A Greener Agenda for International Development the Nexus Between Climate Change and Development

IDAS ISSUES MONITOR A greener agenda for international development The nexus between climate change and development

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KPMG INTERNATIONAL Foreword

The link between development and climate change is undeniable. On the one hand, there is ample evidence that the worst effects of climate change have a direct impact on the poorest and most vulnerable populations in the world.1 At the same time, we have also seen many examples where investment in climate change adaptation has encouraged growth and opened up new avenues of development for poor and underdeveloped nations.

The development community is keenly aware leading sustainability authorities such as Yvo de Boer, of the influence that climate change has on the KPMG’s Special Global Advisor on Climate Change development agenda and is searching for new and Sustainability, to address one of the fundamental opportunities to act as a positive force for change. challenges of our time: driving sustainable growth in a resource-constrained world.2 In this Issues Monitor we outline a clear and compelling argument for greater alignment To help catalyze real and sustainable change, we between development and climate change goals. have also articulated our views and opinions on the issue of climate change through our thought As a global network, KPMG has long been at leadership program, including the influential the forefront of the climate change agenda. Just Expect the Unexpected: Building business value last year, KPMG International brought together in a changing world, which introduced 10 key more than 600 senior executives and top policy sustainability ‘mega forces’ that will shape future makers (including the Secretary-General of the growth and economic development over the next United Nations, Ban Ki-Moon, and the Mayor of 20 years. New York City, Michael Bloomberg) as well as

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. For this edition of Issues Monitor, we have We hope this edition of Issues Monitor inspires brought together some of our leaders from the development community; highlights ways around the world to offer their insight into how in which public, private sectors and civil society development and climate change strategies may can better collaborate in promoting sustainable be integrated to achieve positive and lasting development; and enriches the debate about the change; we explore the 10 key sustainability interplay between climate change, sustainability mega forces and their impact on the achievement and progress in the achievement of development of development goals; and we offer three case goals. studies that clearly illustrate the opportunity for the development community.

Timothy A. A. Stiles Trevor Davies Global Chair, Global Head, International Development International Development Assistance Services Assistance Services Center of Excellence KPMG KPMG

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. © 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Table of contents

04The climate change 06Case study – Investing in 08The role of the and development climate innovation: the development nexus REACT (Renewable Energy community and Adaptation to Climate Technologies) window of the African Enterprise Challenge Fund

Case10 study – Organizing the 12New opportunities for Case14 study – India climate waste-pickers: sustainable green development change preparedness: waste resource tackling water resource management in Brazil management and resilient infrastructure investment needs in Madhya Pradesh

16Conclusions 18Endnotes

MEGA FORCE CHALLENGE DEVELOPMENT IMPERATIVE

Many of those most vulnerable to the impacts of climate change are among the poorest of the world.4 From crops Rising temperatures and water levels will create annual output destroyed by drought and homes lost to rising water levels through to increased levels of heat-related mortality, loss losses of between 1 and 5 percent with the greatest impact CLIMATE CHANGE of economic security, and flooding and inundation of low lying islands and regions, climate change will deeply and felt in the developing world.3 disproportionately impact those at the bottom of the development pyramid.

Rising energy and fuel prices impact negatively on development agendas by driving up the cost of living and cost The move to renewable energy and the growing scarcity of of production in developing nations. Highly polluting energy sources exacerbate climate change. Competition over traditional fossil fuels drives up energy prices and makes ENERGY & FUEL increasingly scarce fuel resources can also drive conflict, reduce security and create regional tension, an issue that may lower-cost energy more appealing to developing markets. become exacerbated by the growing competition for agricultural products between bio-fuels and food.

MATERIAL RESOURCE Increasing demand – particularly from fast-emerging Increasing resource prices tend to make development investments – particularly in infrastructure assets – more economies – for material resources is creating intense global expensive. However, resource scarcity has also created opportunities for the development of ‘greener’ substitute SCARCITY competition and pushing up prices. materials and the recycling of waste.

It is predicted that by 2030, the global demand for freshwater Access to clean and potable water is an absolute necessity for health, growth and development. Areas already suffering WATER SCARCITY will exceed supply by 40 percent5 assuming average economic from drought and poor access to water will be particularly affected by the rising cost of water resources needed for growth and no efficiency gains. food, agriculture and manufacturing production.

The global population is predicted to grow to 8.4 billion by As populations grow, governments will come under increasing pressure to provide more efficient and effective POPULATION GROWTH 20326 placing intense pressure on ecosystems and natural infrastructure and services to support development and economic growth. At the same time, the protection of the local resources. ecosystem will be critical to ensuring the sustainable growth of populations.

