World Bank Voices
Syndicate content

Climate Change

Envisioning the global financial system in a decade

Gloria M. Grandolini's picture
Also available in: العربية | Español | 中文


4 unprecedented disruptions to the global financial system


Climate change, migration, correspondent banking and cybercrime are putting unprecedented and unforeseen pressures on global financial markets.

They aren’t just disrupting the global financial system, but also affect how we approach international development work.

Let’s examine each trend:
  1. “Greening the financial sector” is the new buzz term to finance a transition toward a climate-resilient economy and to help combat climate change. This topic is now getting a lot of attention from the G20 to the Financial Stability Board. The international community is trying to understand what this transition will imply: how resilient the financial sector is to deal with risks stemming from climate change, and how efficiently the financial sector can allocate financial resources. What we know is that currently fossil fuel subsidies and a lack of carbon tax are hindering the market from shifting financial resources from brown to green.
  2. Globally, an estimated 65 million people are forcibly displaced. Migration, resettlement or displacement, of course, impact where and how to channel aid to those in need. But more importantly, as displaced people settle down -- no matter how temporary or long-term -- to become self-sufficient and thrive, they will need to establish new financial relations. This can be for simple transactions such as receiving aid through payment cards (as opposed to cash) or for sending remittances. Or it can be for something more complex as getting a loan to start a business.
  3. At the same time, as the global banking industry is tightening regulations, large banks are withdrawing from correspondent banking and shutting down commercially unsustainable business lines. This recent phenomenon can have a huge impact in some regions on SMEs and on money transfer operators, which largely handle remittances.
  4. Cybercrime is no longer a sci-fi thriller plot, but a tangible potential risk to both national and international financial markets. The focus on cybersecurity risk has increased along with the proliferation of internet and information technology. Fintech is transforming the financial industry -- by extending access to financial services to people and small- and medium-sized enterprises (SMEs) previously left out of the formal financial system – but is also raising many questions, including concerns about cybersecurity. The same technology advancements that are propelling fintech are also addressing cybersecurity risk. However, there is a need to develop an appropriate regulatory framework in combination with industry best practices. This framework is evolving and regulators are grappling with how and when to regulate.

Focus on the “day before” to better plan for the “day after”

Raja Rehan Arshad's picture
Recovery efforts from the conflict in the Ukraine can learn much from reconstruction after natural disasters. Photo Credit: Alexey Filippov for UNICEF


Lessons learned over time from post-conflict recovery and reconstruction efforts reflect the need to reinforce stabilization immediately following the end of a conflict.

Being ready in advance with a recovery and reconstruction plan is one way to ensure that critical interventions can be implemented quickly following the cessation of hostilities.This can be achieved to a large extent by coordinating with humanitarian efforts in the recovery continuum during active conflict.
 
Such a plan helps to identify actionable opportunities that can help to support local-level recovery. This includes immediate improvements in services and enhancing livelihood opportunities essential to establishing popular confidence in state institutions and to fostering social cohesion.

Fragility, conflict, and natural disasters – a ‘one-size fits all’ approach to resilience?

Francis Ghesquiere's picture
Also available in: Español | العربية | Français
A partner from the EU assesses damage to an apartment building in Ukraine. Photo credit: EU

It’s a simple yet essential idea: war and disaster are linked, and these links must be examined to improve the lives of millions of people around the world.

Alarmingly, the total number of disaster events – and the economic losses associated with those events – keep increasing. This trend has been driven by population growth, urbanization, and climate change, leading to increasing economic losses of $150-$200 billion each year, up from $50 billion in the 1980s. But here is another piece of information: more than half of people impacted by natural hazards lived in fragile or conflict-affected states.

Amid growing risks, will leaders protect the poor?

Sri Mulyani Indrawati's picture
Also available in: Español | العربية | Français
© Ashraf Saad Allah AL-Saeed / World Bank


There is enough trouble out there to keep any policymaker up at night. Recent volatility has roiled Chinese and global stock markets, commodity prices have slumped, and security concerns are rising. All of this raises serious questions over the health of the global economy. This year could shape up to be risky, full of challenges and concerns for the fight against poverty.  
 
We ended 2015 with good news: For the first time in history, the number of extremely poor people dropped below 10% of the world’s population. The new Sustainable Development Goals and the Paris climate deal bring momentum to our effort to lift the remaining 700 million extremely poor people out of poverty while generating climate-smart economic growth.

Growing resilient forest landscapes in the face of climate change

Paula Caballero's picture
Also available in: Français | Español
Andrea Borgarello for World Bank/TerrAfrica

Playing out this week and next in Paris is a high-stakes match between science and political will.
 
The science part is quite clear: 2015 is set to be the hottest year on record – a full degree over pre-industrial averages. Climate change is already taking a toll on countries. Add to that we have El Nino wreaking havoc in many parts of the world.  And it is going to get warmer.
 
