Identifying climate-smart pathways for Rwanda to achieve shared social and economic prosperity

Rwanda, a small country nestled amongst a thousand green undulating hills, has been taking a cue from the rich nature that surrounds and sustains it. Although its contribution to global greenhouse gas emissions is negligible, its vulnerability to climate change shocks risks stifling the remarkable economic and social progress that the country has achieved in the past decade. The consequences of extreme natural disasters, including frequent floods and droughts, dampen Rwanda’s prospects for sustainable growth. They also delay the government’s ambitious plans to improve the health and livelihoods of the Rwandan people. A new diagnostic report from the World Bank, the Country Climate and Development Report (CCDR) for Rwanda, estimates that if no action is taken to address climate change, Rwanda’s GDP would be around 2% lower on average through 2050 than it would be in a world without climate change, with similar reductions in levels of household consumption, exports, and government revenue. Rwanda has been at the region’s forefront when it comes to putting climate at the center of its development. The Government of Rwanda has made concerted efforts to mainstream climate action into their strategies in order to significantly reduce greenhouse gas (GHG) emissions and enhance adaptation—all while fostering a better, more prosperous, and more resilient future for its people. Its 2020 Nationally Determined Contribution (NDC) outlines critical climate mitigation and adaptation measures needed to support the country’s low carbon and resilient national development ambitions. The CCDR for Rwanda goes further, presenting pathways that Rwanda could consider to achieve its Vision 2050 and its national strategies for transformation, green growth, and climate resilience—while prioritizing actions that will enhance the impact of NDC investments and deepen the country’s commitment to green economic and social transformation. The cost of implementing actions in the 2020 NDC is high—the Government of Rwanda estimates it at $11 billion, amounting to spending 8.8% of the country’s GDP each year through 2030. Thus, the biggest hurdle Rwanda faces to implementing its innovative, green, inclusive, responsive, and growth-oriented development pathway is finding resources to finance these plans and strategies. It is a challenge that affects a majority of countries in the region at a time when global climate action is stalling amid multiple crises—the conflict in Ukraine, Covid-19, surging inflation, and reversals in development. The CCDR thus suggests a mix of resources: government’s own, development partners, and the private sector to help balance the costs and risks. Therefore, one of the most urgent actions the government of Rwanda can take is to develop a climate-smart, private sector-friendly investment environment that helps balance investment projects with policy reforms and encourages the development of a green finance market. The private sector and private investment have crucial roles to play in helping Rwanda achieve its climate and development goals. The CCDR explores how Rwanda could best engage the private sector across its economy, including agriculture, infrastructure, and urban development. For example, blended finance can help reduce perceived risks by investors and financiers looking to enter new markets, and eventually demonstrate the business case for sustainable private sector investment in the sector and the country. The World Bank Group through the International Finance Corporation (IFC) successfully implemented a blended finance solution in an early stage of market creation to address chronic malnutrition and its negative impact on human capital development in Rwanda. Thanks to IFC’s $26 million investment in Africa Improved Foods (AIF), a 45,000 ton/year processing plant was able produce fortified cereals to treat malnutrition in nearly one million children, and pregnant and nursing women using maize and soy that is sourced and grown locally by Rwandan farmers. These kinds of solutions and others are needed to scale up investments in both human and natural capital, but also other areas such as water infrastructure and management, conservation agriculture, animal husbandry, and sustainable forestry to mitigate carbon emissions from livestock, agriculture, and land use. Investments in low-carbon energy and transport solutions will also be critical to enabling Rwanda to enhance its climate compatible urbanization. At COP27, Rwanda will be unveiling its plans to launch Ireme Invest, a facility for private sector green investments that will crowd in private-sector investment. Ireme Invest is a new green investment facility that will support Rwanda’s private sector to access green finance and increase the private sector’s contribution to Rwanda’s response to climate change. The facility will catalyze green and low-carbon private investment with a focus on blended finance. The facility, the design and operationalization of which was funded by the World Bank, will catalyze green and low-carbon private investment with a focus on blended finance. Rwanda has a great opportunity to demonstrate leadership on how climate change can be integrated with development to scale up opportunities for economic growth and shared prosperity. The consultative process that informed the Rwanda CCDR process ensures that all the stakeholders involved, including the government, private sector, citizens, and development partners, are committed to supporting the integration of climate action in the country’s development agenda. As the largest multilateral financier of climate action in developing countries, the World Bank will continue to work with the government to provide integrated, evidence-based support and financing to build climate resilience in Rwanda and across the region. *The Rwanda CCDR report is one in a series of around 25 CCDRs that the World Bank Group plans to publish this year. The CCDRs analyze the challenges and opportunities for countries should they follow a low-carbon development path that remains in line with the Paris Agreement on climate change while simultaneously allowing them to achieve their development goals. To learn more about the World Bank’s CCDR series, please visit: https://www.worldbank.org/en/publication/country-climate-development-reports Keith Hansen, is the World Bank Country Director for Rwanda, Uganda, Kenya and Somalia, while Rolande Pryce is the World Bank Country Manager for Rwanda.

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Identifying climate-smart pathways for Rwanda to achieve shared social and economic prosperity