World Bank Accused of Not Aligning With Paris Climate Agreement

Nkasiobi Oluikpe

A Washington Post report on Friday, February 10, 2023, has accused the World Bank of lagging behind and not aligning with the Paris Climate Agreement.

According to the publication, while many developing nations are eager to move beyond fossil fuels, they aren’t getting the support they need from the World Bank and other development banks.

“At the United Nations’ COP27 climate summit in November, one of the few points of consensus was the need for development banks to fully incorporate the urgency of climate action into their lending models.

“In the lead-up to the summit, G-20 nations recommended changes to development banks that would facilitate more capital flows to climate-related projects. And months earlier, leading environmental groups made their own recommendations for change.”

Explaining further, the publication noted that for any large organization, adapting to a changing landscape is difficult. But the World Bank’s history — it came into existence to help rebuild countries shattered by World War II — shows the power of multinational development banks to tackle global challenges.  

No challenges, it insisted, is bigger, or requires more international cooperation and coordination, than climate change.

The World Bank was advised to make two more fundamental changes. These changes were said to fall into two categories: Ambition and Risk:

“Ambition. The World Bank has agreed to direct 35 per cent of its financing to climate-related projects by 2025. That’s a step forward, but not far enough. The Asian Infrastructure Investment Bank and European development banks set their targets at 50 per cent. The 550 financial institutions that comprise GFANZ (the Glasgow Financial Alliance for Net Zero), as well as thousands of companies, cities and other organizations, have made ambitious net-zero commitments.

“It’s critical that the World Bank follows suit by setting higher investment targets, putting more of its capital to work in ways that align with the Paris Agreement, and increasing the amount of private-sector capital it mobilizes.

“The fact is: If emerging markets and developing countries don’t transform their energy systems, the world will not be able to meet its goals under the Paris Agreement. Nor can that transformation take place without a tremendous amount of new energy investment, which neither the public nor private sector alone can supply. While the World Bank has stopped investing in coal plants, it is still supporting the construction of gas plants, without adopting energy transition timelines.”

On Risk, it advised that in the developing world, clean energy projects can run up against any number of obstacles that lead private investors view as too risky: weak credit ratings, concerns about a nation’s fiscal or political stability, uncertainty about exchange rates, and fear of inflation.

“But those obstacles can be overcome if public financing is used as a form of insurance for private investors, by reducing the risk of losses. This can be done, for instance, by having the World Bank be first or second in line to accept losses if an investment proves unsuccessful, or by guaranteeing loans.”