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111. Greeniums in sovereign bond markets

Author:
Monika Grzegorczyk
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The total market value of green bonds exceeded half a trillion dollars in 2021 and will increase to $1 trillion by the end of 2022. The growing European green sovereign bond market has a value of close to €147 billion at issuance. We study whether investors price green sovereign bonds differently to normal sovereign bonds. We do not expect to find a so-called ‘greenium’: the promise attached to green sovereign bonds is rather loosely defined and green and normal sovereign bonds are both backed by the full faith and credit of their respective governments. However, when systematically matching green and normal sovereign bonds using a number of criteria, including date of issuance and maturity, a small greenium can be measured. More research is needed to understand why rational investors do not arbitrage away this greenium.
Topic:
Finance, Economy, Public Debt, Bonds, Green Economy, and Sovereign Bonds
Political Geography:
Global Focus

112. Footing the Bill: Fair finance for loss and damage in an era of escalating climate impacts

Author:
Tracy Carty and Lyndsay Walsh
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
The world has entered a new and dangerous era of climate change impacts, causing huge loss and damage and driving up inequality in the world’s poorest countries and communities that have contributed least to the climate crisis. New research by Oxfam estimates that funding requirements for UN humanitarian appeals linked to extreme weather are eight times higher than they were 20 years ago, and over the past five years nearly half of appeal requirements have gone unmet. Funding for emergency humanitarian response is piecemeal and painfully inadequate, as is broader support to address loss and damage such as rebuilding homes and vital infrastructure. Scaled-up financial support from governments, corporations and individuals most responsible for causing the climate crisis, and most able to pay, is an immediate necessity. A new finance facility must be created to help ensure that finance to address loss and damage is accessible and sustained, is additional to adaptation, mitigation and ODA commitments, and is delivered in accordance with the principles of climate justice.
Topic:
Climate Change, Environment, Infrastructure, and Finance
Political Geography:
Global Focus

113. Climate Finance in West Africa: Assessing the state of climate finance in one of the world’s regions worst hit by the climate crisis

Author:
Norman Martin Casas and Azara Remalia Sanogo
Publication Date:
09-2022
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
In West Africa/Sahel, countries and their communities are experiencing the worst impacts of the climate crisis. Elsewhere, Paris Agreement climate finance commitments are set to prioritise the countries that are most impacted by climate change. However, new research by Oxfam shows that, despite West Africa/Sahel being one of the world’s most climate-vulnerable regions, the international climate finance received falls far short of meeting national climate finance needs and is being significantly over-reported in favour of debt instruments. Adaptation finance is also insufficient. Reported climate finance does not place gender equality at the centre, and only a small part directly reaches local actors. In light of this, developed countries and other donors should scale up grant-based adaptation finance that reaches the local level and responds to the real needs of particularly hard-hit regions such as West Africa/Sahel.
Topic:
Climate Change, Development, Environment, and Finance
Political Geography:
Africa, West Africa, and Sahel

114. Climate finance in Asia: Assessing the state of climate finance in one of the world’s most climate vulnerable regions

Author:
Christopher Roy
Publication Date:
11-2022
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
Asia is particularly vulnerable to climate hazards including extreme temperatures, flooding, droughts, cyclones, and sea level rise. The most vulnerable communities need financial support to help adapt to the climate crisis – they cannot do so alone. Developed countries have promised $100 bn in climate finance to developing countries every year until 2025. This promise has not been met. Asian countries have outlined the support they require and delivering on these needs is integral to bringing climate justice to those most vulnerable to – yet least responsible for – the climate crisis. We find that the climate finance provided to Asia is woefully inadequate to support the necessary adaptation actions and vulnerable communities are suffering as a result.
Topic:
Climate Change, Environment, Finance, and Climate Finance
Political Geography:
Asia

115. Mapping climate adaptation finance in Kenya's devolved governance system: a case of Makueni County

Author:
Judith Mulwa and Marie Ladekjær Gravesen
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Danish Institute for International Studies (DIIS)
Abstract:
These years, countries are coming up with policies, laws and regulations aimed at mobilising finances to fund response measures for climate change adaptation. It is, therefore, imperative that these finances, among others, are mapped out so that we can track the measures that are financed, the types of financing that are used, and ultimately look at whether the available funds are meeting their objectives in the ways that they are being spent. Kenya is among the first countries to develop policies, strategies and institutional frameworks for climate action, creating a policy and legal environment to advance an effective climate change response. And specifically, Kenya’s Makueni County has enacted county-level climate change regulation as part of the implementation of the national agenda on climate change. The Makueni county government and its partners have made significant efforts to build the capacity to integrate climate information into CIDPs and apply it to resilience planning and budgeting processes. Doing so, Makueni County has been able to attract climate finance in the recent past. The integration of climate financing in the budgetary processes and allocation is an important example that other counties and governance institutions could embrace to attract climate financing and to ensure that impact of the financing is felt at community level. This DIIS Working Paper is a first step at exploring these dynamics, looking at the main types of devolved public funds from the Kenyan ministries and at how Makueni has adapted local institutions and policies to meet local needs of financing for adaptation activities.
Topic:
Climate Change, Governance, Finance, and Adaptation
Political Geography:
Kenya and Africa

