Takeaways

• France and several World Bank shareholders are pushing to retain elements of the bank’s climate strategy beyond its June expiry.
• Divisions among major shareholders, including the U.S., could reshape how climate financing is prioritized.
• Developing countries continue to demand funding for climate adaptation, mitigation, and resilience projects.

As the World Bank prepares for the expiration of its Climate Change Action Plan at the end of June, a growing group of shareholders led by Eleonore Caroit is working to ensure that its core climate financing efforts continue in some form.

Speaking during the spring meetings of the International Monetary Fund and the World Bank in Washington, Caroit said discussions are underway to preserve the benefits of the existing framework. She stressed that letting the plan lapse entirely would be unacceptable, especially at a time when climate risks are intensifying globally.

The push to maintain the climate strategy comes amid mounting disagreements among key shareholders. The administration of Donald Trump has called for a shift away from climate-focused lending, urging the bank to prioritize traditional development projects, including fossil fuel investments. U.S. Treasury Secretary Scott Bessent has criticized the bank’s climate targets, describing them as ineffective and misaligned with poverty reduction goals.

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These tensions have gained urgency due to recent global economic pressures, including an oil and gas supply shock linked to geopolitical conflict in the Middle East. The situation has reignited debate over the balance between energy security and climate commitments.

Despite the divisions, support for climate financing remains strong among many shareholders. Last year, 19 out of 25 World Bank stakeholders endorsed a statement backing continued climate action. However, key countries, including the United States, Japan, India, Saudi Arabia, Russia, and Kuwait, did not sign on, highlighting a split that could influence future policy direction.

According to officials familiar with the discussions, more than half of the World Bank board’s voting power still supports ongoing climate engagement. However, it remains unclear whether this backing will translate into firm commitments at the leadership or ministerial level.

Under the leadership of Ajay Banga, the bank has already begun reframing its approach. Climate-linked initiatives are increasingly being described as “smart development,” emphasizing their role in job creation, economic growth, and resilience. Nearly half of the bank’s recent financing has included climate-related benefits, spanning projects such as renewable energy, flood-resistant infrastructure, and efficient irrigation systems.

Caroit highlighted that demand for such projects remains high among developing nations. She noted that investments in wind and solar power, along with measures to address extreme weather events, are essential not just for environmental protection but also for improving living conditions.

France is also expected to push for alignment with the Paris Agreement during its presidency of the Group of Seven this year. Upcoming meetings of finance ministers and central bank governors in Paris, followed by a leaders’ summit in Evian-les-Bains, are likely to further shape the global climate finance agenda.

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As the deadline for the Climate Change Action Plan approaches, the outcome of these discussions will be crucial in determining whether the World Bank can maintain its role as a key driver of global climate finance while balancing competing economic and political priorities.

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Source: Reuters