The World Bank’s targets for funding climate-related projects are set to expire on Tuesday, and amid growing pressure from the Trump administration, there doesn’t appear to be any clear replacement for the green goals.U.S. officials have upped pressure on Europe and other Western allies to abandon climate change-related regulations and policies, instead urging refinancing for fossil fuel-related industries. This has resulted in the United States pulling out of the Paris Climate Accord for a second time, a delayed vote on a first-of-its-kind carbon tax on the international maritime industry, increased natural gas exports to Europe, a likely delay for methane reporting rules, and now, the expiration of the World Bank’s climate financing.
Following the United Nations’ climate conference in 2023, the World Bank said it would pledge 45% of its funding to climate-related projects by 2025, with the aim that it would help reduce greenhouse gas emissions from the largest emitters while also propping up developing countries in need of resources to adapt to climate change. The bank exceeded that goal last year, committing 48% of its financing, or around $39.2 billion, to climate-related projects. Better known as the Climate Change Action Plan, the funding target expires on June 30. It was first developed as a five-year plan in 2021, extending on a similar plan created in 2016.Initially, the bank pledged 35% of its funding to climate projects, though that target was raised two years later. Since the plan was first announced, the bank’s climate financing nearly doubled from $21 billion in 2021 to around $39 billion last year.The Trump administration has called on the World Bank to do away with this financing target and instead increase its investments in traditional fossil fuels such as natural gas. The bank officially stopped funding gas extraction projects in 2019, with a few exceptions allowed in some of the world’s poorest countries.In April, Treasury Secretary Scott Bessent said the target “breeds inefficiency, distorts economic decision banking, and moves the Bank away from its core mission.” “We welcome the coming expiration of the Climate Change Action Plan, and upon its long-overdue expiration, expect the Bank to immediately shift its myopic focus on climate and financing volumes to one that emphasizes high-quality, durable projects rather than shaping and selecting projects to chase arbitrary financing targets that do little to lift people out of poverty,” Bessent said. Last fall, 19 of the bank’s 25 executive directors issued a statement in support of continuing the financing target. In addition to the U.S., Japan, India, Saudi Arabia, Russia, and Kuwait declined to sign.In May, 12 executive directors, led by representatives from China and Brazil, again called for the targets to be extended by one year. France made another last-minute plea with the board to continue the financing last week.As the U.S. is the largest shareholder of the World Bank, there are growing concerns among climate activists that the bank’s board of directors will let the financing targets lapse without any additional extensions or compromises.Gautam Jain, a senior research scholar at Columbia University’s Center on Global Energy Policy, told the Washington Examiner via email: “The reality is that the U.S., as the largest shareholder of the World Bank, effectively has a veto power over key decisions.“With the U.S. controlling 16% voting power, it can single-handedly block any decision that requires 85% supermajority,” Jain said. “The US doesn’t need to win a vote, just block consensus, which it can do.”Without a detailed plan to allocate a specific percentage of funds to climate-related projects, the World Bank would have no specific guidelines for aligning its lending with the goals of the 2016 Paris Agreement. This would very likely significantly hurt vulnerable and developing countries that are most likely to feel the impacts of climate change, such as rapidly warming temperatures and more frequent droughts and floods, which rely on wealthier countries to supply funds needed to help adapt to climate change.Ben Cushing, sustainable finance campaign director at the Sierra Club, told the Washington Examiner that allowing the plan to expire under pressure from the Trump administration “would be a serious and shortsighted retreat.”“Climate finance is not a distraction from the Bank’s development mission,” Cushing said, adding that helping countries expand their access to clean energy, ability to withstand effects of climate change, and strengthen their infrastructure and food systems is critical to reducing poverty and supporting global economic growth.“The Bank’s shareholders should not allow one government’s ideological opposition to climate action to weaken a multilateral institution whose decisions affect countries around the world,” he added.The bank’s climate financing has been criticized for the types of projects it has pursued in recent years, including how focused those projects are on mitigating or adapting to climate change.One study published last year by researchers with Swarthmore and Baruch Colleges found that most of the increased climate financing in the last 10 years went to projects with “low climate components.”The authors found that there did not appear to be any significant growth in the number of “pure” climate finance projects focused on mitigation and adaptation, with most of the funding not going to where it is most needed “such as to countries that are more vulnerable to climate change.”Removing the targets entirely, however, would make it more difficult to deliver on climate-related goals outlined in the Paris Agreement, such as lowering greenhouse gas emissions, Jain said.NET-ZERO SLIPS OUT OF REACH AS TRUMP OPPOSES GLOBAL CLIMATE GOALS During the 2024 United Nations Climate Conference, nations agreed to contribute at least $300 billion in climate finance annually, with about half to two-thirds being sourced from multilateral institutions led by the World Bank. “With the U.S. not contributing currently, it will make achieving the target — which is already a fraction of $1.3 trillion that’s needed annually — even more challenging,” Jain said.
