Takeaways

• The World Bank will end its key climate financing target while extending its Climate Change Action Plan (CCAP).
• The decision follows growing criticism from the United States, the bank's largest shareholder, over its climate funding approach.
• The bank says it remains committed to supporting countries' climate goals through financing, technical assistance, and development-focused outcomes.

The World Bank has announced that it will phase out one of its major climate financing targets while continuing its broader efforts to help countries address climate change through its Climate Change Action Plan (CCAP).

The move comes after months of increasing US pressure, with American officials arguing that the bank should place greater emphasis on poverty reduction and economic development rather than fixed climate funding goals.

Although the climate financing target will be retired, the World Bank confirmed that the Climate Change Action Plan (CCAP) will continue beyond its original end date. The framework, which was due to expire this week, will remain in place to support countries in integrating climate mitigation and climate resilience into development projects.

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The CCAP provides financial support as well as technical expertise to help governments reduce greenhouse gas emissions, strengthen climate resilience, and adapt to changing environmental conditions.

In a statement released on June 29, the World Bank said its climate work will continue to be guided by the priorities of its member countries.

The institution noted that its approach "will remain firmly client-driven," supporting nations in achieving the objectives outlined in their national development strategies and Nationally Determined Contributions (NDCs) under the Paris Agreement.

The bank also said it intends to shift its attention from measuring financial inputs to focusing on development outcomes. According to the organization, this change is designed to maximize the impact of its projects while continuing to address climate-related challenges alongside broader development goals.

The decision comes amid sustained criticism from the United States, the World Bank's largest shareholder.

During the World Bank and International Monetary Fund spring meetings in Washington earlier this year, U.S. Treasury Secretary Scott Bessent sharply criticized the bank's climate financing target. He described the goal as "distortionary," "nonsensical," and "arbitrary," arguing that it created inefficiencies and diverted the institution from its primary mission.

Bessent urged the World Bank to abandon its target of directing 45% of financing toward climate-related activities, saying the institution should instead focus on reducing poverty and promoting economic growth.

The United States had also signaled its concerns previously by declining to endorse a joint letter last year supporting the World Bank's ongoing climate initiatives.

Despite the policy shift, the World Bank stressed that climate action remains an important part of its development agenda. Rather than relying on financing targets, it plans to measure success based on the real-world results achieved for client countries.

The bank also confirmed that it will conduct an independent review of the Climate Change Action Plan (CCAP) at the request of its board. The evaluation will examine whether the strategy is effectively helping countries respond to climate risks and achieve their development and climate objectives.

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The review is expected to shape the future direction of the World Bank's climate programs as it balances development priorities with growing global efforts to address climate change.

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Source: ESGDIVE