The World Bank is considering making climate action more central to the mission, according to a draft “evolution roadmap” drafted by bank staff.
The 20-page document, dated 18 December and seen by Climate Home, says the bank will “broaden” beyond its current “twin goals” of ending extreme poverty and boosting shared prosperity.
Its new mission “will emphasize the importance of sustainability and resilience to mirror more clearly our mission includes global public goods (GPGs), for example climate change”.
It suggests changing rules therefore the bank lends much more of its money, switching focus from the world’s poorest countries to more polluting middle-income ones and factoring climate vulnerability into its borrowing criteria.
Why was this roadmap drafted?
The World Bank Group committed $88 billion within the 2023 fiscal year, which it classed $31.7bn (36%) as climate finance. It has not excluded non-renewable fuels from the portfolio and provided $1.7bn to grease and gas sector in 2023.
The bank was setup following the second world war and its traditional mission is to tackle extreme poverty and promote economic growth. It is located in the USA and the US government is its biggest shareholder.
In recent years, the prime minister of Barbados Mia Mottley has led a push to reform the financial institution and the International Monetary Fund to integrate climate considerations in their goals.
Last year, the US, Germany and other governments backed this agenda, contacting the financial institution to launch “fundamental reform”.
“Not enough, too slow”
Mottley’s adviser Avinash Persaud told Climate Home today this roadmap does not go far enough.
“It sets out the right destination,” he said, “however i don’t think it’s a guide to getting there” because it is “not enough, too slow” and “too near to business as usual”.
He asserted the roadmap spends too much energy defending the bank’s current climate policies to the governments that comprise the bank’s shareholders.
A group of UN-appointed experts recently advised that multilateral development banks like the World Bank need to triple their climate finance within the next 5 years.
Persaud said: “If you’re running a business and you need to do 300% more, you can’t simply go to every division and say I want all of you to test a bit harder, you'll need a different approach. You need different mechanisms. You need different divisions.”
This criticism was echoed by NRDC climate finance analyst Joe Thwaites. He told Climate Home: “It’s a disappointing combination of navel gazing and finger pointing. Instead of grapple using the ambitious reforms needed to confront the unprecedented crises the world faces, they’re trying to kick the issue into the bureaucratic long grass. Shareholders shouldn’t are a symbol of this.”
The bank’s president David Malpass has been under fire from environmentalists after casting doubt on climate science last year.
Persaud said “people would like to blame the head” but “it’s difficult for any institution to reform itself”. He explained governments should be drawing up the roadmap and leading the reforms not the financial institution itself.
The bank might lend more
National governments have pushed recently to alter the rules of multilateral lenders like the World Bank to release more money.
The bank’s roadmap partly endorses this, proposing “further optimising the total amount sheet” along with a “overview of [the World Bank-linked International Bank for Reconstruction and Development’s] minimum equity-to-loan ratio to evaluate feasibility for any moderate reduction to enhance the efficiency of capital utilization”.
However, it says the financial institution will try and its AAA credit rating. This rating is placed by rating agencies and permits the bank to gain access to money cheaply. The financial institution fears lending out money could endanger this rating.
Persaud agreed the bank should not reduce its AAA-rating but added “professionals say that there's a considerable amount of additional lending that's possible without lowering the AAA rating”. He said the bank’s proposals were “too tentative”.
More money for middle-income countries
As it aims to tackle extreme poverty, the financial institution has traditionally focussed on the world’s poorest countries.
But the roadmap highlights these countries are responsible for just 2% of global greenhouse gas emissions. Low and middle-income countries are together accountable for 60% of emissions.
The document says: “A focus on global challenges may also require revisiting the emphasis on income per capita… as countries with higher income per capita.. .are essential partners to attain progress on [global public goods] (e.g., on carbon emissions).”
To encourage emissions reductions in middle-income countries, the roadmap proposes scaling in the global public good fund from the International Bank for Reconstruction and Development, the World Bank’s lending arm.
Middle income countries like China could access climate finance through this. But wealthy governments are likely to need to contribute more to it so that it could be scaled up.
More money for climate vulnerables
Whether a rustic is eligible for World Bank finance is judged partly how much it needs the funds. This is currently evaluated how poor the country is.
The roadmap proposes measuring needs partly on vulnerability towards the impacts of global warming.
This would make it easier for climate-threatened nations which aren’t one of the world’s poorest, such as the Maldives, to access World Bank funds.
But which side the cash come from?
The World Bank gets its money by borrowing on the international capital markets. It may achieve this quite inexpensively because lots of governments back it.
But the money it got from governments in 2023 has not allowed it to borrow enough to deal with all of the global crises since then.
These include, the roadmap says, the Covid-19 pandemic, Russia’s invasion of Ukraine and also the climate crisis.
As an effect, the document predicts, World Bank support will begin to fall within the July 2023 to July 2024 fiscal year.
The bank “will need substantial additional financial ability to respond to a far more ambitious, updated mission”.
This will need a “concerted effort” through the bank’s management and also the governments which make up its shareholders.
The roadmap continues to be sent to shareholders and will be presented to the board of governors within the coming weeks.
The bank’s management will are accountable to its development committee at the World Bank spring meeting after which make a paper for endorsement at its autumn meeting.
