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Somalia To Reestablish Financial Relations with The World Bank Group After Thirty Years

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The World Bank Group Board of Executive Directors today moved toward normalizing its relations with the Federal Government of Somalia (FGS) after thirty years. This will open up opportunities for Somalia to access concessional financing from the World Bank’s International Development Association (IDA) and to work closely with all arms of the World Bank Group to attract investment that will support the country’s stability and development.

“Today’s decision paves the way for full resumption of operations so the World Bank Group can provide the strongest possible support to Somalia’s efforts toward economic and social recovery,” said Axel van Trotsenburg, World Bank Managing Director of Operations. “This milestone is the result of several years of close cooperation with the Federal Government, and we now look forward to taking our relationship to the next level with deeper and broader financial and technical support from across the Bank Group.”

The Board’s decision to reengage is based on the government’s strong record of fiscal, political, social and economic reforms in recent years. Somalia’s fiscal management agenda now covers revenue mobilization, budgeting, procurement, auditing, and cash management, as well as accountability over Public Financial Management. The country has also focused strong attention to building core monetary and financial sector governance institutions, establishing the basic legal foundations for a market economy, and introducing reforms in strategic sectors including telecommunications, banking, and energy. Economic policy reforms, such as the recently enacted Public Financial Management Law and the Company Law, have improved public financial management and revenue generation.

Somalia has made important reforms and has demonstrated strong commitment to staying the course,” said Hafez Ghanem, Vice President for Africa, the World Bank. “These reforms lay the foundation for sustained poverty reduction and better lives for the Somali people, and open the door to private sector investment that can create jobs and drive the economy forward.”

Somalia’s reforms continue to strengthen the government’s capability to provide critically needed services in health and education to the Somali people, and build a framework for competitive private sector that can create jobs particularly for Somalia’s youth. The federal government has facilitated consultations on a new National Development Plan, outlining the country’s priorities so that investments can be made in the most critical areas.  

Today marks an important step towards full re-engagement of the World Bank Group in Somalia,” said H.E.M. Abdirahman D. Beileh, Minister of Finance of the Federal Republic of Somalia. “This is a recognition of the ambitious reforms to which this government remains committed, to bring transparency and accountability into Somali institutions and to revive the economy. We are grateful to the Bank for the support they have already provided to help the country reach this point and we look forward to planning a new phase of investments to deliver the poverty reduction goals of the National Development Plan.”

Today’s decision by the World Bank Group Board of Executive Directors lays the groundwork for Somalia to access World Bank Group financing for federal and state government projects under the International Development Association (IDA), private sector debt and equity investments through the International Finance Corporation (IFC) and political risk insurance provided by the Multilateral Investment Guarantee Agency (MIGA) to facilitate foreign direct investments.

The World Bank has played a strong role in helping Somalia reach this point, including through over $250 million in IDA Pre-Arrears Clearance Grants to accelerate the country’s progress on key reforms and on delivering basic services and financial inclusion to its people. The Somalia Multi Partner Fund, which includes funding from Denmark, the European Union, Finland, Italy, Norway, Sweden, Switzerland, the United Kingdom, and the United States, has been crucial in laying the foundations to re-establish basic country systems.

New IDA financing proposals are under preparation and should be ready in the coming months, aimed at providing rapid response to households impacted by recent droughts and flooding, reducing poverty by delivering social protection to over 200,000 women with children under 5, improving education and healthcare, boosting water and electricity supply, and investing in other critical infrastructure projects. With nearly 70 percent of Somalis living on less than $1.90 per day, these investments will help improve the lives of millions of the country’s most vulnerable people and strengthen the systems needed for better livelihoods and a more stable future.

The normalization of relations with the World Bank Group also paves the way for Somalia to receive debt relief under the Heavily Indebted Poor Country (HIPC) and Multilateral Debt Relief Initiative (MDRI) programs to promote growth and recovery over the coming years.

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Finance

Why financial institutions are banking on sustainability

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Eric Usher’s day planner is filled with meetings with the heads of some of the world’s biggest banks. And while he has years of experience working with the financial industry, his mission isn’t profit. It is to support and challenge banks and other financial institutions to lay the foundation for a more sustainable future.

Usher is the head of the United Nations Environment Programme Finance Initiative (UNEP FI), a partnership between UNEP, banks, insurers and investment companies that has established among the most important sustainability frameworks for the sector. Its aim is to align private money with the UN Sustainable Development Goals that aim to shift our economy to clean energy, eliminate hunger, foster gender equality and achieve more than a dozen other social and environmental targets.

In his role, Usher has worked with financial institutions to put sustainability at the heart of their business strategy.

