The World Bank Group is today the world’s largest financier of climate action in developing countries – over $26 billion in 2021 alone – accounting for over half of multilateral climate finance to developing countries—and over two-thirds of adaptation finance.
- An urgent priority is to support a small group of high-emitting countries with the low-carbon transition - halting new coal and decommissioning existing coal-fired plants
- For the world’s poorest countries that account for less than one tenth of global emissions, support will drive investments in clean energy at scale, so they can avoid locking in to polluting infrastructure while achieving their energy access goals.
- Some climate impacts are now inevitable so all countries will need to invest in adaptation and resilience, and these needs will be very localized and specific.
In June 2021, the Bank Group released its second Climate Change Action Plan (2021-25), marking a paradigm shift in the Bank’s approach: from investing in “green” projects to greening entire economies; and from inputs to measuring impacts.
Some key highlights include:
- A major push to further integrate climate and development on a number of fronts, but particularly through new Country Climate and Development Reports (CCDRs) will help inform the development strategies of individual countries in a manner that integrates climate and development.:
- The Bank will make CCDRs public so that other donors, lending institutions or companies can also use them to guide their investments.
- A big step up on finance. The Bank Group set a target to commit 35% of its overall financing to climate finance on average over the five years of the Action Plan; and at least 50% of World Bank climate finance will support adaptation. The commitment to aligning financing flows with the Paris Agreement means that the Bank Group’s finance will account for climate considerations going forward.
- Ramping up support for countries to shape a green, resilient and inclusive recovery. A core part of the Action Plan focuses on key systems—energy; agriculture, food, water, and land; cities; transport; and manufacturing—that must be transformed to address climate change, achieve a resilient and low-carbon future, and support the protection of natural capital and biodiversity.
- Accounting for over 90% of global greenhouse gas emissions, these systems face significant climate change impacts as well, making adaptation action critical across all five.
- In addition, it will be essential to develop local capital markets and make greater use of these markets to fund private investments in climate adaptation and mitigation.
- The Action Plan also places a strong emphasis on approaches that integrate people and communities into the low-carbon transition; so rather than being left behind, they are beneficiaries of the new climate economy of the future.
Even with these ambitious new targets on climate finance, a sizeable financing gap remains and, along with multilateral institutions, both private and public sectors will have a vital role in financing the transition.
- Getting the right policies in place is a first, critical step: ranging from climate-proofing a financial system, to regulating vehicles or setting energy efficiency guidelines, to national climate plans, whether Nationally Determined Contributions to the Paris Agreement or Long Term Strategies for decarbonization.
Setting a clear low-carbon, resilient path sends a signal to the private sector. Trillions of dollars in global financial assets are held by banks, institutional investors, and asset managers.
- The Bank Group’s private sector arm, IFC, is deploying innovative platforms, creating and strengthening local capital markets and greening domestic financial sectors. These efforts will help generate opportunities for bankable projects and private capital to flow at scale for both mitigation and adaptation.
- Financial markets should also take a holistic approach to mainstreaming climate and sustainability in all their decision-making. The World Bank uses the Sustainable Development Bond label as a way to signal that climate and sustainability concerns are integrated across all of our work, regardless of sector, region or country.
Last Updated: Apr 08, 2022