“We need more than multilateralism – we need polylateralism”
As one of his first official acts in office, President Biden returned to the Paris Agreement and re-joined the World Health Organisation. Are we entering a new phase of international cooperation and multilateralism?
Yes, I think we are entering an era of connection and interrelationships between regions and between countries, which is a positive and hopeful signal. However, I believe that the notion of multilateralism is too restrictive considering the challenges ahead of us. The magnitude of the economic, social and environmental challenges we are facing today call for a new form of governance, something broader than what classical multilateral action can deliver.
Very interesting; what could that be?
To accelerate our transition towards a world in common, aligned with the Paris Agreement and the Sustainable Development Goals (SDGs) of the United Nations, we have to fundamentally transform our economies and societies. These unparalleled challenges require states, districts, cities, institutions and citizens to embark on a new journey that I call polylateralism; instead of acting unilaterally, bilaterally or multilaterally, we must act on all these levels at once.
But wasn’t that the idea of the United Nations all along? It sets the standards, and then countries and other actors implement those standards at all levels?
The United Nations sent a powerful new signal in 2015. This message is spreading quickly, making unprecedented connections between national and international agendas. The fact that we all need to work towards the same objectives means that the distinction between international and national has to cease. And the pandemic has continued to highlight how imperative cooperation is. We need coordination at all levels to fight this virus and to address the other major issues of the 21st century, such as climate change, biodiversity loss, water scarcity, migration or digitalisation, to name just a few.
Is the IDFC – the International Development Finance Club – an example of this new approach to alignment?
Absolutely. In our club, 26 public development banks – including KfW and AFD – have decided to work together to implement the international agenda of the Paris Agreement and the SDGs. These institutions are determined to build a new force to help international organisations to leverage sustainable development investment worldwide. We committed to delivering a total of USD 1 trillion for climate finance by 2025.
And Finance in Common grew from that seed?
The Finance in Common Summit (FiCS), an initiative launched by IDFC, best exemplifies the notion of polylateralism, indeed. We gathered for our very first meeting last November. All 450 public development banks in the world were united by their willingness to contribute to the recovery and align with sustainable finance principles.
What is your vision for Finance in Common?
The Finance in Common movement has just emerged. It is now clear that public development banks represent 10% of the world’s annual investments (i.e. USD 2,300 billion) and therefore have enormous transformational power. We look forward to participating in the second Finance in Common Summit which will take place in the fall, prior to COP 26.
…what are some specific ways that development banks can use their transformational power?
Now we have to make our system more effective, concrete and collaborative. We have to provide support for the urgent issues of 2021, primarily financing for Africa, health, climate and food security. We can also accelerate the transformation of our business operations, making them more sustainable by defining and adhering to common alignment methodologies and accountability mechanisms. We still have a lot of work ahead of us, but the vision and ability are there. Just look at institutions like KfW, which is now aligning its operations with the SDGs. And I am aware of KfW’s significance within Germany, the importance it has for the general economic direction, for investment in renewable energy, energy-efficient housing, etc. At a domestic level, its impact far exceeds that of any international institution. And they share this experience with the rest of the world through our colleagues at KfW Development Bank. In other words, we need strong national institutions working towards global goals. This is my understanding of SDG 17, which aims precisely at revitalising global partnership for sustainable development.
On the topic of the SDGs, the deadline is less than ten years away. Do you think we can achieve them – maybe backed by new alliances and new forms of cooperation?
The unexpected crisis we are facing undoubtedly calls into question our ability to deliver on the 2030 Agenda. My guess is that the 2030 timeline for the SDGs and the 2050 horizon so many governments are setting for carbon neutrality are destined to merge as they are inherently interconnected.
Does that mean we postpone achieving the SDGs to 2050?
No, we have to continue to make our best efforts to achieve the SDGs by 2030. However, I believe it is likely that our set of objectives will then be redefined, with their achievement set to be reached by 2050. And we will probably have to be much more ambitious. Everybody has to anticipate that.
Would you agree that more progress has been made on climate and environmental issues than on the social agenda since 2015? Inequality has been on the rise practically all around the globe, even more so due to the pandemic.
I fully agree. We have come further on climate issues than on social challenges and this imbalance has to be corrected. In the past two decades, the gap between rich and poor has grown in over 75% of OECD countries. And with the advent of the COVID-19 crisis, inequalities have been growing at a fast pace. And we learnt that these issues are intertwined. Tackling climate change can also generate new inequalities that, if not properly addressed, can prove explosive, as we witnessed in France with the yellow vest movement. Therefore, it is imperative that we reconcile the environmental challenges with social objectives. Public development banks are extraordinary sensors of these tensions and they can play a role in inventing ways to combine both dimensions.
You talk about new forms of partnerships. What about the relations between industrialised and developing countries? How do they change?
With the SDGs and the Paris Agreement, we have articulated a common interest across all types of countries. There is no disconnection between “we” and “they” anymore. Public development banks have understood that we must learn from each other’s experiences. We are all in transition and we need all the innovations and ideas we can get, regardless of where they originate. And maybe the journey to sustainable development could be shorter for the Global South. As a result, relations between industrialised and developing countries definitely work both ways today – while also keeping in mind that we need to ensure continued support for the poorest among us.
Since taking the helm at AFD you have put a lot of emphasis on partnerships. What is the reason for that?
The strategy of the AFD Group revolves around five principles. One of them is called “non-sovereign first”. It means that we not only work with governments but with a wider range of stakeholders: local authorities, public banks, the private sector, civil society, etc. We search for the best possible channel to reach and deliver services to the population. This can sometimes make our work more complex but so enriching, and ultimately more effective.
Why is that important for you?
Another of our five priorities is “partnership by design”. It means that a project with a partner is better than one we do on our own. It’s as simple as that. Beyond our clients, we try to cooperate with third parties. And ideally, we reach out to institutions that are not yet mobilised. These efforts are crucial because they contribute to spreading the message about sustainability as broadly as possible. And it sets new players on a path to global cooperation.
What about the relationship between KfW and AFD? How important is it for you?
AFD is increasingly involved with its European counterparts. KfW is a solid and long-standing partner with whom we have a well-established and deep relationship. My memories of the late Dr Ulrich Schröder come to mind, as he welcomed me so kindly within IDFC. And I would like to thank my friend Günther Bräunig for our impeccable cooperation. The volume of operations between our two institutions comes up to about EUR 600 million annually. In 2020 – due to the Pandemic – it even reached EUR 1.2 billion. KfW and AFD are walking side by side. Our relationship is characterised by trust.
Very generally speaking, which areas do KfW and AFD cover jointly?
We support a variety of projects and initiatives together, from the Clean Oceans Initiative to counter plastic waste in our oceans, to the Blue Action Fund to protect marine life, to IDFC and projects under the Sahel Alliance.
Anything you value in particular?
It is difficult to pick just one. But I want to highlight a multi-country programme that aims to enable a large-scale regional transition towards electro-mobility in Latin America. The programme is designed by KfW, GIZ, AFD and CAF, the development bank of Latin America. It will provide financial and technical support for low-emission vehicles and allow a paradigm shift in the road vehicles market and the region’s transportation systems. We are also working to get the Green Climate Fund (GCF) on board. This innovative, multi-stakeholder project reflects our shared partnership-oriented ambition, from Europe with the rest of the world and serving multilateral institutions and priorities.
Is this the kind of large impact you hope to achieve more often in different partnership contexts?
Exactly, no institution could have this kind of impact on its own. But together we can push for concrete, at-scale transformation!
The interview was conducted by Friederike Bauer.