Climate-Smart Development

Climate change is inextricably tied to poverty and economic growth, and we must invest now to counter its dire consequences. As we rise to meet the existential threat of climate change, we must be bold and leverage innovative solutions.

MCC will lead by example: promoting low carbon economic development to support countries’ transition away from fossil fuels, maintaining a coal free policy across our investment portfolio, integrating climate across our analytical tools and decision-making, catalyzing private capital for climate finance and elevating support for critical services and systems essential for sustainable growth and poverty reduction.

MCC is announcing a new commitment to expand and deepen our efforts to address climate change challenges across our investment portfolio and business operations, investing in climate-smart development and sustainable infrastructure.

MCC is rising to meet the existential threat of climate change and significantly stepping up its climate ambition to support sustainable and inclusive growth in its partner countries.

This document sets forth MCC’s strategy for more fully integrating climate considerations into MCC’s core business. This strategy will guide MCC’s work across all programs, whether under development, in implementation, or post-implementation.

From 2015 to 2020, MCC invested $1.7 billion—roughly 40% of our program funds—in climate-related activities. Our investments in critical sectors like energy, water, transportation, and agriculture are part of a holistic approach to building climate resiliency, promoting low carbon economic development and supporting countries in their transition away from fossil fuels.

In 2021, MCC expects to invest more than $500 million in climate-smart development—with up to $3.5 billion in total investments by 2024. MCC is well positioned to make a significant impact in advancing sustainable, climate-smart economic growth around the world.

“Climate change, if not proactively mitigated, puts agricultural production advances in Niger at risk and, this is in the sector which employs more than 80 percent of our population. Our partnership with MCC is rehabilitating pastoral lands, promoting soil nutrition and creating access to sustainable groundwater resources among rural communities including thousands of small-scale farmers. These actions will improve productivity while ensuring our land and natural resources are managed better now and remain available for future generations.”

—Mamane Annou
MCA-Niger’s Director General

The Benin Power Compact has the potential to leverage $100 million in private investment and increase utility-scale and off-grid solar power generation creating an enabling environment for independent power producers. This potential could deliver electricity to nearly 630,000 people in the poorest areas of Benin for the first time.

The $697 million Morocco Compact helped farmers protect their incomes in the face of long-term change in rainfall patterns by converting 200,000 acres from annual cereal crops, like wheat, which perform poorly as the weather becomes drier and more variable, to perennial tree crops such as olives and almonds. These tree crops are more resilient to changing weather patterns, reducing risks that farmers face and providing greater income security.

In Niger, the agricultural sector employs more than 80 percent of the population and represents the second-largest export sector. Although poverty trends are slowly improving, with a climate prone to volatile weather conditions and a lack of access to critical inputs and information, agricultural productivity has stagnated. The $437 million Niger Compact includes investments in irrigation infrastructure and management systems, climate-resilient agricultural production, upgraded roads to improve market access, and management of natural resources, while seeking to empower entrepreneurs and smallholder producers. The compact has the potential to benefit approximately 3.9 million people.

Photo courtesy of International Development Fertilizer Center

Replanting Trees One Seedling at a Time

Members of the Tiyanjane Horticultural Club learned new skills to help the community plant trees and improve the health of Malawi’s Shire River. Selling fruit trees and other plants from their roadside stand, they are investing their earnings in their families.

Cabo Verde is surrounded by ocean, but it is one of the most water-scarce countries on the planet. The limited water people have is threatened by changing rain patterns, increased sea-level rise, saltwater incursion in coastal aquifers and water loss from increased temperature. A project in the Cabo Verde II Compact assisted in consolidating nine small water utilities and developing a plan to enable the country to manage its fresh water supply.

The $474 million Indonesia Compact reduced reliance on fossil fuels by expanding renewable energy, reduced land-based greenhouse gas emissions by improving land use practices and management of natural resources, and supported policy improvements through participatory land use planning.

Climate models forecast the possibility of increased floods and droughts for the country. Models showed a deficit of up to 22 percent in the river basins that were the key source of irrigation water during droughts. Given the uncertainty of future water supply, MCC worked with the Moldovan Government to reform water laws, develop a plan to better manage water resource and consolidate information from nine agencies into one modernized system. And an agriculture projecta in the Moldova Compact rehabilitated dilapidated irrigation systems and transitioned farmers to higher value crops.

MCC is also working hand-in-hand with governments in our partner countries to deliver policy and institutional reforms that integrate the needs of women and those most vulnerable, encourage government transparency and promote sustainability. These reforms can expand the impact of MCC investments by catalyzing private sector investments in and around our programs.

Regulatory reforms in MCC’s compact with Mongolia will increase transparency and efficiency by requiring the use of recycled water, strengthening climate resilience of Ulaanbaatar’s water supply, and paving the way for wastewater recycling for industrial uses throughout the country.

MCC’s proposed Tunisia Compact includes infrastructure investments at the Port of Rades to support Tunisia’s nationally determined contribution priority of redeveloping coastal industrial zones. This compact also includes key reforms to improve groundwater management and irrigation, in support of Tunisia’s NDC priority sectors of water resources and agriculture.

The climate challenges facing the development community are daunting, and we must partner to create a positive, lasting impact in the fight against climate change.

MCC is committed to expanding its collaboration with partners in the U.S. and internationally, growing a network of organizations and resources that leverage blended finance tools with a specific emphasis on and mobilizing private capital for climate.

The Jordan Compact included a public-private partnership to finance a wastewater treatment facility, which allowed Jordan’s government to treat 70 percent of the country’s wastewater and meet the region’s wastewater treatment needs through 2025. The plant has improved the long-term sludge management and disposal practices and helped preserve Jordan’s scarce water resources. The expanded plant provides 133 million cubic meters of high-quality treated water per year – equivalent to over 10 percent of Jordan’s entire annual water resources – for irrigation in the Jordan Valley.

In the Philippines, for example, MCC invested $228 million to rehabilitate 222km of roads on Samar Island. Recognizing the risks that climate change posed, MCC used climate models to build climate-resiliency into the design. The value of this approach became clear in November of 2013 when Typhoon Haiyan struck the Philippines with sustained winds of over 190 mph, making it one of the strongest storms to ever make landfall. The road was directly on the storm’s path, but it survived largely intact and provided a crucial artery for emergency response, subsequent reconstruction, and the ongoing development of Samar Island. The demonstration effect of this project has been powerful as well with the government of the Philippines now applying these design standards to other national roads.

$1.7 billion: the amount from 2015 – 2020 MCC invested in climate-related activities

$500 million: the minimum amount MCC expects to invest in climate-related activities in 2021

50 percent: over the next 5 years MCC will commit this much of its program funding to climate-related investments.

Based on historical averages of $700 million in program funds, over the next 5 years MCC anticipates making $3.5 billion in investments.

MCC’s future spending is dependent upon appropriations from Congress and this is based on MCC appropriations for program funding remaining at $700 million.
Source: Congressional Budget Justification FY 2022