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Everyone deserves a sustainable future. But solutions are most urgently needed in developing countries, where the investment gap is deepest and people are most disproportionately impacted by the climate crisis. Helping countries prepare for and invest in low-carbon, resilient development requires key transitions – in energy, transport, cities, and food systems – which are also key to an inclusive and effective recovery from the COVID-19 pandemic. Join us as we discuss solutions sectors, highlight key priorities for COP26, and look at what it will take to shape a resilient recovery that works for people and planet.
Speakers
Minister of Finance, Indonesia
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Read the transcript
- 0:03 [David R. Malpass] Welcome everybody to our discussion.
- 0:06 It's a pleasure to be here today with Secretary John Kerry,
- 0:09 her excellency, Sri Mulyani Indrawati. and Shemara Wikramanayake.
- 0:16 to talk about one of the most defining issues of our time: climate change.
- 0:21 Climate change is a key priority and is critical for the World Bank Group
- 0:25 to deliver on our goals to reduce poverty and boost shared prosperity.
- 0:30 Last year, my first year as World Bank Group President,
- 0:33 we delivered the biggest climate investments in our history at $21.4 billion.
- 0:39 We're on track for this year to be bigger still.
- 0:42 In consultation with our board, we're finalizing a new climate change action plan.
- 0:48 Through this plan,
- 0:49 we aim to increase the World Bank Group's impact on greenhouse gas emissions
- 0:54 and adaptation outcomes
- 0:57 by increasing climate finance, improving and expanding diagnostics
- 1:02 to prioritize climate related actions
- 1:05 and focusing on climate results to deliver impact.
- 1:09 The Bank will prioritize transitions in key systems.
- 1:13 It will use this convening power to support a just transition out of coal.
- 1:19 And the World Bank Group will become aligned
- 1:22 with the principles and goals of the Paris agreement.
- 1:24 So I'm delighted to be here today with this distinguished panel.
- 1:29 Let's dive right in.
- 1:31 I'm looking forward to hearing your thoughts on specific actions
- 1:35 that we can all do together to have the biggest impact
- 1:39 on greenhouse gas reduction and adaptation.
- 1:43 So with that, let me turn to Secretary John Kerry.
- 1:47 Thank you for being here today to lead off our climate event.
- 1:51 This is a critical year for climate in the run-up to the Glasgow summit,
- 1:58 and one where we have to have an impact.
- 2:01 So I'm wondering, could you go through what the US ambition is on climate
- 2:06 and what are the specifics? What are the next steps?
- 2:08 And what are the key areas to move forward in?
- 2:11 Thank you, Secretary Kerry.
- 2:13 [John Kerry] Well, thank you, David. It's a privilege to be here with everybody
- 2:16 and I'm delighted to be with my fellow panelists.
- 2:18 This is the critical fight for all of us.
- 2:21 I know that sounds a little highfalutin to some people, but the evidence,
- 2:26 the science is coming back at us stronger, harder, bigger, faster.
- 2:31 And it's telling us that we are running out of time,
- 2:34 which is what scientists say.
- 2:36 Not political people, not ideological. Science.
- 2:42 And the science told us that we left Paris in 2015
- 2:46 with an agreement that we would all work together
- 2:50 to hold the Earth's rise of temperature well below 2° C.
- 2:55 And aspirationally, we set the target of trying to get to 1.5 degrees Celsius.
- 3:00 As of today, almost no country on the planet
- 3:05 is meeting the target.
- 3:06 In fact, if we did everything we said we would do in Paris,
- 3:10 the Earth's temperature is still going to rise to about 3.7 degrees or higher.
- 3:16 There are some scientists saying we're in the four: 4.1, 4.5...
- 3:20 Absolutely catastrophic, and not worth the fight between the differential
- 3:25 because it's all catastrophic. So what do we do?
- 3:29 We go to Glasgow,
- 3:30 which is the last best opportunity we have to get real and serious.
- 3:35 And if we say this is an existential threat, we have to treat it like that,
- 3:39 which means all nations, particularly the developed world nations,
- 3:45 the 20 nations that are the equivalent of 81% of all the emissions on the planet,
- 3:51 those nations must step up with 2020 to 2030 targets of reduction
- 3:59 that keep us within the range of achieving the 1.5 degrees,
- 4:03 and then being able to lay out a roadmap, taking us to 2050,
- 4:08 which is net zero by 2050.
- 4:11 So all of us have a responsibility to adopt NDCs,
- 4:16 to reduce our emissions at a level that will allow us
- 4:21 to hold onto the hope for the vast majority of nations in the world
- 4:27 that are not contributing to these massive emissions
- 4:30 and who are going to be, many of them, the greatest victims of it.
- 4:33 So it is essential we raise ambition,
- 4:36 we make Glasgow the next step in defining, not what we're willing to do,
- 4:42 but what we really need to do in order to be able to get the job done.
- 4:46 [David Malpass] Thank you.
- 4:47 Sri Mulyani, tell us about Indonesia.
