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4 July, 2018 00:00 00 AM

Private sector in climate change management

The private sector is important as firstly, it is a key driver of paving the pathway towards job creation and sustained economic growth, and risks to it are its unveiled exposure to stringent milestone within a battling financial landscape
Sabbir Rahman Khan
Private sector in climate change management

Following the tenet of “Eco-feminism” and ruthless oppression we are whipping on mother nature, climate change in developing countries can easily be considered as the unwanted child of a hapless woman who has been given forced momentum of marrying myriad interventions, of which some appear as boon while rest turn goons. Dabbled with manifold policy penetrations, climate change issue went widowed and is losing her appeal to receive a decent treatment. As a result, many benevolent frontiers came across to rescue her using well equipped armaments while dumbfounded them with a cross-section of futilities at the end. However, the emerging advent of private sector in the area of Climate Change Adaptation (CCA) and Disaster Risk Reduction (DRR) intervention is giving a sigh of relief. Having been tested through clichéd approaches endorsed by various social good players for years, a strong drive from private sector in this domain will definitely cut a competitive edge.  Since the private sector is no stranger to contingency plan or to innovation-led risk management, it impregnates commercial savvy, innovation-cry and embodies technical supremacy to devise the transformational solutions required by climate change. Moreover, it spearheads particular competencies which can craft a one-of-a-kind contribution to adaptation, through ground-breaking technology, cementing resilient infrastructure, implementation of improved information systems and the time-bound management of mega projects. It is worth capitalizing that private sector is considered as the engine of growth fuelling national prosperity by owning and operating production systems and accounting for most of the investment climate of the country.

The private sector is important as firstly, it is a key driver of paving the pathway towards job creation and sustained economic growth, and risks to it are its unveiled exposure to stringent milestone within a battling financial landscape. Secondly, key catalyst for expansions of existing markets and to generate new markets for adaptation-relevant and climate-resilient products and services, such as drought or saline tolerant crops and Weather Index-Based Crop Insurance (WIBCI). Private sector’s way forward in these markets have the potential in creating sustainable employment portfolio backed by increased incomes. Renowned management consulting firm PricewaterhouseCoopers (2010) distinguished between direct and indirect climate risks to the private sector. The former refers to the direct exposure of core business operations to climate change impacts. For instance, extreme weather will increasingly cause business interruption and damage to physical assets. Furthermore, temperature change will impact on workers’ health, and crop and livestock productivity. Also, water scarcity will pose challenges for river transport, industrial cooling and hydroelectricity. PwC pinpointed that sectors which will be particularly affected include agriculture, infrastructure operators and tourism. They also highlighted that many enterprises will face indirect exposure through other market changes, with sectors particularly affected including food retail, finance and insurance. In addition, supply chains will be disrupted with, such as, challenges to agricultural production and increased competition for some resources. In line with this, market demand will also face change as customers must respond to climate change. These risks are becoming increasingly serious for businesses that have active business-engagement with the sectors aforesaid. The Global Environment Facility (GEF) (2012) noted, for example, that the number of enterprises already affected by extreme weather events is growing, highlighting examples of droughts in wheat growing regions leading to dramatic price rises and food riots, and chronic floods in South and South-East Asian belt severely disrupting global manufacturing.

Coming to Bangladesh perspective, Private sector-led growth has accelerated since the middle of the 1980s, transforming Bangladesh from one of the poorest countries in the world into a nation on the verge of achieving upper middle-income status. Over the next two to three decades, there are two major overarching trends that Bangladesh will have to deal with, and therefore have to plan for as well. The first trend is a positive one, which is our long-cherished desire, and indeed a firm commitment, to graduating Bangladesh out of Least Developed Country (LDC) status within less than a decade. The second, more negative trend is to combat the ripple impacts of climate change that will occur along the way. In order to deal with both these trends, while the role of government is the key in setting policies and agreed-upon standards, the private sector will have to become the cross-corporate mediator in delivering the twin goals of economic development that is also climate resilient. The much-needed transformation to a resilient economy brings new prospects for businesses, inventorying far-ranging new products and services, new and burgeoning markets, cost curtail, building durable supply chains and creating reputational benefits, all of which provide returns on investment and a positive impact on the bottom line.

