Making Climate Action Count

The World Bank Group is midway through its 2021–2025 Climate Change Action Plan (CCAP), which is focused on green, resilient, and inclusive development. This ambitious CCAP is continuing to drive the World Bank Group to achieve substantial climate-positive results for partner countries and clients. Noteworthy is MIGA's progress under the CCAP in: (i) aligning our operations with the goals of the Paris Agreement; (ii) delivering record volumes of climate finance; (iii) enhancing country-level climate diagnostics through the World Bank Group Country Climate and Development Reports (CCDRs); and scaling up our approach to climate adaptation and resilience finance. These four areas of MIGA’s work are explored in greater depth in this year’s Sustainability Report, and we also share our conversation with James Magor, Director of Sustainability at Actis, a valued MIGA client. He shares the firm’s dynamic approach to the climate change challenge.

Implementing the CCAP: Progress Report, 2021-2023

Preparing for Paris Alignment with publicly disclosed approach

Actioned $4 bn in climate finance in first three years of CCAP

Launched Country Climate & Development Reports in 29 countries

Scaling up Climate Adaption/ Resilience Finance in Projects

Aligning Operations with the Goals of the Paris Agreement

The World Bank Group has supported the goals of the Paris Agreement since its signing in 2015. The commitment to align World Bank Group operations with the goals of the Paris Agreement was made at the time of the launch of the World Bank Group 2021–2025 CCAP in June 2021. MIGA affirmed that, starting on July 1, 2023, 85 percent of new operations would be aligned with the Paris Agreement’s low carbon and climate-resilience goals and, beginning on July 1, 2025, 100 percent of MIGA’s new operations would align with these goals. A similar commitment was made by IFC, while IBRD and IDA will align all new financing operations approved from July 1, 2023.¹

A foundational assumption underlying the World Bank Group's approach to Paris Alignment is that individual countries have the flexibility to define their contributions to the central goals of the Paris Agreement. This principle aligns with a core tenet of the Paris Agreement, which acknowledges that countries possess distinct needs and circumstances in integrating climate and development objectives. This recognition extends to variations in the timeline for peaking greenhouse gas emissions in developing countries.² Moreover, it acknowledges that each country has both shared and distinct responsibilities and capabilities based on their unique national contexts.³ Furthermore, the World Bank Group's commitment to Paris Alignment is closely intertwined with the evolving climate strategies of countries, as reflected in their Nationally Determined Contributions, long-term strategies, and national adaptation plans. As a result, the Paris Alignment assessments carried out by MIGA for each operation will be tailored to the operation's specifics, considering the project’s context, developmental objectives, and timing.

In the process of aligning MIGA's operations with the goals of the Paris Agreement, there is a focus on assessing, managing, and mitigating climate risks within projects, as needed. To achieve this, MIGA will apply the Joint MDB Paris Alignment Methodological Principles across its guarantee operations. This collaborative approach, developed and embraced by ten MDBs, serves as a framework for each MDB to then formulate its own unique methods, as it sees appropriate. The World Bank Group offers additional support for aligning its operations with the Paris Agreement through sector-specific notes that will be applied across the institution. These World Bank Group Sector Notes provide guidance to MIGA's project teams, showing how the Joint MDB Paris Alignment Methodological Principles relate to sector-specific considerations (see Figure 1). This guidance integrates specific country and project development contexts, both in the public and private sectors, and factors in feasibility, particularly in private sector operations at MIGA and IFC, where feasibility implies being "commercially available and financially viable." The Joint MDB Paris Alignment Methodological Principles and the World Bank Group Sector Notes are publicly accessible.

Figure 1

The World Bank Group's Architecture on Paris Alignment

Direct Investment Lending, Policy-Based Lending, Intermediate Financing (FI), and General Corporate Financing
For Investment Project Lending, Development Policy Financing, and Program-for-Results Financing
For Direct Investment Operations, FI, and General Corporate Financing

Source: World Bank Group.

