The most important climate decisions are often not made at COPs – they are made before and after. This will also be the case in 2023: Whether progress is made will be determined by the success in bringing the international financial community onto a climate path. And the first serious steps towards this are to be taken at the spring meeting of the World Bank and the International Monetary Fund (IMF) next week in Washington.
That is why this Climate.Table brings you a special focus on this issue. We analyze the debate on the reform, present the different ideas and describe how geopolitics is involved. We also look at the new head, Ajay Banga, whose job it is to combine all these wishes starting this summer.
There are many other topics we will cover. But above all, we keep following the money in this and the coming issues. The topic will continue to keep us busy. In 2023, important decisions will be made on climate action financing, adaptation and the redirection of investment flows.
The debate on the restructuring of the World Bank and the International Monetary Fund (IMF) is the most important juncture in global climate policy in 2023. A different direction for the global financial institutions could have far-reaching consequences. It could:
Unlike in the past, the debate in 2023 will not only revolve around the amount of climate financing. So far, the focus has been on the fact that the developed countries failed to keep their pledge to raise 100 billion dollars annually from 2020 for adaptation and CO2 reduction in emerging and developing countries. But in the run-up to COP28, structural reforms will be discussed on multiple occasions:
The backdrop to the debate: The international financial architecture (“Bretton Woods”) dates back to the mid-20th century and is no longer able to cope with the demands of the globalized world in the climate crisis. Economic and power politics have changed fundamentally. The consequences of the debt crisis and climate change have also become a financial policy threat: In the meantime, southern countries are paying five times more money for debt servicing than for remedying climate damage.
Many hope that a reform of the financial sector will significantly improve the financing of the tasks: It is said that several hundred billion dollars could be freed up in this way. Money that could then flow into urgently needed adaptation and emission reduction. The demand is also huge: According to UN estimates, adaptation to climate change alone could cost up to 340 billion dollars annually in 2030. To achieve all climate targets, another estimate, on which the COP27’s Sharm-el-Sheikh Implementation Plan is based, calls for investments of at least 4 to 6 trillion dollars annually.
But it is about more than just more money: Critics repeatedly call for the World Bank to shift its focus from national projects. Instead of funding individual projects, it should support cross-border ideas that protect global common goods such as climate, species conservation or water. Another demand is that the Bank must push more strongly for political reforms in the recipient countries that structurally protect these global common goods.
In the battle for payments, the various groups of countries are hoping for very different results: The developed countries could fulfill their international climate finance pledges with fresh money; poorer countries are hoping for investments and debt relief. At the same time, a reform could also make rich emerging countries, such as the oil states, climate finance donors, something that the developed countries in particular have repeatedly demanded. In return, they could then be given more say in the World Bank and IMF.
In geopolitical terms, too, the institutional reform is associated with various goals:
The US Biden Administration is pushing for reform at the World Bank, according to Secretary of the Treasury Janet Yellen. For the US, an international solution is the way out of a domestic dilemma: the Republican-dominated Congress barely grants the government money for international climate finance. Instead of a fair share of 42 billion of the pledged 100 billion dollars, the USA pays only 8 billion. A reform and opening up of payments to corporations and foundations could keep US money flowing and bypass Congress. Biden is also not unhappy to replace Trump nominee Eric Malpas as WB chief with his candidate Ajay Banga (see today’s Heads section).
The EU and Germany have been calling for changes at the World Bank for years. The primary goal is to turn the financial institutions into climate action drivers. This would also require changes to the neoliberal “Washington Consensus”, which for around 30 years has stipulated structural reforms for poor countries aimed at reducing the role of the state and increasing private decision-making. From the European perspective, the reforms should clarify: A strong state is needed for climate action. One that stimulates private investment, but defines the goals and framework conditions.
Through a reform, China wants to further position itself as an advocate of the G77 – and possibly distract from the fact that it is now the largest lender to developing countries. In any case, the China-dominated Asian Infrastructure Investment Bank (AIIB) has announced to align all its activities with the Paris Agreement by summer 2023. The World Bank does not plan to make this declaration until July 2023. However, the AIIB defines investments in gas, for example, as compatible with the climate goals.
