Climate Action Plan

MCC Policy Statement

The Millennium Challenge Corporation (MCC) is an innovative and independent U.S. government development agency that partners with countries to reduce poverty through sustainable economic growth.

Recognizing that climate change, poverty and economic growth are inextricably linked, and consistent with Executive Order 14008: Tackling the Climate Crisis at Home and Abroad, MCC is expanding and deepening its work on climate change across the agency’s compact, threshold and regional program grant portfolio and business operations.

With respect to MCC’s compact, threshold and regional grant programs overseas, MCC will reinforce its work with country partners to invest in climate‐smart development and sustainable infrastructure, with a commitment that more than 50 percent of the agency’s program funding will be in climate‐related investments over the next five years (CY 2021 to CY 2025). MCC has a strong track record to build on, having invested over $1.7 billion in integrating climate adaptation, resilience, and mitigation into its work from FY15-FY20, which represents about 40 percent of MCC’s total programming during this timeframe.

To meet this ambitious new commitment, MCC will take a number of actions. MCC will:

• fully integrate climate considerations into the agency’s analytical tools, policies, guidelines, and decision‐making;
• promote climate-smart development and sustainable infrastructure across all key sectors, including energy, transportation, agriculture and water;
• support nationally determined contributions in partner countries and continue to press for important policy and institutional reforms that support a transition toward low‐carbon development;
• focus on the needs of women and those most vulnerable to climate change in designing and implementing investments to better assure MCC programs both consider and address environmental justice concerns;
• bring in new partners to drive innovation and align and link MCC programs with other climate change initiatives; and
• expand the use of blended finance tools to mobilize private capital into climate activities.

With respect to MCC’s domestic business operations and administrative functions, MCC will align its internal operations with its expanded programmatic climate ambitions and seek innovative ways to integrate climate considerations. As such, MCC will fully integrate climate considerations into its administrative functions to reduce the agency’s carbon footprint. MCC will assess and improve the efficiency and resilience of the agency’s facilities and operations to the impacts of climate change. MCC will also assess opportunities across core business processes and operations to bolster adaptation and increase resiliency. This will include an assessment of opportunities across MCC procurement, logistics and facilities management, travel, financial management, and, importantly, MCC’s workforce planning and “future of work” efforts as the agency and the world slowly emerge from the COVID-19 pandemic.

Consistent with Executive Order 14008 and related guidance, MCC will also evaluate risks posed by climate change on an annual basis using the agency’s enterprise risk management framework and MCC’s Occupant Emergency and Continuity of Operations plans. In doing so, MCC will rely on the best available science, including the Fourth National Climate Assessment as the basis for its climate change risk management activities.

As detailed in this Plan and MCC’s new Climate Strategy, MCC will integrate climate-related objectives, activities, milestones, and timelines into the yearly goals of MCC’s departments and divisions. MCC will review progress on implementing this Plan and, as appropriate, will update this Plan (and, as needed, associated action plans) to document adjustments and new focus areas.

Mahmoud Bah
Acting Chief Executive Officer

Introduction

The Millennium Challenge Corporation (MCC) is an innovative and independent U.S. foreign assistance agency that is helping lead the fight against global poverty. Created by the U.S. Congress in January 2004 with strong bipartisan support, MCC delivers smart U.S. foreign assistance by focusing on good policies, country ownership, and results. MCC provides predictable, multi-year grants that promote economic growth, reduce poverty, and strengthen institutions. These investments not only support stability and prosperity in partner countries but also enhance American interests.

Climate change is inextricably tied to poverty and economic growth, and it poses the greatest risks to low and lower-middle income countries, like those where MCC works. These are precisely the countries whose people, economies, and institutions are least able to adapt to or afford its consequences and are generally least responsible for the problem.  For example, the World Bank estimates that the effects of climate change could push an additional 100 million people below the poverty line by 2030, with extreme weather alone resulting in $520 billion in annual consumption losses each year. Other sources estimate that at least 300 million people will live in coastal areas threatened by dangerous flooding by 2050, and climate change has increased economic inequality between developed and developing nations by 25% since 1960.

