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GLOBAL LEADERSHIP DIALOGUES Insights and Inspirations from Change Leaders

Sustainable Finance Visionary RACHEL KYTE Rachel Kyte is CEO and special representative of the UN Secretary-General for Sustainable Energy for All (SEforALL). Before assuming this position in January 2016, she was the vice president and special envoy on climate change at the World Bank. She has also served as vice president for Business Advisory Services at the International Finance Corporation (IFC), and as director for Environment and Social Development at the IFC. Her accomplishments in these positions have been groundbreaking. She set performance standards for the Equator Principles, a framework adopted by financial institutions for determining, assessing, and managing environmental and social risk in projects. She championed women’s leadership in sustainable development, from efforts to move away from the use of carbon-burning cookstoves to women’s increasing prominence in board positions. She brought forward the recognition of natural capital and helped build the accounting principles around it. She also worked to create a global coalition to price carbon. As a result, an unprecedented alliance of heads of state, and city and state leaders, with the support of heads of leading companies, have joined forces to urge countries and companies to put a price on carbon. Maria Ivanova, director of the Center for Governance and Sustainability, interviewed Rachel Kyte on December 9, 2015, in Paris.

Volume 3, Issue 4

CENTER FOR GOVERNANCE AND SUSTAINABILITY JOHN W. McCORMACK GRADUATE SCHOOL OF POLICY AND GLOBAL STUDIES UNIVERSITY OF MASSACHUSETTS BOSTON www.umb.edu/cgs


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As the World Bank vice president and special envoy for climate change, what has your role been in tackling the climate change issue?

world-renowned scientists to come and brief him on the science of climate change. Hans Joachim Schellnhuber and Rosina Bierbaum came and gave a “Climate Science Update 101” presentation. In the course of that briefing, Jim said, “I get it. If this is such a threat, then I want to know what the plan is that is commensurate to the threat.” He asked us to figure that out. He spoke to everybody, including Rajendra Pachauri, then chairman of the Intergovernmental Panel on Climate Change (IPCC). He invited all kinds of people in and basically asked, “What’s the plan?” People gave him bits of a plan. I explained that the plan would hopefully arrive in Paris, and he said, “Well, what’s the plan for us then?”

Over recent years, before and after the Conference of the Parties (COP) to the UN Framework Convention on Climate Change in Copenhagen, there was much discussion and many strongly held views among members of our Board of Directors concerning whether or not climate change was a development issue, and whether development was a climate change issue. There was a controversial attempt to get our board to set a directive on whether the approach would be called the Strategic Framework for Climate Change and Development, or a Strategic Framework for Development and Climate Change. For a long period of time, the board found it difficult to agree that the two concepts—development and climate change—were linked. Prior to this, around 2005–2007, there was a period where we were asked by management, not the board, not to use the phrase climate change.

The question was, if climate change was going to threaten the process to end poverty, if climate change was going to completely undermine development gains, then what needs to be done? So, we asked ourselves what needed to be done, not just what the bank should do. Then we asked and whether or not the Bank Group could help play a role in any of those few things and catalyze leadership and action through our own lending program, our technical assistance, or our convening authority.

I ignored that, but it is within living memory that we were an institution that was having a hard time persuading ourselves, as well as the Ministries of Finance of our clients, that if we were in pursuit of development, climate change was something that we should pay attention to.

We concluded that there were five things that needed to be done: getting prices right, getting finance flowing, changing the way we farm and manage landscapes, working through the energy transition, and building cities for the future. Then we needed to work out what the Bank Group’s contribution could be.

When Jim Kim became president of the World Bank Group in 2012, he was briefed on a series of issues related to infrastructure and sustainable development. I asked two

The World Bank headquarters in Washington, D.C. 2


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On prices, the focus was to end fossil fuel subsidies and put a price on carbon. On subsidies, this meant working with all the other groups and institutions that were working on fossil fuel subsidy reform, to clarify the evidence and the data and to build the case for speedy reform. But more than the case, countries need support to institute change, including strengthening social safety nets and communication channels so that, together with the economic evidence and the improvements in air quality, people would trust that reform would not make them worse off. On carbon pricing, this meant changing the way we did our own business. We changed our discount rates, reflecting a view of the future with climate change taken into account. We put an internal price on carbon, meaning that we prepared internal advice for teams on how to consider a project’s economic rate of return with and without a carbon price and what that price should be. We put in place a process that allowed us to know what mitigation effect we got from our lending, and we worked with other multilateral development banks (MDBs) and members of the International Development Finance Club (IDFC), bilateral development finance agencies, and national development banks in some middle-income countries, to do the same. We all agreed on principles about what counts as adaptation finance. In Paris, we announced mainstreaming principles for climate finance together with 26 other banks, including the Asian Infrastructure Investment Bank (AIIB), covering US$11 trillion in assets. So, from the inside, we changed the way we did our business. There is still a lot to do to have the tracking, measuring, and calculations change investment decisions. That will require active management, but we have made substantial changes and have laid the groundwork necessary for management and the board to lead and know the impact their financing is having.