While a definite connection can be made between climate change adaptation and successful long-term development, The disparity of wealth within and between countries has it is also clear that – currently – ‘green’ development is often a more expensive option, putting more sustainable created challenges for the development of an international WEALTH strategies out of reach of developing nations without the aid and support of the development community and action plan on climate change. international funding.

With virtually all population growth over the next 30 years The ability of cities to absorb newcomers and sustain their populations is critical to the development agenda. Cities will URBANIZATION concentrated in urban areas,7 cities will need to become more require extensive improvements in infrastructure and greater capacity and capability for service delivery if the problems sustainable. of the urban poor are to be addressed in a sustainable and environmentally-friendly way.

Rising food prices threaten to plunge millions more into food poverty and, as we saw in the food price crisis of 2007, Global food prices are predicted to rise by 70-90 percent by can create instability and political volatility in developing nations. Rising food prices also place renewed pressure on 20308 as population growth and water scarcity put pressure FOOD SECURITY national support networks, which frequently lack resources and capability to effectively target social protection of the on the global food production system. most needy.

Declining ecosystems and environments lead to reduced The loss or reduction of ecosystem diversity (particularly declining fish stocks, damaged maritime environments and ECOSYSTEM DECLINE diversity in natural resources and increased damage from shrinking rain forests) will have a significant impact on the rural poor who tend to rely on small-scale farming, gathering invasive species. or access to natural resources. Ecosystem decline often leads to increased migration in rural areas and urbanization.

Forest conservation offers a viable approach to managing carbon emissions at relatively low cost and, therefore, With forested areas set to decline by 13 percent between creating incentives and markets to encourage conservation should be a long-term priority for the development 2005 and 2030,9 we expect to see an increase in weather- DEFORESTATION community.10 The shorter-term implications of deforestation such as fuel scarcity, loss of employment opportunities and related disasters and greenhouse gas levels. disaster response planning and mitigation also underpin the importance of forestry conservation.

MEGA FORCE CHALLENGE DEVELOPMENT IMPERATIVE

The climate change and development nexus

While climate change is clearly a global issue, all signs suggest that the brunt of the burden will fall on the world’s poorest and most vulnerable sections of society. Those already in a Clearly, the carefree and precarious position due to lack of water, food or land will be often excessive path to pushed to the brink while developing nations will likely achieve growth that propelled the less growth as the impacts of climate change worsen. West cannot be repeated Making the connection While these impacts are starting to be in the developing world, addressed by development agencies, The connection between climate change but nor can we deny most would agree that far more will and the achievement of development their desire to grow and need to be done over time. Influenced by goals is hard to deny. Increasing global events such as the food price increases develop; indeed we must temperatures (which, in realistic of 2007-08, many leading donors are scenarios, are expected to rise by be encouraging sustainable recognizing the need to invest more in between 3 to 4 degrees Celsius by growth and development climate adaptation in order to help poor 210011), will make parts of the currently countries not only become more resilient that not only aligns with populated world uninhabitable, forcing to the impacts of climate change, but also new waves of migrants into cities the principles of climate reduce their vulnerability to the increasing and across borders as environmental change mitigation but also frequency of natural disasters and refugees. The scale of the challenge adapt to the longer-term changes in the creates new opportunities will be massive: according to a UN environment which impact on livelihoods, Environment Programme Report, there for the developing world especially of poor people. may be up to 1 billion climate-related to mold their own growth migrants by 2050.12 An unbalanced impact trajectory. Without a significant change in the current Climate change implications could have Lord Michael Hastings, climate change trajectory, the outlook a disastrous effect on the achievement KPMG ’s Global Head of Citizenship for some in the developing world may be of development goals. According to the bleak. Agricultural output in water scarce World Bank, developing nations will regions will decline13 and hunger and bear somewhere between 70 to 80 malnutrition will be endemic, impacting percent of the costs of climate change some 600 million more people in Africa damage17 which would force developing alone.14 Rising water levels from the country governments to reprioritize their melting of ice could submerge or partially investments to mitigate some of the most submerge many of the world’s small significant impacts of climate change. island developing states (SIDS) and least developed countries (LDCs).15 Extreme According to a recent study, climate weather events will test the resilience change already contributes to the death of local infrastructure and force millions of nearly 400,000 people a year and costs to leave marginal land in river deltas and the world more than 1. 2 trillion US dollars coastlines.16 (USD), wiping 1. 6 percent annually from