The 11 sector notes cover the following areas of engagement

1.
Agriculture and Food

2.
Education

3.
Energy and Extractives

4.
Environment, Natural Resources and Blue Economy

5.
Digital Development

6.
Health, Nutrition and Population

7.
Social Protection and Jobs

8.
Social Sustainability and Inclusion

9.
Transport

10.
Urban, Resilience, Disaster Risk Management, and Land Sector

11.
Water

The outcome of MIGA’s Paris Alignment assessments, and all Paris Alignment assessments of World Bank Group operations, is for the operation to be designated as “aligned” or “non-aligned.” For a positive assessment, all the operation’s activities need to be assessed as aligned. Alignment is also required across both mitigation and adaptation-resilience dimensions. Mining thermal coal, generating electricity from coal, extracting peat, and generating electricity from peat are all considered as Universally Non-Aligned activities in the Joint MDB Paris Alignment Methodological Principles. A MIGA client also may be required to adopt measures, before and during the period of the guarantee, to achieve alignment if this is needed. It is important to note:

the outcome of the assessment is an expert judgment;
the outcome is based on information available at the time of the assessment, and this is expected to change over time as technologies, costs, capacities, policies, and consumer behaviors progress both at the level of the country and across the globe; and
The World Bank Group and the MDB community will learn from the experience of implementing Paris Alignment, and our approaches will need to be amended and updated as a result.

MIGA’s assessment of each project’s alignment with the goals of the Paris Agreement will be made during the project’s due diligence process by MIGA’s team of climate change specialists applying the World Bank Group’s approaches and guidance.

With the launch of Paris Alignment, MIGA is scaling up its climate action and systematically integrating climate and development objectives across all our guarantee operations. Ethiopis Tafara Vice President and Chief Risk, Legal and Sustainability Officer and Partnerships

The difference of two years in MIGA and IFC’s goal of achieving 100 percent alignment with the goals of the Paris Agreement reflects the longer lead time needed for developing and supporting projects with private sector participation.
Article 4.1 states: “In order to achieve the long-term temperature goal set out in Article 2, Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties….”
Article 2.2 provides that “This Agreement will be implemented to reflect equity and the principle of common but differentiated responsibilities and respective capabilities, in the light of different national circumstances.”

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MIGA’s Climate Action Journey

MIGA has been scaling up its climate action consistently. The World Bank Group's Second CCAP (2021-2025) marked an historic commitment for MIGA and the World Bank Group to align their operations with the goals of the Paris Agreement. Additionally, it outlined a climate finance objective, aiming for 35 percent of MIGA's guarantees to support climate finance activities, calculated as an average over the five years of the CCAP 2021-2025.⁴

These two approaches—aligning operations with the goals of the Paris Agreement and increasing operations that deliver climate finance—yield climate impact in MIGA’s operations and contribute to the overarching goal of integrating climate and development. However, they differ in terms of assessment, measurement, application, and integration across MIGA's operations.

In identifying, tagging, measuring, and reporting climate finance, MIGA employs the Joint MDB Methodology for tracking climate finance, which encompasses both mitigation and adaptation. This methodology is based on estimating mitigation finance from a list of activities in sectors and sub-sectors that reduce greenhouse gas emissions, aligning with low-emissions development. Adaptation finance is measured through a context-specific and location-specific approach, directly linking activities to a reduction in vulnerability to climate change.⁵

There are several key distinctions between the two approaches, as follows:

Operations tagged as climate finance must positively impact climate change, while Paris Alignment assessments aim to align with specific goals of the Paris Agreement;
Positive impact from a climate finance-tagged operation can stem from either mitigation or adaptation efforts, whereas for a positive Paris Alignment designation, both mitigation and adaptation must be addressed;
To be recognized as delivering climate finance, specific components of a project need to meet the climate finance criteria. However, for assessing Paris Alignment, all project components are considered and must receive a positive assessment;
Under the Climate Finance methodology, specific project components can be assessed as eligible for Climate finance tagging, and a percentage of Climate finance can be applied to the project. On the other hand, for Paris Alignment assessment, the entire project must be aligned for it to proceed; and
While MIGA endeavors to maximize its Climate finance contribution, an operation can proceed even without a Climate finance component. This contrasts with Paris Alignment, where alignment with the principles will be required for MIGA to proceed with most projects (85 percent) and after July 1, 2025, all MIGA-supported projects (see Figure 2).