Possible reforms and a capital injection could also shift the political balance at the World Bank and IMF. Because voting shares are based on a country’s capital contribution and economic performance, countries like the US, China, India, Brazil, Korea or Mexico would benefit from a recalculation.
However, a reorganization could also threaten the central role of the old developed countries in these institutions: So far, the USA, for example, has practically had a veto right in the World Bank due to its large capital share. In addition, the USA traditionally provides the leadership of the World Bank, while the Europeans appoint the head of the IMF.
Starting July 1, all new World Bank projects will be aligned to the Paris Climate Agreement. Axel van Trotsenburg, Senior Managing Director of Development Policy & Partnerships at the World Bank, tweeted this a few days ago regarding the upcoming spring meeting of the World Bank and the International Monetary Fund: “The climate is changing, and so are we”.
But this reorientation comes seven years too late, says Ulrich Volz, Director of the Centre for Sustainable Finance at SOAS University London and researcher at the German Institute of Development and Sustainability (IDOS) in Germany. The World Bank has “clearly failed” to meet the Paris Agreement’s requirement to align global financial flows with climate goals. It has not provided enough money for climate action and adaptation, and even after Paris it has still given too much for fossil purposes, says Volz. “From my perspective, it has not fulfilled its mandate.”
Yet the World Bank is the largest provider of climate finance among all multilateral development banks, according to the institutions’ own figures. It is thus crucial for how well recipient countries can respond to the climate crisis.
The outgoing World Bank President David Malpass quantifies the necessary investment for developing countries for global public goods – i.e. climate change mitigation, global warming adaptation, security and pandemic response combined – at 2.4 trillion US dollars per year, and this for the next seven years.
According to the World Resources Institute (WRI), the need for climate financing alone will rise to 5.2 trillion US dollars per year by 2030. The Sharm el-Sheikh Implementation Plan passed at COP27 estimates the necessary sum to be at least 4 to 6 trillion US dollars per year, without a fixed target year. By comparison, total global climate finance in 2020 was just 600 billion US dollars.
The original mission of the World Bank is different: The task of the International Bank for Restructuring and Development (IBRD) is to promote the economic development of developing and transition countries. Its sister institution, the International Development Association (IDA), focuses on reducing poverty in countries with particularly low-income levels.
The World Bank Group also includes the IFC, which specializes in promoting the private sector in developing countries, MIGA, which protects investments against so-called political risks, and the ICSID, an international arbitration court for the settlement of investment disputes.
In most cases, a new climate focus of the World Bank will also help the fight against poverty, says David Ryfisch, Team Leader International Climate Policy at the non-governmental organization Germanwatch. However, he says, this is not necessarily the case – for example, when it comes to investments in the health sector or the education system. These should not be neglected despite the new focus on climate.
According to van Trotsenburg, in order to tackle climate action and poverty reduction together, the bank wants to:
According to Van Trotsenburg, the IBRD and IDA spent about 29 billion US dollars on climate financing last year. This is three times as much as six years earlier. It supports the generation of renewable energy and the closure of coal-fired power plants, forest conservation and more climate-friendly agriculture, greener infrastructure and coastal protection.
However, it also provides money for natural gas investments, but “only if cleaner options are not feasible”. In addition, the projects financed by the World Bank would be better screened for any climate risks, and the greenhouse gas emissions caused by “all projects in relevant sectors” would be accounted for. According to the World Bank, renaturation is playing an increasingly important role in projects.
Recently, the World Bank began issuing country reports, which are intended to jointly analyze climate and development, called Country Climate and Development Reports (CCDRs). Their purpose is to help countries prioritize the most effective climate action and adaptation measures without losing sight of their broader development goals. The International Monetary Fund also uses the CCDRs as an analytical tool for its lending, writes van Trotsenburg.
