The World Bank’s Evolution Roadmap lays out operational reforms and an updated vision, but no clear target or timeframe to address global challenges. Bank leadership should agree specific levels of lending they aim to see mobilized for climate and pandemic preparedness, and by when. These benchmarks could be negotiated ahead of the Spring Meetings in April 2023, putting pressure on shareholders to be bold and deliver.
The World Bank released its Evolution Roadmap for reform in January, but where does it lead? And how much lending will be required to get there? While the Roadmap proposes technical overhauls and a new direction for the Bank, it offers no quantifiable end goal or timeline for what it hopes to achieve on climate change, or otherwise. This is a notable omission that risks diluting the level of ambition and weakens the Bank’s bargaining position in the pursuit of needed additional capital. The Roadmap gives neither a sense of scale for the problems it’s trying to solve, nor an estimate for how much the Bank must grow to adequately respond.
An explicit finance benchmark for addressing climate change, and other global challenges, would provide this target. Importantly, it would also acknowledge the proportion of lending the World Bank needs to muster relative to other public and private sources of finance. This is how the Bank can demonstrate ambition in its Evolution agenda – by first setting a verifiable goal, and then working out the political and technical solutions to reach it. So, let’s crunch the numbers on how big of a Bank we really need.
Several economists have put forth estimates detailing the yearly climate investment gap in emerging markets:
- $1 TRILLION/yr: The 2022 Songwe-Stern report concludes developing countries will require $1 trillion in external infrastructure finance annually through 2030 to bend emissions curves on track for 1.5oC and adequately adapt to climate impacts, with needs increasing thereafter.
- $1 TRILLION/yr: IEA figures cite $1 trillion in annual clean energy spending needed by 2030 in Emerging Markets and Developing Economies (EMDEs), up from $200 billion today. While only a subset of infrastructure, it’s a comparable scale to the above.
Other estimates vary but are broadly aligned in terms of magnitude. While much of this must be met with private and domestic resources, it’s worth noting how the current levels of MDB and World Bank climate finance stack up.
- $51 BILLION/yr: The 2022 Joint Report on MDB Climate Finance indicates the 10 major MDBs together provided $51 billion in climate finance in 2021.
- $31.7 BILLION/yr: Parcel to that group, the World Bank alone delivered almost $32 billion in climate finance in 2022 – the largest quantum from any single institution. However, the disputed methodology for counting “climate co-benefits” is subject to potential overstatement and lacks third-party verification.
Though these figures represent progress, it is incremental. A major scaling-up of World Bank lending will be required to slow climate change, and the Evolution Roadmap should say so. But by how much? And to what end? For illustrative purposes, the following suggestions have been floated in climate and development policy circles, as possible landing points that Bank shareholders should consider.
- $95 BILLION/yr by 2028: The Songwe-Stern report recommends MDB/DFI yearly climate finance must triple within five years, from $60 billion to $180 billion to put EMDEs on course for a climate-safe future. For the World Bank’s share, 3X would equate to an annual climate finance target of almost $100 Billion by 2028.
- MICs 100% RE by 2035: Rather than a blanket climate lending target, the Roadmap could instead be tied to real-world outcomes. How much would it cost to put tomorrow’s would-be GHG emitters, say the 10 biggest Middle-Income Countries, on a path for 100% renewable energy by 2035?
- $250 BILLION in JETPs by 2030: The past year has seen initial efforts at Just Energy Transition Partnerships take shape in South Africa ($8.5bn), Indonesia ($10bn public + $10bn private), and Vietnam ($7.75bn public + $7.75bn private) to help wean emerging economies off coal and build clean. As a proxy, could the Bank mobilize $250bn in public finance for similar mitigation/development deals in the next 10 countries, including India?
These back-of-the-envelope ideas are indicative of the type of outcome the Roadmap should point toward over 5-10 years, and the scale of finance necessary to get there. As yet though, the Bank’s reform process is lacking this sort of “polestar” to guide its operational changes and directional pivot, so shareholders must agree this while determining how to fund such ambition. Solving global challenges demands that the World Bank Evolution Roadmap provide an inspired, unmistakable destination. Without one, we’re lost.
For more insights, see E3G’s proposal for the key focus areas for the World Bank and IMF Spring Meetings.