Is the World Bank doing enough on climate?

As the largest multilateral financier of climate action in developing countries, the World Bank Group plays a substantial role in tackling climate change. In fiscal year 2022, it committed $31.7bn to help countries address climate change, a 19% increase on the previous year.

Yet, recent comments by president David Malpass – an appointment made by Donald Trump – have caused many to question whether it could be doing more.

Asked three times at a panel discussion hosted by the New York Times in September whether he believed the scientific consensus that manmade emissions were dangerously warming the planet, Malpass declined to respond.

“I am not a scientist,” he said.

Asked about an accusation by former US vice president Al Gore that he was a “climate denier”, Malpass said it was “very odd” and Gore is not somebody he had met.

However, his responses caused raised eyebrows among many net-zero investors around the world and intensified calls from some stakeholders for new leadership as the development bank prepares for its annual meeting in Washington DC.

“The World Bank is the largest multilateral provider of climate finance out of all the multilateral development banks (MDBs) – by a huge margin,” says Bianca Getzel, research officer and specialist in development finance at global affairs thinktank ODI (formerly the Overseas Development Institute). “So, we have to give credit where it’s due.

“[But] tackling the climate crisis is about more than just incremental spending and investment in what is considered commercial clean energy. It requires a much more holistic approach, and the first actor to realise that should be the World Bank.”

Getzel says the World Bank plays a considerable catalytic role, particularly in providing developing countries with the technical capacity and resources to tackle climate change and access capital, but it could be doing more to promote projects and provide policy advice.

“The amount of technical expertise the bank has, especially having assisted what are now high- and middle-income markets in creating low-carbon development trajectories, is not really translating to middle- and low-income countries,” she says.

Moving from proof of concept to scale

With questions being asked of its approach to climate change, some net-zero-focused asset managers and owners are starting to call for greater clarity from the World Bank, particularly when developing investment policy frameworks and facilitating private investment into projects.

“We all need to step up our efforts when it comes to climate change, with the prospect of limiting the global temperature rise to 1.5°C becoming increasingly remote,” says Venetia Bell, chief sustainability officer at GIB Asset Management.

“That includes the World Bank. I would like to see it increase its allocation to climate mitigation projects and take a leadership role around climate-safe investment policy frameworks.

“Specifically, work is needed to reduce the barriers to blended and innovative finance – by encouraging operational readiness across all participants and finding ways to replicate and scale successful pilots and models.”

She adds: “Private sector investors at World Bank meetings also need to amplify their own efforts – increasing their own preparedness for climate investments, investing in resilience and mitigation, and engaging with past World Bank Group work, such as the IFC’s [International Finance Corporation’s] 2019 collaboration on the Operating Principles for Impact Management.”

ODI’s Getzel says development banks no longer need to finance proof-of-concept projects but should instead concentrate on facilitating finance for larger-scale projects where the private sector can have a real impact.

“What the World Bank should be doing is working with investors to tackle risk perceptions,” she says. “One huge aspect is local currency risk when it comes to climate investing.”

Change at the top?

Although Malpass later admitted that emissions derived from man-made sources had an impact on the climate, in an interview with broadcaster CNN International shortly after the New York Times panel, he has continued to face increased pressure on his position.

“I’m not a denier,” he told the broadcaster. “It’s clear that greenhouse gas emissions are coming from man-made sources, including fossil fuels, methane, the agricultural uses, the industrial uses, so we’re working hard to change that.”

As the US is its largest shareholder, the World Bank’s president is always American by informal agreement. And as Joe Biden is president, more voices are calling for the Democrat to force the removal of an appointee from the previous Republican administration.

“After what David Malpass said, and even before he said it, you saw key shareholders voicing a lot of concerns about the World Bank’s lack of ambition when it comes to climate,” says ODI’s Gretzel.

“Going into the annual meeting, ODI is in conversation with a lot of stakeholders and governments directly, and we think they will really use this week to outline a clear vision for the climate agenda.

“One way of doing this would be to press the bank on more ambitious aspects, not only on climate targets but global public goods more generally, such as health, fragility and conflict.”