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Publikationen des German Institute of Development and Sustainability (IDOS)
Updated: 6 days 16 hours ago

Upscaling green bond markets: the need for harmonised green bond standards

Mon, 24/07/2017 - 14:09
If a 2°C-compatible pathway is to be achieved, an enormous investment gap exists and this will need to be financed both with public and private funds. Green bonds have the potential to assume a crucial role in mobilising financial funds for the low-carbon transition. First, green bonds enhance the transparency on the underlying assets by disclosing the use of proceeds. Second, with long-dated maturities, they can match the long-term nature of issuer investment horizons with investor time horizons. Third, green bonds can augment issuers’ reputation. Fourth, green bonds can attract a larger and more diversified investor group.
This potential is reflected in the development of the green bond market. The annual issuance of labelled green bonds grew from USD 2.6 billion in 2012 to USD 82 billion in 2016 and in 2017 the Climate Bonds Initiative expect an increase to 150 USD billion.
According to the Green Bond Principles (GBPs) – the most widely adopted international standard – green bonds are any type of bond instrument whose revenues are used to partly or completely finance or re-finance new and/or existing “eligible” green projects.
While the green bond market has expanded sizably, one main problem in its further development is the lack of harmonised standards. Although several international and national taxonomies addressing green bond standards have improved practices around transparency, bonds structure and reporting (including the GBPs and the Climate Bonds Standard), there are no universal definitions of what constitutes a “green” bond. The architecture of green bond standards at the international and national level is fragmented. Several voluntary standards and various instruments for certifying green bonds have been established including second opinions, green ratings, and green bond indices.
On the one hand, existing standards should be better harmonised at the international and national level because different standards reduce investor confidence and increase their transactions costs. In addition, the various certification schemes for green bonds, including second opinion-providers, should be aligned accordingly. To foster efficient trading and increase liquidity in the market, harmonisation of green bond indices and green bond listings rules should be increased. On the other hand, some diversity at national levels and across different types of green bonds is needed in view of country-specific circumstances and to take into account the different purposes of green bonds. Where diverse standards are required, however, transparency into their differentiation from accepted norms must be provided.
In order to design harmonised standards, a vigorous dialogue among market participants is crucial. Annual consultation of the International Capital Market Association on the GBPs and the consultations organised by the Climate Bonds Initiative are important steps in the right direction. In the same vein, the current work of various authorities and private sector financial market actors on a “green bond term sheet” including standards for the definition, certification and validation of green bonds represents a crucial initiative.
The G20 could promote harmonisation of green bond standards by providing an important dialogue platform for public and private financial actors. Country authorities of the G20 countries could take on a frontrunner role in supporting and implementing harmonised standards for green bonds. They should better align their different domestic standards amongst each other and align them with international standards.

Successful agricultural mechanisation in sub-Saharan Africa and the significance of agricultural financing

Thu, 13/07/2017 - 09:39
The majority of the population in sub-Saharan Africa (SSA) lives in rural areas and is directly or indirectly dependent on agriculture. As land is usually tilled by smallholders manually with a hand hoe, or mattock, the worker’s output and productivity (and with it, their income) is low, and the actual workload high. Similar conditions apply in downstream sectors, ranging from processing and transport to marketing. This frequently results in negative health implications for the workers, many of them women, and makes the agricultural sector less appealing. Particularly in the event that they have achieved good levels of schooling or training, young people prefer to take up employment in the cities and choose to leave rural areas. In addition to the heavy workload, further consequences of manual cultivation include high harvest and post-harvest losses, lack of competitiveness, low agricultural exports and high imports. Agricultural mechanisation can help to improve this situation. Its significance is demonstrated in the declara­tion contained in the African Union’s “Agenda 2063: The Africa We Want” to abolish the mattock by 2025. This is at the very core of a more systematic agricultural modernisation strategy. If implemented sensibly and gradually for particularly appropriate processes and in the case of labour shortages, a frequent criticism associated with this approach, namely that mechanisation causes job losses, does not necessarily apply. Indeed, the job ratio created via mechanisation can be thoroughly positive. However, a number of aspects must be taken into account in order to ensure agricultural mechanisation is successful:
  • Not every viable stage of mechanisation makes economic sense for all small enterprises. That said, alternative exploitation models (machinery rings, larger agricultural enterprises, specialist service enterprises, contract cultivation) and appropriate technologies (e.g. two-wheel tractors) may make mechanisation accessible to these as well. Additional cultivation and marketing measures are often required.
  • The fast and reliable provision of spare parts, repair services, operating materials and fuel or energy must be guaranteed.
  • Specific financial products, including combined loans for customers and suppliers, savings and loan products and leasing models can make mechanisation more accessible.
  • Mechanisation processes should be promoted in a market-driven manner; the state’s role should be limited to supportive measures. In the process, subsidies should be “smart”, i.e. not cause market distortion, of limited duration and conducive to the economic sustainability of the stakeholders and systems involved.
  • Along the value chains, professional competence should be boosted via training courses, either via the private or public sector.
  • The financial and agricultural sectors must collaborate to find solutions for specific mechanisation requirements, and receive support in this joint endeavour.