Given this reality, MCC recognizes that addressing the impacts of climate change is central to achieving MCC’s mission and we must invest now to counter its dire consequences.

To meet this challenge, MCC has substantially increased its climate commitments. This Climate Action Plan (the Plan) and MCC’s newly developed Climate Change Strategy (the Strategy) memorialize how MCC will meet these commitments and adjust its approaches to expand and deepen work on climate change across the agency’s investment portfolio and business operations.

Specifically, MCC will continue to work with country partners to:

• promote climate-smart development and sustainable infrastructure across all key sectors, including energy, roads, agriculture, and water,
• support nationally determined contributions (NDCs) in partner countries; urge important policy and institutional reforms that support a transition toward low carbon development,
• strengthen the integration of climate considerations into the agency’s policies, guidelines, analytical tools, and decision-making,
• focus on the needs of women and those most vulnerable to climate change, and of those living in climate vulnerable areas in designing and implementing our investments,
• collaborate with new partners and expand the use of blended finance tools to mobilize private capital into climate activities, and
• align internal operations with the agency’s climate aspirations and seek innovative ways to reduce our own carbon footprint.

Consistent with Executive Order 14008: Tackling the Climate Crisis at Home and Abroad and Council on Environmental Quality’s (CEQ) Implementing Instructions,[[Council on Environmental Quality, Interim Instructions for Preparing Draft Climate Action Plans under Executive Order 14008, March 2021.]] this Plan presents MCC’s roadmap to meet the goals outlined in our Climate Strategy. This Plan builds from the previous Climate Action Plans and is focused on the impact climate change has on MCC’s critical mission, programs, and activities.

This Plan follows the CEQ Instructions for Preparing Draft Climate Action Plans under E.O. 14008 and focuses on climate resilience across agency programs and the management of Federal procurement, real property, and financial programs.[[U.S. Global Change Research Program’s Fourth National Climate Assessment and CEQ Instructions for Preparing Draft Climate Action Plans under Executive Order 14008]]

Applicable Policies and Guidelines for MCC’s Climate Plan

Consistent with Executive Order 14008: Tackling the Climate Crisis at Home and Abroad, MCC frames its expanded climate efforts within the three overarching objectives of the Paris Agreement: a safe global temperature, increased climate resilience, and financial flows aligned with a pathway toward low-carbon development and climate-resilience.

In addition, MCC’s approach to climate is guided by several policies, principles, and guidance:

• MCC’s Environmental Guidelines(first adopted in 2004), which also formalize MCC’s adoption of the International Finance Corporation’s Environmental and Social Performance Standards (2012). All MCC-funded projects must be carried out in accordance with MCC’s own policy and the IFC Performance Standards, which include specific requirements to assess and manage climate risks and promote environmental justice outcomes through public participation and equitable distribution of benefits.
• Executive Order 13990: Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis (2021), which directs agencies to account for the benefits of reducing climate pollution.
• Executive Order 13677: Climate-Resilient International Development (2014), which requires agencies with direct international investments to screen for climate risks and take appropriate actions when risks are identified.
• Executive Order 13834: Efficient Federal Operations(2018), which instructs agencies to meet statutory requirements related to energy and environmental performance in a manner that increases efficiency, optimizes performance, eliminates unnecessary use of resources, and protects the environment.;
• MCC’s internal operational and technical guidance, including Climate Risk Management in the MCC Compact Development Process; Decision Support Manual for Irrigation Projects; Integration of Resilience into MCC Compact Programs; Building Resilience into MCC Compact and Threshold-Eligible Countries; Road Development and Implementation Guidelines; Power Sector Guidance; and Water, Sanitation, and Irrigation Sector Practice Guidance.

MCC’s core principle of country ownership. MCC’s country partners take the lead to identify the problem, design the solutions, and implement the investments, with MCC oversight and support. This includes helping country partners identify and manage climate risks and opportunities.