- 4:51 What are the highest priorities on climate for Indonesia
- 4:55 and how can those be achieved?
- 4:58 [Sri Mulyani Indrawati] Well thank you very much, David.
- 5:01 It's good to see you all today.
- 5:03 I think when we discuss about the climate, definitely
- 5:08 we have a starting point that is the Paris Agreement.
- 5:12 And that means that the countries who announced a national determined commitment
- 5:18 in reducing the CO2...
- 5:20 I think we all agree, especially for many countries, that there will be a cooperation at the global level.
- 5:28 Each country has their own commitment. For Indonesia, we reduced by 29% by our own effort
- 5:34 and resources and 42% if it is supported by the global effort especially by advanced countries.
- 5:42 Now we have this COVID, which is definitely affecting significantly, David. Because first,
- 5:48 even if we are going to try to invest on the infrastructure which tilts the balance
- 5:54 in this case it toward more or less carbon emission, there will be quite a constraint.
- 6:03 First, we are now fighting to stimulate the demand. And sometime in stimulating the demand,
- 6:08 whether it is just on a consumption, investment, there is a trade off on a CO emission.
- 6:14 We cannot definitely transform it immediately because they will require more resources in
- 6:21 which many countries, which are now facing with this COVID, they are now facing with the fiscal
- 6:28 constraint. So there is really a huge priority. And COVID is really taking huge resources. As a
- 6:35 finance minister, I really can testify that this is really taking a huge resource. Not only just a
- 6:41 huge resource, but also the level of uncertainty. We really don't know when this is going to end,
- 6:47 so there's really always like dynamic between priority. So at least we have two years gone
- 6:52 because of this COVID. And also resources, we just shift into this fighting against COVID
- 6:59 and the implication on social and economy. Now back to this climate change. I think for
- 7:04 a country, they really have to then deliver what they should deliver according to the agreement.
- 7:11 Of course, as I said earlier, the NDC is a starting point. But as Secretary Kerry
- 7:17 mentioned earlier, this is not going to be enough. But even on this NDC, I think what
- 7:23 I can observe as a finance minister, David, is first how you are going to like do the transition
- 7:31 or design the transition from the business as usual into significantly reduced CO2 emission
- 7:39 for a country. And how we are going to design the recovery of the economy while we're, at the same
- 7:45 time, strengthening this commitment on a climate change agreement. And this is what we discussed,
- 7:52 first on the energy. When we have this COVID, David, the demand for energy declined
- 7:59 significantly because business, industry... the only one which is picking up is household because
- 8:05 everybody like worked from home. But this is really a reduction on the demand for energy.
- 8:11 Now for a country like Indonesia, who's already built quite an excess capacity. And especially
- 8:17 also built some of it is from coal. That means that if you are going to build a renewable,
- 8:24 you really have to invest in a new renewable, and retire the existing one while the demand is so
- 8:31 weak. So this is really like a triple hit for all of us. Not to mention that if you try to tilt this
- 8:38 using markup mechanism, then whether this is going to then backfire to your need to recover
- 8:45 the economy, especially on a demand side. So these are all really policy choices, but also
- 8:54 the policy consequence that really needs to be like looked at in a very detailed discussion.
- 9:01 I've already mentioned, Secretary Kerry also, many of the power purchase agreement is a long-term power
- 9:09 purchase agreement. And that means you cannot just like shut it down immediately. There will be legal
- 9:14 consequences. And that's why this is something that we really need to open it very detailed when
- 9:20 we want to comment on this global effort. So what I'm saying is that this is not going to be just
- 9:26 like our determination and then not translate it into action, which then have the consequence
- 9:33 on our choices of policy, resources, and even sometimes a legal implication for many countries.
- 9:39 Thank you.
- 9:40 [David Malpass] Very interesting.
- 9:41 And Shemara, you head a diversified financial services company.
- 9:46 Tell us how you see climate ambition and how does this feed together?
- 9:51 What does it mean for your business?
- 9:53 [Shemara Wikramanayake] I might just start with saying what a privilege it is to join this esteemed panel
- 9:58 on this very big topic.
- 9:59 For Macquarie, I'd start with our purpose statement,
- 10:03 which is basically empowering people to innovate and invest for a better future.
- 10:08 And addressing this climate challenge
- 10:10 is a big part of delivering that better future for us.
- 10:14 But the way we go about doing that is empowering,
- 10:17 not just our people, but our counterparts, our clients, our communities,
- 10:22 the governments and regulators.
- 10:24 In terms of innovating investment solutions
- 10:27 for the large pools of capital that are out there in the world
- 10:30 to address these challenges.
- 10:32 And there are three main areas where we're trying to help
- 10:36 in terms of all the issues that have been raised so far
- 10:39 with bringing investment, particularly for emerging countries.
- 10:43 The first of those is in mitigation solutions.
- 10:47 And that's in infrastructure across all areas, be it energy,
- 10:51 transportation, buildings, agriculture, etc.