Development is seriously impeded by climate change, which threatens to reverse the gains made towards the achievement of the Millennium Development Goals (MDGs)…I am convinced that climate change, and what we do about it, will define us, our era, and ultimately the global legacy we leave for future generations. Ban Ki-Moon, Secretary General of the United Nations18

global GDP.19 The Stern Review suggests climate change response in order to that – without immediate action – the allow less developed nations to prioritize overall costs and risks of climate change poverty reduction and economic growth could be equivalent to around 5 percent of over longer-term sustainability objectives. global GDP each year; 20 percent or more if a wider range of potential risks and Advocating for change impacts are taken into account.20 Our experience in both the development and climate change sectors suggest Taking action to protect that more could be done to factor development environmental costs and benefits into Economic growth and dealing with the traditional project planning process. climate change are not a dichotomy. For example, opportunities exist at “Clearly, the carefree and often excessive the national and regional level to build path to growth that propelled the West capacity, share best practices and cannot be repeated in the developing create structures to help adaptation and world, but nor can we deny their desire resilience programs. Increased stringency to grow and develop; indeed we must at the project level would help to ensure be encouraging sustainable growth and that investments reflect environmental development that not only aligns with the best practices. principles of climate change mitigation Ultimately, the ability to achieve long-term but also creates new opportunities for development goals will depend on how the developing world to mold their own developing countries and their funders growth trajectory” said Lord Michael and backers respond to the issue of Hastings, KPMG’s Global Head of climate change. Achieving lasting change, Citizenship. however, will require an unprecedented Not surprisingly, the relationship between level of cooperation between national climate change and development has governments, as well as more locally become clearer to the development between government, private sector, and community over the past few years civil society. with organizations such as the It is also important to spread the lessons Intergovernmental Panel on Climate of any ‘win-win’ solutions that emerge, 21 Change, and the United Nations and so – throughout this report – we have 22 Development Programme taking various identified and explored a few examples initiatives to drive awareness and address of where these different institutions have the issue. The issue has taken center been collaborating effectively to bring stage at many of the recent climate about positive change in areas which help change talks – particularly the UNFCCC progress the goals of both environmental Conference of Parties – where developing sustainability and development. nations have lobbied for mature markets to shoulder a greater burden of the

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 6 | IDAS Issues Monitor: A greener agenda for international development Case study – Investing in climate innovation: the REACT (Renewable Energy and Adaptation to Climate Technologies) window of the African Enterprise Challenge Fund

Opportunities for green development New technology Private sector participation

The challenge for International Development (DFID)), The AECF and REACT have also The drive to encourage more robust the Danish International Development developed partnerships with local growth and development in Africa is Agency (DANIDA), the International organizations to help foster a wider often inhibited by three key challenges: Fund for Agricultural Development cross-section of companies. In the need for greater investment in – and (IFAD), Swedish International cooperation with Kenya’s Climate adoption of – innovation; the demand Development Cooperation Agency Innovation Center, for example, for greater access to electrical power, (Sida), and the Netherlands Ministry companies that do not quite meet the particularly within rural areas; and of Foreign Affairs (NMFA), the African REACT criteria are provided incubation 23 the increasing awareness of the link Enterprise Challenge Fund (AECF) space to help develop their concepts between climate change mitigation and has created a fund (USD47 million) further. Efforts are also underway to economic development. dedicated to investing in African develop relationships with investors renewable energy and adaptation who might be willing to help fund At the same time, there is a growing technologies, which is managed on their recipient companies through late-stage recognition among development behalf by the KPMG practice in East development and commercialization. agencies that locally-grown and Africa. commercialized ideas tend to generate REACT funds a wide range of projects the most value, not just because they The fund, which has been active for just including initiatives in micro-solar are tailored to the unique characteristics 2 years, has already invested in more PV solutions for households and of the population and geography, but than 30 companies with funding periods businesses that have little or infrequent because they offer opportunities to of up to 6 years. By far the majority of grid access, power generation from generate ‘spin off’ industries that, in the companies – more than 70 percent – agricultural waste, drought resistant turn, drive economic activity. are classified as ‘start ups’ and would seeds, early weather warning systems likely struggle to secure financing from that increase resilience and reduce With a strong history in agribusiness the traditional market. vulnerability, and weather insurance for and rich renewable energy resources smallholder farmers. in the solar, wind and bio-fuel sectors, A key objective of the REACT window is to help new enterprises in this sector Africa has a unique opportunity to Analysis capitalize on the global demand for develop capabilities and resilience in more efficient and effective renewable order to create a self-sufficient business Anjali Saini, International Development energy by creating and commercializing cluster. As such, the fund plans to Consultant, KPMG in Kenya closely monitor the progress of funded new innovations. Challenge funds like the REACT companies and share some of the window can be powerful tools to help leading practices and lessons learned The solution development agencies drive private with other challenge funds or similar sector development and simultaneously Jointly funded with an investment of mechanisms. USD205 million by UKAid (Department

A challenge fund is a financing mechanism to allocate (donor) funds for specific purposes using competition among organizations, mainly small and medium size companies as the lead principle. A challenge fund invites for proposals from companies, organizations and institutions working in a targeted field to submit project proposals. Challenge funds are always set up to meet specific objectives – such as extending financial services to poor people or finding solutions to a specific health problem in developing countries.

