The World Bank is facing intense negotiations among member states as the Climate Change Action Plan (CCAP) officially expires at the end of June, with the US pushing for complete scrapping of the climate policy framework. According to Table.Briefings, there is widespread resistance to the proposed changes, creating significant tension within the world's leading climate finance provider. The negotiations have reached a critical juncture as the bank's management seeks to balance climate commitments with political pressures from major shareholders.
The World Bank Group announced on Monday it will retire its previous goal to devote 45% of its annual lending resources to projects with climate co-benefits, marking a significant shift in the development lender's climate financing approach. According to reports from The Hindu BusinessLine, the bank said it would complete a shift to focusing on lending outcomes rather than input goals, moving away from the climate lending target that was adopted during the Biden administration in 2023. World Bank President Ajay Banga has shifted his focus to 'smart development,' which aims to boost job opportunities while still providing climate-related benefits such as drought-resistant agriculture or storm-resistant infrastructure and renewable energy where appropriate.
The decision came under pressure from the Trump administration, which had ordered the World Bank and the International Monetary Fund to return to their core missions of development and financial stability in 2025. According to The Hindu BusinessLine, U.S. Treasury Secretary Scott Bessent argued the bank's 'myopic' focus on climate financing targets had to go. Executive directors including France and 18 other shareholding countries had signed a letter last October endorsing the bank's continued work on climate change, but the largest shareholder, the United States, declined to sign, along with executive directors representing Russia, Kuwait and Saudi Arabia, while India and Japan abstained. French development minister Eleonore Caroit last week issued an eleventh-hour plea for the World Bank to keep the climate finance target intact.
Despite abandoning the 45% target, the World Bank extended its longstanding Climate Change Action Plan (CCAP), which was due to expire on Tuesday. As reported by The Hindu BusinessLine, the bank said its management would continue to track climate scorecard indicators on net global greenhouse gas emissions and on beneficiaries with enhanced resilience to climate risks under the CCAP. The bank will make such reports for all projects, as well as quarterly and annually for its lending portfolio. At the request of its executive board, the lender's Independent Evaluation Group will perform a review of the Climate Change Action Plan, which was first adopted in rolling five-year plans in 2016. According to Mezha.net, the bank will keep the Climate Change Action Plan while dropping numeric lending targets, raising questions about how climate outcomes will be measured and enforced going forward.
Despite abandoning the climate lending targets, bank officials have said that demand for projects with climate co-benefits remains strong from client countries. As reported by The Hindu BusinessLine, the bank said its framework has served its purpose well, embedding smart development in all operations in response to client needs and priorities. The bank will explore and discuss ways to better structure its engagement on adaptation, nature and pollution, indicating continued focus on climate-related initiatives while avoiding specific numerical targets. According to Mezha.net, the bank's decision to keep the Climate Change Action Plan while dropping numeric lending targets raises questions about how climate outcomes will be measured and enforced going forward.
