The Banking Executive Magazine - September 2023 Issue

ISSUE 177 SEPTEMBER 2023 the BANKING EXECUTIVE 1 Editorial UNLOCKING THE FULL POTENTIAL OF MULTILATERAL DEVELOPMENT BANKS IN THE GLOBAL CLIMATE STRUGGLE In the face of the escalating climate crisis, the pivotal role of Multilateral Development Banks (MDBs), notably the World Bank, cannot be overstated. As the world grapples with unprecedented environmental challenges, the forthcoming annual meetings of the World Bank and the International Monetary Fund on October 9-15 present a decisive juncture for recalibrating our collective approach. Recent events in Libya, Pakistan, and the Horn of Africa underscore the inextricable link between climate disasters and development, necessitating a substantive reevaluation of MDBs' role in the global response. Currently, MDB lending hovers at approximately $100 billion annually, a fraction of the $2.4 trillion estimated by climate finance experts as necessary for climate and development finance. The urgency of the situation demands a concerted effort to enhance the contribution of MDBs to this critical cause. The Summit for a New Global Financing Pact in Paris this summer proposed innovative solutions to catalyze private capital for green projects in developing countries. However, challenges persist in attracting private-sector investment, especially in sectors such as resilient infrastructure and climate-resilient health and education systems. The adaptation-finance gap, estimated at an additional $200 billion annually, requires immediate attention. Leveraging existing MDB capital and extending guarantees to de- risk climate-related loans can add $100 billion to annual lending, providing a significant stride toward meeting this financing shortfall. As we deliberate on these strategies, it is crucial to recognize the regional implications. In the Middle East, where climate vulnerabilities intersect with geopolitical complexities, the role of banks becomes pivotal. MDBs must collaborate with the Arab world to tailor financial mechanisms that address the unique challenges faced by this region, fostering sustainable development amidst a changing climate. In essence, the forthcoming World Bank meetings offer an unparalleled opportunity for key decision-makers to reshape the narrative. The system of AAA-rated MDBs, with its preferred-creditor status, is our lever for effecting change in the global climate trajectory. It is time for MDBs' main shareholders to not only acknowledge the gravity of the situation but to act decisively by increasing annual lending by $200 billion—a crucial investment in a sustainable and resilient future for all nations. Dr. Joseph Torbey, Chairman - World Union of Arab Bankers