SIDA July 2012

achieve longer-term goals such as climate change mitigation abandoned completely. As African markets continue to and adaptation. emerge, it will be increasingly important for the public and private sectors to work together to bring electricity and REACT – and other similar mechanisms – also provides other resources to those who need them most. governments and development agencies with important signals about which market segments the private sector is To achieve both efficiency and impact, challenge funds persistently unwilling or unable to invest in, but where require existing business capacity and innovation they are amenable to action if the costs are shared or capabilities. They also require an environment and the risks are mitigated. This will provide clues regarding fund structure that supports risk taking while ensuring where public support is needed the most, where policies protections exist to secure business assets and need revision, or where perhaps initiatives should be intellectual property.

The role of the development community

The issue of climate change is certainly not new to the development community’s agenda. Development banks, agencies and donors have become increasingly active in the climate change and sustainability debate and have created a number of innovative and valuable programs.

A collaborative endeavor collaboration between governments, are directly funding technological companies, and civil society groups to research to reduce climate change While there continues to be much achieve positive change. risks in developing countries (such as debate about the exact role that the the USAID Development Innovation development community should play Ventures Program support for off grid in the response to climate change, one A history of engagement power in India26), while others are thing is certain: the problem cannot be To date, one of the key roles played working with governments to create a solved by the development community by the development community in supportive environment for innovation alone. the global climate change debate has and the commercialization of new been to draw attention to the issue and In part, this is a matter of funding technologies. create an environment in which all key and investment. Globally, overseas stakeholders can come together to • Rallying support around the cause: development assistance makes up just agree on priorities. The development Influential donor agencies have been 7 percent of investment in developing community played such a role in instrumental in helping bridge borders countries.24 At the same time, the Kyoto Protocol in 1997 and has and build consensus around regional development organizations are largely remained active in the global dialogue issues (due to both their ability to focused on a somewhat different – yet ever since. act as an impartial mediator and by complimentary – objective: catalyzing virtue of their investment power) and prosperity and promoting well-being in At the UN’s Rio+20 Conference on often have influence over national developing countries. Sustainable Development last year, and international policy development. we noted four key areas where the It is also a matter of timing. Development Many venues for this activity already international donor community was agencies tend to focus on time horizons exist (such as the Africa Group of already making a resounding impact on of 15 years or less, while climate change Negotiators, the Alliance of Small the climate change agenda: objectives tend to be set within much Island States, the G77 and the Least longer-term horizons. As a result, • Providing funding for climate change Developed Countries Negotiators). there is some debate as to how the action: The Green Climate Fund and • Enhancing national capacity: With development community might structure the Global Environment Facility offer extensive experience in project their programs to achieve longer-term excellent examples of donor-driven design, appraisal, implementation sustainability goals.25 initiatives that allocate funding and funding, donor agencies and the towards developing country climate The challenge facing the development development community are working change mitigation and adaptation community is how to properly closely with national governments to efforts. allocate resources to achieve not only build capacity in climate change and development and climate change • Encouraging the development of sustainability disciplines. A strong objectives, but also to mobilize effective new technology: Some donors example of this can be found in the

The development community will play a critically important role in the global response to climate change. Efforts and initiatives to help developing countries understand and adapt to the impacts of climate change are starting to bear fruit, while greater focus is being placed on projects and investments that limit and – ultimately – reduce greenhouse gas emissions. Yvo de Boer, KPMG’s Special Global Advisor on Climate Change and Sustainability and former Executive Secretary of the UN Framework Convention on Climate Change

UK Department for International Development Bank) or the work that the project structures.30 Greater emphasis is Development’s Ethiopia Strategic International Development Association also being placed on the development of Climate Institutions Programme.27 has been doing in countries like low-carbon infrastructure such as mass Vietnam (where access to safe water transit systems, water treatment and The development community has also has increased by 34 percent in just 18 waste management, and the growing been actively involved in environmental years).29 interdependence between cities, issues though the advancement of the climate change and economic growth.31 Millennium Development Goals, one of which is to ensure environmental Shifting priorities As such, new models and opportunities sustainability. Indeed, there are many We have seen a gradual increase in the are emerging that – with the right examples of development agency priority accorded to more innovative support and encouragement – could programs that respond to this specific interventions and stricter adherence make a significant impact on climate goal such as the Congo Basin Forest to environmental principles within change. Fund28 (implemented by the African development agency funding and

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The challenge Opportunities for green development Following an era of massive urbanization in the 1960s and 1970s, Policy change Brazil quickly started to face a waste crisis as existing infrastructure rapidly Private sector participation became overwhelmed by the massive Green city development influx of new citizens.