116. Devolution of donor funded climate change adaptation finance

Author:
Per Tidemand, Andrew Hattle, Esbern Friis-Hansen, Beatrice Sumari, Peter Rogers, Judith Mulwa, and Millicent Omala
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Danish Institute for International Studies (DIIS)
Abstract:
From 2013-2019 Tanzania received USD 2.0 billion as adaptation-related development finance, whereas Kenya received USD 3.3 billion. Based on the OECD database, this DIIS Working Paper analysis projects based on their financial value, measured as ‘adaptation-related development finance’. This is combined with an analysis of the project documents to measure degree of devolution was developed with three main parameters: the extent to which finance was managed through local government accounts; the extent to which the projects in the respective national budgets were considered devolved; and the use of participatory planning arrangements for management of the funds. Given Kenya’s greater emphasis on devolution, its fiscal strengths, and the autonomy of its counties, when compared to Tanzanian local governments, it was assumed that adaptation-related development finance would be relatively more devolved in Kenya than Tanzania. However, preliminary analysis suggests otherwise. The analysis also suggests that projects classified by development partners as ‘adaptation-related development finance’ in several cases exaggerate levels of funding and only contribute marginally to improved local governance of climate adaption activities.
Topic:
Climate Change, Governance, Finance, and Adaptation
Political Geography:
Kenya, Africa, and Tanzania

117. Private Insurance, Public Welfare, and Financial Markets: Alpine and Maritime Countries in Comparative-Historical Perspective

Author:
A. van der Heide and S. Kohl
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Contemporary capitalist societies use different institutions to manage economic risks. While different public welfare state and financial institutions (banks, capital markets) have been studied across coordinated and liberal market economies, this paper adds the private insurance sector to the study of countries’ security arrangements, following up on Michel Albert’s classical distinction between Alpine and Maritime insurance cultures. Building on extensive new insurance data collections (1880–2017) and institutional analysis, this paper corroborates the long-run historical existence of two worlds of private insurance. Maritime countries (USA, GBR, CAN) developed much bigger life and non-life insurance earlier, with no state-associated insurance enterprises and riskier investments steered towards financial markets. Alpine insurance (AUT, DEU, CHE), by contrast, was initially smaller, with strong state involvement, a significant reinsurance tradition and relatively heavy investments in mortgages and property, due to economic and financial backwardness. We argue that the larger and more “Maritime” the insurance sector, the more it made welfare states liberal and securities markets large. Insurance is thus a hidden factor for countries’ varieties of capitalism and world of welfare. The recent convergence on the Maritime model, however, implies that the riskier and risk-individualizing type of private insurance has added to privatization and securitization trends everywhere.
Topic:
Development, Capitalism, Finance, and Welfare
Political Geography:
Global Focus

118. Asia’s Push For Monetary Alternatives

Author:
Marcus Noland
Publication Date:
12-2022
Content Type:
Special Report
Institution:
East-West Center
Abstract:
For the last quarter century, Asia has been seeking greater autonomy within the existing international monetary system. While the region has had the resources to go its own way, intraregional rivalries and a reluctance to damage ties to the US and the International Monetary Fund have put a damper on regional initiatives. Now the ascendency of China offers a path toward greater regional autonomy in monetary affairs. Asia, led by China, has been playing a two-track strategy pushing for greater influence within the existing global institutions, while developing its own parallel institutions such as the Chiang Mai Initiative Multilateralization, the Belt and Road Initiative, and the Asian Infrastructure Investment Bank. Use of the Chinese renminbi will likely grow as a trade invoicing currency but expanded use of the renminbi as a reserve currency is more uncertain. It is possible that the dollar-centered international financial system could evolve into a multipolar system with multiple currencies playing key roles.
Topic:
Monetary Policy, Finance, Economy, and Investment
Political Geography:
China, South Asia, East Asia, Asia, and Southeast Asia