Rachel Kyte at the University of Massachusetts Boston in November 2015

This meant engaging in a hard-fought battle within the World Bank Group, which resulted in an agreement that we would increase our own lending by a third, and continue to mobilize private finance so that by 2020 we have committed that we will be mobilizing US$29 billion a year. Other multilateral development banks have made similar stretch commitments. What did it take to create such change, and what were the objections within the bank? How does an international organization change its way of doing business so dramatically? I think you need leadership internally and externally. First, it is important to understand that the Bank Group is a client-driven organization. Our clients are governments of developing countries, the private sector in emerging markets, and we were getting questions from our clients. They were saying, “Okay, we know we’ve got to adapt, but how on earth are we going to afford to adapt, and what exactly are we adapting to? If it’s two degrees, it means this; if it’s four degrees, it means something else.” To a large extent, our clients were the driver. That then became the imperative and pushed us to ask ourselves anew what the science implied economically. We produced a series of publications called Turn Down the Heat, which were important internally and externally. Externally, the World Bank was discussing the economic impact of climate change and making the point that this was a development issue. This in and of itself had an impact. Internally, the reports educated staff about the risks, and that meant that staff could listen differently to clients and engage clients in a different dialogue. Of course, NGOs and others had been continuing to try to get the Bank Group out of fossil invest-

The Bank Group has also changed its portfolio. Our energy portfolio has now shifted from fossil fuels to renewables. But then we worked in partnership to build a movement for carbon pricing with business and governments around the world. The idea was to make it a political imperative, not just a technical issue, something we had been supporting countries and regions on for many years. This effort has led the Carbon Pricing Leadership Coalition to focus on helping leaders around the world to move quickly to establish carbon pricing in their jurisdictions. Lastly, we have tried to mobilize more of the US$100 billion a year agreed upon in Copenhagen and which has become a litmus test for the developed world and one that must be passed to build the trust essential for a strong deal. 3


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I think, external to the convention process, the fact that the scientific consensus was cemented by the IPCC in 2014 is critical. The fact that China and the United States decided to dance together rather than apart in 2014 is critical. The fact that Connie Hedegaard and the EU attempted to make up for what had happened in Copenhagen and formed a platform to think about how to make progress in the COP in Durban, mattered; in some ways it was a precursor to the “high ambition coalition” here in Paris. And, I think the fact that you can feel and see climate change happening has focused people’s attention.

We had to educate ourselves inside the bank as to the close relationship between ending poverty and fighting climate change, the interplay of issues and the impacts in different parts of the world and in different sectors of the economy.

What has also helped cause this shift is the extent of the understanding within economics that inaction is more expensive than the courses of action being recommended, that the politics will have to support action, but that economically we can lay out clear pathways and the policy tools that can be used and measures that might work. Climate is not only a scientific debate. The science is clear and the economics compelling. It is now difficult to turn your head away from an economic imperative to act.

ments. The divestment movement got the attention of our treasurers. External pressure is important. Our shareholders firmed up their evolving positions, but the changing demands and needs of our clients were the greatest driver of all. Internally, the understanding of a lot of old-time bank staff and bank management was that “we do development and poverty alleviation.” They perceived climate as politically controversial and thought that the bank should not get involved with it. They feared that it would create problems for the bank with Republicans on the Hill, or with some of the bank’s other shareholders. We had to educate ourselves inside the bank as to the close relationship between ending poverty and fighting climate change, the interplay of issues and the impacts in different parts of the world and in different sectors of the economy.