The World Bank, as the largest issuer of sustainable bonds, mobilizes about 50 billion dollars of private capital annually to achieve the United Nations Sustainable Development Goals (SDGs), according to van Trotsenburg. How to increase this amount is a core question in the reform debate. Private investors aim for returns, multilateral banks, on the other hand, usually want to finance particularly high-impact projects. The two do not always fit together.
“The next step on this journey” is now to align the World Bank’s operations with the Paris Climate Agreement, writes van Trotsenburg. To this end, a joint approach is being developed with other multilateral development banks and is expected to be published soon.
The first details are laid down in the World Bank’s Climate Change Action Plan 2021-2025, which was adopted in June 2021:
However, environmental and development organizations are critical of the promise to stop funding fossil fuel projects in the future. They criticize the lack of transparency. Oxfam, for example, found from its own calculations that the amount of actual climate funding cannot currently be independently verified. It could deviate by up to 40 percent from the claimed amount.
Heike Mainhardt, an expert on multilateral financial institutions at Urgewald, says the lack of transparency masks the extent to which the World Bank “continues to artificially inflate and safeguard fossil fuel profits“. Since the Paris Climate Agreement was adopted in 2015, the Bank has supported fossil fuel investments in a wide variety of ways with billions of dollars, she says. And the new reform plans are not likely to change that.
This is why Urgewald is calling for the World Bank to put all activities involving oil, gas and coal on an exclusion list from the outset. It should commission independent audits to examine its financial flows. And it should measure whether and to what extent the economies that receive its loans are becoming less dependent on fossil fuels.
In order to do more for the climate, without neglecting its original mandate, the World Bank needs more money. A new “Capital Adequacy Framework” plans for it to change the prescribed ratio of equity to loans for this purpose. Until now, the ratio has been 20 percent, but now it is to be reduced to 19 percent. To avoid jeopardizing the bank’s AAA rating, only small steps will be taken.
The new quota would create an estimated four billion dollars in additional financing capacity, says David Ryfisch of Germanwatch. He expects the new quota to be adopted at the spring meeting.
The new Capital Adequacy Framework is important, says economist Ulrich Volz. In addition, a capital increase for all multilateral development banks is also necessary, because “We need more money for everything: for financing, climate action, adaptation, and the Sustainable Development Goals (SDGs).”
However, Volz fears that mobilizing enough private money will prove unsuccessful. The financing of the climate agenda rests very much on the hope of creating incentives through billions in public money, which in a second step will allow the flow of trillions in private funding. But that already hasn’t worked for the past 20 years, Volz said. “I’m skeptical that it will work any better now, in the face of a major debt crisis in the Global South.”
The spring meetings of the World Bank and International Monetary Fund (IMF), scheduled for April 10-16 in Washington, D.C., will discuss various ideas for structural reform. However, decisions are not expected before the fall meeting in October.
The various proposals are not all equally concrete. They must now find a majority among the voting states. The upcoming meeting will show which elements from which drafts could gain a majority.
The most widely embraced reform agenda for financial institutions came from the Prime Minister of Barbados, Mia Mottley. In her Bridgetown Initiative, she proposes:
The first three demands require reforms at financial institutions, while the last two would require political agreement.
The World Bank itself, at the behest of Germany and the United States, among others, presented its own roadmap for the bank’s ongoing development in January 2023. The paper admits that the goal of ending extreme poverty by 2030 is “increasingly out of reach“. Most developing countries, as well as the World Bank, are not prepared to adequately mitigate potential upcoming crises and ensure stable development. Therefore
The proposals are less specific than other ideas, thus leaving management significantly more leeway.
The German proposals are also on the table. They are aimed above all at the following points:
For Niels Annen, Parliamentary State Secretary in the Development Ministry, the top priority for the reform projects: There must be “no cutbacks” in grants and favorable loans for developing countries: “The poorest countries must be the winners of the reform“.
