Integration of climate mitigation and resilience in key sectoral strategies

Explanation

The IsDB’s Climate Action Plan (CAP) recognises the critical importance for the Bank’s sector strategies to align with the IsDB’s objectives to ensure project selection and implementation supports these. Accordingly, the CAP refers to sector strategies as “expected to have specific sector-based objectives related to climate change”. Moreover, the IsDB has developed an internal “Simplified Verification Tool (SVT)” to monitor and assess climate mainstreaming effectiveness at different stages of its operations. The SVT uses a point-based system across pre-defined criteria to evaluate climate mainstreaming across the project cycle. While the SVT represents a potentially valuable tool for verifying climate mainstreaming in projects across sectors, no further public update on the tool’s use has been forthcoming following its 2020 pilot.

Energy

Energy infrastructure development is one of the IsDB’s highest priorities. In line with this, the Bank developed an Energy Sector Policy (last updated in 2018) setting out its approach to the sector. Although there is reference on the Bank’s website to a complementary energy sector strategy being finalised to guide implementation on the basis of the sector policy, no further details of this have been publicly forthcoming.

Although it is alluded to indirectly, climate mitigation is at no point specifically mentioned. However, the sector policy also explicitly refers to establishing partnerships to support MCs with realising their Nationally Determined Contributions (NDCs) under the Paris Agreement. Moreover, renewable energy is one of four core pillars for the policy (alongside access, energy efficiency, and knowledge), and the Bank makes explicit reference to promoting renewables “as an alternative to fossil fuels”. The strategy also refers to leapfrogging to environmentally friendly technologies as part of supporting the transition.

However, the policy does not rule out continued support for fossil fuels, stating rather that the IsDB will consider the provision on the basis of safety, operational efficiency, and sustainability. Notably “energy sustainability” is defined without explicit reference to climate mitigation.[1] In acknowledging the fossil fuel energy reserves concentrated in a small number of member countries (MCs), the policy suggests that energy development strategies must be tailored to MCs’ “specific resources and climatic and economic conditions”.

Climate resilience and adaptation is also not directly mentioned at any point, nor is it covered by indirect references to relevant activities (e.g. in the way that climate mitigation is through a focus on renewables and energy efficiency). Considering the vulnerability of certain IsDB MCs to climate-related shocks, and the critical importance of energy system resilience in the context of energy access and security, this is a notable omission.

While the Paris Agreement is referenced in the context of NDC support (see above), there is no reference or comprehensive integration of the IsDB’s own commitments to aligning its operations with the agreement (likely owing to the document last being updated in 2018).

Transport

The IsDB’s Transport Sector Policy was published in 2018, with the remit to guide the Bank “on its future specific transport interventions needed in each region during the next five years”. However, the policy has not been updated or replaced since this five-year horizon was passed (as of the end of 2023). At the time of publishing, the transport sector accounted for more than 30% of the IsDB’s project portfolio, making it one of the Bank’s main sectors of operations.   

The sector policy features “green transport” as one of its five main pillars, focusing on reducing environmental impacts, including urban congestion, air pollution, and CO₂ emissions. Climate change and environmental sustainability are in turn listed among the six “enablers” to be considered across all transport operations.

In terms of mitigation measures, the strategy explicitly refers to supporting MCs’ transition to clean and low-carbon transport systems, including through investments in urban public transport, green freight, and the expanded use of clean vehicles and fuels. The IsDB also notably commits to calculating the carbon footprint of new projects.[2]

Regarding climate adaptation, the strategy mandates the screening of all projects for climate risks and incorporating climate-resilient design considerations where necessary. However, there is no indication of support for building structural resilience in transport systems or targeted support for adaptation initiatives in the sector.

Although acknowledging the commitments of MCs under the Paris Agreement, the document makes no reference to the IsDB’s own commitments in this vein, or aligning interventions with a pathway for limiting warming to a maximum of 2°C (and striving for 1.5°C).

Water

As of September 2021, water related activities accounted for 5.1% of the IsDB’s total approvals since inception. Although water resources vary across MCs, relatively high demand on water resources from the agriculture sector is a common trait. Agriculture water withdrawals tend to be around 80% across IsDB MCs, exceeding the world average of 70% (below 40% for developed countries).

In line with the sector’s significance across MCs, the IsDB published a comprehensive Water Sector Policy in 2020 to guide the direction and priorities for the Bank’s contribution to water-related operations. The sector policy acknowledges climate change as adding greater uncertainty to already critical levels of water insecurity, particularly considering high exposure to climate change impacts and varied levels of preparedness across MCs.

Appropriately, “resilient water systems” are one of five key pillars for the policy, with climate resilience and adaptation key components of this. Valuably, resilience is recognised as extending beyond physical infrastructure and including operational and managerial aspects in the context of building systemic resilience. However, while “efficient water resources management” and “water use efficiency” are both pillars of the sector policy (and sustainability features as a high-level objective), these priorities are not explicitly linked to climate mitigation goals. More broadly, there is a notable lack of coverage of greenhouse gas emissions reduction in water and sanitation systems (even if “unabated pollution” is recognised as a man-made water-related challenge in MCs). The policy also notably lacks explicit reference to the Paris Agreement.

Cities

The IsDB first published its Urban Sector Policy in 2020, providing a framework for orienting the Bank’s sectoral interventions and aligning them with other sectoral engagements and overarching corporate policies. This has since been complemented by the Urban Sector Operational Strategy 2021-2025, intended to guide implementation of the sector policy. Developing a dedicated operationalisation framework for the sector policy in this way represents a best practice approach.