But for many of the new urban formal contracts with municipal municipal recycling schemes without poor, these landfills created new waste management systems,32 formal bid processes and created a opportunity. Quickly, an informal the vast majority operated in the level of protection for waste-pickers sector labor-force of waste-pickers informal sector without meaningful within the law. emerged in the landfills surrounding support networks or opportunity for Since then, Brazil has made massive the cities, creating and then supplying development. a new market for recyclables and investments into its municipal waste management systems which has harvesting scarce resources from The solution waste that could then be sold to extended the lives of landfills and manufacturers. Before long, waste- Recognizing the growing problem allowed scarce resources to be pickers began to organize themselves created by waste, Brazil’s government recycled, energy to be saved and into cooperatives to achieve greater took steps to develop a modern and development costs to be reduced. bargaining power, advocate for their efficient waste management system However, the modern systems have interests and offer a form of support that not only recognized the need for also had a significant impact on network to individual waste-pickers. greater environmental stewardship, the livelihood of the waste-pickers but also the contributions of the who – in many instances – have seen By 2008, there were approximately waste-pickers. In 2007, Brazil reviewed their landfills closed or volumes 200,000 waste-pickers in Brazil. the Basic Sanitation Law to allow the dramatically reduced. And while almost 5 percent had hiring of waste-picker organizations in

As part of a wider movement towards Analysis In one pioneering example, the greater inclusion of the poorest and government recognized the Ricardo Zibas, Sustainable Risk most disadvantaged people within contribution of waste-pickers at the Consultant, KPMG in Brazil Brazilian society, a range of programs Gramacho Landfill which – after 30 have been set up by the government Ultimately, Brazil’s new waste years in operation and achieving the to encourage waste-pickers to attend management system will help dubious accolade of South America’s school, undertake training and enter mitigate the impact of climate change largest landfill – was slated to be the formal sector. The government by helping to reduce energy use, closed. More than 1,700 waste- has also encouraged municipal waste preserve scarce resources, protect the pickers received ‘severance packages’ systems to retrain waste pickers to diversity of the ecosystem and reduce from Rio city officials on average of fulfill new roles within the modern waste while simultaneously fostering USD7,500 each.34 plants. economic growth and development for Brazil’s experience shows that vulnerable members of society. The development community cooperation between government, has also been active in helping By working with the development private enterprise and the urban poor Brazil transition waste-pickers community to achieve both can generate innovative approaches. into the formal sector. In 2009, development and climate change Development agencies should Brazil’s National Banks for and sustainability goals, Brazil has therefore continue their work towards Economic and Social Development demonstrated that – with proper inclusion for the poor and vulnerable created a USD125 million fund to policy and social support programs – while creating platforms for greater support waste-pickers and their positive change can be brought about collaboration across private, public and cooperatives.33 Other development at a municipal level. However, the civil society. agencies – both national and government has also recognized that international – have been working the needs of each municipality may be with waste-picker cooperatives to different and has therefore supported a train members for new career paths. variety of initiatives around the country.

New opportunities for green development

New opportunities are emerging for the development community to have a greater impact on climate change objectives within their existing mandates.