Negotiating the implementation of peacebuilding: a challenge for the transition to peace and democracy

Wed, 05/07/2017 - 11:52
The success of peacebuilding not only depends on the effective negotiation of peace agreements, but essentially also on how negotiations fare during the practical implementation of peacebuilding policies on the ground. Negotiations are thus a central part of the daily business of United Nations (UN) peacebuilding operations. International actors play an important part in these negotiations, not only as facilitators between conflict parties, but as an own party with the political agenda to promote peace and democracy. Yet the impact of negotiations between international actors and domestic elites on the success of peacebuilding has only received limited attention so far. Given the mixed success of UN peacebuilding operations in promoting peace and democracy in post-conflict contexts, this neglect is a missed opportunity to search for avenues that could make peacebuilding more sustainable. This Briefing Paper therefore engages with the role of negotiations in implementing peacebuilding policies and their impact on peacebuilding success. It particularly scrutinizes the challenges that international actors confront during a negotiation process and which constrain the prospects of reaching proclaimed goals of peace and democracy. Several aspects of negotiation processes either limit international actors in pushing through their demands or provide domestic elites with ample leeway to pursue interests not necessarily aligned with peacebuilders’ goals. These challenges to negotiation processes need to be carefully taken into account when planning a peacebuilding intervention. The findings of this Briefing Paper rest on a fine-grained process tracing of external-domestic interactions in four policy fields at the local level in Kosovo. The following messages need to be kept in mind regarding the role of negotiations in peacebuilding:
  •  Peacebuilding is a constant negotiation process. Negotiations do not stop after the conclusion of a peace agreement; peacebuilding goals and practice continue to be negotiated at every step of policymaking. Thus the success of peacebuilding also depends on how negotiations fare during implementation.
  • During such negotiation processes particular challenges arise for international actors vis-à-vis domestic actors: the reconciliation of the diverging goals of peacebuilders and domestic elites; mutual dependencies on both sides; the balance between flexibility and long-term strategies; and the selectivity of international engagement.
In light of these challenges, international actors need to:
  • Be aware of the need for compromise but make sure that compromises do not undermine overall peacebuilding goals. Issues for negotiation need to be selected strategically with a view to ensuring the best outcome of a peacebuilding policy.
  • Be aware of the need for contingency planning while finding a balance between flexibility and strategic long-term thinking. Fast-changing security environments may require strategic readjustment, but arbi­trary ad hoc changes in priorities must be avoided.

What next for the Economic Partnership Agreements? Thoughts on deepening the EU-Africa trade partnership

Wed, 14/06/2017 - 16:58
Many actors in the G20, the EU and Germany are calling for a quantum leap in the economic co-operation between Europe and Africa. However current discussion of EU-Africa trading relations frequently focuses solely on the much-debated Economic Partnership Agreements (EPAs).
EPA negotiations date back to the 2000 signing of the Cotonou Partnership Agreement (CPA) between the EU and the African, Caribbean and Pacific states (the ACP group). The ensuing negotiations took a highly controversial contentious turn, culminating during the 2007 EU-Africa Summit, when African heads of state and government accused the EU of looking to conclude trade agree¬ments between fundamentally asymmetrical markets.
In light of the upcoming EU-Africa summit in November 2017, it is important to continue the dialogue regarding what the EU and Africa wish to achieve with the EPAs. EPAs could contribute to the strengthening co-operation between the EU and Africa by forming part of a broad strategy supported by adequate political, human and financial resources. EPAs however remain a divisive topic, with many actors having divergent expectations. Yet in spite of ongoing controversy regarding EPAs on both sides, there remains a strong common interest in intensifying trade co-operation between Africa and the EU.
Against this background, this paper examines four possible scenarios for the future of the EPAs– with their respective opportunities and risks:
  • Scenario A: Continuing the current EPA strategy
  • Scenario B: Discontinuing EPA negotiations
  • Scenario C: Resuming EPA negotiations on a new basis
  • Scenario D: Pursuing an adapted and more flexible EPA agenda
The discussion of these scenarios shows that EPAs offer key benefits to EU-Africa trading relations, for example by strengthening legal security for the parties involved (Scenario A). The discontinuation of negotiations (Scenario B) offers no solution for the future of EU-Africa relations, with a restart of these (Scenario C) also offering little prospect of success. We therefore urge the adoption of a modified and more flexible EPA agenda (Scenario D), which specifically addresses the concerns of the ACP countries, reinforces African regional integration processes, and delivers more supportive measures than a continuation of the current strategy.
It is not helpful to consider the EPAs in isolation from the broader field of trade and development and expect them to deliver substantial results on their own. If the current impasse is to be overcome, all actors – whether critical or moderate – need to take part in explicitly interest-led discussions. Scenario D offers the possibility of the EPAs forming an integral element of the debate regarding trade and investment, whereas to date they have formed more of a separate thread of discussion in EU-Africa relations.

Brexit: impact, risks and opportunities for European development policy

Mon, 24/04/2017 - 16:14
In her “farewell letter” to EU-Council President Tusk, UK Prime Minister (PM) May stated that the UK “wants to make sure that Europe is capable of projecting its values and leading in the world.” What exactly this means for British engagement in European external relations and development cooperation (DC), is still unclear. Furthermore, the Brexit White Paper presented by the British government in February has failed to establish clarity regarding substantial issues. Merely three weeks after handing over the notification of the British withdrawal from the Union to the European Council on 29 March and officially triggering the negotiations under Article 50 TEU, PM May called for a general election in Britain to be held on June 8. This paper discusses possible consequences of Brexit for UK and EU cooperation with developing countries. A central recommendation is to protect development policy as far as possible from the trade-offs of the negotiation gamble and place common goals and values beyond dispute. In more detail, EU development policy faces the following challenges: short-term problems regarding existing legal obligations, looming budget shortfalls and the securing of business continuity as well as the longer-term realignment of EU development policy following the departure of the United Kingdom (UK). There is also the problem of the UK’s succession in international treaties and mixed agreements in which both the EU and the member states are partners, such as trade agreements and memberships of international organisations, global development financing and representation in multilateral forums or negotiations. Against the background of what is known about the positions of both sides, this paper addresses three subject areas: 1. Brexit diminishes the influence and shaping power of both sides, the UK and the EU. Issues of security, migration and, above all, trade dominate the debate on post-Brexit external policies. The form and conditions for further involvement of the UK in EU development policy have yet to be defined. Overall, EU-UK cooperation will become less structured, less predictable and more strongly subjugated to national interest. The weakening of Europe’s stature, its DC capacity and economic power might result in a series of negative effects for international cooperation and multilateral processes. 2.  The development agenda plays a subordinate role in the Brexit negotiations as well as in British politics, and risks being instrumentalised as a bargaining chip. The political forces that gained the upper hand in the UK with the Brexit referendum give rise to fears that a shift in political culture and a reduction in the significance of DC in British politics could come to pass. The general elections on 8 June will most likely further strengthen the government’s Brexit-mandate and positions. 3. The effects of Brexit will also be felt on trade with developing countries, presenting these with uncertainties as well as specific challenges and problems. However, the situation presents the occasion to improve existing trade and partnership agreements. Brexit should be viewed as an opportunity and inspiration for reforms to enhance the coherence of EU trade and development cooperation as well as other policy areas. More effective cooperation at EU level could partially compensate for the loss of the UK.