“If we want to meet global sustainability challenges, we absolutely need the support of the private sector,” said Usher recently. “There just isn’t enough public money out there, especially in the wake of COVID-19, to finance the massive structural changes our societies desperately need.”

The Organization for Economic Cooperation and Development estimates it will cost $6.9 trillion annually through 2030 to finance the sustainable development goals.

Usher’s comments came just ahead of the United Nations Climate Change Conference of Parties, known as COP26. The gathering came with the planet slipping dangerously behind the goals of 2015’s landmark Paris Agreement and already experiencing the effects of a changing climate. Progress towards the other Sustainable Development Goals has also been uneven.

Origins of a movement

UNEP FI was born out of a group of six banks that met on the sidelines of 1992’s Rio Earth Summit, considered by many as one of the most important environmental gatherings of the last three decades.

Nearly 30 years later, more than 450 financial institutions are members of what is the UN’s largest partnership with the finance industry.

In the past year alone, member banks have given 113 million vulnerable customers access to financial services and advised over 15,000 companies on their climate strategies.

Not only is that work helping people and the planet, it’s also securing the future of financial stability. The burgeoning green economy is creating a host of new investment and lending opportunities. Institutional investors and retail banking customers are increasingly demanding that financial institutions uphold environmental standards. And, perhaps most importantly, a growing number of financial institutions have realized that financing fossil fuels, and other projects that harm the environment, is bad for their long-term future.

“I truly believe that the next 30 years of our economy and our society, can’t be like the last 30 years,” said Guy Cormier, CEO of Desjardins Group, one of Canada’s largest financial services companies. “The activities of a financial institution can make a real difference in the lives of the people and also in the environment.”

Becoming more environmentally sustainable requires banks, insurers and investors to redesign their business models, says Usher.

“Traditional risk (in the financial sector) looks at what failed in the past,” said Usher, “With climate change that doesn’t work. Now it’s about forecasting the future, which isn’t easy and therefore is an area that we work with our members to develop the norms and standards needed to respond.” 

The latest Intergovernmental Panel on Climate Change , released in September, finds that nearly every corner of the world has been touched by climate change. UNEP’s Emissions Gap Report 2021 found that, even with new national climate pledges and mitigation measures, the world is still on track for a global temperature rise of 2.7°C by the end of the century, which could lead to catastrophic climate impacts. To keep global warming below 1.5°C this century, the aspirational goal of the Paris Agreement, countries would need to halve annual greenhouse gas emissions in the next eight years.

With this as a backdrop, Usher says the work of the UNEP FI has never been so important.

“There really is no time to waste,” said Usher. “The current decade is critical to determining the future of our species and our planet.”

Guiding principles

To shepherd the financial industry towards sustainability, UNEP FI has unveiled a series of guiding frameworks including:

These industry frameworks have attracted widespread support among financial institutions. Some 80 per cent of the investment industry has committed to the Principles for Responsible Investment while 260 banks, representing $70 trillion in assets, have signed onto the Principles for Responsible Banking.

The Principles [for Responsible Banking] are very much hinged on the Paris Agreement as well as the Sustainable Development Goals,” said Siobhan Toohill, Group Head of Sustainability, Westpac. “It’s clear that climate change is a really significant factor that banks need to address… and there are areas of impacts that we need to give closer attention to, such as biodiversity.”

A progress report, released in October, highlights the accomplishments of the responsible banking principles initiative. Among other things, it found that signatories have mobilized at least $2.3 trillion in sustainable financing. What’s more, 94 per cent of banks identify sustainability as a strategic priority.

The industry frameworks developed by UNEP FI help financial institutions embed sustainability into all aspects of their business. But with more than US$100 trillion required to transition the global economy to net-zero emissions by 2050 – and US$32 trillion of that over the next decade – there is an urgent need to focus financing on helping to achieve that goal.

Three UNEP FI-convened groups are working with more than 170 investors, banks and insurers to develop the tools and science-based guidance to use with their customers and the companies they invest in to decarbonize their businesses. The financial institutions are setting targets every few years and making their progress public via annual reporting to ensure that their work can be measured and scrutinized, and that they keep their commitments on track.

The large number of financial institutions involved and the near-term action that has been committed to, have left Usher optimistic about the future.

“There’s no question we have a lot of work to do to make our societies more sustainable,” he said. “But in the private sector, the desire for real change is growing and that makes me hopeful.”

UNEP

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Energy News

Colombia’s energy districts: an example for the region

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image: UNIDO

An energy district is a local institution that leads, implements and accelerates a locally-owned, inclusive and clean energy transition. In the process, energy districts create local jobs and retain and grow wealth, while simultaneously reducing carbon emissions and air pollution.