To draw substantial reinforcement on new business pursuits availed from zigzag lane of climate change; new sources of finance are available to support investment in these newly sourced markets, products and services, including the Green Climate Fund (GCF), which has a specific focus on the private sector (IFC, 2010). Accessing the GCF with a need-driven approach is an imperative for Bangladeshi private sector. Proper capitalization on GCF could create an “Opportunity Buffer” for them. It is important to note that these opportunities are often pursued as a response to several driving forces, including climate change among other socio-economic and environmental factors. Considering the trade-rhetoric spelled by climate change, first-mover companies show multiple drivers for undertaking a climate-related activity, highlighting that climate change presents a window of opportunity to take action on issues and areas that are already important to the business. In this backdrop, the GCF helps create a legitimate avenue for developing countries achieve their ambition for low-carbon-induced growth using the window of opportunity facilitated by climate change. Through the PSF (Private Sector Facility), the GCF will allocate a significant proportion of resources to the private sector, mobilizing funding at scale from institutional investors and working with local private sectors in developing counties through the MSME support programme. It has set aside up to US$200 million for the MSME programme, with a cap of US$65 million each for Africa, Latin America and Asia.  Furthermore, MSME support activities could include an ecosystem approach that would allow organisations to become established or expand and a staged finance model to build a pipeline of bankable projects (CDKN, 2016). Private sector investment can also come via adaptation-related infrastructure measures. But experts cautioned that when designing such private-public partnerships, one would need to insure the private sector’s need to make a buck in their pocket is not undermining the public service provision. For example, it would be a counterproductive use of scarce public finances to raise a road to make it less prone to flooding, but then deny access to people unable to pay a user fee or toll (Devex, 2016).  

Although Bangladesh’s private sector has been showing interest in seizing the opportunities offered, but, it lacks the full-fledged institutional effort to access the fund. Sourcing funding avenues to scope the opportunity pool offered by GCF fund for Bangladeshi private sector needs to be easy-going which can be intervened by government in a ubiquitous manner.  GCF funds are available for investment in 3 main areas namely building country readiness to manage or deliver funds; climate-related programmes or projects; and leveraging private sector investments in responding to climate change. To access the GCF directly, countries need accredited national implementing agencies (NIEs). These can be line ministries, development banks, financial intermediaries or climate funds. Moreover, a country can select any number of NIEs to access, manage and distribute GCF funding. With its own NIEs, a country can avoid multilateral agencies, increasing ownership over projects and improving institutional capacity for climate fund management. Besides, Executing Entities (EEs) can carry out the projects or programmes and can access GCF funds indirectly through an accredited implementing agency. The GCF’s fit-for-purpose accreditation approach is designed to engage a wide range of entities with different levels of capacity. Applicants can qualify for different levels of accreditation, depending on their track record of fiduciary, environment and social standards. Bangladesh’s National Designated Authority (NDA) is the Ministry of Finance’s Economic Relations Division (IIED, 2016).

Pinpointing the bottlenecks barring the progress in our context, first thing that is giving a sneak-peek from the backdoor is the absence of proper knowledge management system among the cross-section of SMEs in Bangladesh as SMEs are considered the lifeline of our business eco-system. It is alarmingly evident that a fat proportion of businesses are unaware of the opportunities, lacks the necessary tools, or is hindered by an unfavorable business environment to turn these opportunities into business realities. Moreover, short-term financial cycles and investment barriers keep businesses from investing in augmenting their own resilience to climate change. Additionally, there is low awareness of the climate change risks and the need to plan in advance to reduce potential consequences. More to the point, the GCF access is still no easy alternative Financing Avenue. So many process-complications are still giving a bad breath on it. Another important decision can be taken to establish a Climate Change Ministry to dedicatedly combat policy discrepancies in this domain.

Devising a blend of raising awareness and reducing barriers to investment will usher stronger enabling environment for the private sector to arrest adaptation opportunities and reduce multiplier risk effect.  Leaving out the role of the private sector folded in climate change management is a missed opportunity that can inhibit incremental positive change. Since Bangladesh is making a transition toward a middle-income economy, it can build on its reputation as a global role model and innovator on climate change issues and infuse its engagement with the pro-business landscape, using the right negotiation table, diffusing clear policy signals that the private sector is a critical partner to shelve climate compatible development interventions.


The writer is Assistant Secretary (Research and Development),

The Dhaka Chamber of Commerce and Industry (DCCI)



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Editor : M. Shamsur Rahman

Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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