The following are just a few of the ways help mitigate impacts by reducing the economic growth by helping governments that the development community can emissions of greenhouse gases. This will develop, enact and implement supportive add unique insights and value to the include the use of improved agricultural policy and regulation which encourages global response to climate change. We techniques to make crops more reliable in cleaner development. In terms of adapting have seen growing interest within both the face of increased drought, changing to climate change, policy change can also the development and climate change temperatures, and variable rainfall. It will help to achieve more resilient development communities to work together to achieve also involve making improvements to strategies by, for example, incorporating mutually beneficial goals. Some, like the energy technology to exploit renewable appropriate incentives for private investors case study we present on page 6 on the resources more cost effectively. and the public sector to factor climate Renewable Energy and Adaptation To change into their investment decisions. According to Yvo de Boer, KPMG’s Climate Technologies (REACT) Window This, in turn, will require more effective Special Global Advisor on Climate of the Africa Enterprise Challenge public private partnerships. Change and Sustainability, “Developing Fund, are funded through bilateral aid nations and their development partners and demonstrate how the international will need to assess the potential for community can help set the stage for new technologies such as renewable positive change on a regional basis. energy or smart infrastructure, not only Supportive policy can catalyze Others, such as the example of the trash to reduce greenhouse gases but also to change in developing markets in pickers in Brazil (page 10) or the efforts develop new and different pathways for some rather simple yet powerful of the Indian State of Madhya Pradesh’s economic growth. This will require a level ways. Helping communities take government to address climate change of assessment and comparative analysis risks (page 14) illustrate how climate that won’t be easy to accomplish; it responsibility for reforestation change and development goals can be will require support from multilateral and maintaining woodlands, advanced through initiatives supported agencies and global bodies to help create for example, or educating the by both the national and international applicable benchmarks and forecasts.” public about alternative methods development community. According to Supporting policy change for rural cooking, or changing Lord Michael Hastings, KPMG’s Global the regulations governing Head of Citizenship, “We need to come Building a policy environment that transportation and carbon- up with new and innovative ways to encourages environmental protection and make a real and sustainable difference climate change adaptation and mitigation based emissions; all of these in the way developing nations deal with initiatives will be critical for developing gains can be made through the dire impacts of climate change.” nations. The development community the development of policy that can help to achieve significant gains in instigates behavioral change. Generating new technologies greenhouse gas emission reduction, Tim Stiles, Global Chair of KPMG’s New technologies can help developing especially in those emerging markets experiencing rapid economic growth. It is International Development Assistance countries adapt and cope with climate Services change challenges, and more generally also important to foster more sustainable

Rapid urbanization often results in people – rural migrants in particular – being marginalized and not receiving the support or the development assistance they require to become productive members of a city. Greater opportunity must be created in both urban and rural areas. Programs that generate employment opportunities through environmental initiatives – such as ecotourism or renewable energy generation – would be especially relevant in helping to mitigate the environmental impacts of urbanization.

David O’Brien, Global Head of KPMG’s Cities Center of Excellence

Encouraging private sector is only set to increase. The development participation community could help mitigate the impact of urbanization by focusing on the Given that a significant portion of today’s greening of urban development, as well as greenhouse gas emissions result from developing employment and opportunity The private sector activities within the private sector, it seems within both cities and rural areas. clear that any solution must involve some needs to feel confident form of private public partnership, as well that they are investing in as appropriate regulation. However, with Urban livelihoods offer the a country that is politically many developing markets perceived as stable, that disputes are being high risk to private investment, few scope to be much more incentives exist for private enterprise environmentally sustainable. settled within a solid to engage in a meaningful way in the High density can mean low commercial regime, national climate change debate or to transport costs, energy efficient that land rights are in invest in local adaptation measures. The housing, and environmentally development community can therefore place and honored – help achieve a greater focus on climate efficient services. But this will essentially a country change by supporting national and regional require a massive step change in where their investments efforts aimed at creating greater stability, the volume of investment in the can be sustained in the transparency and rule of law within client rapidly expanding urban areas of markets which, in turn, will better enable developing countries. long-term. Governments private sector engagement. and development John Burton, Principal Adviser in KPMG’s International Development partners have a key Supporting green city role in creating this development Center of Excellence enabling environment Cities account for approximately 70 percent of the world’s greenhouse for investment and gas emissions, about 80 percent of the sustainable world’s energy usage35, and contribute growth. approximately 80 percent of global economic output or GDP.36 Given the Trevor Davies rapid rate of urbanization in developing KPMG’s Global Head of markets (in India alone, urban populations International Development are expected to increase by 700 million, Assistance Services the equivalent of about 500 new cities 37), Center of Excellence the influence of cities on climate change

© 2014 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 14 | IDAS Issues Monitor: A greener agenda for international development Case study – India climate change preparedness: tackling water resource management and resilient infrastructure investment needs in Madhya Pradesh

lead to disease outbreaks like malaria. Opportunities for green development More frequent heat waves will drive Policy change up energy demand in residential and commercial areas of major cities, most Private sector participation of which are ill-equipped to deal with extreme events. Green city development The State’s action plan on climate change specifically highlights the need to address the impact on the urban The challenge mitigation and adaptation towards poor and homeless who are subject climate change. Factors including to excessive heat exposure. It also Madhya Pradesh, an Indian State temperature, precipitation, wind speed highlights the critical need for asset situated at the heart of the country, is and extreme events directly determine modernization in the state to check completely land locked and home to the availability, quality, distribution and inefficient water management practices one of the largest agrarian populations productivity of natural resources. These and plans. in India. Over the past two decades, factors also place tremendous strain the State has seen rapid urban on energy and water requirements development and now boasts an urban for the operation and maintenance of population of more than 20 million infrastructure, as well as agricultural people. The consequence is a growing output. and competing demand for resources, particularly water and energy. Variability in temperature and precipitation patterns impact hydro Both the urban and water sectors power production in the state. Flooding are highly susceptible to the can compromise water storage facilities vagaries of climate and therefore and distributing structures, and often create substantial opportunities for