Colombia is a pioneer South American country in the promotion of this approach. Beginning in 2013, the United Nations Industrial Development Organization (UNIDO), together with Switzerland’s State Secretariat for Economic Affairs (SECO), has been implementing an energy districts project in cooperation with the Ministry of Environment and Sustainable Development (Minambiente) and the public utility of the city of Medellín (Empresas Publicas de Medellín – EPM).

In its second phase, beginning in 2019, the project has been working closely with national and city-level authorities and stakeholders to improve and implement national and sub-national policy and regulatory frameworks to promote further development of energy districts; reinforce knowledge and capacities for energy districts of all market players; and provide technical assistance to some 10 selected cities so that they can include energy districts in their urban planning and support the realization of two-three near-future mature projects.

From the 17-19 November, the UNIDO project and partners, ACAIRE (Colombian Association for Refrigeration and Air Conditioning) and CIDARE, the Centre of Research and Development in Air Conditioning and Refrigeration hosted the Third International Conference for Energy Districts, a virtual event bringing together national and international experts from industry and academia, and representatives from the public sector and international organizations.

Carlos Eduardo Correa, Colombia’sMinister of Environment and Sustainable Development, stated that the conference was the ideal scenario to show the achievements of the country in the implementation of district energy as a contribution to the Sustainable Development Goals.

“All of our actions, plans, projects and regulations, are geared towards the achievements of the Nationally Determined Contributions, the reduction of greenhouse gas emissions, and, at the same time, the contribution of low-carbon development. Here, Colombia has an important experience and is an example for the region,” he stated.

The progress of district energy in Colombia and the region, the importance of their implementation in urban planning, energy maps and clean energy transition, the mechanisms to finance these projects and the use of renewable energies in their execution, were some of the main topics addressed by more than 30 national and international speakers during the three days of discussions.

“The implementation of the project has, as a main component, the sustainability of knowledge and capacities in Colombia. That is why the support and work with academia are fundamental to strengthen the capacities of all the actors in the value chain and promote the education of professionals in the areas of sustainability and energy efficiency, among others,” noted Alex Saer, Director of Climate Change and Risk Management at the Ministry of Environment and Sustainable Development.

The conference was also the opportunity to celebrate the awards of the Second Competition for Universities in District Energy, with the objective of designing a business model for the sale of thermal energy applied to residential users.

The contest, which had the participation of eight universities from Colombia, awarded the first-place winner team with  fully funded attendance to the International District Energy Association Campus Energy in Boston in February 2022.

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Tech News

193 countries adopt the first global agreement on the Ethics of Artificial Intelligence

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All the nations members of the UN Educational, Scientific and Cultural Organization (UNESCO) adopted on Thursday a historical text that defines the common values and principles needed to ensure the healthy development of AI.

Artificial intelligence is present in everyday life, from booking flights and applying for loans to steering driverless cars. It is also used in specialized fields such as cancer screening or to help create inclusive environments for the disabled.

According to UNESCO, AI is also supporting the decision-making of governments and the private sector, as well as helping combat global problems such as climate change and world hunger.

However, the agency warns that the technology ‘is bringing unprecedented challenges’.

We see increased gender and ethnic bias, significant threats to privacy, dignity and agency, dangers of mass surveillance, and increased use of unreliable AI technologies in law enforcement, to name a few. Until now, there were no universal standards to provide an answer to these issues”, UNESCO explained in a statement.

Considering this, the adopted text aims to guide the construction of the necessary legal infrastructure to ensure the ethical development of this technology.

“The world needs rules for artificial intelligence to benefit humanity. The Recommendation on the ethics of AI is a major answer. It sets the first global normative framework while giving States the responsibility to apply it at their level. UNESCO will support its 193 Member States in its implementation and ask them to report regularly on their progress and practices”, said Audrey Azoulay, UNESCO chief.

AI as a positive contribution to humanity

The text aims to highlight the advantages of AI, while reducing the risks it also entails. According to the agency, it provides a guide to ensure that digital transformations promote human rights and contribute to the achievement of the Sustainable Development Goals, addressing issues around transparency, accountability and privacy, with action-oriented policy chapters on data governance, education, culture, labour, healthcare and the economy.

One of its main calls is to protect data, going beyond what tech firms and governments are doing to guarantee individuals more protection by ensuring transparency, agency and control over their personal data. The Recommendation also explicitly bans the use of AI systems for social scoring and mass surveillance.

The text also emphasises that AI actors should favour data, energy and resource-efficient methods that will help ensure that AI becomes a more prominent tool in the fight against climate change and in tackling environmental issues.

“Decisions impacting millions of people should be fair, transparent and contestable. These new technologies must help us address the major challenges in our world today, such as increased inequalities and the environmental crisis, and not deepening them.” said Gabriela Ramos, UNESCO’s Assistant Director General for Social and Human Sciences.

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