119. Social Cohesion and Firms’ Access to Finance in Africa

Author:
Yabibal M. Walle
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
Social cohesion has recently gained increasing attention in academic and policy circles. Apart from being a necessary feature of stable societies per se, social cohesion is also a key factor for sustainable economic development. One potential means through which social cohesion could foster economic development is by enhancing financial development. In this paper, we examine whether social cohesion is significantly associated with firms’ access to finance in Africa. To this end, we use a recently constructed dataset on social cohesion in Africa, which is based on the Afrobarometer survey and the Varieties of Democracy database. The dataset contains indices for the three pillars of social cohesion – trust, inclusive identity and cooperation for the common good. Combining this dataset with that of the World Bank Enterprise Surveys, we build a sample which covers more than 12,500 firms and 27 African countries. Our results show that all three components of social cohesion are positively associated with at least one measure of firms’ access to external finance. In particular, trust – but not inclusive identity and cooperation for the common good – is significantly associated with the likelihood that firms have a checking or savings account, or are financially constrained. When we measure access to finance with respect to having a line of credit or a loan from a financial institution, all the three pillars of social cohesion, including inclusive identity and cooperation for the common good, are related to access to finance. The results are robust to addressing endogeneity concerns using a heteroskedasticity-based identification strategy. Overall, our results suggest that improving social cohesion (e.g. through social protection, education, strengthening civil society organisations) could do more than hold society together; it could also promote access to finance, growth of firms, and thus economic development and job creation.
Topic:
Finance, Business, Economic Development, and Social Cohesion
Political Geography:
Africa

120. Urbanisation and Rural Development in Developing Countries: A Review of Pathways and Impacts

Author:
Tekalign Gutu Sakketa
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
This paper reviews the current state of literature on the impacts of urbanisation on rural development in developing countries, with an emphasis on Sub-Saharan Africa (SSA). Assessments of these effects diverge greatly. While some authors see urbanisation as strongly benefitting rural areas, for instance, through increased demand for agricultural goods and services, others highlight negative effects, for example, through the loss of livelihoods emanating from displacements and the conversion of agricultural land. Given this complexity, a review that thoroughly analyses the causal relationships between urbanisation and rural development is warranted. To do this, this Discussion Paper identifies seven channels through which urbanisation affects rural development: i) production and consumption linkages; ii) employment linkages; iii) financial linkages; iv) land market linkages; v) information and public service linkages; vi) social interactions linkages; and vii) environmental externalities. As to the first channel, production and consumption linkages, the review suggests that urbanisation has increased demand for agricultural products and services; natural resources; commercialisation and modernisation of agricultural technologies; and smallholders’ participation in modern agricultural value chains. The employment channel suggests that rapid urbanisation is enabling the diversification of rural livelihoods by bringing new eco­nomic opportunities to rural areas, but the effects have not been uniform across countries and communities. With regard to financial linkages, flows from cities have increased in many developing countries, benefitting rural areas; yet some studies point to no or to negative effects due to reduced agricultural productivity from the loss of labour and technology, and the crowding out of investment. Land market effects are particularly heterogeneous. While urbanisation tends to drive land value up and encourages investments, there are also negative developments in terms of crowding out and speculation. As to information and public service linkages, the review suggests that urbanisation has fostered information and knowledge flows from urban areas to rural areas which have improved income, innovation, and employment. Social interactions among urban and rural citizens more generally may bridge cultural gaps, improve the flow of information, knowledge, and resources pertinent for rural economic transformation, and thereby enhance social cohesion; yet little empirical evidence exists so far in terms of effects and causalities. Finally, urbanisation affects rural development through the environmental externalities it generates: waste disposal, environ­mental degradation, and loss of biodiversity. If appropriate technologies are put in place, urbanisation can also improve waste management and soil fertility, thus reducing the cost of agricultural production. To this end, the review has identified research gaps that have important policy implications. First, although effective rural-urban planning, monitoring and evaluation of rural-urban devel­opment policies require better data, there is lack of data collection systems or their quality is poor. In this respect, investing in emerging data sources such as satellites data can help countries improve their data collection systems and measures. Second, research is needed to revise and re­formulate better theoretical frameworks that take into account the uniqueness of African urban cities. Third, empirical evidence which documents to what extent and how rural-urban linkages provide an important arena for improving social interactions among neighbours, societies, and communities is needed. Finally, as many African countries continue to experience rapid urbani­sation (mostly urban sprawl), a thorough study of the impacts of urban externalities on agri­cultural productivity, food security, biodiversity, and the health of rural communities is necessary.
Topic:
Development, Environment, Urbanization, Employment, Finance, and Public Service
Political Geography:
Africa and Sub-Saharan Africa