World Bank drops climate financing target under US pressure

The World Bank has dropped it 45% climate financing target under its Climate Change Action Plan (CCAP), after ongoing pressure from the US government.

The bank had put out an ambitious target for its itself to dedicate 35% of its financing towards climate on an average in FY21-25 to support green, resilient and inclusive development.

In 2023 it announced a further target of 45% to climate-related projects from July 2024 to June 2025.

"The World Bank Group is pushing to do more to battle climate change and do it faster," it had said.

However, as it further extended the CCAP at the end of June, it retired the targeting.

US secretary of the treasury Scott Bessent noted earlier in the year that climate finance targets impede market efficiency, distorts incentives, and detracts the World Bank from its core mission of reducing poverty and increasing economic growth.

"We welcome the coming expiration of the CCAP, and upon its long-overdue expiration, expect the Bank to immediately shift its myopic focus on climate and financing volumes," he said.

He added the World Bank should not shape and select projects to chase arbitrary financing targets that do little to lift people out of poverty.

"The Bank should turn its attention to whether its investments and the countries they support are resilient to a multitude of shocks, rather than to meeting nonsensical arbitrary targets," he said.

The United States is the largest single shareholder in the World Bank Group, holding roughly 15% to 16% of the voting power.

The World Bank said: "We have done significant work in answering client demand and needs. Further progress on outcomes will continue to be driven by client ambition and enabled by the work of the knowledge bank, consistent with countries' international commitments."

It added it will continue to track and report on its two scorecard indicators on net greenhouse gas (GHG) emissions and beneficiaries with enhanced resilience to climate risks. It will also continue its work to strengthen its outcome measurement methodology and keep engaging with other Multilateral Development Banks (MDBs).

"We will continue to report to the board on progress, including on climate co-benefits, and to contribute to our related joint MDB efforts," it added.

"We will explore and discuss ways to better structure our engagement on adaptation, nature and pollution."