WASHINGTON — Leading organizations have presented leaders of the World Bank Group with a five-point reform plan urging a large increase in their funding for climate action. The plan includes increasing funding for mitigation and adaptation, supporting and providing climate capital to developing countries, reallocating billions of dollars from fossil-fuel projects to mitigation and adaptation, and enabling 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 has the power to alleviate suffering and create opportunity — but only by stepping up its climate action,” said Jake Schmidt, Senior Strategic Director for International Climate at the NRDC (Natural Resources Defense Council) who has joined others on the 5 point plan. “The World Bank could free up tens of billions of dollars every year if it acted more decisively to fund projects to fight climate change. The need for such finance is great – for clean energy, adaptation, mitigation – and the World Bank is sitting on capital that could really transform people’s lives and livelihoods.”
The groups mailed 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 must seize the opportunity to dramatically increase the quantity (more dollars) and quality of lending (Paris-aligned, no fossil fuel exemptions). These institutions need new tools and modern approaches to help the poorest countries, trapped in debt, access finance after relentless shocks to their economies,” said Claire Healy, Director of E3G US: “There is a win-win -Situation when we can increase funding for developing countries to build clean energy systems and adapt to warmer climates. Shareholders must act as shareholders and demand that their equity be put to better use.”
Better climate finance through the WBG (World Bank Group) offers an opportunity to help address several challenges the world is facing in efforts to tackle the climate crisis. These reforms could help:
- Increase overall climate finance at a time when additional resources are urgently needed. Climate finance could increase by over $13 billion per year through 2025 if the WBG climate target were increased to 50% of its total funding. This amount could be increased by an additional tens of billions if the overall funding capacity were increased through the implementation of the reforms identified in the Capital Adequacy Framework (CAF) review.
- Offer more climate finance for the poorest countries struggling to access climate finance through other channels. Given the proportion of this funding that goes to International Development Association (IDA) countries, increasing total climate funding could significantly increase the amount of resources available to the world’s poorest countries and people.
- Increase funding for adaptation measures. Funding for adaptation could increase by over $5 billion per year if the WBG climate target were increased, and by an even larger amount if overall funding capacity was increased;
- The WBG is shifting the billions in funding supports fossil fuel projects to mitigate and adapt to climate change. Since the passage of the Paris Agreement, the WBG has committed more than $14 billion to fossil fuel projects at a time when scarce resources must be directed to helping countries mobilize more renewable energy and energy efficiency adapt to the impacts of climate change and spur other strategies to combat climate change while reducing poverty.
- Create more possibilities to unleash large-scale, transformative and innovative strategies. By leveraging its financial clout and available tools, the WBG could play a leading role in supporting countries’ energy transitions, expanded adaptation strategies, interventions transforming the market in multiple jurisdictions, and innovative financial structures that help to engage private finance.
“The World Bank can – and must – be a climate champion, but first it has work to do,” said Kyle Ash, policy director at the Bank Information Center. “Some actions it needs to take to meet its commitment to 100 percent Paris alignment by July 1, 2023 include: zeroing all fossil fuel investments, stakeholder involvement in project design, full disclosure of the nature and way they calculate the co-benefits for the climate and a greenhouse gas 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 tightening on all fronts, the World Bank should increase the quality and quantity of its overall climate finance while making strategic use of scarce resources. It should:
- Increase the target for its climate financing share from 35% to 50% by 2025.
- provide quality climate finance that respects human rights.
2. Delivering the Paris alignment: faster, credible, comprehensive and in an inclusive and transparent way. It is also important that all World Bank financing – not just that counted as climate finance – is aligned with global ambitions to keep temperatures at 1.5°C and supports efforts to address the impacts of climate change. The World Bank should:
- Exclude all fossil finance, not just coal and upstream oil and gas, by FY23, except in rare cases where a credible alternative analysis transparently and resiliently demonstrates that poverty alleviation needs are not met with renewable energy, energy efficiency or can be used as an energy storage option and does not bind to fossil fuels. This should also apply to investments that support internal combustion engines.
3. Significantly increase the investment in and quality of fitting support. Improving the overall lending capacity and climate finance target would significantly increase the amount of resources devoted to adaptation, as the World Bank is already a major adaptation financier. The bank should:
- Provide adaptation finance on highly concessional terms, including reviewing the eligibility criteria for concessional finance to include a specific climate vulnerability exception for adaptation projects;
- Mobilizing 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 to ensure leadership and employees perform to achieve these goals in the short term while laying the foundation for WBG to become a leader in climate finance in the coming decades.
5. Increasing the World Bank’s overall lending capacity. By implementing one or more recommendations in the G20 MDB Capital Adequacy Framework (CAF) Review, the WBG could increase total lending capacity by tens of billions of dollars per year, which could benefit urgent development needs, including climate change. The total loan capacity of the WBG for climate protection should:
- Raised by shareholders to unlock another tens of billions in total funding capacity
- Show leadership by persuading the other MDBs to implement the CAF recommendations.
In addition to NRDC, others supporting the recommendations: E3G, Bank Information Center, AbibiNsroma Foundation, African Coalition on Green Growth, Brighter Green Center for Financial Accountability, India, Center for International Environmental Law (CIEL), Climate Action Network Canada, ECCO, the Italian Think Climate Change 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 non-profit environmental organization with more than 3 million members and online activists. Since 1970, our attorneys, scientists and other environmental professionals have worked to protect the world’s natural resources, public health and the environment. NRDC has offices in New York City, Washington, DC, Los Angeles, San Francisco, Chicago, Bozeman, MT, and Beijing. Visit us at www.nrdc.org and follow us on Twitter @NRDC.