Briefing: Making CDC work for people and planet

November 2019

This briefing highlights some of the major problems with the CDC and the projects it funds. We believe that these problems are not aberrations but are a product of the type of organisation CDC is. CDC needs a new, legally-binding mandate which commits it to reducing poverty, closing global inequalities, doing no harm to the climate and facilitating a just, green transition to renewable energy as its driving objectives, for which its board can be held legally accountable. We propose that CDC should be transformed into an international Green Investment Bank, with the ability to lend to local and national governments in developing countries, and with other donors who share this reformed vision being invited to contribute to its finance and governance.

Campaigners have been concerned for many decades that CDC was failing in this remit – and perhaps that the remit itself was fundamentally flawed. Much evidence suggests that CDC has often pursued high financial returns over genuine development impact, and that CDC fundamentally confuses ‘development’ with simply promoting a highly financialised version of capitalism, with all the inequality and throwing of costs onto wider society which that entails. CDC’s track record of investments reflects a highly problematic approach to aid in which an ideology of ‘the market knows best’ is prioritised over transparency, accountability and meeting the international sustainable development goals (SDGs).

In place of this failing model, we believe a reformed CDC should incorporate elements of:

  • A national, government-owned development bank, similar to Germany’s KfW which primarily invests in housing and provides assistance to small and medium enterprises (SMEs). However, a reformed CDC should also learn from the mistakes of other public development banks and should take a comprehensive approach to achieving policy goals, as suggested by Maria Romero.[i] As some economists have argued, this type of model would be able to redress the structural bias towards lending for property and financial sectors and could help to de-risk green activities.[ii]
  • An international, publicly-owned, Green Investment Bank which would facilitate a just transition to clean energy and green infrastructure. The UK’s original Green Investment Bank was privatised by the Conservative government in 2017. Fran Boait, Director of Positive Money, has argued that a central Green Investment Bank could help to close the climate finance gap by issuing green bonds as is done in France and the US.[iii]
  • Regional development banks which invest in infrastructure and services in a particular region with specific development needs. While some models for this may be seen as problematic, such as the Asian and African Development Banks which largely follow the World Bank’s privatisation agenda, the Labour Party has also proposed a similar model of regional development banks for the UK as a means of supporting public services and tackling regional inequalities.[iv] Economist Maria Nikolaidi has also argued in favour of a “strong network of regional green banks” supported by a strong central bank.[v]

 

Topic:
Aid
Type:
Briefings
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