Groups Urge World Bank to “Sharply Increase” Climate Investment & Action
WASHINGTON, D.C. — Leading organizations have delivered a 5-point reform plan to World Bank Group leaders urging a sharp increase in its financing for climate action. The plan includes increased funding for climate protection and adaptation, supporting and delivering climate capital to developing countries, shifting billions of dollars from fossil fuel projects into mitigation and adaptation, and enabling more large-scale innovative strategies to address the climate crisis.
“As the climate crisis continues to leave a trail of destruction across the planet, the World Bank is in a position to ease suffering and create opportunity—but only if it ramps up its climate action,” said Jake Schmidt, Senior Strategic Director for International Climate at NRDC (Natural Resources Defense Council), which joined others on the 5-point plan. “The World Bank could unleash tens of billions of dollars each year, if it moved more assertively to finance projects addressing climate change. The need for such finance is great—for clean energy, adaptation, mitigation—and the World Bank is sitting on capital that could make a real difference in people’s lives and livelihoods.”
The groups sent their 5-point reform, “Refresh the World Bank Group for Climate Action” to shareholders and World Bank officials, and others.
“IMF and World Bank shareholders need to seize the opportunity to dramatically increase the quantity (more dollars) and the quality of lending (Paris-aligned, no fossil-fuel exceptions). These institutions need new tools and modern approaches to help the poorest countries, trapped in debt, access financing after unrelenting shocks to their economies,” said Claire Healy, Director E3G US: “There’s a win-win if we can ramp-up finance to developing countries to construct clean energy systems and adapt to warmer climates. Shareholders need to act as shareholders and demand that their equity be put to better use.”
Better climate finance from the WBG (World Bank Group) has an opportunity to help address several challenges the world is facing in efforts to tackle the climate crisis. These reforms could help to:
- Increase overall climate finance at a time where additional resources are desperately needed. Climate finance could increase by over $13 billion per year in 2025 if the WBG climate target was increased to 50% of its overall finance. This amount could be increased by tens of billions more if the overall finance capacity were increased by implementing the reforms identified in the Capital Adequacy Framework (CAF) review.
- Deliver more climate finance for the poorest countries that struggle to gain access to climate finance from other channels. Increasing the overall climate finance could significantly raise the amount of resources available to the poorest countries and people in the world given the share of this financing that goes to the International Development Association (IDA) countries.
- Increase financing for adaptation actions. Funding for adaptation could increase by over $5 billion per year if the WBG climate target was increased and by an even larger amount if the overall finance capacity was increased;
- Shift the billions in funding that the WBG is providing to support fossil fuel projects towards climate mitigation and adaptation. Since the Paris Agreement was adopted, the WBG has provided more than $14 billion for fossil fuel projects at a time when scarce resources need to be directed towards helping countries mobilize more renewable energy and energy efficiency, adapt to the impacts of climate change, and spur other strategies to address climate change while alleviating poverty.
- Create more opportunities to unleash large-scale, transformative, and innovative strategies. By using its financial heft and tools at its disposal, the WBG could play a leading role in supporting country energy transitions, scaled-up adaptation strategies, interventions that transform the market across multiple jurisdictions, and innovative finance structures that help crowd-in private finance.
“The World Bank can - and must - be a climate champion, but first it has a lot of work to do,” said Kyle Ash, Policy Director at Bank Information Center. “Some actions it needs to take as it moves to meet its commitment to 100% Paris alignment by July 1, 2023, include: zeroing out all fossil fuel investments, stakeholder participation in project design, full disclosure of how it calculates climate co-benefits, and a GHG neutral portfolio.”
The five reforms in the groups’ “Refresh the World Bank Group for Climate Action” are:
1. Do better on climate finance. At a time when fiscal space is being squeezed on all fronts, the World Bank should ramp-up the quality and quantity of its overall climate financing, while strategically leveraging scarce resources. It should:
- increase the target for the share of its climate financing from 35% to 50% by 2025.
- deliver high-quality climate finance that provides respect for human rights.
2. Delivering Paris alignment: faster, credibly, comprehensively, and in an inclusive and transparent manner. It is also essential that all World Bank financing – not just that which is counted as climate finance – is aligned with global ambitions to hold temperatures to 1.5°C and supports efforts to address the impacts of climate change. The World Bank should:
- rule out all fossil finance, not just coal and upstream oil and gas, by FY23, except in rare circumstances where a credible alternative analysis transparently and robustly proves that the poverty alleviation needs can’t be met with a renewable energy, energy efficiency, or energy storage option and does not create any fossil fuel lock-in. This also should apply to investments that support internal combustion engines.
3. Significantly increase the investment in and quality of its adaptation support. Improving the overall lending capacity and the climate finance target would significantly increase the quantity of resources for adaptation given that the World Bank is already a major financier of adaptation. The bank should:
- provide adaptation financing on highly concessional terms including reviewing the eligibility criteria for concessional finance to include a particular exception for climate vulnerability for adaptation projects;
- mobilize investments for large-scale and locally led adaptation strategies aligned with country strategies
- provide more support in the form of technical assistance for adaptation;
- mainstream adaptation into other strategies and sectors.
4. Reform the incentive structure so that leadership and staff deliver these objectives in the near-term while laying the foundation for the WBG to become a leader in climate finance for decades to come.
5. Raise the World Bank’s overall lending capacity. Through implementing one or a group of the recommendations in the “G20 MDB Capital Adequacy Framework (CAF) Review”, the WBG could increase the overall lending capacity by tens of billions of dollars per year which could go to pressing development needs including climate change. The WBG’s overall lending capacity for climate should:
- Be increased by shareholders to unleash tens of billions more in overall finance capacity
- Show leadership in convincing the other MDBs to implement the CAF recommendations.
Besides NRDC, others supporting the recommendations included: E3G, Bank Information Center, AbibiNsroma Foundation, African Coalition on Green Growth, Brighter Green Centre for Financial Accountability, India, Center for International Environmental Law (CIEL), Climate Action Network Canada, ECCO, the Italian climate change think tank, Emmaus International, Federation of Community Forestry Users, Nepal (FECOFUN), Foreign Policy for America, Fundación Ambiente y Recursos Naturales (FARN) - Argentina, Germanwatch, Global Citizen, Jamaa Resource Initiatives, Pennsylvania Interfaith Power & Light, RMI (Rocky Mountain Institute), Southern Africa Climate Change Coalition, Union of Concerned Scientists and Zimbabwe Climate Change Coalition.
NRDC (Natural Resources Defense Council) is an international nonprofit environmental organization with more than 3 million members and online activists. Since 1970, our lawyers, scientists, and other environmental specialists have worked to protect the world's natural resources, public health, and the environment. NRDC has offices in New York City, Washington, D.C., Los Angeles, San Francisco, Chicago, Bozeman, MT, and Beijing. Visit us at www.nrdc.org and follow us on Twitter @NRDC.