Priority Adaptation Actions

MCC will organize agency adaptation work through six work streams, aligned with our Climate Strategy:

1. Strengthen integration of climate adaptation considerations in analytical tools
2. Fully integrate climate and related environmental considerations (e.g., resilience, environmental justice) into all stages of program development and implementation
3. Support policy and institutional reforms to broaden the impact and sustainability of MCC investments and the broader enabling environment (including in adaptation to strengthen resilience)
4. Leverage blended finance to catalyze private capital for climate
5. Expand and deepen partnerships to further climate objectives
6. Integrate adaptation and resilience considerations into MCC’s facilities management and internal operations.

Each action is described in greater detail below.

Across all these priority actions, MCC is committed to mainstreaming climate across the agency. Mainstreaming means MCC will continue to work through existing processes, management chains, and decision-making frameworks, with every part of the agency and country partners playing a role. While this Plan and the Strategy lay the foundation, a cross-departmental Climate Coordination Team will oversee the development of department and divisions plans, to include specific actions and timelines. The role of the Climate Coordination Team is described in greater detail in the implementation section below.

Priority Action #1: Strengthen integration of climate adaptation considerations in analytical tools

Consistent with MCC’s model, MCC will:

Priority Action #2: Fully integrate climate adaptation and related environmental consideration into all stages of program development and implementation.

Consistent with MCC’s model, MCC will:

Priority Action #3: Support policy and institutional reforms in adaptation to strengthen the resilience of MCC investments 

Consistent with MCC’s model, MCC will:

Priority Action #4: Leverage blended finance to catalyze private capital for climate activities

Consistent with MCC’s model, MCC will:

Priority Action #5: Expand and deepen partnerships to further climate objectives

Consistent with MCC’s model, MCC will:

Priority Action #6 Integrate adaptation and resilience considerations into MCC’s facilities management and internal operations

Consistent with MCC’s model, MCC will:

Resource Requirements

Much of the operational work required to support the actions outlined in this plan is already supported by MCC’s existing processes and procedures. As implementation continues into FY 2023 and beyond, it is likely that MCC will need to reprioritize available resources, and seek additional funding in the future, to take advantage of new opportunities and achieve the scale and impact intended in MCC’s Climate Strategy and this Plan. Specific examples include:

• Human Capital: As MCC develops its detailed climate change action plans, MCC departments will likely require additional human capital capacity, including new and specialized skills, in certain areas to undertake requirements for expanded climate-focused work.
• Program Development and Oversight Funds: The strengthened “whole-of-agency” approach to climate change set forth in the Climate Strategy will have resource implications across the agency. Departments will make every effort to work within existing program development and oversight budgets, but MCC will likely require additional resources in the future. As MCC departments develop action plans and clarify the scope of this work, they also will re-examine current resource allocations to identify efficiencies and potential reprioritization opportunities.

In addition, numerous MCC staff will need to dedicate time to advancing this strategy. This starts with members of the Climate Coordination Team, given their role coordinating this work across the agency, and will include other technical and operational staff who will carry out much of the day-to-day implementation of the strategy.

MCC Vulnerability Assessment

Section 211 of E.O. 14008 and the CEQ Instructions request that agencies identify those management functions and/or decision points for managing procurement, real property, public lands and waters, and financial programs that are most susceptible to climate change. MCC’s financial programs, including compact, threshold and regional programs, are sensitive to climate change impacts in critical sectors such as agriculture, water and sanitation, health, and infrastructure. While climate change, variability, and extreme events effect each of MCC’s partner countries differently, climate impacts may lead to vulnerabilities in MCC’s ability to effectively reduce poverty through economic growth. MCC’s climate strategy and corresponding proposed actions therefore identify and seek to mitigate the following vulnerabilities:

• Physical impacts of climate change to MCC projects
• Exogenous constraints to project implementation and governance
• Impact of climate uncertainties on MCC cost-benefit, beneficiary, and sustainability analysis
• Limited resources to meet climate finance needs in partner countries
• Insecurity, natural disaster, and physical displacement of beneficiary populations
• Availability, retention, and recruitment of staff due to increased extreme weather events.

The implementation timeframe, monitoring and evaluation framework, resource requirements and other administrative aspects to mitigate these vulnerabilities will be developed in alignment with the agency climate strategy process.

