U.S. Treasury Secretary Janet Yellen urged the World Bank and other multilateral development banks to take "bolder and more imaginative" steps to address climate change and other global challenges, including mobilizing more private capital and lowering investment costs for projects.
"International public finance alone will come nowhere close to the level of financing needed to effectively tackle global challenges and achieve the (United Nations') Sustainable Development Goals. We expect the evolution agenda to reflect the importance of private financing and domestic resource mobilization," Ms. Yellen said in a speech at the Center for Strategic and International Studies in Washington Thursday.
The world has gone through tremendous change since the World Bank was founded nearly 80 years ago, and the multilateral development bank (MDB) system has broadened its scope of work to include programming on human capital and good governance, but the current model is "insufficient" to meet challenges like pandemics and climate change, she said. "The MDBs are a powerful pillar of a broader financial architecture that should be deployed to address 21st century development challenges.
"It's time for these banks to address global challenges head on — with the urgency and scale that is required," Ms. Yellen said, adding the World Bank has started doing so and will next approach regional development banks to do the same.
Creating incentives for countries to tackle global challenges could include lowering investment costs to make projects more economically viable and economic incentives for decommissioning coal plants and protecting workers displaced by the clean energy transition. The World Bank could also tap into the expertise of other entities to implement innovative projects, such as making it easier for cities to fund climate-smart urban infrastructure.
Other ideas worth exploring include increased securitization of private sector portfolios or piloting the issuance of subordinated debt instruments "to boost headroom," Ms. Yellen said.