The World Bank is making strides in climate financing, but its support for fossil fuel projects is raising concerns about its alignment with the Paris Climate Agreement. In 2022, the Bank provided $3.7 billion in loans and capital for trade finance, which likely ended up funding oil and gas developments. This amount is more than triple the Bank’s annual fossil fuel finance and casts doubt on its commitment to climate goals. However, this estimate does not include the impact of war in Ukraine, which spiked oil and gas prices. Additionally, the report does not cover coal-related trade. Despite the Bank’s pledge to align its spending with the Paris Agreement, trade finance, considered indirect finance, was not included in these promises to halt coal and upstream oil and gas financing.
One notable individual in the World Bank’s leadership is Ajay Banga, who became president in June. While he is not seen as a climate crusader, his predecessor’s denial of the link between fossil fuels and climate change sets a low standard. Banga has called for collaboration with governments, philanthropies, and multilateral banks to free up the trillions of dollars needed for climate action. His previous experience as the CEO of Mastercard, where he led efforts to set net-zero emission targets, demonstrates some commitment to the climate cause.
Despite the Bank’s efforts, there are concerns about the lack of transparency in its trade investments, with 70% being distributed confidentially. This opacity makes it difficult to track which investments are funding fossil fuel projects. Furthermore, 40% of the Bank’s climate finance cannot be verified, according to an audit by Oxfam in October 2022.
In 2022, the World Bank dedicated a record $31.7 billion to climate financing, accounting for 36% of its total financing for the year. This marks a 19% increase from the previous year and exceeds the Bank’s own target of 35% set in its Climate Change Action Plan. However, the US Congress has urged the Bank to increase this share to 50%. On the other hand, the Bank has invested $14.8 billion in fossil fuels between 2015 and October 2022, according to Big Shift Global, a coalition of NGOs.
It is clear that the World Bank’s actions in climate financing are a mixed bag, with both positive strides and lingering concerns. Critics argue that the Bank needs to overhaul its Paris Alignment approach to include all fossil fuels and address the lack of transparency in its trade investments. Only time will tell if the Bank can be a true driver of the climate revolution.
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