Two-thirds of the countries in the Global South are “critically or very critically indebted” after the Covid pandemic and the subsequent economic crisis: This is the conclusion of the current debt report of the development organization Misereor and the initiative erlassjahr.de. The war in Ukraine and rising interest rates are expected to further exacerbate the situation.
Due to the excessive debt, there are insufficient financial resources to fight poverty and hunger, and to combat the climate crisis, according to the two organizations. Therefore, they are calling for debt relief for affected countries. The demand is not part of the official proposals that will be discussed at the World Bank and IMF spring meetings. However, the debt crisis will still be a topic there.
Collaboration: Alexandra Endres
Due to rising temperatures caused by climate change, significantly more people in the Global South will die from heat-related causes by 2100. In the Global North, on the other hand, there could be fewer temperature-related deaths, as fewer people will die as a result of extreme cold in the future. This is the conclusion of a study in the Climate Inequality Report 2023.
According to recent studies and projections, the climate crisis will hardly change the overall number of people dying due to extreme temperatures. What is changing, however, is the geographic distribution: Countries that are already hot and poor could experience even more heat-related deaths in the future. People in these countries also have the least resources to adapt to rising temperatures in the future and thus mitigate the effects of heat. cult
Ajay Banga is US President Joe Biden’s proposed candidate to lead the World Bank. It is thus virtually certain that he will get the post. Banga is to succeed David Malpass, who was appointed by former President Donald Trump, and who is stepping down at the end of June, one year before the end of his five-year term. Malpass faced intense criticism for his refusal to acknowledge that burning fossil fuels are driving climate change.
Banga, on the other hand, has received praise for his attitude toward climate change, as well as his experience managing money. He spent more than 25 years as an executive across banks like Citigroup and Mastercard before serving as Vice Chairman of General Atlantic, a private equity firm. “Ajay has proven his ability as a manager of large institutions and understands investment and the mobilization of capital to power the green transition,” said US Special Envoy for Climate John Kerry, said on Twitter.
During his time at Mastercard, the 63-year-old Banga viewed climate change concerns through a business lens. “I’ve said it before and I’ll say it again: business is not philanthropy,” he wrote in 2020. “Any socially- or environmentally-responsible initiative we take on must clearly connect to our business.”
Born in India, Banga also said that he brings a perspective from a country on the receiving end of development finance. “I’m American today, but I grew up where the rubber hits the road, in the Global South,” he told reporters earlier in March.
However, some environmental groups expressed concern that Banga has little experience in the public sector, his past employers have large fossil fuel investments, and his rhetoric on climate change hasn’t translated into much action.
The World Bank plays an important role in the global response to climate change. It managed more than 115 billion US dollars in financing last year for low and middle-income countries, including 31.7 billion US dollars to help countries adapt to warming and mitigate greenhouse gas emissions.
But the bank has also continued to finance fossil fuel development, loaning out 5.7 billion US dollars between 2018 and 2020. In recent years, some developing countries have called for more financing to exploit their own fossil fuel reserves to reduce poverty after missed deadlines and broken promises from wealthier nations to provide support for clean energy.
The bank itself published a development roadmap in late 2022, outlining how it intends to better address climate change in the future. In addition, there are other reform ideas that will be discussed at the upcoming spring meeting of the IMF and World Bank.
Banga said that he thinks the bank can fulfill its mission to address poverty while mitigating climate change. “I think it’s a fallacious argument that says, either-or,” Banga told Axios. “I have every intention of focusing the bank and its people on the idea that this is an intertwined challenge.”
With his wife, Ritu, Banga is also involved with philanthropy including an effort to address health disparities and an initiative to assist entrepreneurs in underrepresented markets. The couple has two daughters.
Banga is now on a worldwide listening tour, meeting with senior officials in Africa, Asia, and Latin America across 37 governments to hear their concerns and build support for his candidacy. The US traditionally nominates the President of the World Bank, but the bank’s board must approve as well. His message has been well-received so far, but he tested positive for COVID-19 while in India, leading him to cancel a meeting with Indian Prime Minister Narendra Modi. Umair Irfan
The most important climate decisions are often not made at COPs – they are made before and after. This will also be the case in 2023: Whether progress is made will be determined by the success in bringing the international financial community onto a climate path. And the first serious steps towards this are to be taken at the spring meeting of the World Bank and the International Monetary Fund (IMF) next week in Washington.