- 10:55 And I'm happy as we go on to talk in more detail about that.
- 10:59 The second is in building resilience in existing infrastructure,
- 11:03 because we were talking about the weather events we're having here in Australia currently,
- 11:08 but climate change is upon us.
- 11:09 And we are going to have to make our food supply chains, our infrastructure and transportation etc., more resilient,
- 11:16 which will require investment.
- 11:18 And the third thing then is in terms of helping our clients and also the communities we work in
- 11:24 in terms of that transition where they're in high-emission industries,
- 11:28 to do that in a considered way so that we thread the needle
- 11:33 in terms of the economic issues that were being discussed:
- 11:36 the impacts on jobs, blackout risks, power price surge risks.
- 11:41 While we do this transition to addressing the climate challenges.
- 11:45 And that's gonna require balancing and considered gradual transition.
- 11:50 And as far as we're concerned,
- 11:52 we, as part of business of the world's largest infrastructure manager,
- 11:56 and we've just recently... were one of the first asset managers to make a commitment to net zero emissions by 2040.
- 12:03 And that's catalyzing a lot of others in our industry as well
- 12:07 who are intermediaries between connecting with capital of the world
- 12:10 with the investments solutions to bring momentum behind this area.
- 12:14 [David Malpass] Thank you.
- 12:16 That's very informative. And so, as we think about getting to net zero,
- 12:21 one of the key critical areas for countries is the NDCs.
- 12:25 So I wonder for Secretary Kerry, as the world goes into a new round of NDCs
- 12:32 of the nationally determined contributions,
- 12:35 what do you see though? How do you see those working?
- 12:38 And what's the role and what's the US interaction with those?
- 12:41 [John Kerry] NDCs are absolutely critical
- 12:44 because that is the target announced by a country
- 12:47 for what it's going to reduce.
- 12:48 And as I said a moment ago,
- 12:51 the targets that everybody put out, even if we did everything we said, we'd do in Paris,
- 12:57 and we're not, we would still rise way above a level that is acceptable.
- 13:03 So we have to go a lot further. And what we're doing right now is working with countries.
- 13:08 The United States has returned to the Paris agreement.
- 13:12 I recently was in Europe working with our European friends and the President of COP and so forth.
- 13:17 But we're working far beyond that.
- 13:19 We've had conversations with my friend and Indonesia.
- 13:22 We're working with Japan, with Korea, with Australia,
- 13:27 Argentina, Colombia, Mexico, and many other countries, in the Middle East,
- 13:33 India, China. We have to be able to get everybody to raise their ambition.
- 13:40 Now I'm very familiar with the common but differentiated responsibility standard.
- 13:46 But the fact is that is not a block to countries stepping up to do what they agreed to do in Paris,
- 13:53 let alone what we now know from the science we need to do. So the stated ambition of every
- 13:59 country, particularly the 20 major economies of the world, those countries must step up
- 14:08 with adequate levels of reduction that we keep alive the prospect of holding the temperature
- 14:13 increase to 1.5 degrees centigrade. And the NDC is our promise to do that. We will have an ambitious
- 14:21 US NDC. It will be announced that the President Biden's summit on April 22nd
- 14:28 and all those nations that I just mentioned are invited to that summit. We've worked with a number
- 14:34 of countries that have already promised they're going to raise their NDCs. And the key will
- 14:39 be actually for the finance world to step up and help facilitate the implementation of those goals.
- 14:50 There are many things, the World Bank, the IMF, the Asia Development, the European Development
- 14:54 Bank, other finance institutions, our our finance development corporation, and so forth need to come
- 15:02 together to help shape how we will get those NDCs implemented. The World Bank can play a critical
- 15:10 role in that, through the expertise that you have in your teams, that they can bring to the table
- 15:16 by helping countries to be able to figure out their finance. And frankly, with all respect to
- 15:22 my friend from Indonesia, if you're locked into a contract that has onerous outcomes,
- 15:27 legally, you have redress with respect to that. And number two nations will step up to help
- 15:33 undo what we shouldn't be doing. The World Bank and other MDBs must move away from the finance
- 15:40 of coal. And if we know that financing coal is dangerous and damaging to where we are, and in
- 15:46 fact, counterproductive to our effort to reach our goals, we need to help those countries rapidly
- 15:53 transition with payment, with additional finance capacity, with concessionary money, coupled
- 15:59 with investment money in order to move rapidly towards the implementation of alternative energy,
- 16:06 whether it's hydrogen or new fuels or whether it is simply more renewables, in many cases,
- 16:13 or more efficient use of existing plants. Many of the coal plants of the world are
- 16:18 operating at 50% efficiency or even at a loss. That doesn't make sense economically. So we think
- 16:26 there's a much better future to define that will create jobs, create a virtuous energy cycle. And
- 16:33 at the same time help us recover from COVID-19. We're all going to be spending money to recover
- 16:39 from COVID-19. We need to make sure we're making that expenditure for this new energy future. That
- 16:47 is exciting because it will be cleaner. It will be less polluting. It will be more security for many,
- 16:54 many countries with energy independence, and it will, of course create a huge number of jobs in
- 17:00 the new technologies necessary to make it happen.