The political analysis is more complicated. On the one hand, if the national plans, the Intended Nationally Determined Contributions (INDCs) drawn up by countries to tackle climate change were implemented, including actions that have been conditioned on available finance, this would likely put the planet on about a 2.7 C degree trajectory that would be catastrophic for the economic, social and natural systems on which we depend.  Clearly more needs to be done. On the other hand, it is a sign of welcome progress. The fact that almost all the world’s countries (Carbon Brief tracks 184 climate pledges to date) have put forward INDCs is a remarkable feat many would have considered impossible just a few years ago.  So there is progress, just not fast enough.
 
Paris should be seen as an important milestone in an arduous journey– a platform for generating an ever upward spiral of ambition in many fields of climate action.
 
One area that promises innumerable wins for people and the planet is land use change, agriculture, and forestry. Together these sectors account for about 24 percent of global emissions, but represent a much greater share of emissions in many developing countries. A preliminary analysis of INDCs shows strong commitment to reducing greenhouse gas emissions from deforestation, forest degradation, land use change and agriculture. And there is evidence of a growing appetite for landscape restoration measures in many of those countries. 

Making the risky business of agriculture ‘climate-smart’

Vikas Choudhary's picture

Farmers harvest crops in Madagascar.

Agriculture is an inherently risky business.  From natural disasters and erratic rainfall to pests, few other sectors are as exposed or as vulnerable to shocks.
 
Climate change is a source of significant risks for agricultural and food systems: Climate projections suggest that average growing conditions will shift and there will be more uncertainty in predicting climate and weather conditions. More concretely, these impacts will translate into an overall warming trend, an increasingly erratic distribution of precipitation, more frequent and more devastating extreme weather events, and spatial shifts in the occurrence of pests and diseases. These impacts can cause production losses which lead to market volatility and in some cases, reactionary shifts in policies and regulations. 

Farmers and food companies can build resilient supply chains

Marc Sadler's picture
People working on a strawberry farm in Argentina.


So the global challenge is clear: We need to sustainably feed 9 billion people in 2050, while building the resilience of farmers and food companies AND concurrently making agriculture part of the climate solution, not an increasingly large part of the problem.

Daunting? Well, yes of course, but that is why it is a “global challenge” and not just something that incremental change will solve.

There is nothing new in this story and many of the things we need to do are known, but just not done at scale. What is new is the fact that the interests, aspirations and objectives of a wide group of stakeholders are coming together. We have long searched for truly sustainable farming – one that will sustain farmers and enable them to prosper, while ensuring that the landscapes in which we live and work are not the subject of short term gain resulting in long term degradation.

Is climate-smart gender-smart?

Sanna Liisa Taivalmaa's picture
Also available in: العربية
Women farmers in Rwanda.
Women create terraces on a farm in Rwanda. Photo: A'Melody Lee / World Bank


Climate-smart agriculture (CSA) can help make the food system more sustainable in a changing climate. But does it come at a cost to women, in terms of a heavier workload?

Climate-smart agriculture’s three pillars: improved agricultural productivity, increased adaptation to climate change and reduction of greenhouse gases are goals well worthy of targeting. On the one hand, CSA practices such as water harvesting or planting trees that provide more accessible fuel, fodder and food can save women’s time. On the other hand, some practices such as increased weeding or mulch spreading can require women to spend more time in the field.

Clean energy, not coal, is the solution to poverty

Rachel Kyte's picture
Also available in: Español | Français | العربية

 Dana Smillie / World Bank

It is the development conundrum of our era. Extremely poor people cannot lift themselves out of poverty without access to reliable energy. More than a billion people live without power today, denying them opportunities as wide-ranging as running a business, providing light for their children to study, or even cooking meals with ease.

Ending poverty requires confronting climate change, which affects every nation and every person. The populations least able to adapt – those that are the most poor and vulnerable – will be hardest hit, rolling back decades of development work.

How do we achieve the dual goals of expanding energy production for those without power and drastically reducing emissions from sources such as coal that produce carbon dioxide, the primary contributor to climate change?

There is no single answer and we cannot ask poor communities to forego access to energy because the developed world has already put so much carbon pollution in the air.

An array of policies and programs backed with new technology and new thinking can — if combined with political will and financial support — help poor populations get the energy they need while accelerating a worldwide transition to zero net carbon emissions.

Limiting the Spread of Diseases that Climate Change is Making Worse

Timothy Bouley's picture

Rift Valley Fever, which can infect both humans and animals, has long plagued East Africa. And climate change, in combination with urbanization, population growth, and travel, can increase conditions that are favorable for this disease and many others.
 
Temperature, humidity, and rainfall will be affected by climate change –and each can influence the way that disease develops and spreads. Mosquitoes, for example, thrive in warm, humid climates. As climate change alters the geography of these conditions, the number and range of mosquitoes will also change, spreading the diseases that they carry, and exposing populations that have never before seen them. But this is not just true for mosquitoes – ticks, midges, and other vectors that carry disease also stand to have greater impact with climate change.  The impact will be felt—with increasing intensity– by both humans and animals. Of the nearly 340 diseases that have been identified in humans since 1940, ¾ are zoonotic, passing directly from animal species to humans.
 

Pages