Again, it is clear that leadership matters, and there is now leadership across all sectors of society, from climate scientists and environmentalists to health advocates and women’s groups, faith communities, industry leaders across all sectors of the economy, political leaders, and the financial sector. We have leadership in the financial sector saying, “Wait. If we are all holding onto a commodity, or a currency, called carbon, which is poisonous and dangerous to communities and the planet, and which therefore cannot be the mainstay of our growth in the future, what will be the implications for financial stability because of our exposure to carbon and how do we let go of it?” These kinds of questions have moved in just two to three years from being questions asked by NGOs and radical movements to mainstream discussions in the academy, in the Bank of England and other central banks and regulators, in finance ministries, in the Financial Stability Board, and hopefully in the International Monetary Fund.

When it came to changing the Bank Group’s approach to climate, urgency played an important role. Large institutions are always changing, but often incrementally and slowly, first thinking and then practice. With climate change, however, time is the enemy; we have limited time to change the direction of economic growth toward lowcarbon growth. There is a tension between the speed at which a bureaucracy works and the speed at which we need to have climate action. In the past year, the crescendo of activity and the focus on Paris meant having to make change and shift gears in a way that was uncomfortable for some inside the institution. Forcing the pace of change is one of the important aspects of the focus that can be achieved by a COP.

The science is clear and the economics compelling. It is now difficult to turn your head away from an economic imperative to act.

Talking about international climate politics more broadly, what do you think has shifted, and what happened to cause this shift?

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VOLUME 3, ISSUE 4: RACHEL KYTE

and small groups of individuals within an institution can move it. Things proceed very, very slowly, until they move, and then they can move very, very quickly. I think that being peripatetic and getting experience in different sectors of society, in different kinds of institutions, is extraordinarily important. In this day and age, a couple of years in the private sector, a couple of years in government or in a governmental institution or intergovernmental institution, a couple of years in a civil society organization, will become extraordinarily useful to you later in your life.

Photo: UNEP

GLOBAL LEADERSHIP DIALOGUES

I am very lucky. I never had a plan; I moved from one challenge to another. When I look back, I think about the intervention of a number of really incredible women, who could see something in me that I did not really see in myself at the time. They saw a potential, or they saw skill or determination, or some mix of all three, at a point when I was not really self-aware enough to see that I could stretch myself that far. It really matters who you work for, and my message to young women and men is to work for somebody from whom you will learn.

Wind and solar power are key renewable energy sources.

I think the leadership of the UN Secretary-General, Ban Kimoon, was critical. He called the heads of state together a year before the COP to participate in the 2014 Climate Summit and made it their business to show up and own the Paris process.

Expanding a bit on the point of women and leadership and mentorship, you have now been featured in Vogue as 1 of 13 climate warriors and in a piece in The Conversation about 15 climate champion women that was picked up by CNN and Fortune. What can we learn from your experience regarding women’s leadership and mentorship?

The extraordinary thing about this COP [COP21 in Paris] is that the world really did come to Paris and that it feels as if the world is here. This is not the first time the world has come to a COP. The world went to Copenhagen, the world went to Kyoto, but the negotiating rooms were impermeable. It was very difficult to bring the outside in. Somehow in Paris, because of the universality of the concern, of the preponderance of will, from faith communities to business, to finance, to nongovernmental organizations to everybody else, to the integrated and comprehensive preparations and engagement, there is a preponderance of concern that we get a strong agreement in Paris, and this has penetrated the negotiating rooms. Business leaders and others have said that they believe we must change the direction of our economies and have created confidence among negotiators that there is a constituency ready to act, and they are reacting to that.

I think that you have to make space for women coming behind. You have to put your foot in the door and then kick the door a little bit further open and let other women come in behind you, because somebody put her foot in the door for you. And I think that this sense of solidarity is really important. One of the most moving things for me in the last couple of years, in the run-up to Paris, and one of the things that has kept me going through really difficult moments, has been a network of women. We do not all agree with each other all the time, we are coming from very different angles toward the common agenda of action on climate change, we are put in opposition to each other sometimes, but there is a sort of sense of solidarity among us that change requires individuals, and individuals must be sustained. Sometimes it is difficult to find that within your own team, or within your own organization. And so, lifting up friends and colleagues is really important.

You have had an interesting career, moving from advocacy in civil society to working at an international organization and changing it from within. Can you share with us the milestones in your career and some of the lessons from both the advocacy field and from international organizations? I think that it is really important to understand institutions, because they can make things happen, slow the change, or stop it from happening. It is also really important to understand individuals. Big institutions are not monolithic,

I have worked for some extraordinary women and men in my life. My career in the World Bank Group moved the way that it did because enlightened men gave me a chance. 5


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surface. The ability to communicate with trust, especially when people find themselves on opposing sides, is very important. I think Christiana Figueres should get real credit, because she has brought a spirit and feminine feel to the process which was not there before, and which has opened up the space for all of us.