That is why this Climate.Table brings you a special focus on this issue. We analyze the debate on the reform, present the different ideas and describe how geopolitics is involved. We also look at the new head, Ajay Banga, whose job it is to combine all these wishes starting this summer.
There are many other topics we will cover. But above all, we keep following the money in this and the coming issues. The topic will continue to keep us busy. In 2023, important decisions will be made on climate action financing, adaptation and the redirection of investment flows.
The debate on the restructuring of the World Bank and the International Monetary Fund (IMF) is the most important juncture in global climate policy in 2023. A different direction for the global financial institutions could have far-reaching consequences. It could:
Unlike in the past, the debate in 2023 will not only revolve around the amount of climate financing. So far, the focus has been on the fact that the developed countries failed to keep their pledge to raise 100 billion dollars annually from 2020 for adaptation and CO2 reduction in emerging and developing countries. But in the run-up to COP28, structural reforms will be discussed on multiple occasions:
The backdrop to the debate: The international financial architecture (“Bretton Woods”) dates back to the mid-20th century and is no longer able to cope with the demands of the globalized world in the climate crisis. Economic and power politics have changed fundamentally. The consequences of the debt crisis and climate change have also become a financial policy threat: In the meantime, southern countries are paying five times more money for debt servicing than for remedying climate damage.
Many hope that a reform of the financial sector will significantly improve the financing of the tasks: It is said that several hundred billion dollars could be freed up in this way. Money that could then flow into urgently needed adaptation and emission reduction. The demand is also huge: According to UN estimates, adaptation to climate change alone could cost up to 340 billion dollars annually in 2030. To achieve all climate targets, another estimate, on which the COP27’s Sharm-el-Sheikh Implementation Plan is based, calls for investments of at least 4 to 6 trillion dollars annually.
But it is about more than just more money: Critics repeatedly call for the World Bank to shift its focus from national projects. Instead of funding individual projects, it should support cross-border ideas that protect global common goods such as climate, species conservation or water. Another demand is that the Bank must push more strongly for political reforms in the recipient countries that structurally protect these global common goods.
In the battle for payments, the various groups of countries are hoping for very different results: The developed countries could fulfill their international climate finance pledges with fresh money; poorer countries are hoping for investments and debt relief. At the same time, a reform could also make rich emerging countries, such as the oil states, climate finance donors, something that the developed countries in particular have repeatedly demanded. In return, they could then be given more say in the World Bank and IMF.
In geopolitical terms, too, the institutional reform is associated with various goals:
The US Biden Administration is pushing for reform at the World Bank, according to Secretary of the Treasury Janet Yellen. For the US, an international solution is the way out of a domestic dilemma: the Republican-dominated Congress barely grants the government money for international climate finance. Instead of a fair share of 42 billion of the pledged 100 billion dollars, the USA pays only 8 billion. A reform and opening up of payments to corporations and foundations could keep US money flowing and bypass Congress. Biden is also not unhappy to replace Trump nominee Eric Malpas as WB chief with his candidate Ajay Banga (see today’s Heads section).
The EU and Germany have been calling for changes at the World Bank for years. The primary goal is to turn the financial institutions into climate action drivers. This would also require changes to the neoliberal “Washington Consensus”, which for around 30 years has stipulated structural reforms for poor countries aimed at reducing the role of the state and increasing private decision-making. From the European perspective, the reforms should clarify: A strong state is needed for climate action. One that stimulates private investment, but defines the goals and framework conditions.
Through a reform, China wants to further position itself as an advocate of the G77 – and possibly distract from the fact that it is now the largest lender to developing countries. In any case, the China-dominated Asian Infrastructure Investment Bank (AIIB) has announced to align all its activities with the Paris Agreement by summer 2023. The World Bank does not plan to make this declaration until July 2023. However, the AIIB defines investments in gas, for example, as compatible with the climate goals.
