World Bank retires climate financing targets

The World Bank has announced that it will retire its climate financing targets following pressure from the US administration, its largest shareholder. The Group will, however, indefinitely extend its Climate Change Action Plan (CCAP) which had been due to expire on Tuesday 30^th June[i].

In 2023, the World Bank Group set a target of allocating 45% of its annual lending resources to projects with climate co-benefits. This has now been dropped, along with the Bank's previous target of directing 35% of lending resources towards climate-related projects. The initiative generated significant investment:  in fiscal year 2024 (1^st July 2023 to 30^th June 2024) the World Bank Group delivered a record $42.6 billion in climate finance.

However, following pressure from the US, which holds the largest voting share in the World Bank, the Group has now decided to retire its financing targets and instead focus on outcomes rather than input goals. In April US Treasury Secretary Scott Bessent called for the Bank to ‘jettison’ its climate finance targets, saying that the 45% target “breeds inefficiency, distorts economic decision making, and moves the Bank away from its core mission."[ii]

In a statement released on Monday (29^th June), the World Bank said that the organisation “will retire the 45% climate co-benefits target and the 35% target in the CCAP,” adding that: “We have done significant work in answering client demand and needs. Further progress on outcomes will continue to be driven by client ambition and enabled by the work of the Knowledge Bank, consistent with countries’ international commitments.”[iii]

In response the Independent Evaluation Group (IEG) will now perform an evaluation of the CCAP. The World Bank has stressed that it remains committed to tracking and reporting on its two scorecard indicators. These are: net greenhouse gas (GHG) emissions, and beneficiaries with enhanced resilience to climate risks.

The Group will also continue reporting on progress, including climate co-benefits, and contributing to related joint Multilateral Development Bank (MDB) initiatives. Reporting requirements will remain in place for all projects, as well as for the portfolio on a quarterly and annual basis through existing channels. In addition, the World Bank said it will explore and discuss ways to better structure engagement on adaptation, nature and pollution.

References

[i] Update on the World Bank Group Climate Change Action Plan

[ii] Secretary Bessent IMFC-DC Statement | U.S. Department of the Treasury

[iii] Update on the World Bank Group Climate Change Action Plan

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