MCC’s Board Discusses Climate Change: Here’s Why it Matters

March 18, 2015

MCC has long applied rigorous environmental safeguards and standards to its investments in partner countries.  And since President Obama’s September 2014 Executive Order on Climate-Resilient International Development, MCC (along with other key USG foreign assistance agencies) has been expanding  its efforts to ensure that it considers climate change risk—and, where possible, mechanisms for adaptation—in investment planning and execution.  Since MCC invests in countries and sectors that could be hugely impacted by changes in the risk of natural disasters, this is very important.

At MCC’s quarterly board meeting today, the agency presented on current actions and ongoing plans to foster climate-resilient development. It doesn’t appear that anything decisional was lined up for the meeting, but I expect we can look forward to more comprehensive information from MCC about its approaches to take climate change risk now that the board has been briefed.

Taking broader climate risks into consideration makes sense for MCC.  After all, the bulk of the agency’s portfolio is made up of transportation infrastructure and agriculture, both sectors in which changing climactic conditions can jeopardize investments.  MCC’s road project in the Philippines compact highlights this point.  During the design phase, MCC and the Government of the Philippines ended up taking extra steps to “climate-proof” the road, knowing the country’s high risk for typhoons.  When Typhoon Haiyan, the most powerful storm ever to make landfall, hit in late 2013 (after road construction had already begun) the portion of road already completed withstood the damage.  MCC and the Government of the Philippines made these design decisions before Obama’s executive order on climate change resilience specifically directed the agency to do so.  However, to the extent that events like these will become stronger and more frequent (an assertion supported by many climate scientists), it makes sense to systematically include a broader view of these kinds of climactic risks in project planning.

Increased attention to climate change considerations won’t change MCC’s fundamental mission to reduce poverty through economic growth.  But it is likely to mean that MCC will more systematically think through how changing climactic conditions (e.g., projected changes in the frequency of things like mega-storms or droughts) could impact its capital investments over a medium- to longer-term horizon. While adaptive design adjustments may come with increased costs, by reducing risk, they may also increase an investment’s projected benefits.  This calculus should be considered in the rigorous cost-benefit analysis that MCC and its partner countries do as part of project planning (and, where necessary, making substantial mid-course adjustments).  After all, if a road is washed away in a series of strong storms over a number of years, or if medium-term changes to the conditions of a regional watershed reduce the functionality of village boreholes, the benefit side of the balance sheet would certainly suffer.

We’ll look forward to learning more about MCC’s efforts in this area soon.


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