- 17:04 [David Malpass] Thank you.
- 17:06 The World Bank is doing two things related to... And thank you for raising the financing issues.
- 17:11 We're working with now 65 countries on their NDCs. So to try to help them where they need
- 17:17 help in terms of formulating the NDCs. And then with regard to the just transition
- 17:24 out of coal that I mentioned to you, one... You raised very well: the costs of that,
- 17:31 we're able to work with the countries on how do the workers transition in terms of their skills.
- 17:37 So those are important key questions. Sri Mulyani, Finance Minister of Indonesia,
- 17:43 thank you for being up very early this morning to join our conversation. I wanted to ask you, so
- 17:52 the challenge has been mentioned for you the cost of this. And I wonder how you see the
- 17:59 interaction with the wealthier countries. How is this going to all come together
- 18:05 for Indonesia? And what are the ways that countries around the world can help as you
- 18:11 think about moving away from coal, for example?
- 18:14 [Sri Mulyani Indrawati] Well, thank you so much, David.
- 18:16 You mentioned the World Bank supporting or helping many countries -sixty-five-
- 18:23 on different steps in order for them to, even in this case for many country,
- 18:27 when they say about a commitment to reduce emissions, it does really require quite a lot of,
- 18:34 what we call a plan action, a program and action. And that really required a lot of technical
- 18:41 system. This is one element which is required or needed for us to be able to have this [inaudible].
- 18:47 And I think what the World Bank is doing is really wonderful in this case. For Indonesia,
- 18:52 we did this and transmitted this NDC into national plan. So we have the budget,
- 19:00 which is also paying for this climate change in order for us to be accountable
- 19:05 in our delivery, that the 4% there is resources required to deliver the NDC
- 19:12 is coming from our budget, and this is already consistent regardless this pandemic or before
- 19:19 pandemic, or even during this pandemic, we continue to be consistent on that commitment.
- 19:25 So at 55% from the mitigation, 45% for adaptation. We also try to do the
- 19:32 diversification of the financing. So even Secretary Kerry at this moment try to mobilize
- 19:39 many of the discussion among country and also with financial institution. We also try our best in
- 19:46 order for us to be able to diversify the financing sources or our commitment on delivering the NDC,
- 19:54 including issuance of the green bonds and retail bonds, because we really think that investing in
- 20:02 a younger generation by issuing the green retail bonds to them, so they have all the ownership
- 20:10 and also the commitment to finance and then movement is really like very powerful. I think
- 20:17 this is not be underestimated. This even have to be strengthened as a force of change itself.
- 20:24 As the transition David, at this very moment, I'm sitting with the Minister of Energy [inaudible] We
- 20:33 are trying to look at what is the national prime, especially on energy first. I think
- 20:37 Indonesia also have a problem on deforestation, as the forest is one of the most important solutions
- 20:46 for absorbing the CO2 in this case. Now for us on energy, we now have to sit down and see what is
- 20:54 going to be the economic outlook during and post pandemic. And then transmitted into the demand for
- 21:01 energy and how we are going to then combine this with our own plan of delivering 20%, 23% of our
- 21:10 energy mix into more renewable. For Indonesia, the alternative for renewable are plenty. So it's not
- 21:18 the problem of the alternative. The problem, as you mentioned earlier, it is the transition cost.
- 21:25 That is leading, like looking in the fairly deep, then the composition of this energy mix, and then
- 21:31 who's providing that, what kind of contract, and even we are asking for the state-owned enterprise
- 21:38 electricity, if this is not yet financial close, can you renegociate to become then renewable if
- 21:46 this is originally coal. In this case, then we are going to provide incentives.
- 21:50 We provide incentives in terms of the taxation, so that it tells the incentive from the nonrenewable
- 22:00 into renewable. We also, because Indonesia is an Island country, David, there is also a need,
- 22:06 which is totally different from the very dense population like Java with a remote Island country,
- 22:12 with [inaudible]. That will definitely required and can be used for example, like the solar cell,
- 22:19 but for a big place, we really need to have a more reliable and sustainable energy sources.
- 22:27 And then there is also a problem of geography. If we have like the hydro, the source of hydro in the
- 22:33 big Island, but this is [inaudible] so you really have to build a lens transmission and distribution
- 22:42 infrastructure. Which is really expensive. So we really have to look at all this in very detail,
- 22:49 but I, as a Finance Minister and sitting at the tenth person of this coalition of Finance
- 22:55 Ministers, I really have to look at this, so the whole discussion and transition is credible.