Figure 2

Climate Finance and Paris Alignment

Climate Finance	Paris Aligned Finance
Positive Impact on Climate Change	Align with specific goals of the Paris Agreement
Can be Mitigation and/or Adaptation	Needs to consider both Mitigation and Adaptation
Project Components Assessed Individually	All project components are assessed
Calculate Climate Share	Binary Classification – Aligned or Not–Aligned
Part of Decision Making , but not a “Go / No Go” Decision	Will be “Go / No Go” decision with 100% Alignment Solution

Source: MIGA

The World Bank Group announced at the Summit for a New Global Financing Pact in June 2023 that it will introduce a new climate tracking metric to complement the Joint MDB Methodology for tracking climate finance, which is the methodology applicable to the World Bank Group’s 35 percent target for climate finance. The aim will be to develop a pipeline of projects that are designed to have a greater climate impact rather than using a use-of-proceeds approach measured on an expected basis, which is the method for applying the current Joint MDB climate finance methodology. Building on learnings from the current Climate finance approach and work on the Paris Alignment approach, the World Bank Group will lead an effort among the MDBs to develop this new methodology for tracking climate outcomes. An outline is expected to be announced at the 2023 United Nations Climate Change Conference in Dubai, UAE (November 30th – December 12th).

It is important to recognize that prior to the World Bank Group CCAP (2021-2025), the World Bank Group had already taken decisive action to fight climate change. In 2013, the World Bank Group announced it would provide financial support for greenfield coal-power generation projects only in rare circumstances. The World Bank Group has not financed a new coal-fired power plant since 2010 and has no active coal-fired power generation project in its pipeline. In 2017 the World Bank Group announced that it will no longer finance upstream oil and gas projects starting in 2019. Non-upstream natural gas investments may be considered aligned in countries where there are urgent energy demands and no short-term renewable alternatives to reliably serve such demand. Accounting for unique national circumstances, all World Bank Group investments in new gas infrastructure will be assessed for consistency with the country’s Nationally Determined Contribution, long-term strategy, or other national development strategies, and will aim to ensure they do not lead to long-term carbon lock-in, among other considerations. MIGA also applies IFC’s Green Equity Approach when supporting equity and equity-like investments in financial institutions.
For further explanation of the Joint MDB Climate Finance Methodology, see the 2021 Joint Report on Multilateral Development Banks’ Climate Finance.

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Emerging Messages from Country Climate and Development Reports

In FY23, the World Bank Group introduced a new core diagnostic product, the Country Climate and Development Reports (CCDRs), jointly produced by the World Bank, IFC, and MIGA, in coordination with the International Monetary Fund (IMF). ⁶In FY23, the World Bank Group, published 25 CCDRs covering 29 countries. In FY24, the World Bank Group aims to release an additional 29 CCDRs, covering 40 more countries.

The primary goal of the World Bank Group's CCDRs is to assist countries and their partners in both the public and private sectors in gaining a deeper understanding of their most urgent climate risks. Moreover, these reports provide insights into how to manage these risks while simultaneously achieving the countries' development goals.

Key findings from the FY23 CCDRs⁷ include:

Climate change is a key challenge to longterm development, poverty reduction, and enhancing shared prosperity;

Climate objectives can be achieved without compromising development, but only if key conditions are met; and

Achieving success demands policy reforms, optimal allocation of limited public resources, and an increased influx of financial assistance from the international community.

The CCDRs emphasize that the active involvement of the private sector is an essential element in addressing climate change.
They highlight the following points:

The relationship between development and climate action hinges on private sector investments and innovation. This dynamic also generates opportunities for private sector growth, heightened income and exports, and job generation;
The private sector holds the potential to significantly contribute to both adaptation and mitigation efforts. However, realizing this potential requires favorable conditions and targeted support;
The private sector's climate resilience and preparedness are still at an early stage. Policy and institutional changes are needed for the private sector to effectively address climate risks and invest in resilience;
The anticipated substantial growth in renewable energy capacity is expected to be predominantly financed by the private sector. This sector can also drive innovation in storage and demand management;
The private sector is poised to take a leading role in transport and buildings, with remarkable innovation and growth already evident in the electric vehicles market; and
Climate-smart practices in agriculture, forestry, and landscape management can enhance resilience and decrease emissions.

