The consensus among officials gathered in Washington DC for the bank’s annual meeting was that the heat was off for Malpass – for now.
“There doesn’t seem to be a big appetite for a lot of change right now” in the bank’s leadership, said Kalee Kreider, who worked as an adviser to former vice chairman Al Gore. She was working with Gore on September 20 when he launched the most recent controversy at a New York Times event where he called Malpass a “climate denier.” Malpass later declined to answer on stage whether he believed fossil fuels were the primary driver of climate change, but has since sought to affirm his acceptance of climate science publicly and internally with staff.
The United States and European countries quickly piled Malpass’s comments on climate with broad calls for “fundamental” reform of the World Bank and other multilateral development banks to, in part, accelerate climate finance. The moves were widely welcomed, officials and observers said at the World Bank meeting this week.
But some countries, particularly those in Africa, have viewed calls to focus on renewable energy with skepticism, fearing they will also come with demands to throttle investment in national gas reserves only they wish to exploit.
Many of the World Bank’s major contributors called for varying degrees of change, with a consistent request: that the Bank provide more financing to fund the clean energy transition, especially in emerging economies whose growth energy consumption jeopardizes the achievement of global climate goals.
Large middle-income countries are suddenly discovering an opportunity for below-market financing from the World Bank’s group of lenders, which is normally only available to poorer countries.
Egyptian Foreign Minister Sameh Shoukry, who will lead the climate talks at COP27 next month, said in a note released on Friday that it was time to “think more creatively about how to adapt services and practices to our climate reality”. This effort, he said, should include “highly concessional grant-based climate finance for countries in the Global South.”
The broad spectrum of countries calling for change — and a weakened Malpass — appears to offer climate advocates an opening for changes in the bank’s lending practices.
“I feel like there’s a bigger and broader political coalition that will – I think this time might, fingers crossed – get some of these reforms through,” said Claire Healy, director of the climate-focused study. E3G think tank office in Washington, DC.
Although the World Bank has been criticized for its climate policy, it launched a climate strategy last year to reduce greenhouse gas emissions. On Monday, Malpass announced a new financing facility to provide grants to developing countries to shore up carbon credit markets, and a spokesperson for the bank defended its record.
“Under David Malpass’s leadership, the World Bank Group has more than doubled its climate financing, released an ambitious climate change action plan, and launched country-level diagnostics to support the climate and development goals of country,” the spokesperson said in a statement. “The World Bank Group is the largest multilateral funder of climate investments in developing countries, providing $31.7 billion in climate finance in the past year alone.”
Frustrations with the World Bank’s climate performance predate Malpass. The Bank has been criticized as laggy, too bureaucratic and unwilling to invest in renewable energy and projects to help communities adapt to climate change in developing countries that the private sector finds too risky.
Treasury Secretary Janet Yellen said last week that the World Bank and other multilateral development banks needed to change their operations to address global challenges such as climate change and offer more capital at lower cost to do so. . That tone represented a “massive shift,” E3G’s Healy said.
Indian Prime Minister Narendra Modi’s government is keen to boost sustainable finance through the World Bank and other multilateral institutions when India begins chairing the G-20 in December, special assistant Prayank Jain said. from the CEO of the New Delhi-based think tank Council on Energy, Environment and Water.
“The current system is not working to solve the problems of the present,” he said. “The main reason why India is actually in favor of reform…is to solve the climate crisis.”
But this push will require the support of other nations to find a place in a busy schedule.
“Unless they have allies who come to support them on this issue, it won’t be part of the debate,” Jain said.
Yet many of the same countries pushing for change have failed to meet their own climate finance commitments, Jain added. The United States, for example, has failed to deliver on President Joe Biden’s pledge to quadruple international climate finance spending to $11 billion a year. The world’s rich countries have also missed the 2020 deadline to send $100 billion in climate finance to the poorest countries.
Industrialized countries’ calls for climate action as they scramble to shore up supplies of oil, gas and coal have been noted by developing countries. A proposed G-7 ban on public financing of fossil fuels abroad that would come into force at the end of this year and a tightening of fossil fuel financing rules for development banks have seemed increasingly more unsustainable as rich countries invest huge wads of public money in subsidizing their gas supplies or building new infrastructure to deal with the energy crisis caused by the war in Ukraine. This year, the EU designated gas investments as sustainable during a transition period, a move that has baffled countries in Africa where the same European investments are blacklisted.
Although the World Bank hasn’t supported new coal-fired power plants in years, it hasn’t officially halted its support for fossil fuels, leading to skirmishes over how it funds gas. Several African countries want the World Bank to provide more gas financing, and they have made European opposition to gas for their nations as self-serving as the bloc scours the world for fuel shipments to offset Russian supplies.
“If you think the competition [for gas supplies] is fierce this year, the next two years will be even worse,” said Kreider, who is now president of public affairs firm Ridgely Walsh. “If the World Bank tightens the rules for Africa, then the Europeans might have an easier time for a limited resource.”
Still, many emerging economies whose energy systems must become greener to stave off the worst of climate change are riding the wave of change, observers noted, with G-7 nations reaching out to major shareholders as a courtesy.
Implementing new mechanisms could help countries like Indonesia and South Africa access better financing terms for clean energy projects, said Jake Schmidt, senior strategic director of international climate at the Natural Resources Defense Council. And taking more risk could sink “tens of billions without asking capital to commit more money”, he added.
Many of the world’s largest emerging economies are not eligible for the World Bank’s cheaper financing terms because they are considered middle-income countries. But there is a new desire to open avenues for these countries to access better financial conditions to solve global challenges like climate change.
These efforts include Yellen’s call for ‘holistic reform’, Barbados Prime Minister Mia Mottley’s ‘Bridgetown Initiative’ to provide climate finance to the developing world, the Architecture Task Force United Nations Economic Commission for Africa’s Global Finance and a G-7 push for systemic change.
Critics also believe the World Bank’s target of 35% of its investments delivering some sort of climate benefit is weak compared to its development bank counterparts. How he defines those benefits — or even what finance counts as climate — is unclear. Oxfam International, a global anti-poverty group, has suggested that the World Bank may overestimate its climate funding by up to 40%, or $7 billion. The World Bank spokesman said he supported his assessment and was “rigorous” in the way he applied the joint multilateral development bank methodology he used to calculate the climate benefits of its funding.
Environmental groups also want the World Bank to suspend funding for all fossil fuel projects, which activists say totaled $5.7 billion between fiscal years 2018 and 2020, although the World Bank spokesperson stated that he disagreed with this finding. Climate activists also want the World Bank to more clearly outline how it aligns its financing with the goals of the Paris Climate Agreement.
“That’s the really big first problem,” said Kyle Ash, director of policy at watchdog group Bank Information Center. “Everything I think would cascade from there.”