IDB Group’s Roadmap to Strategic Recovery: The case for a climate-smart overhaul in the region using partnerships and innovation

The current economic juncture demands a speedy economic recovery; the socioeconomic impacts of recent catastrophic climate events ³ demonstrate the imperative need to make climate resilience one of the backbones for such a recovery. The IDB Group sees potential for powerful synergies between economic stimulus and climate-smart investments. We must help countries focus their recovery on the sectors with the greatest need to adapt, and most likely to attract capital markets and institutional investors, which are increasingly looking for opportunities in emerging markets with certified sustainable and green investment propositions.

In this context, the climate mainstreaming work that the IDB Group has been leading and refining over the years, has become more relevant than ever. We have unique experience in developing models that de-couple growth from emissions and create the skills needed to face climate risks. This will provide a critical resource for countries to achieve economic recovery and build back better, greening investments with a focus on long-term plans that are healthy for their population, sustainable for their economies, and competitive for growth. 

We will know whether we have achieved these transformational shifts in three main ways: 

i) First, the IDB Group is already working hard to respond to the needs of the pandemic with tailored investment solutions; the diversification in range and segmentation of our financial products will guarantee an opportunity to jumpstart all LAC sectors at any development stage seeking to invest in a green and climate-smart recovery.

ii) Second, through technical support and financial assistance, we expect to lead LAC countries into a new era of improved NDCs, by ensuring they incorporate results and objectives and actions to effectively limit temperature rise, as defined in the Paris Agreement, in clear articulation with forward-looking LTSs.

iii) Finally, we will work relentlessly until NDCs become an essential component of national investment plans in our borrowing member countries, and LTSs serve as the technical basis for the prioritization and design of sectoral infrastructure planning. In that sense the strategic shifting we are pursuing is to move from a project by project to programmatic approach in the dialogue with countries.

All of this while enhancing our partnerships and collaboration with other MDBs, public and private donors and private partners, to jointly create platforms, investment vehicles, and blended finance instruments that increase the level of private capital mobilized in support of mitigation and adaptation investments.

Synergies between economic recovery, climate action and the biodiversity agenda: The Amazon Initiative

The climate change and biodiversity agendas overlap and must be addressed jointly in the context of country-specific economic recovery strategies. This is the rationale behind IDB Group’s enhanced efforts to generate nature-based solutions. This approach offers our clients opportunities to mitigate emissions cost-effectively and strengthen adaptation capacities to help countries manage the impacts and long-term hazards of climate change while promoting SDGs.

Such an approach is illustrated by our Amazon Initiative, which touches on several of the pillars outlined in the IDB’s Vision 2025 agenda, and lays out opportunities for spurring the region’s recovery while addressing climate action. This flagship effort is devoted to mobilizing public and private resources, including from the multilateral banks, to forge and implement sustainable development models based on human capital, natural wealth, and the cultural heritage of the Amazon region. It is the result of seven amazon countries⁴ coming together in 2019 and signing the Leticia Pact to strengthen coordination on the sustainable development of the Amazon. This entails regional action to:

i) Promote resilient and diverse landscapes

ii) Foster amazon-positive value chains

iii) Support sustainability in commodity supply chains

These main action lines will seek to tackle deforestation, selective logging, and illegal exploitation of minerals; accelerate restoration and reforestation initiatives in degraded areas; and strengthen the mechanisms that support and promote the sustainable use of forests in every segment of production lines. The collaboration will feature a strong focus on empowerment of Indigenous Peoples and Local Communities (IPLCs), with targets dedicated to ensuring the prioritization of IPLC as beneficiaries. 

The Amazon is critically important to ecosystems worldwide: it provides between 35% and 40% of Latin America's fresh water, regulates air quality, stores net carbon emissions, and regulates nutrient and hydrological cycles for the South American continent. The Amazon region is also home to more than 30 million people, which include approximately 1.5 million indigenous people and more than 5 million people of African descent. 

The launch of the Amazon Initiative aimed for a total of $1 billion in capital mobilization; following an initial commitment by the IDB Group of $20 million in seed capital, interested donors have committed a further $34 million to establish the Amazon Bioeconomy and Forest Management Multi-Donor Trust Fund. Additionally, a $279 million investment from the Green Climate Fund (GCF) has been recently announced in support for the Amazon Bioeconomy Fund, with a total pool of $600 million for the program. This will encourage private investment in key bioeconomy areas: sustainable agroforestry, native palm cultivation, non-timber natural forest products, growing native species timber, aquaculture, and community-led nature tourism. Implementation will be carried out in close coordination with the Amazonian countries and the Amazon Cooperation Treaty Organization (ACTO).  

³For example, hurricanes ETA and IOTA in Central America.  

⁴Signatories of the Leticia Pact are Bolivia, Brazil, Colombia, Ecuador, Guyana, Peru, and Suriname.