Country Climate and Development Reports identify the regulatory reforms and incentives needed to enable private sector investment in climate adaptation and mitigation solutions. Ethiopis Tafara Vice President and Chief Risk, Legal and Sustainability Officer and Partnerships

See Country Climate and Development Reports.
The main findings from the FY23 Country Climate and Development Reports are synthesized in the publication, Climate and Development: an agenda for action.

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Mind the Gap: Private sector climate adaptation finance

The impacts of global warming, as forewarned by the scientific community, have been evidenced prominently worldwide: glaciers and ice sheets rapidly melting, intensifying heat, persistent droughts, severe floods, escalating frequency and severity of forest fires, and escalating devastation caused by cyclones and hurricanes.

The need to adapt and build greater resilience to climate change repercussions has become undeniable. The World Bank Group is working to unlock financing for adaptation and resilience.⁸ To address the physical risks of climate change in its projects, MIGA collaborates with its clients to exchange knowledge, promote the adoption of appropriate methods and actions, and amplify financial support.

Across the developing world, addressing adaptation needs is critical if development gains of recent decades are to be preserved. However, limited capacity and insufficient financing, especially from the private sector, are impeding progress. The United Nations estimates that developing nations will require $160-$340 billion annually by 2030 to adapt to mounting climate impacts. This estimation is projected to rise to $315-$565 billion by 2050. Currently, however, less than $50 billion is allocated for climate adaptation finance.⁹

Understanding the financing gap means dissecting the drivers of adaptation and resilience finance, particularly in the context of mobilizing private sector finance. Climate adaptation finance often falls to the public sector to support, reflecting that these operations often are large-scale infrastructure projects that are non-revenue generating. Typically, these projects are financed using public sector funds and may be considered "public goods," either wholly or in part. But developing countries are often faced with limited fiscal space to prioritize infrastructure projects that address physical climate risks, particularly when resources are also required to fulfill basic needs, such as access to clean water or electricity. Consequently, governments increasingly acknowledge the importance of fostering private sector investments and finance in adaptation and resilience.

Private sector projects, constructed for purposes beyond explicit climate adaptation or resilience, yet designed to tackle elevated risks linked to climate change, represent another source of climate adaptation and resilience finance. By developing more resilient private sector projects, economies can contribute to climate change adaptation. The private sector may be more likely to invest in this form of adaptation finance as it is likely to be better aligned with their business interests.

However, tracking and reporting this kind of climate adaptation finance is often challenging and so it tends to be underreported. In addition, the private sector may not take appropriate measures to enhance their projects' resilience due to various factors, such as:

Lack of awareness of climate risks

Inadequate understanding of potential climate risks that could adversely affect their projects;

Access to climate risk data

Limited access to up-to-date climate risk models and data;

Pricing climate risks

Challenges in determining how to factor in climate risks when pricing projects;

Uncertainty in mitigation measures

Uncertainty about the appropriate measures to mitigate climate risks;

Long-term benefits vs. immediate costs

Uncertain benefits that may only become apparent over an extended period, if at all, when weighed against immediate and certain costs; and

Public sector backing

Belief that in the event of a severe climate event, the public sector will shoulder the costs, rendering an upfront private sector investment redundant.

The institutions of the World Bank Group, including MIGA, are actively collaborating across the public and private sectors to elevate private finance for adaptation and resilience. Efforts revolve around assisting governments in creating an environment that fosters private sector investment in adaptation and resilience finance (see Figure 3).