- 23:01 Now from the global point of view, I think your role [inaudible], they're all very committed at
- 23:16 this climate the issue of global financial, which is non multilateral development bank. For example,
- 23:24 I mentioned this to Secretary Kerry, I issue global green bond, but I don't receive a
- 23:31 differentiation in terms of price because at this level as agreed, yes [inaudible] so market
- 23:41 mechanism is definitely very powerful. And as of now, I think there is still a gap between the lack
- 23:48 of commitment with the real class we have. So these are really quite, quite a lot of effort,
- 23:55 but as a Finance Minister at the end, I have to decide about what is the budget every year, what
- 24:02 is the medium term and how we are going to manage on this very important into that, in the more
- 24:07 sustainable and a critical way. So that is maybe the most important on a commitment. At the end,
- 24:15 maybe the 100 billion that the advanced countries promise on the Paris agreement, they are not
- 24:20 delivered also, David. And that's really creating a constraint for many developing countries to
- 24:27 deliver what they promise in the NDC. Thank you. [David Malpass] Thank you. And maybe we can come
- 24:32 back to that a hundred billion dollars, but we have an even bigger investor. Shemara, Macquarie
- 24:38 is one of the world's biggest infrastructure investors. So I wonder if you can comment and also
- 24:44 where you see the opportunities for the private sector within that Sri Mulyani just gave us some
- 24:52 of the difficulties. How do you handle diversity of geography with small islands, big islands with
- 24:58 hydro and, and how do the investments come in from the private sector? What do you think?
- 25:04 [Shemara Wikramanayake] Yeah. Well, thank you, David. You and Secretary Kerry were talking
- 25:08 about the finance available to help emerging countries transition through this industry.
- 25:14 Mulyani was saying how important it is to have this concessional finance. I think what we're
- 25:19 doing as a private sector player is trying to create investible projects that are able to make
- 25:24 it the default choice of rational actors to invest in them because they are driving financial return,
- 25:31 as well as community outcomes, social outcomes. And if I can give some examples and I talked about
- 25:38 investment in adaptation being particularly important for these emerging economies I had
- 25:44 the good fortune of being one of the founding commissioners on the global commission on
- 25:47 adaptation that the UN set up and we visited Bangladesh as part of that. And, you know, there
- 25:53 are severe weather exposures for that country. And it was really pleasing to see the investments
- 26:00 happening there in civic awareness, in early warning systems, in strengthening of buildings.
- 26:06 And also in terms of disaster shelters for cyclones, etc.
- 26:10 All of these things ultimately drive economic value for the community. And what we need to
- 26:16 think about is how we measure and translate that into delivering return to bring private capital,
- 26:21 to drive these sort of projects. So if I can just quickly hop through a handful of places where
- 26:27 we're doing things where this win-win-win is evidenced. In the Philippines, we have an energy
- 26:32 business called Energy Development Corporation. It's subject to extreme typhoons. We have found it
- 26:38 valuable in that asset to invest in early warning systems or to be modeling some of the impacts in
- 26:45 soil degradation that are going with our slope failure and investing in rerouting pipes,
- 26:50 etc. Because it makes the asset more resilient and drives better financial outcome for our private
- 26:55 investors. Equally in Finland where we have 26,000 kilometers of overhead pipe but power lines,
- 27:03 different climatic situation, but we've buried a lot of those grounds underground so that in
- 27:08 harsh winter conditions, we can still get power to customers and the asset does better financially.
- 27:16 The Blankenburg tunnel in the Netherlands, we have put 950 kilometers of transportation
- 27:22 under a river, the Scheur River. And lastly, I'd say in our agricultural assets as well, we're
- 27:27 big manager there. We have 4.8 million hectares of land in Brazil and in Australia, we're investing a
- 27:34 lot in precision technology and farming because that is helping us not just improve yield, but
- 27:40 help deal with land degradation and soil quality. So we can get more resilience of food supply
- 27:46 while also driving financial return. So apologies to take a bit of time giving those examples, but
- 27:52 I'm keen to have people understand that there is a win-win here to draw this finance from the private
- 27:58 market for the projects that need it. I think the big challenge we have from here is to move
- 28:03 on from it being a feature in our infrastructure assets to making it an asset class so that things
- 28:09 like flood defenses become financeable. When we work with public sector partners to measure the
- 28:14 benefit and then reward for it in a way that the private sector can bring capital. And we're very
- 28:19 committed to working with the public side on that. [David Malpass] Thank you. I'm very glad you
- 28:24 brought in examples. Those really help people understand the challenge. And,
- 28:29 and so to Secretary Kerry, the, you know, the pandemic has battered many of the economies. So
- 28:36 one of the challenges is how do you put together climate action and development
- 28:41 when there's an environment of high unemployment and of fiscal deficits in many of the countries.
- 28:48 What's the step to put that together? [John Kerry] Well, the first step to put that
- 28:52 together is to get ahead of the COVID-19 pandemic. Obviously we are finally, finally, making a huge
- 29:00 leap to doing that just today or the last day as President Biden has announced that we're
- 29:08 going to have a doubling of our current target to 200 million vaccinations by the first hundred
- 29:16 days of his administration. And as you know, when the Quad -India, Australia, United States
- 29:22 in Japan- met recently, they dealt with the COVAX program and talked about getting the vaccine out.