Possible reforms and a capital injection could also shift the political balance at the World Bank and IMF. Because voting shares are based on a country’s capital contribution and economic performance, countries like the US, China, India, Brazil, Korea or Mexico would benefit from a recalculation.
However, a reorganization could also threaten the central role of the old developed countries in these institutions: So far, the USA, for example, has practically had a veto right in the World Bank due to its large capital share. In addition, the USA traditionally provides the leadership of the World Bank, while the Europeans appoint the head of the IMF.
Starting July 1, all new World Bank projects will be aligned to the Paris Climate Agreement. Axel van Trotsenburg, Senior Managing Director of Development Policy & Partnerships at the World Bank, tweeted this a few days ago regarding the upcoming spring meeting of the World Bank and the International Monetary Fund: “The climate is changing, and so are we”.
But this reorientation comes seven years too late, says Ulrich Volz, Director of the Centre for Sustainable Finance at SOAS University London and researcher at the German Institute of Development and Sustainability (IDOS) in Germany. The World Bank has “clearly failed” to meet the Paris Agreement’s requirement to align global financial flows with climate goals. It has not provided enough money for climate action and adaptation, and even after Paris it has still given too much for fossil purposes, says Volz. “From my perspective, it has not fulfilled its mandate.”
Yet the World Bank is the largest provider of climate finance among all multilateral development banks, according to the institutions’ own figures. It is thus crucial for how well recipient countries can respond to the climate crisis.
The outgoing World Bank President David Malpass quantifies the necessary investment for developing countries for global public goods – i.e. climate change mitigation, global warming adaptation, security and pandemic response combined – at 2.4 trillion US dollars per year, and this for the next seven years.
According to the World Resources Institute (WRI), the need for climate financing alone will rise to 5.2 trillion US dollars per year by 2030. The Sharm el-Sheikh Implementation Plan passed at COP27 estimates the necessary sum to be at least 4 to 6 trillion US dollars per year, without a fixed target year. By comparison, total global climate finance in 2020 was just 600 billion US dollars.
The original mission of the World Bank is different: The task of the International Bank for Restructuring and Development (IBRD) is to promote the economic development of developing and transition countries. Its sister institution, the International Development Association (IDA), focuses on reducing poverty in countries with particularly low-income levels.
The World Bank Group also includes the IFC, which specializes in promoting the private sector in developing countries, MIGA, which protects investments against so-called political risks, and the ICSID, an international arbitration court for the settlement of investment disputes.
In most cases, a new climate focus of the World Bank will also help the fight against poverty, says David Ryfisch, Team Leader International Climate Policy at the non-governmental organization Germanwatch. However, he says, this is not necessarily the case – for example, when it comes to investments in the health sector or the education system. These should not be neglected despite the new focus on climate.
According to van Trotsenburg, in order to tackle climate action and poverty reduction together, the bank wants to:
According to Van Trotsenburg, the IBRD and IDA spent about 29 billion US dollars on climate financing last year. This is three times as much as six years earlier. It supports the generation of renewable energy and the closure of coal-fired power plants, forest conservation and more climate-friendly agriculture, greener infrastructure and coastal protection.
However, it also provides money for natural gas investments, but “only if cleaner options are not feasible”. In addition, the projects financed by the World Bank would be better screened for any climate risks, and the greenhouse gas emissions caused by “all projects in relevant sectors” would be accounted for. According to the World Bank, renaturation is playing an increasingly important role in projects.
Recently, the World Bank began issuing country reports, which are intended to jointly analyze climate and development, called Country Climate and Development Reports (CCDRs). Their purpose is to help countries prioritize the most effective climate action and adaptation measures without losing sight of their broader development goals. The International Monetary Fund also uses the CCDRs as an analytical tool for its lending, writes van Trotsenburg.