Agency Efforts to Enhance Workforce Climate Literacy

MCC will employ several strategies to build climate literacy. The first is the establishment a cross-department Climate Coordination Team (described more fully below), which will embed implementation efforts for this Plan and the Climate Strategy across the agency. The goal is to have the entire agency engaged in implementing this Plan and the Strategy as well as to make sure that staff across the agency better understand the implications of climate change on MCC programs and facilities. Efforts to date have included an all-agency presentation of the Strategy, a presentation to MCC’s Board of Directors on MCC’s climate commitments and the strategy, as well as the operationalization of the Climate Coordination Team.

MCC will also build capacity through engagement on climate change with external partners as it is mainstreamed both into work within country teams and across departments. This includes initiating a learning series with industry, civil society, and academic thought leaders on leading climate methods and insights of relevance to MCC.

In September 2021, MCC also procured the services of highly qualified technical firm with a successful track record in climate risk management and integration. That firm will provide world class technical assistance, working with staff to mainstream climate adaptation and resilience into all relevant aspects of their work. Through the work of this firm, MCC will also host capacity building trainings.

Agency Actions to Enhance Climate Resilience

Climate-Ready Sites and Facilities

MCC’s headquarters facility is in commercial leased space and is up for renewal in fiscal year 2026. As such, MCC will:

• Engage with other federal agencies and local community planners to increase awareness of and to monitor climate change trends.
• Conduct a facilities vulnerability assessment and document the risks that climate change poses to agency site/facility operations.
• Update the MCC’s Occupant Emergency Plan to include climate readiness procedures.

Agency Actions to Incorporate Climate Resilience into Strategic Plans

Implementing the Action Plans

Successful implementation of this Plan will require engagement and action across the entire agency. The Department of Compact Operation and the Department of Administration and Finance will play leading roles, overseen by the Office of the Chief Executive. Country teams will also play essential roles assessing risks and opportunities, identifying alternatives, and designing and implementing investments that drive this strategy. The interdisciplinary membership of country teams, drawing expertise from across the agency, will be a key asset for addressing the complex challenges posed by climate change.

Responsibility for this Climate Action Plan

MCC’s Chief Sustainability Officer (CSO) is responsible for leading the planning, development, and submission of the Plan. MCC’s Senior Advisor in the Office of the CEO will serve as MCC’s Climate Adaptation Official for this Plan, with overall responsibility for implementation of the Plan.

As action plans for this Plan and MCC’s programmatic climate objectives are further elaborated, MCC may revisit the overall oversight structure for all agency climate efforts, including realignment of the CSO role.

Additionally, MCC has established a cross-departmental Climate Coordination Team to provide visibility and foster collaboration across MCC on all related aspects of this Plan as well as MCC’s related efforts to better integrate climate considerations across the development, implementation, and evaluation of MCC’s grant programs overseas. The Climate Coordination Team is led by the Managing Director for MCC’s Infrastructure, Environment, and Private Sector division. The Climate Coordination Team is responsible for tracking the various workstreams and deliverables related to MCC’s overarching climate efforts (both programmatic and business operations), as well as identifying topics for management decision.

Action Plans and Role of the Climate Coordination Team

Based upon the goals and objectives outlined in MCC’s Climate Strategy, agency departments, divisions, and practice groups are currently developing actions plans as necessary to orient their work in support of the Climate Strategy and this Plan. The Climate Coordination Team will provide representation from across the agency to review materials and provide feedback on important deliverables, coordinate the elaboration and implementation of departmental and divisional action plans, report progress, and carry out specific tasks as required.

The Climate Coordination Team will support the compilation of an agency-level action plan based on the department and division action plans discussed above. The agency action plan will include an overall timeline and concrete deliverables and milestones, as well as a matrix of roles and responsibilities for Climate Coordination Team members and the departments / divisions they represent. Practice groups and administrative units engaged in this work will provide leadership in their area of responsibility.

Across these work streams, regular updates on progress toward the milestones on the action plan will be provided MCC senior management.