World Bank ditches climate lending target amid US pressure
What's the story
The World Bank Group has decided to "retire" its goal of allocating 45% of annual lending resources to projects with climate co-benefits. This decision comes even as Europe faces a severe heatwave that has resulted in over 1,000 excessive deaths. The change in policy will shift the focus from input-based lending quotas to a framework that measures project outcomes.
Policy shift
US Treasury Secretary's criticism of World Bank's climate agenda
US Treasury Secretary Scott Bessent has been a vocal critic of the World Bank's climate agenda. Earlier this year, he urged both the World Bank and the International Monetary Fund to refocus on their "core missions." In April, he described the bank's emphasis on climate financing targets as "myopic" and called for those metrics to be dropped.
Strategic realignment
Shift toward 'smart development'
World Bank President Ajay Banga has, over time, shifted the institution toward "smart development," which combines job creation and economic growth with climate resilience. The bank currently focuses on financing projects such as drought-resistant agriculture, storm-resilient infrastructure, renewable energy, and improved water systems when they align with client country priorities.
Framework review
Continuing to report climate-related indicators
Despite dropping the lending target, the World Bank will continue to report climate-related indicators. It has asked its Independent Evaluation Group to review the Climate Change Action Plan, first introduced in 2016. The decision also highlights divisions among shareholders, with France and 18 other countries supporting continued engagement on climate change while the United States declined to sign and some others abstained from signing a letter in support of it.
Climate crisis
Europe's record heatwave and its impact
The timing of the World Bank's decision is significant as Europe suffers one of its worst heatwaves on record. The World Health Organization has reported over 1,300 excess deaths due to high temperatures across Europe since June 21. Countries like Germany, France, Switzerland, and the UK have been affected, with roads softening and railway tracks buckling under extreme heat.