Unlocking the irrigation potential in sub-Saharan Africa: are public-private partnerships the way forward?

Mon, 24/04/2017 - 14:22
Irrigation can help to improve and stabilise agricultural productivity, thereby contributing to food security and to resilience against climate change. Irrigation – either full or supplementary – reduces reliance on erratic rainfall/droughts and increases yields; it extends cropping periods and cycles, allows the cultivation of a broader spectrum of crops, and provides stable conditions for applying further yield-increasing means (fertilizers). Irrigation also encourages farmers to invest, on the one hand, and financial institutions to provide credits, on the other. Moreover, there is evidence from Asia that irrigation has the potential to reduce both poverty rates and income inequalities.
Several sub-Saharan African (SSA) countries still have a significant potential for expanding the area under irrigation. While small-scale irrigation can be managed by individual farmers or farmer groups (though with some difficulties and risks), for larger schemes  which tap larger potentials  this is hardly an option: public financial sources are constrained, and public management of irrigation schemes has shown many disadvantages.
This Briefing Paper argues that, instead, public-private-partnership (PPP) projects in irrigation can be beneficial for smallholders, rural communities, investors and the public if certain conditions are met. The challenges to realising inclusive PPPs are the following:
Due to the “public good” character of water, the “common pool resources” character of irrigation schemes, and SSA land tenure systems, governments must play a pro-active role in creating security and stability for investments in relation to land- and water-use rights and in protecting public goods.
Investing in water infrastructure alone is not sufficient in SSA countries. It must be embedded in a comprehensive support package including access to extension services and financial products, input supply, and  above all  access to stable markets.
All successful PPPs we reviewed in SSA have in common that smallholders have established farmer-owned liability companies to run commercial businesses. These companies have entered into contracts with private sector companies for irrigation management, service provision and market access. Farmers are represented on the management boards of their companies. For such arrangements, smallholders need long-term support such as vocational training along with assistance in designing contracts and acquiring management skills.
PPP arrangements require country- and site-specific solutions and must address the risks of the various parties involved if it is to be ensured that PPPs are development-friendly, are economically viable and protect natural resources.

Proceeding with River Basin Management: legal, financial and political dimensions in Mongolia

Mon, 10/04/2017 - 08:46
As competition for water resources grows, a holistic management approach is required. Integrated Water Resources Management (IWRM) provides a coordinated, participative management framework to maximise economic and social welfare equitably, without compromising the sustainability of vital ecosystems. IWRM requires coordination at the national level for effective decision-making. Often IWRM is based on River Basin Management (RBM), which takes the river basin as the working unit for water management.
Implementing RBM is not an easy task and levels of success differ between countries. This policy brief analyses the challenges that Mongolia faces as it continues down the IWRM/RBM path. Mongolia is an interesting case because of its rapid legal adoption of IWRM, its transition towards political decentralisation in its post-socialist era, and the tensions caused by a push for economic growth through mining activities. In particular, we analyse how to move from de jure to de facto RBM implementation. We structure our analysis and recommendations based on the political, legal, and financial dimensions that characterise water management decentralisation under the principles of IWRM.
First, we find that regarding the legal dimension, Mongolia has made considerable progress in advancing the legal framework for IWRM/RBM and defining institutional responsibilities, both horizontally across sectors, as well as vertically across government levels.
However, vertical coordination between the national and the river basin levels still needs improvement. The Ministry of Environment (MEGDT) and the National Water Committee (NWC) can further harmonise vertical coordination through different levels of government. Regulations for the implementation of water pollution fees need to be developed.
Second, regarding the financial dimension, there is still ambiguity in some respects:
  • In practice, River Basin Authorities (RBAs) remain underfunded and their financial resources are barely enough to cover their fixed costs.
  • River Basin Councils (RBCs), as important as they appear to be in legal terms – allowing stakeholder participation in watershed management and decision-making – remain “paper tigers”, as they are not financially supported. Thus, stakeholder participation is marginal and in practice often only includes the participation of province (Aimag) and district (Soum) representatives, if any.
  • Financing strategies related to the River Basin Management Plans (RBMPs) are needed.
Third, on the political dimension, the development of the legal framework is an expression of the political will to implement RBM. This political will, however, remains half-hearted when it comes to enforcing environmental law, sparking participation, prioritising funding for respective water organisations and providing those organisations with the equipment required to fulfil their tasks.
Aware of the current payment crisis, this paper argues for securing proper environmental conditions that sustain economic and social development in the long run.

The European Union Trust Fund for Africa: what implications for future EU development policy?