I think that you have to make space for women coming behind. You have to put your foot in the door and then kick the door a little bit further open and let other women come in behind you, because somebody put her foot in the door for you. And I think that this sense of solidarity is really important.

And of course there are amazing female professors from places like the University of Massachusetts Boston who are documenting all of this and bringing their own special expertise to it! You are now entering a new space as the incoming CEO of Sustainable Energy For All. Um hmm. I love challenges. Tell us about that challenge. What kind of challenge would you like to take on as part of that job, and where would you like to take that initiative?

Now, they will admit later that at times they gave me jobs to do never thinking that I would be able to succeed, and there is a whole narrative now around why women are given impossible jobs more often than men—the glass cliff. When we secured the new standards for environment and social performance of private investments in the International Finance Corporation (IFC), that then formed the basis for the Equator Principles, senior management told me, as the champagne popped, that they had given me a 10% chance of success.

I think the SDGs [UN Sustainable Development Goals] are a remarkable set of universal goals that nobody really thought we would ever get with a unanimous agreement. We do not get to either of those destinations—long-term zero-net emissions or 2030 SDGs—without a fairly substantial revolution in our energy systems. And it is criminal that in 2015 and 2016, the first years of implementation, 1.3 billion people do not have access to power and 2.9 billion people are using a source of energy for cooking that is deleterious to their health. It is outrageous that 6 million people die every year from indoor air pollution. And the fact is that we cannot leave people behind in this pursuit of low-carbon growth and resilient development. We cannot decarbonize the economy, grow, create jobs, and be competitive without people. We need to be able to square the circles and be able to provide access to energy while pursuing a long-term goal of zero net emissions, while getting to 1.5 degrees, and we do it through the twin revolutions of renewable energy and energy efficiency. The confluence of the new business models and new technology, along with the plummeting price of renewable energy, means that it is possible to imagine that everybody can have access to clean, affordable energy.

But nevertheless, they gave me opportunities, and I was able to take those opportunities and turn them into something. So, again, the intervention of enlightened men and strong women has sort of brought me to this moment, and it is very important to pass that on. What is the role for women in the climate negotiations? Are there any women who have made a particular impression on you, and in what sense? There are extraordinary women in the negotiations, around the negotiations, in the media, and on the fringes. Whether in civil society, the press, business, government delegations, or international organizations, they are in the minority, and in certain settings they are in the extreme minority. However, there are a critical number of women who can speak and shape the debate. There has been a period in the last 10 days where I have been really tired of being the only woman on the panel again and again and again and again. There are some spaces that are better than others, but there are themes, or sectors, where there are still almost no women at all representing or speaking.

We need this extraordinary revolution in energy efficiency—not just supply-side energy efficiency, but demand-side energy efficiency. I mean, we can now provide a household with everything they need—television, refrigerators, lighting, heating—for much fewer watts per household than was the case just a few years ago, and that will continue to decrease with super-efficient appliances.

This has been a long process, and so there have been significant relationships of trust formed underneath the 6


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and graduate, not just in terms of the gray matter in their minds but their outlook and the way in which they decide to apply that. I think that educating people in silos was always dangerous, but universities could survive. I am not sure given the existential and integrated nature of the threats that we face that that is really a business model that works for much longer.

It is not an outlandish vision to imagine that we can get everybody power, in a clean way, stay on the course for two degrees or below, and bring everybody with us.

So universities need to change their own model before they can change the world.

It is not an outlandish vision to imagine that we can get everybody power, in a clean way, stay on the course for two degrees or below, and bring everybody with us. That is not beyond the realm of possibility. And it is not beyond the realm of possibility that it can happen long before 2030, because by 2030 everybody has to have health care and education and all the other goals are to be met, and how do they have that if they do not have reliable power? The SDG on sustainable energy has to be a front-loaded goal, and it has to happen in the next decade, and it has to happen cleanly. I think it is exciting to be part of a team of people from all over the world, in every walk of life, who want to attack that problem.

