This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs.
| Paris alignment | Reasoning |
|---|---|
| Some progress | The overarching strategy includes both mitigation and adaptation, and also acknowledges that climate is a threat to poverty reduction. Focus is now needed on implementation in all parts of the Bank’s activities, including technical assistance, and specific incorporation of Paris alignment and the “do-no-harm” principle. |
| Standalone climate strategy | Overarching strategy |
|---|---|
| The Climate Change Action Plan (2021 – 2025) constitutes a slight improvement from the previous action plan, but large gaps and imprecise commitments remain. Constituent parts of the WBG will align with the Paris agreement by different dates | The WBG has published multiple forward-looking strategic documents referring to climate action and decarbonization. However it is unclear to what extent these influence the current strategic positioning of the Bank. |
Explanation
Overarching strategy
Climate change was integrated into the 2017 WBG ‘Forward Look: vision for 2030’. This is the World Bank Group’s strategic vision document for 2030. This reinforces the Bank’s commitment to the implementation of its Climate Change Action Plan (CCAP) approved in 2016.
In 2023, the World Bank committed to a reform agenda, recently put forth in an “Evolution Roadmap,” that would see global challenges like climate change and pandemic preparedness take on a more prominent focus. Unlike past efforts to align the Banks’ existing portfolio with the Paris agreement, this suite of reforms is centered around scaling additional finance for tomorrow’s high emitters to shift their economies onto low-carbon emissions trajectories. The idea is to use concessional finance to de-risk emerging investment environments, thereby incentivizing private investment at scale.
As currently laid out, the Roadmap entails a renewed vision statement explicitly integrating climate change into the Bank’s objectives, as well as changes to the Bank’s operating model and financial capacity to support it. Such a historical pivot, however, requires agreement among shareholders, and negotiations over the details are currently ongoing. The level of climate ambition remains to be articulated though, with projected outcomes ranging from a few billion to hundreds of billions in new climate finance. In its current form, the Roadmap represents more of a foundation from which more ambitious proposals can be fleshed out, rather than as of yet a comprehensive, detailed plan for Word Bank Evolution. Under new leadership, the 2023 Annual Meetings have potential to be the climate action turning point for the World Bank.
The World Bank Group has also published the 2050 Strategic Directions Note focusing on long-term country strategies for decarbonization. The comprehensive document outlines challenges and opportunities, as well as risks on the pathway toward a decarbonized global economy. The document is clearly referencing the Paris Agreement and aims to pick up on its pledges. It further details how the Bank will support countries to meet their long-term decarbonization goals through country programs, technical assistance, lending and knowledge products.
Climate was one of a number of special themes in the IDA19 capital replenishment. This states that all Strategic Country Diagnostics since 1 July 2017 have incorporated climate and considered the NDC. IDA committed to thos in the Forward Look and in the IDA18 capital replenishment. The document also contains several references to the Paris Agreement.
The World Bank Group’s “COVID-19 Crisis Response Approach Paper” also mentions climate, with a particular focus on climate resilience in a number of areas. The document states that “maintaining a strong focus on climate change in the early stages of crisis response is critical to maintaining a line of sight to long-term goals”. It also has a specific reference to NDCs where it states “rebuilding better entails focusing on countries’ climate change objectives. These are expressed in Nationally Determined Contributions [ … and] National Biodiversity Action Plans”. Other than this reference to NDCs the document does not refer to the Paris Agreement.
The Approach Paper also makes two interesting comments. The first is around how higher debt could impact climate action where it states that “higher debt, public and private, could make it more challenging to mobilize finance for climate action”. The following paragraph also has implications for investments in fossil fuels: “To support job creation and preserve growth-oriented enterprises, it will be important to promote reallocation of resources to more efficient companies, restructure and recapitalize firms, and avoid measures that risk propping up unviable firms or declining industries. For example, as countries and markets shift toward low carbon and renewable energy, as part of efforts to support climate adaptation and mitigation, it will be important not to slow this shift by subsidizing energy-inefficient industries and others at risk due to this changing policy and market environment.”
The Multilateral Investment Guarantee Agency (MIGA) also has a specific focus on climate change in its business plan. MIGA is in the process of reviewing its Strategy and Business Outlook, including its climate change component.
Although the documents above taken together show good progress has been made in mainstreaming climate in the WBG’s overarching strategy documents, more could be done in the specific area of mainstreaming the concept of Paris Agreement alignment. Over the last few years progress on the implementation of the Paris Agreement within WBG processes appears to have slowed, and this is something that the WBG needs to accelerate in order to achieve Paris aligned status.
Standalone climate strategy
The WBG Climate Change Action Plan (CCAP), published in 2021 outlines how the Bank will tackle climate change. The CCAP is linked to the Green, Resilient and Inclusive Development (GRID) approach. The Bank has based its CCAP on three principles. These are 1) people must benefit from a low-carbon and resilient future, 2) natural capital is an integral part of protecting the climate and 3) the Bank will work together with other institutions. The World Bank has identified five key sectors that will need to transform (referred to as Key Systems Transitions): energy, agriculture (including water and land), cities, transport and manufacturing. The action plan aims to demonstrate how the WBG is going to meet the challenges and opportunities posed by climate change, providing concrete actions to help countries address current and future climate risks and opportunities.
As part of its in-country work, WBG will develop a new analytical tool. These Country Climate and Development Reports (CCDRs) will analyse the impact of climate change and decarbonisation on development prospects of a country. While the CCDRs could potentially become a cornerstone to align in-country development finance with the Paris agreement, the Bank does not detail how the CCDRs will be produced and used.
The inclusion of the five systemic sector transformations constitutes an improvement from the previous CCAP. However, the World Bank does not outline specific implications for its lending, such as restrictions or precise prioritisation beyond general remarks on decarbonisation technologies.
WBG will align with the Paris agreement by different dates. While World Bank (IDA/IBRD) will align with the Pairs agreement by July 2023, MIGA and IFC will be 100% aligned by 2025 (85% by July 2023).
Recommendation: While the CCAP constitutes a slight improvement from the previous action plan, large gaps and imprecise commitments remain. The new CCAP lacks detail and a clear roadmap for implementation.
Last Update: February 2023