Fri, 10/03/2017 - 09:22
The European Union Emergency Trust Fund for Africa (EUTF) is a central part of the EU’s engagement on migration. It has generated both high aspirations and serious concerns regarding its aims, activities, and relation¬ship to broader trends in migration and development policy.
The EUTF’s stated goal is to “address the root causes of destabilisation, forced displacement and irregular migration”, an aim that is widely seen as unrealistic. However, key actors have other ambitions for the fund. These include demonstrating action on migration in response to political pressure, incentivising African cooperation on migration management, and using the fund’s flexibility to develop innovative programming. It is arguably through such innovation that the EUTF could add most value.
The EUTF is perceived by many African partners as part of a European-imposed migration agenda that prioritises EU interests over African ones. While experiences vary between countries and projects, African ownership within the EUTF is undoubtedly weaker than within traditional European cooperation instruments. The EUTF risks alienating African partners and overlooking local priorities, knowledge and capacities.
The selection of EUTF projects and partners has been criticised as ad hoc and untransparent. Member states’ implementing agencies play the largest role in implementation, and some clearly see the fund as a source of finance for their regular programming. This raises concerns over whether EUTF projects add value to existing programming and are the best fit for either the trust fund’s goals or local context.
The most controversial aspect of the EUTF is its potential to divert development aid in service of the EU’s migration agenda, including in ways that contradict EU development and human rights commitments. This appears to be part of a broader trend towards the securitisation of EU development assistance. The EUTF also undermines EU development commitments by skewing aid allocations towards countries based on their migration profile, and by abandoning aid effectiveness principles such as alignment.
There are several measures that could improve the EUTF and make the most of the opportunities that it offers. These include: more transparent and consultative project development; stronger engagement with local actors and needs; greater emphasis on seeking out “best fit” implementers; and drawing on existing lessons, evidence and approaches. However, if the EUTF is ultimately an indication of the future direction of EU development cooperation, this does not bode well for the EU’s prioritisation of development principles, its long-term interests, or its relationship with Africa.
Several processes lie ahead that will influence the future of EU-Africa relations. These must be used to examine how Europe and Africa can work together more constructively to address migration in ways that meet both their interests.

Post-conflict societies: chances for peace and types of international support

Fri, 03/03/2017 - 14:17
Preventing crises and conflict recurrence in post-conflict societies remains a major concern for international politics. What exactly characterises post-conflict societies, and what are their chances to avoid renewed conflict? What does this mean for peacebuilding efforts, and what types of international support do they receive? Based on a rich compilation of partly newly coded data by the project Supporting Sustainable Peace at the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE), this briefing paper analyses international support to 28 countries that emerged out of a civil war after 1990. Moreover, it analyses their predisposition for renewed violence based on established risk factors for recurrence. Recurring violence haunts many countries that have experienced a civil war. Even after a violent conflict has ended, the challenge to build stable peace seems often insurmountable. In fact, peace frequently falters shortly after it has been achieved. Unfavourable background conditions, often created or intensified by the previous conflict, reinforce the challenge and contribute to the conflict trap countries appear to face. Although much international support has been provided to those struggling to overcome their violent past, the amount of official development assistance (ODA) varies strongly between recipients, as well as among different areas of engagement. Based on the data gathered, three main messages become particularly clear. First, half of the cases experience civil war recurrence; the other half remain relatively stable. When civil war recurred, it was usually severe and took place within the first five post-conflict years. The risk of recurrence is enhanced by the fact that almost all post-conflict societies struggle with unfavourable background conditions known to amplify the likelihood for renewed political violence, such as conflict in the neighbourhood. Chances for peace do exist, yet policy-makers need to be aware of – and prepared for – the high risk of renewed conflict. Second, it is striking that those post-conflict societies that receive considerably more international support experience fewer recurrences of civil war. This is even true with respect to each one of the four issue areas that make up international peacebuilding support: socio-economic foundations; security; politics and governance; and societal conflict transformation (SCT). Notably, it is not that external actors only choose to engage in the easy cases where they face the most favourable conditions. Although these findings warrant further analysis, they are a strong indication that international support to the four issue areas does indeed reduce a country’s likelihood of experiencing renewed violence. Third, much potential exists to strengthen support to SCT in post-conflict societies. Many practitioners and academics stress that supporting conflict transformation at the societal level and dealing with the past experience of violence is of utmost importance to create sustainable peace. Our new dataset demonstrates that SCT has received the least support by international actors; in one-third of the cases, international donors did not engage in this area at all.

New opportunities for EU-China-Africa trilateral cooperation on combatting climate change

Thu, 02/03/2017 - 09:34
The entry into force of the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC) on 4 November 2016 is a milestone towards safeguarding an opportunity for our species to live in peace and dignity on this planet. It is the first universal, legally binding instrument requiring both developed and developing countries to tackle climate change as a joint responsibility. While developed countries reconfirmed their obligation to provide support to developing countries under the Paris Agreement, there is also a growing recognition of the importance and potential of new partnerships among and with developing countries through South-South and trilateral cooperation. The European Union (EU), having shown considerable leadership in forging the Paris Agreement, also expressed its intent to work trilaterally with China and African countries to support the treaty’s implementation. The new EU strategy on China proposes to turn what is often perceived as EU-China competition in Africa into “greater cooperation” and to pursue “joint approaches” to “speed up the implementation of the Paris Agreement wherever possible, including the implementation of Nationally Determined Contributions” (European Commission, 2016). Cooperation on addressing climate change has been part of China’s Africa policy since 2006, and China has been increasingly supporting African countries through South-South cooperation as well as trilateral cooperation with the involvement of United Nations entities. In 2015, China committed to significantly scaling-up its efforts in the area by pledging 20 billion Chinese yuan (CNY) (USD 3.1 billion) to its recently established South-South Cooperation Climate Fund, which will focus on supporting African countries. Trilateral cooperation between the EU, China and African countries should be guided by Africa’s priorities. There are 53 African countries that have communicated their national plans on addressing climate change under the Paris Agreement through the submission of so-called (Intended) Nationally Determined Contributions ((I)NDCs). Based on an analysis of (I)NDCs and a review of existing partnerships and recent pan-African developments, this briefing paper proposes for EU-China-Africa trilateral cooperation to initially focus on renewable energy. The African Union’s newly launched Africa Renewable Energy Initiative (AREI) provides a possible entry point at the regional and national levels. The EU and China should build on their existing pledges of support for AREI and jointly explore with African partners the development of pilot projects towards AREI’s goal of installing at least 10 gigawatts (GW) of new and additional renewable energy generation capacity by 2020 and establishing the Africa Renewable Energy Institute. The single largest pledge in support of AREI by an EU member state has been made by Germany, which is well positioned to spearhead the proposed trilateral cooperation by building on its technical expertise and its G20 Presidency objective to support Africa’s development, including in the area of renewable energy.