The solution Another key objective, in addition to necessitate innovation and increased ensuring the ‘mainstreaming’ of climate investment to bridge the deficit As the State embarks upon its change sensitivity in infrastructure in green development. Ongoing development agenda, there is development and policy planning, has infrastructural expansion and steady concerted effort to revise and create been to identify areas for technological growth trajectories present an policies, regulations and schemes for a intervention and create scope for PPP opportunity for Indian states to integrate sustainable future. The Environmental engagement in each of the areas. principles of environment, social and Planning and Coordination Organisation The State has already initiated large technological inclusiveness through (EPCO) in Madhya Pradesh is scale infrastructural development each stage of policy development.” establishing a mechanism that including buildings, waste and transport facilitates management of long-term management. A total estimated climate risks and uncertainties as an Analysis investment of USD1. 3 billion has been integral part of the state development Stuti Sharma, Sustainability Consultant, planned for City Development Plans of planning, particularly in the urban and KPMG in India four major cities. A major improvement water sector. Within both sectors, sub- of state water resources infrastructure Despite recent advancements sectoral risks and opportunities have including canals, dam rehabilitation and substantial government and been identified and analyzed extensively and information systems has been development agency spending, the through consultative processes with planned, and the World Bank has use of approaches driven by climate- policy makers, project developers and allocated more than USD443 million sensitive technology has remained in implementation authorities. towards this. Within these sub-sectors, its infancy. Furthermore, the creation of However, while most stakeholders over 30 areas of asset modernization standardized processes to encourage possess a general knowledge of climate (through technological intervention) and promote private sector investment change, its specific impact has – to have been identified and many relevant in climate resilient development has date – not been well understood. In stakeholders sensitized. been limited. order to ensure robust, timely and Raajeev Batra, Head of KPMG in India’s At each stage of policy development, effective policies, sector-focused Climate Change and Sustainability frameworks are required to assess customized checklists for policy makers practice, said “Climate change and and integrate emission reduction have been created including both pressures such as changing land use potential in development planning. Risk mitigation and adaptation aspects. preparedness for extreme weather events is also a priority. Assessing risk and opportunities, using sub-sector specific check-lists, provided the impetus for encouraging investment and capacity building. The long term goal is to set up systems whereby climate change is mainstreamed across policy planning and service delivery as a matter of course.

Conclusions

As we approach the milestone of the 2015 Millennium Development Goal targets, it is timely to think about the linkages between climate change and sustainable economic and social development. Climate change, one of the ‘mega forces’ we have highlighted, will shape the dominant development challenges and processes for the 21st century and must therefore be carefully considered. Development agencies and governments of rich and poor countries must succeed in reducing vulnerability to inevitable changes in climate, while also working to reduce the extent of unwelcome climate change. Otherwise it will be very much harder to achieve global ambitions to eliminate absolute poverty by 2030 and make continued social and economic progress. We therefore need to address climate risks to promote development. Equally (and unless the livelihoods of poor people can be enhanced through actions such as investments in infrastructure, better government services, and the creation of better jobs), the poor are likely to remain particularly vulnerable to relatively modest changes in climate. So we also need to promote development to reduce climate risks.

We must be guided by the reality that inaction now will prove the costliest action of all in the long term. Ban Ki Moon, UN Secretary General