Yes, I think they have to do both at the same time. What attracts me always back to Fletcher is that, first of all, the students ask better questions than I get asked often by my own staff. They really make me think. It is the light in their eyes. Fletcher students have normally gone out and worked for quite a few years between undergraduate and graduate school. It is a particular dynamic, and they come back to school with a whole bunch of experiences under their belt, and what they are trying to do is make sense of it and change the course of their lives so that they can make a difference. What a privilege it is to be able to talk to them.

You are a non-resident professor of practice of sustainable development at the Fletcher School of Law and Diplomacy at Tufts University. What role do you see for universities as we seek to implement the SDGs and the Paris agreement and to get energy for all? How can universities change their business model and participate on an equal footing and be contributors to this broader agenda?

What inspires me are the people who are out there, making things happen and struggling and never seeming to blink, and making something from nothing. Whether it is diplomatically or whether it is in terms of entrepreneurship or whether it is in terms of political leadership, I am constantly amazed at how much an individual can do.

What inspires you, and what keeps you up at night?

What keeps me up at night is the fear that, because of the breakdown of political systems in many of the countries in which we live and work, we are lethargic, distracted, and do not sense the urgency, and that, in not sensing the urgency, we will make some terrible mistake and leave people behind who should not be left behind. To leave one person behind is to leave ourselves behind. And, choosing not to act is a moral choice, because if you live in the developed world, such as in the United States as I do, choosing not to act means that you are choosing to leave people behind by proceeding with business as usual. Who gave me that authority or that right? Nobody. I do not have it. I have to act.

I think universities have an extraordinary responsibility to help the student body, students after they graduate, as well as their own research capabilities to ask the right questions. If you do not ask the right exam question, the essay is going to be great, but it is going to be of limited value; it is going to be decorative. I think that the interdisciplinary nature of the problems that we face means that getting the questions right is really important. I think there is a real responsibility to produce generations of young people who are equipped morally, philosophically, and spiritually, as well as academically, to navigate what is going to be an extremely volatile world. And I think universities have a duty of care to students, undergraduate

Thank you, Rachel. You are inspiring all of us to act, and I am really grateful for the opportunity to talk with you.

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About the University With a growing reputation for innovative research addressing complex urban issues, the University of Massachusetts Boston, metropolitan Boston’s only public university, offers its diverse student population both an intimate learning environment and the rich experience of a great American city. UMass Boston’s 11 colleges and graduate schools serve nearly 17,000 students while engaging local, national, and international constituents through academic programs, research centers, and public service activities. Part of the five-campus University of Massachusetts system, UMass Boston is located on a peninsula in Boston Harbor, near the John F. Kennedy Library and Museum, the Massachusetts State Archives and Museum, and the Edward M. Kennedy Institute for the United States Senate. To learn more about UMass Boston, visit www.umb.edu.

About the John W. McCormack Graduate School of Policy and Global Studies Named in honor of U.S. House of Representatives Speaker John W. McCormack, the McCormack Graduate School was founded in 2003 as an academic and research center in policy studies at the University of Massachusetts Boston. It is the go-to school for a world-class interdisciplinary education and values-driven research that seeks to explain and offer remedies for some of the most important social, political, economic, and environmental issues of our time. A dynamic institution with a teaching soul, the school trains the next generation of local and global leaders in conflict resolution, gerontology, global governance and human security, international relations, public affairs, and public policy.

About This Series Based on in-person interchanges, the stories told in the Global Leadership Dialogues Series offer insights into the professional work and personal experiences of notable professionals in the global governance field. The series provides in-depth perspectives on what these leaders think about key issues in global governance, what inspires them, and how they imagine the future.

Citation Information Please use the following citation for this brief: Global Leadership Dialogues, Volume 3, Issue 4: “Sustainable Finance Visionary: Rachel Kyte.” 2016. Center for Governance and Sustainability, University of Massachusetts Boston.

Center for Governance and Sustainability The Center for Governance and Sustainability seeks to bring academic rigor to real-world policy challenges in environment, development, and sustainability governance. It serves as information hub, analyst, and honest broker among scholars, students, and practitioners. Opinions expressed in the Global Leadership Dialogues Series are solely those of the interviewees and do not necessarily represent the views of the Center for Governance and Sustainability or the University of Massachusetts Boston. All issues are available for download at www.umb.edu/cgs/publications and www.environmentalgovernance.org/publications.

Center for Governance and Sustainability

Global Leadership Dialogues Series

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Series Editor: Prof. Maria Ivanova maria.ivanova@umb.edu

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Series Reviewer: Robert Turner

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