- 29:31 So control the pandemic is important. Part of it, obviously. Beyond that, there is an opportunity
- 29:38 here because we artificially shut down economies. It's not as if there was a downturn or an economic
- 29:46 cycle that took place. Governments decided to stop the economies and they're, they're
- 29:52 desperately waiting to get going again. So I think there's going to be a very fast recovery
- 29:59 in many different places, providing that we are smart in what we're doing and talking about with
- 30:06 respect to the allocation of capital for that. So that's the key to building back better. And,
- 30:12 and I'm obviously using the phrase that President Biden has used, but it makes sense for everybody
- 30:18 to think about that as we come out of this and we put money into recharging our economies
- 30:27 we've got to put it in the right places into the right things. Infrastructure is critical component
- 30:32 of that. Certainly in America it is anyway. We have neglected to refurbish our infrastructure
- 30:38 for quite some number of years now. But if we bill back with a grid, for instance, for America,
- 30:43 with a legitimate smart grid, with investment into transmission, that goes from one part of the
- 30:49 country to another, we avoid the kind of problem we had in Texas recently. But we also gain massive
- 30:56 efficiency in the distribution of power, which can lower costs and also reduce emissions in a
- 31:03 very significant way. Every country will have a different mix of what it has available to it
- 31:10 in the way in which it can address this question. But the important thing is that the finance
- 31:15 is there. The UN puts out a report every year on the finance gap. If you
- 31:23 read them most recent gap, I think it's about $2.6 trillion to about $4+ trillion per year,
- 31:31 for the next 30 years is the gap we face in terms of making this transition both just,
- 31:38 and even just making a transition, investing in the new energy possibilities. I'm also told that
- 31:46 about 50% of the reductions of emissions we need to gain are going to come from technologies that
- 31:52 have not yet reached commercial distribution in the marketplace. So we have this incredible
- 31:59 capacity to, whether it's making real the hydrogen possibilities or gaining storage sufficient to
- 32:10 change the base load challenges, which changes the solar picture, or new technologies emerging and
- 32:18 solar, which could be 40% more efficient, which once again, will become a dramatic drop even in
- 32:25 the already dramatic drop of prices of solar. Aviation fuel, the possibility of fourth
- 32:33 generation nuclear, which makes some people shiver, but it is allegedly capable of dealing
- 32:41 with the waste issue, dealing with the melt issue, dealing with proliferation issue, and may be far
- 32:47 more efficient and affordable and standardized and safe. If that is true. And Bill Gates and
- 32:53 others are looking at that technology, building a prototype to check it out, as Bill Gates says, if
- 33:00 we have a miracle in storage or fission or fusion, a lot of these problems get solved very quickly.
- 33:07 We have to make sure that we're guarding against the potential that we don't get there with the
- 33:13 technology, we have to build on what we know how to do. Now that's prudent governance. And
- 33:19 we can't take the risk that we're not moving rapidly, therefore, in the next 10 years.
- 33:24 And I think much effort has to go into that, David, in order to guarantee that
- 33:28 we're being responsible. But I'm very confident about our ability to do this,
- 33:34 both technically and scientifically, the issue is will we have the political will.
- 33:41 And here again, I've been working with some of the major financial institutions in the United States.
- 33:47 They are now ready because of ESG and SDGs, but also because of climate, to allocate
- 33:55 a certain amount of their investment and lending into climate sectors that will reduce emissions.
- 34:02 Most of the sectors that we need to do this in our revenue producing. If it's transportation
- 34:10 it's revenue producing. If it's power, it's revenue producing for the users. They have
- 34:18 to pay the fee, whatever it's going to be. So as long as there's revenue and a revenue stream
- 34:25 with the combination of the MDBs and the possibility of some concessionary money,
- 34:31 we can take first risk away and begin to build something that is marketable in an instrument
- 34:38 that goes out 30-40 years and provides a capacity to raise the trillions of dollars
- 34:44 necessary to do this. I think that's the way the MDBs have to think, it's a whole new model.
- 34:51 And it requires us to be creative, but also be bold, because the challenge is enormous.
- 34:59 [David Malpass] You're bringing out many of the problems and challenges. One of them,
- 35:05 I think... We will see innovation in financial markets. So I want to come to Minister
- 35:10 Sri Mulyani, you mentioned the green bond spread being too narrow. Shemara mentioned very clearly
- 35:20 that the goal of having infrastructure as an asset class in green infrastructure as an asset class.
- 35:26 And that brings us together with the NDCs and and the paperwork that's going along with with
- 35:34 credits within the marketplace. How do you see this all? Do you have a concept of how this can
- 35:42 come together in terms of marketable credits for the green side that helps create an asset class?
- 35:50 Well, first, I think, on the innovation of the financing, I think that's very important.