Introducing results-based approaches in agriculture: challenges and lessons learnt

Wed, 22/02/2017 - 16:30
Increased and more effective public and private investments in the agricultural sector are needed to achieve the goals of ending hunger and reaching food security by 2030. Results-based approaches, which are innovative financing modalities that link payments to pre-defined results, are potentially powerful tools for overcoming the food security challenge.
Results-based approaches promise several advantages over traditional aid modalities, to include a greater focus on results, better accountability systems and improved incentives. They can also be an important tool for accelerating innovation and leveraging additional resources from private investors for agricultural and food security interventions.
While widely applied in the health and education sectors, only few experiences with results-based approaches in agriculture exist, and the suitability of the sector for the instrument is debated. Our briefing paper contributes to this debate by: laying out the challenges to implementing results-based approaches in the agricultural sector; introducing the Five Rural Worlds model (5RW) (OECD, 2006) as a framework for analysis of targeting and interdependencies; and summarising first experiences from pilot programmes.
We briefly review three pilot interventions representing different types of results-based approaches: results-based aid (a contract between governments) in Rwanda, results-based finance (a contract between a funder/host-country government and a service provider) in Zambia, and development impact bonds (DIBs) (a contract between a funder, a service provider, and a private investor) in Peru.
The analysis of the three pilot programmes shows that results-based approaches have the potential to foster innovation in agriculture and to play an important role in improving food security in developing countries.
Results-based aid programmes can provide additional incentives for partner country governments to focus on agricultural innovation and on reducing hunger and malnutrition in the long run. Results-based finance programmes, by offering economic incentives to service providers or private companies, can help to overcome market failures and foster the adoption of new technologies. DIBs are a novel way to engage private actors in addressing development challenges.
However, our analysis also shows that implementing results-based approaches in agriculture is challenging because of the complexity of measuring and achieving results in the sector. First, desired outcomes such as increased yields or incomes are highly variable and influenced by external conditions (e.g. weather and world market prices). Second, agriculture is a productive sector. Market forces and private actors play a much more important role in agriculture than in health or education. Improving agricultural productivity and food security relies on the decisions of millions of farmers and enterprises. Hence, designing results-based incentives and deciding whom to target is much more complex than in sectors dominated by the government.
Using the 5RW model, which distinguishes between five types of rural actors, ranging from chronically poor households to large commercial agricultural enterprises, we find that results-based approaches should take into account interrelations between the RWs.

Expanding oil palm cultivation in Indonesia: changing local water cycles raises risks of droughts and floods

Thu, 02/02/2017 - 09:10
During El Niño in 2015, devastating forest fires in Indonesia directed international attention towards land use changes and deforestation on the archipelago. At least partially a result of clearing land for plantation estates, those fires spurred debate about the sustainability of palm oil, which is the most traded vegetable oil. Recently, seven European governments signed the Amsterdam Declaration. Its signatories, including Germany, committed themselves to helping the private sector to achieve a fully sustainable palm oil supply chain by 2020.
Despite progress made in talks on sustainability, little is visible on the ground. To the contrary, as the Indonesian case shows, that palm oil expansions can cause soil and water resources to degrade. Especially weak law enforcement poses a major challenge to a sustainable production of oil palm. At the same time, the oil palm business has been expanding rapidly in Latin America and West Africa. For smallholders oil palm cultivation is an attractive land use option that requires little labour input and allows them to engage in off-farm income activities.
Current discussions about the ecological impacts of expanding palm oil production focus on how it destroys primary forest and peatlands, increases greenhouse gas (GHG) emissions and reduces biodiversity. Little attention has been paid to concerns that oil palm plantations severely impact local water resources and increase flood risks. This briefing paper makes use of a recent interdisciplinary publication (Merten et al., 2016) and extensive fieldwork to analyse the way expanding palm oil production impacts the hydrological cycle. It also discusses water management criteria in certification schemes and national regulations. Measurements of eco-hydrological processes and observations of Indonesian farmers indicate that large-scale oil palm monoculture has long-term negative consequences for smallholder farming systems and the water supplies of rural communities.
Our interdisciplinary study has revealed that: local populations report water shortages in dry seasons in the wake of new oil palm plantations; expanding oil palm plantations leads to more frequent floods; intensive monoculture plantation systems severely degrade the soil, impeding the recharge of groundwater reservoirs and increasing surface runoff; and oil palm cultivation impacts the local hydrological cycle more severely than other crops.
Based on these findings we recommend that:
  1. The European Union (EU) should set mandatory sustainability standards for all palm oil products.
  2. Water and soil management should have prominent roles in environmental impact assessments and sustainability standards.
  3. Sustainability standards for agrofuels should be better monitored. If compliance cannot be guaranteed, the EU should consider a temporary ban on using palm oil for agrofuel production.