This suggests the need to ‘mainstream’ and that their expertise and capacity climate resilience within the development are critical to finding the right agenda. We have identified four specific solutions. high-priority opportunities for further • Green city development is essential action: as cities continue to outpace • New technology will be required in rural areas in terms of population, order to provide more climate resilient greenhouse gas emissions, and livelihoods in agriculture, and better economic activity. At their best, cities infrastructure in cities and rural areas can provide solutions in terms of alike. This will include greener energy greener, climate resilient livelihoods. to reduce the causes of climate At their worst, they represent change, as well as other technologies uncontrolled urban sprawl with poor to cope with the impacts of more services and high levels of climate variable and severe weather vulnerability. conditions. Thankfully, successful models and • Policy change is needed to put in initiatives are now underway: the Africa place the right enabling environment Enterprise Challenge Fund is working to for the development of climate- promote technology innovation through friendly initiatives and actions. This leveraging private sector resources and agenda spans truly global initiatives, initiative; in Brazil, work with waste- such as measures to limit the growth pickers shows that empowerment of emissions, to purely local, such of the poor can be consistent with as measures to apply appropriate improved recycling services; and in the building standards to reduce climate Indian State of Madhya Pradesh, a state risks. government has taken the initiative to mainstream the climate change agenda • Private sector participation will within its development strategy. be crucial to success. In part, this reflects the limited reach and capacity Such examples are inspirational. of governments around the world But they will need to be replicated to tackle the nature of the climate and emulated many times over to change challenge. It also reflects reach a scale which is appropriate the reality that private companies and sufficiently substantial in order undertake most of the economic to address the challenges of greener activity which causes climate change, development in the 21st century.

Endnotes

1. United Nations Development Programme, (2008). 20. Stern, K. (2006). Stern Review on The Economics of Human Development Report 2007/2008 Climate Change. HM Treasury, London. 2. Business Perspectives on Sustainable Growth: Preparing 21. http://www.ipcc.ch/ for Rio+20, February 14-16 2012, New York City 22. UNDP Report – Climate Change 3. United Kingdom Stern Review on the Economics of 23. http://www.aecfafrica.org/index.php?option=com_conte Climate Change, Executive Summary (2006). nt&view=article&id=12&Itemid=26 4. United Nations Development Programme, (2008). 24. Development Initiatives, (2012). Official development Human Development Report 2007/2008 assistance: Data & Guides. 5. United Nations Environment Programme, (2011). 25. ODI: Scott, Lucy and Andrew Shepherd (2011) ‘Climate Towards a Green Economy: Pathways to Sustainable change as part of the post-2015 development agenda’. Development and Poverty Eradication http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/ 6. United Nations, Department of Economic and Social publications-opinion-files/7133.pdf Affairs, Population Division. (2011). World Population 26. http://allafrica.com/stories/201306070566.html?page=2 Prospects: The 2010 Revision. 27. http://projects.dfid.gov.uk/project.aspx?Project=201866 7. UN Habitat. (2010). State of the World’s Cities 2010/2011 – Cities for All: Bridging the Urban Divide. 28. www.cbf-fund.org 8. Oxfam International. (2011). Growing a Better Future: 29. http://www.worldbank.org/mdgs/environment.html Food justice in a resource-constrained world. 30. OECD DAC (2006) Guidelines and Reference Series 9. OECD. (2008). OECD Environmental Outlook to 2030. Applying Strategic Environmental Assessment 10. United Kingdom Stern Review (2006) Op Cit. “A 31. UNEP (2006) Catalysing low-carbon growth in developing substantial body of evidence suggests that action to economies Public Finance Mechanisms to scale up prevent further deforestation would be relatively cheap private sector investment n climate solutions compared with other types of mitigation” 32. Women in Informal Employment Globalizing and 11. World Bank Report – Turn Down the Heat - Why a 4°C Organizing, (2011). Statistics on Waste Pickers in Brazil. Warmer World Must Be Avoided May 2011. 12. United Nations Environment Programme Report - 33. International Labour Organization, (2012). Working Livelihood Security Climate Change, Migration and towards sustainable development: Opportunities for Conflict in the Sahel decent work and social inclusion in a green economy. 13. FAO Report – Climate Change, Water and Food Security 34. Independent Newspaper (June 2012) http://www. independent.co.uk/environment/climate-change/ 14. Intergovernmental Panel on Climate Change Report rio-shuts-down-its-trash-mountain-7813517.html 15. United Nations High Commissioner for Refugees, 35. World Bank (press release) City of Rio and World Bank Division of International Protection, (2009). Climate Launch Ground-Breaking Program for Low Carbon City Change and the Risk of Statelessness: The Situation of Development. June 18, 2012. Low-lying Island States. 36. http://www.citiesalliance.org/sites/citiesalliance.org/ 16. Kniveton, D. et al. (2008). Climate Change and Migration: files/7%20-%20WB%20Urbanization%20KP%20 Improving Methodologies to Estimate Flows. Full%20Document.pdf 1 7. FAO Report – Climate Change, Water and Food Security 37. KPMG (2012) Cities Infrastructure, A Report on 18. http://www.un.org/apps/news/story.asp?NewsID=23926 Sustainability 19. DARA Group (2012) Climate Vulnerability Monitor: A Guide to the Cold Calculus of A Hot Planet

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