President and CEO of BlackRock Larry Fink. (Photo by Mat Szwajkos / Images) Images
In a New York Times opinion piece, Larry "Fink , the CEO of $ 10,000 billion financial giant, BlackRock, and a staunch supporter of investment " ESG , asserts that rich countries (OECD + China, according to its classification) should provide $ 100 billion of climate change mitigation assistance to developing countries. He estimates that in order to decarbonize, developing countries need to invest around $ 1 trillion a year in new technologies and infrastructure (the math is a bit fuzzy); we think he means institutional investors will provide the remaining $ 900 billion). Because developing country governments lack the resources, foreign institutional investors (such as BlackRock) will have to step in.
The problem is that these investors fear political risks and weak infrastructure institutions in developing countries. From Fink's perspective, annual aid of $ 100 billion "in the form of grants and subsidies can absorb some of the risks associated with investing in emerging economies." They can make climate projects a viable option for institutional investors. Thus, $ 1 of foreign aid would attract $ 9 of institutional investors.
Fink needs to clarify what will be subsidized and how this will reduce the political risks that institutional investors fear. But assuming thatFink has developed his theory of exchange, the question is how 100 billion dollars will be distributed. Fink believes that existing multinational agencies such as the World Bank can do the job, but he's not opposed to creating new institutions.
We agree with Fink on the seriousness the climate crisis and how institutional investors can help the decarbonization process. However, Fink's proposal is impractical for two reasons. First, donor countries will find it difficult to generate a national consensus for this kind of big aid surge. Think about it: the rich countries were committed to creating a Fund "green for the climate of $ 100 billion under the Paris Agreement, but barely contributed 10% of the amount!
Second, many question the effectiveness of foreign aid in the achievement of governance and development objectives.Let us remember the criticisms addressed to the book by Jeffrey Sachs 2005, The End of Poverty , which ironically offered $ 100 billion in foreign aid per year. Should climate aid be any different?
Fink is right to point out that rich countries have contributed the most to climate crisis and must bear responsibility for decarbonization. We also agree that developing countries lack the resources to do so. But the issue is domestic support in rich countries for this type of engagement. everything, they themselveseven need a domestic boost, a la Jeff Sachs.
Consider the infrastructure collapse that the United States is facing. In 2014, approximately 42 million Americans could not drink tap water. By 2018, that number had increased from to 60 million ! A recent national "blood testing study reveals that 50% of children under 6 tested positive for lead; 58% in predominantly black neighborhoods and 56% in predominantly Hispanic postcodes. The culprit is the aging water infrastructure that uses lead pipes, especially in older and cheaper neighborhoods.
Fink also notes that climate change will have cross- spillovers. But dealing with these spillovers requires adaptive help.ation, and not a mitigation aid as he advocates.
Why focus on adaptation abroad? This is where the issue of climate-induced migration comes in. One cannot even imagine the desperation of individuals when they decide to migrate. Their journey to a new destination is often perilous with migrants at risk of horrific abuse. The UNHCR indicates "that 1% of the world's population , around 79 million, is displaced. Yet rich countries are sometimes faced with a nativist reaction when they accept large numbers of overseas migrants. Let us recall the populist mobilization in Europe in the aftermath of the Syrian refugees. This motivated the European Union to provide billions "from euros to Turkey for reteend refugees.
The United States works with the same philosophy. On the eve of Vice President Kamala Harris' visit to Central America, the The " New York Times noted: "As Vice President, Joseph R. Biden Jr. waged a huge campaign to deter people from moving to the United States by spending hundreds of million dollars to Central America, in the hope of making the region more tolerable for the poor - so that less will abandon it. Now, as President Biden, he's doubling down on that strategy again and entrusting his own VP, Kamala Harris, with the thorny challenge of carrying out his $ 4 billion commitment plan in a remarkably similar approach then. that she goes to the region.
Aid E Effectiveness
Foreign aid, whether for mitigation or adaptation, could poser governance problems in beneficiary countries. This is sometimes called a " curse "aid ". If aid is delivered through existing government channels, aid reinforces the status quo, patronage and corruption. Think of Afghanistan. John "Sopko , the inspector general for the reconstruction of the Afghanistan notes that US aid has created "rampant corruption". In 2019, the misuse of aid and corruption prompted the US Department " of State to withhold $ 160 million in aid. Distinguished Asian Affairs Commentator, Kishore " Madhubani writes: "If the United States does notcome to understand the main structural mistakes they made in Afghanistan and elsewhere, he will continue to repeat them. Still, there are few signs of a serious overhaul. Instead, many people in Washington blame the Afghans for this catastrophic failure, including pointing to corruption. But corruption requires both demand and supply. If the United States had not drowned Afghanistan in a tsunami of mis-counted dollars, the corruption would not have taken place.
Some might believe that the corruption created by aid could be reduced if aid is channeled through government organizations (NGOs). The problem is that delivering corrupts the NGO sector, turning them into aid contractors rather than representatives of the population. NGOs are starting to play the aid game,seeking to gain the good graces of donors, instead of serving the local population. This is sometimes called NGOisation of civil society.
Moreover, as N GOs receive foreign funds to provide public goods, governments of developing countries are beginning to view them as political competitors. No wonder around 40 countries have enacted restricting laws "l 'NGO access to foreign funds . Even though rich countries may be persuaded to provide mitigation or adaptation assistance, it is not clear how the aid will be. provided to developing countries.
Fink advocates for help to reduce emissions. Previously, mitigation assistance was provided through Clean development mechanisms and REDD (Reduction of emissions linked to deforestation and forest degradation). Their success is disputed and the emission reductions (or carbon sequestration) are certainly not on the scale envisioned by Fink. This raises the obvious question: why not Finance emissions reductions at home? After all, it doesn't matter whether emissions are reduced in the United States or India (although emission reductions can create co-benefits of cleaner air). more, if aggressive decarbonization in the United States lowers the cost of solar and wind power, or electric cars, Indians will likely adopt these technologies as well. Big Indian companies such as Ambani " and Adani have embarked on massive energy projectsrenewable, all without foreign aid. So it's not clear what kind of political risk Fink's $ 100 billion a year is supposed to face.
Climate change requires international cooperation. Rich countries, the main creators of the climate problem, have an obligation to help developing countries cope with climate change. But international support should probably focus on climate adaptation, not mitigation. Moreover, providing aid without a clear theory of change and without drawing on past experience with foreign aid is likely to be the most failing thing. Politically speaking, foreign aid as an implicit subsidy for BlackRock is probably not a good idea. The climate change and international development communities should focus on creating an adaptation support framework so that money fromhelp is put to good use.