Green bonds: taking off the rose-coloured glasses

Tue, 20/12/2016 - 11:10
In light of the recent global climate agreement, the Paris Agreement, which came into force in November 2016, there is an urgent need to mobilise additional funds for environmentally sustainable investments and to direct financial flows from “brown”, that is, environmentally damaging, to “green” investment. Public officials, investors and the media have hailed green bonds as a key instrument for achieving both. But what are green bonds, and how realistic are assessments of their potential to contribute to financing sustainable development, notably by financing sustainable investments that would not be financed otherwise? Green bonds are debt instruments to finance environmentally sustainable investments. Although the green bond market began to grow only slowly after the onset of the global financial crisis in 2008, the market has seen explosive growth since 2014, with issuances in 2015 reaching USD 42 billion. Since the 2014 ”take-off”, the expectations with respect to the potential of green bonds have further increased. A number of factors make green bonds appealing for investors. Compared to other green instruments, green bonds are in many cases relatively simple, familiar fixed-income instruments. Moreover, many investors increasing­ly weigh the risks related to carbon-intensive investments when designing investment portfolios. Green bonds are also attractive for groups of investors who wish to make an environmental impact. Finally, in particular the green bonds issued by international financial institutions or large corporations usually have enough scale to be attractive to institutional investors. There are, however, also a number of challenges in relation to green bonds. These include: first, deficiencies of the governance framework of the green bond market; second, the significant costs associated with labelling a bond “green”; and third, the weakly developed pipeline for green projects in which the proceeds from the bonds could be invested. In the context of developing and emerging countries, green bonds face additional limitations. In particular, weakly developed capital markets and low credit ratings for potential green bond issuers pose obstacles to the issuance of green bonds. Moreover, green bonds have rarely been issued to mobilise additional climate finance. An important way to address these challenges and to realise the potential of green bonds to finance sustainable development is the design of an appropriate governance framework. Only then can the green bond market mature with integrity. An improved governance framework should be based upon a clear and ambitious definition of green bonds and include regular reporting, monitoring and evaluation of the compliance with standards, going beyond industry self-regulation. It will also be important to take measures to enhance the inclusiveness of governance and to share information among various stakeholders. Governments and multilateral development banks (MDBs) may play an important role in deepening bond markets by reducing the costs of issuance, which is an important precondition for the ability of green bonds to mobilise additional financing. Each of these measures will help to increase confidence in the green bond market. Without such confidence, it will be difficult for green bonds to meet the expectation to mobilise additional funds for environmentally sustainable investments and to direct financial flows from brown to green investments.

Green finance: actors, challenges and policy recommendations

Tue, 29/11/2016 - 12:50
The year 2015 seems to have been an historic turning point in combatting climate change. Not only did the world agree on the first universal climate agreement, but the United Nations established the Agenda 2030 for Sustainable Development. Implementing the Paris commitment means limiting global warming to below 2°, striving even for 1.5°. In practice, this implies the radical decarbonisation of our economies, which entails fundamental changes in the financial world towards what has been termed “green finance”.
Green finance represents a positive shift in the global economy’s transition to sustainability through the financing of public and private green investments and public policies that support green initiatives. Two main tasks of green finance are to internalise environmental externalities and to reduce risk perceptions in order to encourage investments that provide environmental benefits.
The major actors driving the development of green finance include banks, institutional investors and international financial institutions as well as central banks and financial regulators. Some of these actors implement policy and regulatory measures for different asset classes to support the greening of the financial system, such as priority-lending requirements, below-market-rate finance via interest-rate subsidies or preferential central bank refinancing opportunities.
Although estimations of the actual financing needs for green investments vary significantly between different sources, public budgets will fall far short of the required funding. For this reason, a large amount of private capital is needed.
However, mobilising capital for green investments has been limited due to several microeconomic challenges such as problems in internalising environmental externalities, information asymmetry, inadequate analytical capacity and lack of clarity in the definition of “green”. There are maturity mismatches between long-term green investments and the relatively short-term time horizons of savers and – even more important – investors. In addition, financial and environmental policy approaches have often not been coordinated. Moreover, many governments do not clearly signal how and to what extent they promote the green transition.
In order to increase the flow of private capital for green investment, the following measures are crucial. First, it is necessary to design an enabling environment facilitating green finance, including the business climate, rule of law and investment regime. Second, the definition of green finance needs to be more transparent. Third, standards and rules for disclosure would promote developing green finance assets. For all asset classes – bank credits, bonds and secured assets – voluntary principles and guidelines for green finance need to be implemented and monitored. Fourth, because voluntary guidelines may not be sufficient, they need to be complemented by financial and regulatory incentives. Fifth, financial and environmental policies as well as regulatory policies should be better coordinated, as has happened in China.

Private finance for climate-change adaptation: challenges and opportunities for Kenya

Tue, 29/11/2016 - 12:45
Private investments in climate-change adaptation are important. First, because the costs of adaptation are too high to be met by the public sector alone. And second, developed countries pledged to mobilise USD 100 billion annually by 2020 to support developing countries’ climate change mitigation and adaptation; the private sector is described as a source of finance. Yet how realistic is it to rely on the mobilisation of private investments in adaptation, in particular for less developed countries? This Policy Brief aims to answer this question in relation to Kenya. It is based on interviews and an analytical framework that spells out enabling environments; mobilisation and delivery of private investments (see Figure 1).
As a first step, developing and developed countries, and the private sector can create enabling environments to mobilise private investments in adaptation. Adaptation is a priority to both the Kenyan government and its development partners. However, private adaptation has not been mainstreamed in key government policies. The Kenyan private sector appears unfamiliar with the concept of adaptation. Where it acts on adaptation, its purpose is generally resource efficiency or to address land degradation.
This makes it hard to track mobilised private investments. For example, rural communities might contribute to adaptation though improved water management. However, related expenditure remains unknown, as is the extent to which it is financed by banks. Neither actor tracks or reports investments in adaptation.
It is even harder to assess if private investments, once mobilised, actually deliver on adaptation. Regardless of the underlying motivations, many investments that reduce poverty or stimulate sustainable resource use contribute to adaptation. However, a private actor can also adapt at the expense of communities, for example by securing or fencing off its own water intake. There are no explicit checks and balances on private-sector impacts on adapta¬tion. Safeguards such as environmental impact assessments (EIAs) do not explicitly address adaptation.
All of the above make it extremely difficult to assess private investments in adaptation in Kenya, in particular in the context of the above-mentioned USD 100 billion target. Kenya's private sector has taken little interest in the UN climate negotiations. It is currently not able to tap into international funds such as the Green Climate Fund. If it could, private actors might take more interest in adaptation and the UN negotiations. This in turn might also provide incentives for quantifying investments in adaptation.
The Kenyan government could encourage more private-sector investments in adaptation. By stimulating a shared public-private awareness and understanding of adaptation, the government could improve enabling environments for private adaptation; mobilise more private investments; and improve the tracking of private investments in adaptation. Moreover, the government and development partners could include adaptation criteria in project selection and EIAs in order to reduce private maladaptation and increase private adaptation.

