile industry alone.
 

Greater financial access for women would yield a growing market opportunity with phenomenal profit potential for companies.


For the past several years at IFC, I’ve been working with the private sector, namely financial institutions, to address the supply-and-demand constraints that women face when trying to access the formal financial system. IFC tackles these constraints in three ways:
 
  • Defining the size of the women’s market, female-owned and  -led SMEs, and as individual consumers of financial services
  • Showing financial institutions how to tap into the women’s market opportunity by developing offerings that combine financial products, such as credit, savings and insurance, with non-financial services such as training in business skills
  • Increasing women’s access through convenient delivery channels, such as online, mobile and branchless banking

If you want to go far, go together

Jana Malinska's picture

A new global network of Climate Innovation Centers will support the most innovative private-sector solutions for climate change.
 
Pop quiz: What does an organic leather wallet have in common with a cookstove for making flatbread and a pile of recycled concrete?
 
Believe it or not, each of these represents something revolutionary: a private sector-driven approach to climate change. Each of these products – yes, even concrete – is produced by an innovative clean-tech company. And as of March 26th, those businesses, and hundreds more like them, have something else in common. They’re connected through infoDev's newly established global network of Climate Innovation Centers (CICs), an innovative project that is taking the idea of green innovation beyond borders.
 
Having piloted the CIC model in seven different countries – Kenya, South Africa, the Caribbean, Ethiopia, Morocco, Ghana and Vietnam – it was time for infoDev, a global entrepreneurship program in the World Bank Group’s Trade and Competitiveness Global Practice, to follow a time-honored business practice: to scale up and take this movement global.

And so, as part of last month’s South Africa Climate Innovation Conference, we joined forces with 14 experts from the seven different countries where the CICs operate to establish the foundations of the world’s first global network devoted to supporting green growth and clean-tech innovation.



CIC staff debate and discuss the new CIC Network during the South Africa Climate Innovation Conference.

This global network of Climate Innovation Centers – business incubators for small and medium-sized enterprises (SMEs) – has been designed to help local ventures take full advantage of the fast-growing clean-technology market. The infoDev study “Building Competitive Green Industries” estimates that over the next decade $6.4 trillion will be invested in clean technologies in developing countries. An even more promising fact is that, out of this amount, about $1.6 trillion represents future business opportunities for SMEs, which are important drivers of job creation and competitiveness in the clean-tech space.

History in the making: 'Policy relevance' and long perspective, with the Spring Meetings starting a series of summits

Christopher Colford's picture

History “is a critical science for questioning short-term views, complicating simple stories about causes and consequences, and discovering roads not taken. Historical thinking – and not just by those who call themselves historians – can and should inform practice and policy today. . . . History can upset the established consensus, expand narrow horizons, and ‘keep the powerful awake at night.’ In that mission lies the public future of the past.” -- "The History Manifesto"
 
Lace up your running shoes and summon your stamina: At the starting line of the Spring Meetings sprint, policymakers and economy-watchers are now poised for an adrenaline-fueled week of debates on diplomacy and development at the World Bank Group and the International Monetary Fund.
 
History hangs heavily over the Bank and Fund this week, amid an animating awareness that “2015 is the most important year for global development in recent memory,” as World Bank Group President Jim Yong Kim declared in a speech last week at the Center for Strategic and International Studies. In an environment that has provoked dire warnings by the IMF’s Christine Lagarde about the danger of prolonged low-growth, high-unemployment “secular stagnation” – with “the new mediocre” threatening to become “the new normal” – this week’s meetings will be just the starting-point in a series of events in 2015 that could define the development agenda for decades.

A July conference in Addis Ababa will determine the financing mechanisms for future development initiatives. A September summit at the United Nations in New York will adopt a detailed set of Sustainable Development Goals. A December forum in Paris will adopt – or reject – a worldwide treaty to restrain climate change. Along the way, the Bank and Fund will convene policymakers – in Lima rather than Washington – for the Annual Meetings in October.