- 35:57 I'm an optimistic person in this case, David, so even when we have this commitment and at
- 36:03 that time, many of them are [inaudible], not thinking about the green bond yet before you
- 36:10 didn't prepare. And that's why before you issued the green bond, you really need to
- 36:15 build the credibility of the tracking because you cannot issue a green bond without linking it to
- 36:21 what you have to deliver. And I'm quite fascinated with this mechanism, or methodology i which you
- 36:28 have dark green, light green, or relatively green in this case. I think this also give
- 36:35 an option for a country to be able to offer that all the projects which are related to the green
- 36:43 commitment can be delivered. I think project by project,
- 36:47 relatively can be addressed on the financing side. And if you combined with the concessional,
- 36:52 I think that's even also very, very good in the ability to deliver that. If you are issuing bonds,
- 37:00 as I mentioned earlier, the market is not differentiated. You know, what [inaudible] really
- 37:06 is the statement of Janet Yellen and power. In this case, the [inaudible] than the commitment on
- 37:14 the green. So maybe the United States can use that power in other, for globally can really change
- 37:21 differentiating. Because Secretary John Kerry now discussing with many of the financial institution.
- 37:27 But I think what really moved globally is the statement by Jerome Powel and Janet Yellen.,
- 37:33 that we are now witnessing. The third one is I think, it's trying to really addressing the
- 37:40 issue of the transition. Because I think when you mentioned about the asset class,
- 37:46 we can really combine many of the renewable and that this is hydro, geothermal and solar, and
- 37:51 the appetite of the financial sector to finance that is really impressionable, really huge.
- 37:58 The problem is on two things, the one that is not really obvious like transmission
- 38:04 and distribution. This is usually is much harder to get the financing. And this is usually the area
- 38:10 where the MDBs are investing or our own resources. And that's a huge investment. And then the third
- 38:18 one is of course, the transition from the, if you really want to be very ambitious as Secretary
- 38:26 Kerry mentioned, then you really have to... Either you are going to stop the nonrenewable,
- 38:32 and every increase in demand will only be satisfied or fulfilled by the
- 38:38 renewable one. Or another choice is, which I saw this one, like in the US and in China,
- 38:45 in Japan and South Korea, they're not declining the coal. They're still have the coal but every
- 38:51 increase in demand is going to be satisfied, or if you are going to be very ambitious retiring the
- 38:57 coal or any high CO2 emission source of energy, it will require a huge transition toward that.
- 39:06 So this is all the strategy that needs to be discussed. For countries that are now recovering,
- 39:12 the economy is going to recover. Hopefully the vaccines and all this pandemic can be in control.
- 39:18 Then you are soon going to be faced with increasing demand again.
- 39:23 And when you have the increasing demand, the choice is now really at your, whether you are
- 39:28 going to like fulfill with the same old way of the nonrenewable, or with the renewable.
- 39:35 If it is renewable, then you really have the choice about solar - this technology is really
- 39:41 amazing. Now prices also declined, but we cannot use all solar. We have hydro, we have geothermal,
- 39:48 which I think each of them have their own risks. And usually frontend investment is quite big.
- 39:55 And this are all that need to be addressed in their own way. How you are going to overcome the
- 40:02 first loss absorption, the exploration failure, especially on the geothermal, how you are going to
- 40:08 deal with the sustainable and intermittent between the peak load and the off peak load. These are
- 40:17 all the problems which really required a lot of thinking on the financing application. And then we
- 40:23 can discuss with the MDBs and how the market can support. Market is very powerful, but I have to
- 40:30 say that at this very moment, they are not really signaling this differentiation price between the
- 40:36 commitment on the climate and on climate. [David Malpass] These are true problems
- 40:40 that we need to work through. Shemara, Secretary Kerry mentioned
- 40:45 the importance of a revenue stream and that creates then the basis for an asset class.
- 40:50 And do you want to comment also on, on what we just heard from the Finance Minister about the
- 40:56 narrowness of the spread, and I'm wondering your thoughts on carbon credits as a market. How
- 41:02 can this come together from a financial sense? And do you see signs of light on these issues?
- 41:12 Keeping with what I've been saying, I think really the secret to drawing private finance
- 41:17 to all of this is creating an environment where it makes rational sense to invest. And
- 41:24 as well as being part of the global commission on adaptation, I worked with
- 41:28 Michael Bloomberg's commission for leadership in finance for emerging countries over the last
- 41:36 two years. And the thing we found to attract that private finance to renewable projects in emerging
- 41:42 countries, is there a three big things we think that are needed. One is setting of clear targets.
- 41:48 The other one is policies by sector. And then the third one is creating stability in terms of
- 41:54 rule of law and currency, etc. If that can be done, we are seeing that the market will step
- 42:01 up and bring finance to these areas, renewable energy, transmission, distribution, etc.
- 42:06 And again, if I could use an example of Taiwan where we've been working for quite some time.