The mobilisation of sub-national revenues is a decisive factor in the realisation of the 2030 Agenda

Tue, 15/11/2016 - 15:29
In 2015 the global community committed itself to an ambitious programme of reform. Achieving the Sustainable Development Goals and implementing the resolutions of the Paris climate conference require that great efforts are made – including those of a financial nature. Many states will have to ensure that untapped or barely used sources of income are developed.
Sub-national units such as provinces, departments, districts, and cities will play an increasing role in the mobilisation of public revenues. They are also in the forefront with regard to realisation of the global reform agenda, as many of the objectives concern classic areas of activity of local government: schools, basic medical care, local road construction, public transport, construction of social housing, the supply of drinking water and disposal of waste water, refuse collection etc. These services are already the responsibility or co-responsibility of sub-national units.
The mobilisation of revenues at sub-national level is therefore not only a financial necessity, it is also prudent from a development policy perspective: if the users and funders of a good match, there is a greater likelihood that the preferences of citizens will be observed and the use of funds monitored. In addition, local taxes and levies are often paid by a broad circle of citizens and companies. This serves to strengthen the relationship between governments and the governed.
One thing should be clear in this: although many countries will exploit the scope for collecting local taxes and levies in the future, this potential is nevertheless limited. Many sub-national units will remain dependent on transfer payments from the central state. Cities, districts and the middle tier cannot solve the funding problem of the states on their own. However, they can help to place the provision of public services on a broader foundation of legitimacy and, in co-operation with the national level – for example via the exchange of information – improve fiscal policy as a whole. Consequently, they also contribute to overcoming problems of fragile statehood.

Ensuring SDG-sensitive development cooperation

Mon, 14/11/2016 - 08:33
The 2030 Agenda for Sustainable Development challenges domestic and international actors. The Sustainable Development Goals (SDGs) represent a multidimensional approach to development and are consequently aimed at all countries. To ensure SDG-sensitive cooperation it is not only necessary to adapt the allocation of official development assistance (ODA) to the requirements of the agenda, but also to reinforce the role of development cooperation in international cooperation. However, there is a lack of clear guidelines for adaptation and reform.
Using five strategic questions of donor decision making, the objective is to illustrate what SDG-sensitive development cooperation includes. The reform potential of the 2030 Agenda and the effectiveness of ODA giving are significantly dependent on the ability of donors to adjust their cooperation criteria, mechanisms and instruments towards the aims of the agenda. They should focus to a greater extent on the priorities of partners and the global common good, to co-ordinate themselves and focus on their comparative advantages. The goal is to establish development policy as an instrument to achieve policy coherence and reinforce the high development-relevant standards of the 2030 Agenda as underlying principles for international cooperation in all policy fields.
The following recommendations for SDG-sensitive development cooperation can be derived from the 2030 Agenda:
  1. Allocation channel: Global public goods are central to the realisation of the 2030 Agenda. Therefore, the multilateral channel should be strengthened.
  2. Country selection: SDG-sensitive ODA allocation is based on the division of labour amongst donors and supports particularly under-developed countries in the realisation of the agenda. In cooperation with emerging countries it strengthens their international responsibility and the reduction of inequalities between and within countries.
  3. Sector selection: SDG-sensitive sector selection requires strategic coordination and the reliable division of labour amongst donors. This enables donors’ profile formation and broad national support for the agenda. However, country-specific cooperation with each partner is also central.
  4. Instruments: An SDG-sensitive instrument-mix is adapted to the conditions of the partner country and makes increased use of local systems. Evidence-based and flexible instruments contribute significantly to this.
  5. ODA as catalyst: ODA can only be catalytic if the 2030 Agenda is realised, with the creation of development-relevant standards and regulations that enable the mobilisation of national, public and private investment.
These recommendations require further systematic analysis to enable learning processes and design development cooperation adaptively. The objective should be an evidence-based policy that reacts to changing conditions and is transparent and aware of its responsibility.

Build towns instead of camps: Uganda as an example of integrative refugee policy

Tue, 18/10/2016 - 11:00
The public perception of the situation of refugees differs from the facts in two key aspects: the overwhelming majority of refugees stay in poor neighbouring countries adjoining their place of origin (86 percent) and they stay there a very long time (17 years on average). Although this has been known for a considerable time, these host countries frequently receive no support and refugees have scarcely any opportunity to establish themselves permanently and integrate into their host communities. As a consequence, thought is increasingly being paid to replacing the typical refugee camps - which are primarily designed for the provision of emergency support for refugees – with longer term approaches in refugee policy.
One example of a successfully integrative refugee policy – and therefore a possible role model for other countries – is that of Uganda. Since 1999 the Ugandan government has pursued an approach of local social and economic integration of refugees. They receive land, are permitted to work and are thus intended to become independent of assistance. This liberal policy is also of benefit to the native population: the enhanced economic dynamic in areas in which many refugees live leads to higher consumption and improved access to public infrastructure for people in neighbouring villages. In particular, they are also able to use the schools and health clinics operated by the aid organisations.
However, the subjective perception of the local population does not reflect these positive developments: they view their economic situation as poorer than people in other areas of Uganda. Local conflicts over land flare up frequently and there are indications that the Ugandan government spends less on the operation of health clinics and the support of poor people in districts with a high refugee presence. Although the government and the aid organisations strive to ensure that none of the groups is worse off than the other and to dismantle prejudices through encounters, the (perceived) competition for resources endures.
The Ugandan experiences and challenges in the support of refugees in Kenya and Jordan underscore the major potential of an integrative refugee policy. The local population can benefit from this and costs are saved in the support of refugees. Four recommendations can be drawn from the analysis for host countries that house large numbers of refugees:
  • Building settlements instead of camps and giving refugees the right to work results in an economic dynamism that also benefits the local population in the region.
  • This requires good co-ordination between national government and international donors, for example with regard to public services and the allocation of funding.
  • To avoid conflicts between refugees and the local population, it is advisable to inform the native citizens of the advantages and encourage interaction between the two groups.
Particular consideration should be given to poor population groups, who should not be disadvantaged by the presence of the refugees. Aid payments should be considered where appropriate.

