by: Zhongjing Wang, Chief Executive Officer, MCDF

As we approach COP26, decisive climate action is needed from all stakeholders. At the Multilateral Cooperation for Development Finance (MCDF), our goal is to respond to the increasing demand by developing countries for high-quality infrastructure and connectivity project that adhere to international standards. Connectivity infrastructure projects have received less attention in the climate discussion and we are convinced they need to be part of the solution for climate-smart and resilient economic growth.

Connectivity infrastructure – transportation links, regional transmission lines, hydropower projects in river basins shared across countries – has a vital role to play in the Paris Agreement and the Net Zero commitment of nations and companies. Furthermore, connectivity infrastructure must consider the rapid changes we are seeing in climate-related shocks in their design and operations. These projects can also already happening and support efforts to make economies and societies more resilient and better adapted.

On climate mitigation, connectivity infrastructure must play an important role in reducing the energy sector's carbon footprint and in supporting the net-zero goals of private companies through climate-smart supply chains.

Regional power pools and the underlying connectivity transmission infrastructure are indispensable to optimize the use and complementarity of renewable sources across countries. For example, the Singapore NDC and climate strategy ^[1] call for more cross-country energy trading to allow the use of hydropower and large-scale solar sources unavailable in their territory. In Africa, only 11 percent of the hydropower potential is used ^[2]. At the same time, ninety percent of waterways in Africa are part of 63 international river basin catchments ^[3]. The hydropower potential of Africa must be part of a lower-carbon growth for the continent. However, it also needs strong transmission connectivity and well-functioning power pools.

A significant challenge for companies committing to net-zero goals is that, in most sectors, the largest source of their emissions is upstream or downstream of their core operations. According to CDP, emissions in a company's supply chain are on average 5.5 times higher than its operational emissions ^[4]. This is an important area where connectivity infrastructure can make logistics, shipping, and trade more efficient. Lowering the transport emissions in supply chains needs an integrated view of the whole system.

Connectivity infrastructure also has a vital role in climate adaptation and resilience. For example, McKinsey estimates that semiconductor supply chains in Southeast Asia will be two to four times more vulnerable to hurricanes by 2040 ^[5]. The Panama Canal's operations are threatened by climate impacts on the water system it relies on ^[6]. The World Bank estimates that the disruptions in the connectivity transport infrastructure of Tanzania caused by rains and floods costs business a total of $150 million per year, or 0.4 percent of GDP ^[7]. The February 2021 winter storm caused close to 70 percent of homes in Texas to lose electricity for an average of almost two days, and more than 150 people died, leading to calls for a more resilient power network ^[8]. A rapidly changing climate cannot be ignored.

Building climate-resilient infrastructure and societies requires connected hydrometeorological data collection infrastructure that share information globally allowing for more accurate forecasts. Businesses and communities need these forecasts to take informed actions in the face of more frequent and intense climate-related disasters. The World Bank estimates that 23,000 lives per year could be saved by upgrading hydromet and early warning systems in low- and middle-income countries to meet the current standards of European systems, ^[9] and the WMO calculates that the potential benefits of this connected hydromet infrastructure from avoided losses globally could be as much as $66 billion. ^[10]

Climate change is a defining global challenge. MCDF's tools are designed to help in this challenge through connectivity infrastructure of high quality. In this context, high-quality means infrastructure that supports the net-zero goals of countries and private companies. It also means infrastructure that is ready for the climate shocks we face today and in years to come.

[1] https://unfccc.int/sites/default/files/resource/SingaporeLongtermlowemissionsdevelopmentstrategy.pdf [2] https://www.hydropower.org/region-profiles/africa [3] CIWA04pager0low_1.pdf (worldbank.org) [4] CDP_Supply_Chain_Report_Changing_the_Chain.pdf (rackcdn.com) [5] Could climate become the weak link in your supply chain? | McKinsey [6] https://www.economist.com/the-americas/2019/09/21/climate-change-threatens-the-panama-canal [7] Lifelines : The Resilient Infrastructure Opportunity (worldbank.org) [8] Protecting and Empowering Communities during Disasters - RMI [9] Hallegatte, S. (2012). A Cost Effective Solution to Reduce Disaster Losses in Developing Countries: Hydro-Meteorological Services, Early Warning, and Evacuation. Policy Research Working Paper 6058, World Bank, Washington, DC. [10] WMO (2021) GAP Report - Alliance for Hydromet Development (alliancehydromet.org)