The IsDB’s Urban Sector Policy is oriented around the overarching goal of inclusive and sustainable urban development. Cities are recognised as both causes and victims of climate change, with “Disaster, Climate & Environmental Resilience” featuring as one of five core policy pillars. The vulnerability of cities in IsDB MCs to climate change impacts is clearly recognised under this pillar, calling for the IsDB to support cities with implementing climate adaptation measures, such as updated building codes to comply with international disaster resilience standards. Moreover, the co-benefits of climate mitigation investments are also promoted, particularly in the area of urban energy consumption and associated emissions but also including waste management. Despite the integration of both climate mitigation and adaptation considerations, the policy lacks explicit reference to the Paris Agreement.

The Urban Sector Operational Strategy (2021-2025) translates these policy objectives into a framework for monitoring implementation and tracking planned impacts for the period covered. With regards to cities and climate action, both SDG13 on climate and the Paris Agreement (in particular NDCs) are recognised as overarching policy goals. Accordingly, the strategy reiterates the climate mitigation imperative for sectoral interventions, targeting investments in mainstreaming renewable energy, energy efficiency, and green urban transport; and disaster and environmental resilience is once again a core theme.

In terms of implementation frameworks, the strategy notably features a “synergy matrix” illustrating how the Bank’s urban sector and climate and disaster thematic teams will collaborate on city-level interventions. Separately, priority levels of potential interventions are also broken down by regional group and country income classification, illustrative of an adaptable strategic approach. The strategy also outlines a series of management tools to support implementation as well as key performance indicators as part of a results monitoring framework. This includes dedicated indicators for the “disaster, climate & environmental resilience” pillar.  

Agriculture

The IsDB’s Agriculture and Rural Development Sector Policy, published in 2018, provides the strategic direction for the Bank’s sectoral investments, intended to support MCs to improve food security through rural and agricultural development supporting economic growth and employment generation. The Bank’s strategic approach to the sector involves promoting the commercialisation of smallholder agriculture through and emphasis on agriculture value chains and private sector participation.

Building resilient and climate-smart agriculture is the first of six policy pillars for the sector policy. The latter is notably defined as agriculture that “sustainably increases productivity, enhances resilience (climate adaptation), reduces or removes greenhouse gas emissions where possible (climate mitigation), and enhances the achievement of national food security and development goals”. This shows clear recognition of the importance of both aspects of climate action in the Bank’s approach to the sector. However, the goals of the Paris Agreement (relating to both adaptation and mitigation) are not explicitly integrated.

In terms of specific measures, the strategy refers to promoting policies that make sustainable use of natural capital and conserve biodiversity, supporting climate adaptation measures for smallholder farmers, and pursuing partnerships (in particular public-private partnerships) that increase both adaptive capacity and reduce GHG emissions (including through new technologies).

Despite this promising framing, the policy lacks a comprehensive implementation framework including mechanisms for monitoring and reporting progress and associated targets. Moreover, given the agriculture sector’s substantial contribution to global emissions – through livestock, soil management, and land-use change – the lack of detailed coverage of highly pertinent topics such as commodity-driven deforestation is notable.

Recommendations: 

• Across all sectors covered above where this has not already been done (e.g. energy, transport, water, and agriculture development) the IsDB should mirror its best practice approach in the urban development sector of publishing a dedicated five-year sector strategy to guide the implementation of the Bank’s overarching sector policy documents. This should provide an overview of the Bank’s framework for fulfilling its commitments and achieving impact in line with its priorities (as derived from MCs) in a given sector, including targeted key performance indicators for climate action as part of a results monitoring framework (as featured in the Urban Sector Operational Strategy 2021-2025).
• Energy: Both as part of a dedicated implementation strategy (see above) and in an update to the Bank’s sector policy document, the IsDB should more comprehensively integrate climate adaptation and resilience considerations in its strategic approach to the energy sector, in view of their critical importance to energy security. Moreover, explicit reference to the Bank’s commitment to align its operations with the Paris Agreement should also be included.
• Transport: As part of a dedicated implementation strategy (see above), the IsDB should consider orienting its approach to supporting climate mitigation action (aligned with the temperature goals of the Paris Agreement) in the transport sector around the best practice Avoid-Shift-Improve framework.[3] Moreover, the strategy should further develop the Bank’s consideration of adaptation opportunities and climate risk in the sector through a more holistic approach that targets structural resilience.
• Water: Both as part of a dedicated implementation strategy (see above) and in an update to the Bank’s sector policy document, the IsDB should explicitly integrate climate mitigation considerations in its approach to the water sector. This should include explicit reference to supporting efforts to reduce GHG emissions across water and sanitation systems and aligning interventions with the temperature goals of the Paris Agreement.
• Agriculture: As part of a dedicated implementation strategy (see above), the IsDB should consider developing an explicit approach to pertinent topics such as commodity-driven deforestation, aligning sectoral interventions with the overall temperature goals of the Paris Agreement, and embedding structural resilience measured in agriculture and rural development. Such a strategy should also consider integrating and aligning with established agricultural sustainability frameworks such as the Sustainable Rice Platform (SRP) Standard, the Global GAP Climate Module, and FAO’s Climate-Smart Agriculture Sourcebook, which provide internationally recognised metrics for sustainable and climate-resilient agricultural practices.

[1] The sector policy defines energy sustainability as “access to adequate and reliable supplies of energy at competitive prices, with regard also given to the energy needs of future generations.”

[2] This calculation takes place ex ante. See “GHG accounting and reduction” metric for further details.

[3] As has been implemented by peer institutions such as the Asian Development Bank (ADB).