The World Bank, as the largest issuer of sustainable bonds, mobilizes about 50 billion dollars of private capital annually to achieve the United Nations Sustainable Development Goals (SDGs), according to van Trotsenburg. How to increase this amount is a core question in the reform debate. Private investors aim for returns, multilateral banks, on the other hand, usually want to finance particularly high-impact projects. The two do not always fit together.
“The next step on this journey” is now to align the World Bank’s operations with the Paris Climate Agreement, writes van Trotsenburg. To this end, a joint approach is being developed with other multilateral development banks and is expected to be published soon.
The first details are laid down in the World Bank’s Climate Change Action Plan 2021-2025, which was adopted in June 2021:
However, environmental and development organizations are critical of the promise to stop funding fossil fuel projects in the future. They criticize the lack of transparency. Oxfam, for example, found from its own calculations that the amount of actual climate funding cannot currently be independently verified. It could deviate by up to 40 percent from the claimed amount.
Heike Mainhardt, an expert on multilateral financial institutions at Urgewald, says the lack of transparency masks the extent to which the World Bank “continues to artificially inflate and safeguard fossil fuel profits“. Since the Paris Climate Agreement was adopted in 2015, the Bank has supported fossil fuel investments in a wide variety of ways with billions of dollars, she says. And the new reform plans are not likely to change that.
This is why Urgewald is calling for the World Bank to put all activities involving oil, gas and coal on an exclusion list from the outset. It should commission independent audits to examine its financial flows. And it should measure whether and to what extent the economies that receive its loans are becoming less dependent on fossil fuels.
In order to do more for the climate, without neglecting its original mandate, the World Bank needs more money. A new “Capital Adequacy Framework” plans for it to change the prescribed ratio of equity to loans for this purpose. Until now, the ratio has been 20 percent, but now it is to be reduced to 19 percent. To avoid jeopardizing the bank’s AAA rating, only small steps will be taken.
The new quota would create an estimated four billion dollars in additional financing capacity, says David Ryfisch of Germanwatch. He expects the new quota to be adopted at the spring meeting.
The new Capital Adequacy Framework is important, says economist Ulrich Volz. In addition, a capital increase for all multilateral development banks is also necessary, because “We need more money for everything: for financing, climate action, adaptation, and the Sustainable Development Goals (SDGs).”
However, Volz fears that mobilizing enough private money will prove unsuccessful. The financing of the climate agenda rests very much on the hope of creating incentives through billions in public money, which in a second step will allow the flow of trillions in private funding. But that already hasn’t worked for the past 20 years, Volz said. “I’m skeptical that it will work any better now, in the face of a major debt crisis in the Global South.”
The spring meetings of the World Bank and International Monetary Fund (IMF), scheduled for April 10-16 in Washington, D.C., will discuss various ideas for structural reform. However, decisions are not expected before the fall meeting in October.
The various proposals are not all equally concrete. They must now find a majority among the voting states. The upcoming meeting will show which elements from which drafts could gain a majority.
The most widely embraced reform agenda for financial institutions came from the Prime Minister of Barbados, Mia Mottley. In her Bridgetown Initiative, she proposes:
The first three demands require reforms at financial institutions, while the last two would require political agreement.
The World Bank itself, at the behest of Germany and the United States, among others, presented its own roadmap for the bank’s ongoing development in January 2023. The paper admits that the goal of ending extreme poverty by 2030 is “increasingly out of reach“. Most developing countries, as well as the World Bank, are not prepared to adequately mitigate potential upcoming crises and ensure stable development. Therefore
The proposals are less specific than other ideas, thus leaving management significantly more leeway.
The German proposals are also on the table. They are aimed above all at the following points:
For Niels Annen, Parliamentary State Secretary in the Development Ministry, the top priority for the reform projects: There must be “no cutbacks” in grants and favorable loans for developing countries: “The poorest countries must be the winners of the reform“.
