World Bank’s climate target cut threatens blended finance pipelines
The World Bank has decided to maintain its Climate Change Action Plan despite growing pressure from the US administration, but it has retired its key climate financing targets posing challenges for blended finance climate projects
The world’s largest multilateral development bank pledged to uphold its climate framework indefinitely but scaled back its financial commitments amid political pressure from its largest shareholder, the United States.
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Going forward, the Bank will retire its target to dedicate 45% of its annual lending resources to projects with climate co-benefits, as well as the earlier 35% target.
This move poses a significant challenge for blended climate finance, particularly in the Global South, where predictable public funding often anchors private investment.
The World Bank provides approximately $115 billion annually in loans, grants, equity investments, and guarantees to partner countries and private businesses, driven mainly by the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) and its private sector arm, the International Finance Corporation (IFC).
Its loans have helped fund projects such as Egypt’s Benban Solar Park, which saw participation from Macquarie Capital and EDF Renouvelables. Similarly, Kenya’s Lake Turkana Wind Power Project was backed by IFC equity finance combined with loans from commercial lenders including Standard Chartered and KfW, while private equity firms and infrastructure asset managers such as Enel Green Power and Meridian Energy held significant equity stakes.
Earlier this month, IFC backed a $105m equity package for Indian green hydrogen, it is also key backer of T. Rowe Price's Blue Bonds strategy.
Although the bank is owned by 189 member governments, the US holds by far the largest stake and effectively wields veto power over major policy decisions.
In April, US Treasury Secretary Scott Bessent accused the World Bank of “mission creep,” criticising the bank’s focus on international development, climate change, gender, and social issues as disconnected from its core mandate. He argued that the 45% target “breeds inefficiency, distorts economic decision making, and moves the Bank away from its core mission.”
However, the US position faced pushback from other shareholders. France, in particular, urged the World Bank not to abandon its climate action plan. Speaking at London Climate Action Week, French Development Minister Éléonore Caroit said that France would continue to push for operations to be sufficiently ambitious on climate finance.
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