- 42:11 In 2015, they had 80% of their power coming from coal and gas, and they made a commitment in 2017
- 42:18 within the next 80 years to take renewables from 5% to 25%, which was a 5.7 gigawatt increase. And
- 42:26 then they were going to add another 10 gigawatts out to 2035. We've been part of that project and
- 42:31 have now delivered two and a half gigawatts of offshore wind, renewable energy in Taiwan.
- 42:36 Through investible projects where the private sector actually bought money at very competitive
- 42:41 costs of capital as well. Early stage with you know, the returns were higher, we had to take the
- 42:47 development and all the construction risk, but now that the projects are reaching completion,
- 42:51 we're actually able to sell down our investors investments at great profits,
- 42:55 to people who are keen to come into these sectors once you catalyze them.
- 43:00 So I think it's an example of where the public and the private sector
- 43:04 can be working together to try and bring the much needed capital to this area. And you know,
- 43:10 there's other examples as well. I know they're happening in Vietnam, Philippines, some in
- 43:15 Indonesia, considering it in Latin America. And we as the private sector, I think have an obligation
- 43:22 to create these investible projects, but also to be an active sponsor, which we're doing through
- 43:28 having taken over the green investment group from the UK government and also the UK climate finance
- 43:34 initiative. We're working with in India creating a yield co-fund for renewables in South Africa,
- 43:41 a black empowerment initiative. So there are some examples, and I think the carbon
- 43:47 market and the offset market are important aspects in this private sector participation,
- 43:52 commodities and trading businesses are working actively in developing this market. But I know
- 43:58 David we're running tight on time. So I might say this belated discussion and give the other
- 44:03 speakers more time. I'll hand back to you. [David Malpass] Those are very interesting
- 44:10 and very practical aspects of developing these markets. And I think that's going
- 44:15 to be a critical part. I wonder if we can end
- 44:17 with Secretary Kerry. Maybe on the same topics. How big is the problem that we're facing, and
- 44:28 how do we make progress through markets, through public-private partnerships as was mentioned. Any
- 44:35 final thoughts for the Group and for the panel? [John Kerry] Thank you, David. And I look forward
- 44:41 to following up with Sri and also with Shamara very, very interested in what she has said,
- 44:47 and I think there are ways to build out on it. Look, I think this is as big a challenge
- 44:54 as any of us have ever faced. But we're looking at the opportunity to take part in the largest market
- 45:01 the world has ever known. Four and a half to five billion users today. Already multi-trillion
- 45:08 dollar market in double digits. And it's going to grow to nine billion users in the next 30 years,
- 45:16 with huge sums of money that will be invested in and ultimately made
- 45:24 in the marketplace by those who are investing in this future. That's happening. You're seeing
- 45:30 already, I think it was about 500 billion plus that was invested last year. The projections in
- 45:36 the United States from the labor statistics are there three job categories that will
- 45:40 grow more than 50% this next year in America. The first at 62% is wind turbine technician.
- 45:49 The second is a practitioner, nurse practitioner. We know why that's growing.
- 45:54 And the third is solar panel installer. It's happening. Already the market is moving.
- 46:02 And that's why I think it shouldn't be that difficult to create this new financial instrument.
- 46:10 I'm not a financial engineer, but I know that we're... I mean, we had about 13 to $17 trillion
- 46:17 sitting in net negative interest status in the last years, are you kidding me? Net negative
- 46:22 interest. Paying for the privilege of being parked somewhere when there were obviously things
- 46:27 to invest in and do around the world that could have burned you a decent return on investment.
- 46:33 So we have to get real and serious about this opportunity. It is the challenge of our generation
- 46:41 with the next generations. And they're the ones who've been calling us to account,
- 46:46 asking why the adults can't get this done. So I think the challenge is clear.
- 46:51 I think the opportunities are equally as clear. What we have to do now is summon the creativity
- 46:56 and the personal energy of our countries to commit to doing this. And I think it will
- 47:05 be something that's amazingly exciting because the quality of life will improve. Cleaner air,
- 47:12 cleaner water, more people employed, a greater energy independence,
- 47:17 greater security between nations and I think a huge kickstart to the post-COVID world.
- 47:24 [David Malpass] Fabulous, thank you all three. The World Bank is in the middle
- 47:30 of many of these issues. So we want to work with all of you
- 47:33 on how do we get to the next steps. What are the highest priority
- 47:39 things that we can get done? So again, thank you so much for joining today.
Watch the Main Event
Key Green Transitions for People and Planet
Record-breaking wildfires, droughts, floods and hurricanes have taken lives, damaged homes, hospitals and businesses. Meanwhile, COVID-19 took a heavy health and economic toll and pushed millions into extreme poverty. How can we change course?
2021 Spring Meetings
Watch the replays of the World Bank Group Public Events
Watch the full replays of the Spring Meetings 2021 World Bank Group public events
- April 6th - Economic Recovery: Toward a Green, Resilient, and Inclusive Future
- April 7th - Rethinking Debt: Financing the Future Amid Crisis
- April 8th - Key Green Transitions for People and Planet
- April 9th - COVID-19: Vaccines for Developing Countries