Pulling off a success at any one such summit would be a dramatic achievement. Delivering triumphs at all three summits might require masterstrokes of diplomacy.

“When we look at the longer-term picture,” said Kim in his CSIS speech, “we see that the decisions made this year will have an enormous impact on the lives of billions of people across the world for generations to come." The challenges that Kim and Lagarde analyzed in their pre-Spring Meetings speeches require “governments [to] seize the moment” – starting this week – if they hope for success in the Addis-UN-Paris trifecta.
 

From MIGA: Reflections on investment prospects for countries facing fragility and conflict

Kyoo-Won Oh's picture

On a mission for MIGA – the political risk insurance arm of the World Bank Group – I recently visited Burundi, South Sudan and Afghanistan to understand the investment conditions and needs of these conflict-affected countries.
 
In a blog post, I've shared four common threads that I observed during my trip, which offer insights into the challenges and opportunities on the ground.
 
The blog post for MIGA – the Multilateral Investment Guarantee Agency – can be found here: https://blogs.worldbank.org/miga/reflections-investment-prospects-countries-facing-fragility-and-conflict
 

Valuable lessons from many backyards What can SEZs learn from U.S. Foreign Trade Zones, and vice versa?

Martin Norman's picture


Back in January, as I sat in the “Fundamentals of U.S. Foreign Trade Zones” (FTZs) class in Austin, Texas, I was looking for answers to two questions.
  
  • “What can I learn from the way the US runs its FTZ regime that I can bring to my government clients worldwide for their Special Eeconomic Zone regimes?” and
  • “Are there actually things that other countries are doing that hold lessons for the U.S. FTZs?” 

After several moments of epiphany during the event with regard to these two questions, I discussed some of my experiences and takeaways with various board members of the event organizer, the U.S. National Association of Foreign Trade Zones (NAFTZ), who then invited me to be the keynote luncheon speaker at their annual Legislative and Regulatory Seminar on February 10, in Washington.

Over beef stroganoff and fresh salad, I gave the 80 participants a whirlwind virtual tour of SEZs worldwide and lauded the best practices that I could use as U.S. models for my client countries, in particular investor-friendly and innovative aspects of the US FTZ regime from which other countries can learn:
 
  • “Smart incentives,” including the ability for FTZ companies selling into the local U.S. market to choose either the value of the end product or the sum of some group of components as the basis for calculating the duties owed to Customs.
  • The ability for FTZ companies to pay a single, weekly introduction fee for containers for FTZs – equivalent to a single container’s fee – instead of a fee for each container. 
  • The Alternative Site Framework (ASF) established in 2009, which allows a large tract of land, often associated with the boundaries of several counties, to be designated as an FTZ.  However, nothing in that area is actually “activated” (i.e., a bona fide FTZ company with all the associated benefits) until, one by one, companies apply for the automatic grant of FTZ benefits of either some or all of its buildings. 

 
But what about the second question: about things that other countries are doing that might be useful ideas for U.S. FTZs? The NAFTZ Board had instructed me not to shy away from provocative ideas, and indeed I had found an area which I felt to be Achilles' heels of the US FTZ regime.
 
The US FTZs are highly geared toward production, assembly or logistics.  Yet Business Insider recently published an article in which 11 out of the 14 industries projected to “boom in the next decade” are in the services industries. Are the US FTZs well-positioned for riding the crest of a great, upcoming services industry wave?  I doubt it, and I believe that several international zones, such as Hong Kong’s Cyberport and Dubai Media World, can show the way on how to improve the future competitiveness of the US FTZs. 
 
My big takeaway from these two experiences was that South-to-South learning is vital for our client countries worldwide, without doubt.  However, we often forget that developed economies may have some interesting lessons to glean from at our own backyards in the developed world.  And yet, even a country like the United States can learn from some of the practices buried in the backyards of our client countries.  




 

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