Two-thirds of the countries in the Global South are “critically or very critically indebted” after the Covid pandemic and the subsequent economic crisis: This is the conclusion of the current debt report of the development organization Misereor and the initiative erlassjahr.de. The war in Ukraine and rising interest rates are expected to further exacerbate the situation.
Due to the excessive debt, there are insufficient financial resources to fight poverty and hunger, and to combat the climate crisis, according to the two organizations. Therefore, they are calling for debt relief for affected countries. The demand is not part of the official proposals that will be discussed at the World Bank and IMF spring meetings. However, the debt crisis will still be a topic there.
Collaboration: Alexandra Endres
Due to rising temperatures caused by climate change, significantly more people in the Global South will die from heat-related causes by 2100. In the Global North, on the other hand, there could be fewer temperature-related deaths, as fewer people will die as a result of extreme cold in the future. This is the conclusion of a study in the Climate Inequality Report 2023.
According to recent studies and projections, the climate crisis will hardly change the overall number of people dying due to extreme temperatures. What is changing, however, is the geographic distribution: Countries that are already hot and poor could experience even more heat-related deaths in the future. People in these countries also have the least resources to adapt to rising temperatures in the future and thus mitigate the effects of heat. cult
Ajay Banga is US President Joe Biden’s proposed candidate to lead the World Bank. It is thus virtually certain that he will get the post. Banga is to succeed David Malpass, who was appointed by former President Donald Trump, and who is stepping down at the end of June, one year before the end of his five-year term. Malpass faced intense criticism for his refusal to acknowledge that burning fossil fuels are driving climate change.
Banga, on the other hand, has received praise for his attitude toward climate change, as well as his experience managing money. He spent more than 25 years as an executive across banks like Citigroup and Mastercard before serving as Vice Chairman of General Atlantic, a private equity firm. “Ajay has proven his ability as a manager of large institutions and understands investment and the mobilization of capital to power the green transition,” said US Special Envoy for Climate John Kerry, said on Twitter.
During his time at Mastercard, the 63-year-old Banga viewed climate change concerns through a business lens. “I’ve said it before and I’ll say it again: business is not philanthropy,” he wrote in 2020. “Any socially- or environmentally-responsible initiative we take on must clearly connect to our business.”
Born in India, Banga also said that he brings a perspective from a country on the receiving end of development finance. “I’m American today, but I grew up where the rubber hits the road, in the Global South,” he told reporters earlier in March.
However, some environmental groups expressed concern that Banga has little experience in the public sector, his past employers have large fossil fuel investments, and his rhetoric on climate change hasn’t translated into much action.
The World Bank plays an important role in the global response to climate change. It managed more than 115 billion US dollars in financing last year for low and middle-income countries, including 31.7 billion US dollars to help countries adapt to warming and mitigate greenhouse gas emissions.
But the bank has also continued to finance fossil fuel development, loaning out 5.7 billion US dollars between 2018 and 2020. In recent years, some developing countries have called for more financing to exploit their own fossil fuel reserves to reduce poverty after missed deadlines and broken promises from wealthier nations to provide support for clean energy.
The bank itself published a development roadmap in late 2022, outlining how it intends to better address climate change in the future. In addition, there are other reform ideas that will be discussed at the upcoming spring meeting of the IMF and World Bank.
Banga said that he thinks the bank can fulfill its mission to address poverty while mitigating climate change. “I think it’s a fallacious argument that says, either-or,” Banga told Axios. “I have every intention of focusing the bank and its people on the idea that this is an intertwined challenge.”
With his wife, Ritu, Banga is also involved with philanthropy including an effort to address health disparities and an initiative to assist entrepreneurs in underrepresented markets. The couple has two daughters.
Banga is now on a worldwide listening tour, meeting with senior officials in Africa, Asia, and Latin America across 37 governments to hear their concerns and build support for his candidacy. The US traditionally nominates the President of the World Bank, but the bank’s board must approve as well. His message has been well-received so far, but he tested positive for COVID-19 while in India, leading him to cancel a meeting with Indian Prime Minister Narendra Modi. Umair Irfan
