As a low-income country with limited institutional and technical capacity, Liberia is yet to make any significant progress in instilling environmental, social, and governance standards, as well as risk management into its financial systems. As a result, many public and private investment projects continue to be sanctioned with limited disclosures on their impacts and responsibilities for the environment.
A case in point is the country’s palm oil industry, which is yet to have detailed national level safeguards. The industry, mainly reliant on non-state certification schemes, have their commitments to sustainability only in paper, according to multiple country reports.
Liberia’s weak institutional capacity coupled with the rising population of unemployed young people continues to put pressure on the government’s ability to ensure investments are properly in line with applicable sustainability standards. Consequently, more focus is given to short-term gains at the expense of long-term value creation and more inclusive benefits to society and the environment.
Key policies and governance approach
Liberia is a party to the Economic Community of West African States (ECOWAS) Trade Liberalisation Scheme Protocols and Regulations which aims to establish a common market through (i) the liberalisation of trade by the abolition, among the Member States, of customs duties, levied on imports and exports, and the abolition among the Member States, of non-tariff barriers to establishing a free trade area at the Community level; (ii) the adoption of a common external tariff and a common trade policy vis-a-vis third countries; (iii) the removal, between the Member States, of obstacles to the free movement of persons, goods, service and capital, and to the right of residence and establishment.
SUCCESSES AND REMAINING CHALLENGES
Liberia’s attempts to implement specific environmental sustainability and climate action measures are mainly constrained by financial limitations. As a result, many climate change-related priorities, despite carrying a huge level of ambition, are affected by competing financial needs. This, in part, is due to the decline in the price of rubber and iron ore, low or lack of new investments and especially, the aftermath of the Ebola Virus Disease in 2014 that shocked many parts of the country's economy.
Initiatives and Development Plans
Liberia is currently working on various sustainable finance initiatives in line with its Pro-poor Agenda for Prosperity and Development and the World Bank’s Country Partnership Framework. Measures include strengthening domestic revenue mobilization through reduction of duty waivers and tax holidays, which is critical to expanding the fiscal space for increased public investment, according to World Bank’s June 2021 report. The initiatives are expected to yield various benefits to multiple sectors in the country, such as the energy and agricultural sector. This is in addition to strengthening the oversight and transparency of State-owned Enterprises (SOEs); promoting financial inclusion through the amendment of the Payments Act and introduction of digital credit; and creating an efficient, transparent and sustainable Social Safety Net System.
The growing evidence on climate risk and other environmental and socio-economic shocks offers an opportunity for Liberia to align its financial policies and institutions to be more responsive. This could include guidelines for ensuring investment and lending by financial institutions are considering environmental, social and governance issues. Some of the potential areas are sustainable and green infrastructure projects through products that drive financial returns by creating social and environmental value.
[2] The World Bank (2019). [Online]. Available: https://www.worldbank.org/en/results/2019/11/08/striving-to-achieve-sustainable-inclusive-growth-in-liberia-rebuilding-vital-infrastructure-while-strengthening-human-capital.