Figure 3

Five Steps to Enable Private Sector Engagement in Climate Adaptation

1 Long-Term Adaptation Planning Support

Support to update/revise/draft long-term adaptation strategies (i.e. NAPs, NDCs, etc.) and develop robust analysis of investibles initiatives

2 Develop a National Adaptation Investment Plan

Facilitate the translation of long-term adaptation strategies and goals into a national adaptation investment plan with a portfolio of both required policy measures & investments, with assessment of bankability

3 Market Assessment & Pipeline Screening

Support pipeline screening and market assessment for portfolio of prioritized private potential projects and formulation of enabling conditions/incentives to incentivize market development and private sector investment, including PPP framework development & capacity-building

4 Project Preparation Support

Facilitate data sharing, knowledge and leading practices and support the identification of project investment risks and opportunities for private investors

5 Downstream Transaction Demonstration

Facilitate the coordination of project financing with relevant investors and support adaptation-related projects ready for investment

Source: Enabling Private Investment in Climate Adaptation & Resilience: Current Status, Barriers to Investment and Blueprint for Action. World Bank.

In collaboration with client countries and private sector clients and partners, MIGA is undertaking the following actions to scale up its work in climate adaptation and resilience:

Resilience screening

All potential MIGA-supported operations are screened for climate change risks in line with the World Bank Group's Paris Alignment commitments. MIGA guarantees will only be extended to clients whose projects are resilient, in line with the application of MIGA's approach to aligning its projects with the goals of the Paris Agreement.¹⁰ This applies to MIGA-supported projects in both the real and financial institutions sectors.

Climate Action Plans Developing

Climate Action Plans, as needed, that require clients to commit to mitigation measures to address identified risks before MIGA can proceed with a guarantee for the project.¹¹

Partnerships for risk screening

Collaborating with financial institutions from both the private and public sectors to encourage and support the establishment of systems for developing and refining internal climate risk screening procedures to enhance climate resilience. This work is expected to have a demonstration effect in the sector moving beyond project-specific benefits to system-wide benefits.

Trust fund utilization

If needed, deploying funds from donor trust funds to support qualifying climate resilience and adaptation actions within MIGA-supported projects. In FY22, MIGA established The Fund for Advancing Sustainability, a trust fund aimed at enhancing the sustainability of MIGA projects for this purpose and other sustainability goals.

Identifying high adaptation benefit projects

Identifying and supporting projects in sectors where high adaptation benefits can be achieved. These sectors encompass infrastructure, manufacturing, agriculture, and services. In FY23, financing proceeds guaranteed by MIGA were directed towards climate resilience finance in these areas of MIGA's business.

Pricing discounts for climate finance projects

Offering potential pricing discounts for qualifying climate finance projects, including those supporting resilience and adaptation climate finance.

Innovating new products

Collaborating with the insurance industry to develop a para- metrically based climate insurance option offered by private insurers; and

Encouraging climate-related risk disclosure

Urging clients to disclose climate-related risks and adopt standards for doing so, such as the Task Force on Climate-Re- lated Financial Disclosures (TCFD). MIGA itself leads by example, having reported under the TCFD's recommenda- tions for three consecutive years and engaging with global standard setters on climate financial disclosures and best practices.

MIGA, partnering with the public and private sectors, must act with urgency to scale up climate actions and finance to build resilience to climate shocks. Hiroshi Matano Executive Vice President, MIGA

MIGA and the WBG actively support both mitigation and adaptation/resilience finance. Adaptation and resilience finance differ from mitigation finance as mitigation finance attempts to slow the underlying cause of climate change by reducing GHG emissions.
UNEP: Adaptation Gap Report 2022: Too Little, Too Slow – Climate adaptation failure puts world at risk.
This requirement applies to 100 percent of MIGA guaranteed projects beginning July 1, 2025. From July 1, 2023, until July 1, 2025, 85 percent of MIGA guaranteed projects will need to meet this condition.
This requirement applies to 100 percent of MIGA guaranteed projects beginning July 1, 2025. From July 1, 2023, until July 1, 2025, 85 percent of MIGA guaranteed projects will need to meet this condition.

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James Magor

Director, Sustainability

James joined Actis – a leading global investor in sustainable infrastructure – in January 2016, and works across the firm’s sustainability strategy and sits on Actis’ Risk Committee. James has over 18 years of experience in the sustainability sector, primarily serving the private equity, banking, and development finance sectors. James is a member of the UN Principles for Responsible Investment (PRI) Infrastructure Advisory Committee, the African Private Equity and Venture Capital Association (AVCA) Sustainability Committee, and holds an MSc in Applied Meteorology & Climatology from the University of Birmingham.

