| Paris Alignment | Reasoning |
|---|---|
| Some progress | Between 2019 and 2022, for every USD 1 the WBG provided to fossil fuels, USD 3.30 went to clean energy, USD 1.77 went to transmission and distribution (which typically cannot be attributed to any one energy type), and USD 1.30 went to “other” energy (e.g. mixed energy, nuclear, and biomass projects). Of the institutions constituting the WBG, IBRD has a higher relative ratio of clean energy spending relative to fossil fuels than any MDB covered by E3G’s Public Bank Climate Tracker Matrix. IFC and IDA have ratios within the average of range other MDBs assessed by the E3G Matrix, while MIGA continues to provide close to equal support for fossil fuels and clean energy. The WBG is on track to achieve its target of 45% of total financing to climate by 2025, having achieved 41% in FY23. |
Explanation
Non-fossil to fossil energy ratios
In the period FY2019 to FY2022, for every USD 1 the WBG provided to fossil fuels, USD 3.30 went towards clean energy investments, USD 1.77 to transmission and distribution (which typically cannot be attributed to any one energy type), and USD 1.30 went to other energy projects (e.g. mixed energy, nuclear, and biomass projects). These aggregate figures fall within the average among the other MDBs covered in E3G’s Public Bank Climate Tracker Matrix. However, they remain well short of the leading ratios, including those of the Inter-American Development Bank (IDB) and European Investment Bank (EIB).
However, the ratios for FY2019–FY2022 do represent an improvement on those for the preceding four-year period (FY2015–FY2018). In this period, for every USD 1 the WBG provided to fossil fuels, it was channelling marginally less towards clean investments at USD 0.99, and markedly less for transmission and distribution (USD 0.64) and other energy projects (USD 0.37).
Behind these aggregated ratios, the energy lending ratios of the four main lending institutions that constitute the WBG differ markedly. In relative terms, for the period FY2019–FY2022, for every USD 1 in fossil fuel lending by each institution:
- IBRD channelled an impressive USD 16.53 towards clean energy projects.
- IDA channelled USD 3.27 towards clean energy projects.
- IFC channelled USD 3.62 towards clean energy projects.1
- MIGA channelled almost exactly equal finance towards clean energy at USD 1.03.
In the preceding period (FY2015–FY2018) these ratios were lower across the board. For instance, IBRD only channelled USD 0.94 towards clean energy projects between FY2015–FY2018 for every USD 1 to fossil fuels, highlighting a strong performance to improve its ratio over recent years.2
In absolute terms, WBG fossil fuel lending during FY2019–FY2022 averaged USD 1.25 billion annually, down from USD 3.62 billion average per year over FY2015–FY2018. Conversely, average annual clean energy lending was slightly higher for the most recent four-year period at USD 4.13 billion, compared with USD 3.59 for the preceding four years.3
For the period FY2019–FY2022, approximately 37.55% of the WBG’s fossil fuel finance was channelled through MIGA, with 32.49% going through IFC, 24.28% through IDA and only 5.68% through IBRD. Conversely, IBRD accounted for 28.48% of clean energy finance in this same period, with IFC accounting for the greatest share at 35.69%, IDA 24.08%, and MIGA 11.75%.
Climate finance
At COP28 in 2023, the WBG raised its climate finance target by committing to devote 45% of its annual financing to climate by FY25. The previous target was to achieve 35% average across the years of its Climate Change Action Plan 2021–2025 (CCAP) – at the time of the announcement, the new target represented around USD 9 billion more than previously programmed funds.
Provision of climate finance has also increased in practice, with a record USD 38.6 billion delivered in FY 2023, representing a 22% increase from an already all-time high of USD 31.7 billion in FY22. For FY23, climate finance reached 41% of total WBG commitments, up from 29% in FY20, 32% in FY21 and 37% in FY22. In terms of the separate arms in FY23, climate finance accounted for 54% of total IBRD & IDA commitments, 46% for IFC, and 28% for MIGA. Notably, 32% of WBG climate finance went towards adaptation in 2023, reflecting a substantial drop from the 41.8% figure recorded in 2022.4
The WBG is therefore well on track to achieve its latest target, which is encouraging. However, external stakeholders such as Oxfam have expressed concerns with regard to the WBG’s climate finance accounting methodology. Oxfam’s report attempted to duplicate the WBG’s climate finance accounting methodology, and in doing so found the reported 2020 levels to be off by as much as 40% (USD 7 billion).
It is also important note that the quality of climate finance is key as there is not an agreed definition and the MDBs’ own principles and methodologies are contested.
1 To compare IFC to other private-sector focused banks, FMO channelled USD 5.3 to clean energy projects for every USD 1 of fossil fuel lending over 2018–2022, while EBRD channelled USD 2.8 over 2019–2022
2 The corresponding FY2015–FY2018 figures for the other institutions are: IFC USD 1.37, IDA USD 1.43, and MIGA USD 0.37.
3 Average annual lending towards other energy or transmission and distribution both exhibited a smaller change (roughly a USD 303 million increase and USD 90 million decrease respectively) between the two periods considered.
4 For more detailed analysis, see the “Climate risk, resilience and adaptation” metric.