An executive authority for the UN Development System: why this is necessary and how it could work

Tue, 18/10/2016 - 10:22
United Nations (UN) member states and the UN development system (UNDS) are in a familiar bind: They have problems that they’ve always wanted to set right but never found the energy for, and as the problems grow, so does the challenge of correcting the wrongs. For decades, member states have discussed the need to establish a system-wide executive authority at the top of the UNDS to keep it functioning. The new “2030 Agenda for Sustainable Development” makes considering this option more urgent than ever, and the current reform process presents an opportunity to finally make the UNDS “fit for purpose”.
The need to reform and in some way integrate the UNDS is little disputed by member states or experts. With its 34 funds, programmes, specialized agencies and other entities, 1,432 country offices, no effective system-wide coordination and rising levels of earmarked contributions, the UNDS is on an unsustainable trend of fragmentation and “bilateralization” (that is, donors contracting UNDS entities to implement their priorities, marginalising the multilateral framework). In its current form, the UNDS can hardly be expected to play a significant role in the collective effort to transform our world. For this, the UNDS must provide integrated development solutions, acting as one. It must become more efficient, effective and professional. And it must ensure multilateral functions such as the provision of objective knowledge, coordination, long-term orientation and intellectual leadership.
A system-wide executive authority is needed to run the UNDS. The core functions of such an executive authority would be to administer the Resident Coordinator system, draft and monitor a system-wide framework and corresponding financial overview, and act as the “brain” of the UNDS. How could this be implemented? This paper suggests that instead of adding new structures, the existing coordination forum of the UN Development Group (UNDG) should be separated from the UN Development Programme (UNDP) and re-organized as the executive authority:
  • The position of the UNDG Chair should be transformed into the "High Commissioner for Sustainable Development (HCSD)”, heading the new executive authority.
  • The Development Operations Coordination Office (DOCO) should form the nucleus of the new executive authority’s secretariat and draw additional units and staff from the UNDS.
  • Funding should continue to be provided through the UNDG cost-sharing agreement, which should be significantly expanded.
  • UNDS members of the Chief Executives Board (CEB) should make up the new executive authority’s board of directors, with the HCSD representing the UNDS in the CEB.
  • The specialized agencies should be become quasi-equal members of the UNDS, subject to the same coordination as the funds and programmes, but on the basis of an opt-out mechanism.
Such an executive authority would arguably enhance UNDS performance more than any other reform, with initial costs compensated by increased efficiency. It would amount to an urgently needed investment in higher quality operational activities, winning back the trust of donors and recipients.

Diversity and implications of food safety and quality standards in Thailand and India

Tue, 11/10/2016 - 09:19
Although Thailand and India are two of the world’s largest producers and exporters of fruits and vegetables, both countries suffer from severe food-safety and quality problems with its domestic and export-oriented produce. According to the United Nations Conference on Trade and Development, the two countries are consistently listed in the EU and US 2002–2010 agrifood rejections category, pointing to inadequate compliance – or lack thereof – with international standards, alluding to the low degree of implementation of good agricultural practices (GAP) nationwide. Both countries are aware that, in order to increase food safety and quality domestically and internationally, voluntary GAP standards are key. However, compliance is costly and can threaten the existence of small and poor farmers and value-chain operators in particular. Thus, standards and their implementation require careful consideration. However, among the host of food-safety and quality standards in existence, which ones are most relevant?
In this Briefing Paper, we distinguish between Level 1 GAP standards for high-value export markets and Level 2 local GAP standards for domestic markets and lower-value export markets. We provide an overview of the opportunities and challenges of implementing different levels of standards and use the “Five Rural Worlds” (5RWs) model of the Organisation for Economic Co-operation and Development (OECD) to demonstrate how standards impact and address the specific challenges of different types of agricultural producers. The primary findings of this analysis are as follows:
  • Level 1 GAP standards, such as the collective pre-farm gate standard GlobalGAP, are the most challenging to comply with and can only be adopted by a minority of producers belonging to RWs 1 and 2. Although voluntary, Level 1 standards, which are required by major supermarkets and retailers worldwide, are de facto becoming increasingly mandatory to supply high-value markets.
  • Level 2 GAP standards are local voluntary standards (e.g. ThaiGAP, IndiaGAP) introduced with the aim of im¬proving the level of food safety in domestic supply chains and to allow gradual upgrading to Level 1 standards. Level 2 standards are easier to comply with and could benefit the many traditional and subsistence agricultural households in RWs 2 and 3. In Thailand and India, parallel initiatives by the public and private sectors have led to two co-existing and overlapping local GAP standards.
Food safety will continue to remain an issue if GAP principles are not adopted on a large scale. Due to the complexity of standard requirements and the high costs of compliance, Level 1 standards are not an option for the majority of farmers in developing countries in the near future. Level 2 standards are more promising, but our case studies have shown that, if introduced by public actors, they tend to lack credibility due to a lack of capacity and resources. It is simply not possible for governments to certify millions of smallholders and to monitor continuous compliance as long as certification is not demanded and supported by the private sector. We encourage public and private actors to cooperate in harmonising standards and to jointly support smallholders in obtaining certification through institutional arrangements, extension programmes and media campaigns. Moreover, we recommend that governments focus on the implementation of GAP principles and improving quality infrastructure rather than focus on certification per se.