Working with the private sector to integrate climate with development A conversation with James Magor from Actis

QThank you for sharing your time with us today, James. Starting July 1, 2023, 85% of MIGA’s new operations will be aligned with low-carbon and climate-resilient development pathways. It is undeniable that integrating climate with development will require substantial support from the private sector. As a leading private investor in sustainable infrastructure, how is Actis supporting the low-carbon and climate resilient transition – has Actis made any corporate commitments?

AAt Actis, we recognize climate change is an environmental problem with profound social consequences, and successful socio-economic development must be integrated with climate resilience and adaptation measures. We also understand the role that private investors need to play to help decouple economic growth and development from carbon emissions. The IEA estimates that we need to invest USD 5 trillion per year by 2030 to achieve the transition to a net zero economy (‘the Transition’) and clearly this quantum of capital cannot come from the public sector alone. However, we view the Transition not as an insurmountable challenge, but as a compelling investment opportunity to generate outsized returns.

In order to ‘transform infrastructure’ and deliver a ‘better tomorrow’ we need to invest in a way that aligns the carbon emissions of our portfolio with a Net Zero pathway. That is why we announced in 2022 that 100% of our assets under management (AUM) will achieve Net Zero by 2050, and in 2023 we announced that 60% of our AUM will be aligned with Net Zero pathways and 50% of our AUM will be invested in Climate Solutions by 2030.

The target set by Actis for at least 50% of the total assets under management to be in climate solutions is ambitious. How does Actis and the private sector more broadly view the financing for climate action? What opportunities and challenges do you see?

Evidently, wind and solar power generation is, and will continue to be, at the heart of the Transition for the foreseeable future. The IEA’s Net Zero pathway estimates that we need over 10,000 GW of renewable energy installed capacity by 2030, which equates to approximately three times the total global installed capacity of renewables in 2022¹². In other words, we need to build another two planets of renewable energy power plants in 8 years. That will form the core of our sustainable infrastructure investment strategy going forward and will be a significant contributor to our climate solutions target. However, there are many other infrastructure sectors that will continue to provide essential services up to and beyond 2050 but need to start the process of decarbonization now.

Let’s take district cooling as an example; not only is it approximately 30-50 percent more energy efficient than conventional cooling alternatives it’s also more affordable, and the UN Environment Programme described district cooling as “a secret weapon for climate action and human health.¹³” As global temperatures increase, the heat stress of occupants is becoming a key consideration in keeping workforces productive, industrial processes viable (vaccine production, food production, etc.) and in keeping residential building stock inhabitable. Lack of access to basic residential cooling where needed—the cooling gap—is increasingly considered a dimension of energy poverty.

Private sector investment in climate adaptation is challenging, especially when compared with the myriad opportunities for investing in mitigation. Supporting climate mitigation by investing, for example, in new renewable power projects, typically comes with a power purchase agreement that provides certainty of financial return. On the other hand, investing in adaptation projects that reduce the risks that communities face from climate hazards does not bring the same long-term, contracted financial return. As a result, climate adaptation is often viewed as a public sector obligation rather than a viable commercial investment opportunity for a private sector investor.

Nevertheless, for private infrastructure investors looking to maximize returns, there are still interesting opportunities to invest in climate adaptation while safeguarding and enhancing shareholder value. For example, investing in flood defenses to protect an infrastructure asset often reduces the risk to local communities. Similarly, all Actis’ infrastructure companies implement a community development strategy because we recognize that securing a social license to operate (SLTO) mitigates the risk of disruption and maintains business continuity or asset availability. We often find that supporting adaptation projects that build climate resilience in host communities is one of the more effective ways of securing that valuable SLTO, which ultimately has a payback for us at exit.

There are still interesting opportunities to invest in climate adaptation while safeguarding and enhancing shareholder value. James Magor Director, Sustainability, Actis

MIGA and Actis are working together to build climate resilience for a critical power generation project in Bangladesh. Can you please share a few details on this effort? How were physical climate risks identified and how are these being mitigated?

Bangladesh is one of the world’s most climate vulnerable countries, due to a variety of physical climate risks and low adaptive capacity. Furthermore, the Bhola power plant is situated on a low-lying island which is part of an active delta in the major Ganges–Brahmaputra–Meghna river basin. This presented a unique challenge for Actis when we were assessing the opportunity to acquire the power plant.

In the UK we probably suffer from three types of drizzle but during our due diligence we learned that the site in Bangladesh was exposed to three possible flood event types: (1) overland flooding due to heavy rainfall occurring on the island; (2) riverine flooding due to heavy rainfall occurring near or upstream of the island which causes river flows to rise and accelerate, resulting in eventual overtopping of river banks; or (3) coastal flooding due to extreme weather events occurring in the Bay of Bengal which induce storm surge towards the island. Under extreme scenarios, all three flood events can occur simultaneously.

In order to assess the flood risk to the power plant and to communities living in the vicinity of the site, we commissioned specialist advisors to update the project’s flood risk assessment, to better evaluate how climate risks could evolve under various climate scenarios and across several time horizons. This analysis relied on localized climate change projections from a collection of climate models. The analysis relied on a 2-D flood routing model software and employed field datasets as well as satellite imagery to assess overland, riverine, and coastal flood risks due to changes in extreme rainfall and associated river flows, sea-level rise, and storm surge from tropical cyclones.

The 2-D flood modeling and consultation with subject matter experts helped informed the design of flood mitigation measures. To help mitigate and adapt to this risk to the power plant and its workers, the embankments adjacent to the river have been raised and structurally strengthened to prevent the risk of riverine flooding; and accelerated erosion under extreme flood scenarios. In addition, the stormwater drainage system has been upgraded to increase its capacity and we developed a flood resilience action plan for the workers at the site. We were also conscious that the development must not increase the flood risk for people living with the power plant’s area of influence. Our flood risk modelling concluded that the development of the power plant has not exacerbated existing flood risks for the households, as drainage outflows from the site will be directly discharged into the neighboring river, which has sufficient capacity to collect and convey this water. Nonetheless, as the nearby households are at risk to increased flooding due to climate change, we are working alongside government partners to provide flood and cyclone response training for nearby communities, disseminating flood warnings to communities, and exploring potential investments through a community investment plan to enhance community emergency response facilities and community drainage infrastructure.

As you have noted, climate risks can be difficult to diagnose and mitigate. What are a few lessons you have learned which other private investors can benefit from? Also, what can MIGA, the World Bank Group or other Multilateral Development Banks do to better support the private sector in financing climate resilient development?

I believe there are three critical lessons that we have learned from the Bangladesh project. Firstly, it’s vital that climate change risk is screened at the beginning of the due diligence process and, where necessary, incorporated from the outset of the detailed due diligence phase. Physical climate risks are increasingly complex and often multifaceted, the magnitude of the risk needs to be thoroughly assessed and the commercial viability of the mitigation solutions needs to be determined with a high degree of confidence. It takes time and resources to complete the sort of robust assessment that we undertook for the Bhola project. Secondly, be transparent about your limitations and draw upon relevant expertise. Thirdly, while you need to understand where your ‘red lines’ are, don’t shy away from a challenge if you believe in the investment case. There were times when the Bhola project seemed potentially too difficult, but we persevered and implemented a suite of comprehensive and commercially viable mitigation measures that will protect this important asset, the people that work there and the neighboring communities for the foreseeable future. In fact, our mitigations were tested in May this year when cyclone Mocha struck the coast of Bangladesh, causing widespread flooding. Thankfully, all the mitigation efforts worked, the power plant and surrounding communities were unharmed, and the Bhola power plant continued to generate essential electricity for the country.

We are working alongside government partners to provide flood and cyclone response training for communities.James Magor Director, Sustainability, Actis

See IEA's: (i) Renewable Energy; and (ii) Tripling renewable power capacity by 2030.
See UNEP's: "District energy: a secret weapon for climate action and human health" and "District energy in cities: unlocking the potential of energy efficiency and renewable energy."

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