World Bank doubling climate financing efforts for 2021 to 2025
The World Bank Group has announced it is doubling its current investments around the world to US$200 billion and these will be channelled towards fighting climate change on "five fronts" between 2021 and 2025.
The $200 billion is made up of $100 billion in direct finance from the World Bank (IBRD/ IDA), and approximately $100 billion of combined direct finance from the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) and private capital mobilized by the World Bank Group.
In a statement, World Bank Chief Executive Officer Kristalina Georgieva said in particular, investing in adaptation will be key.
"So, while we invest in a low carbon future, we must invest in resilient societies at the same time. Simply put, adaptation and resilience are two sides of the same coin," she said.
Countries like Samoa will, as in the past, be eligible to apply for the new round of funding going forward.
The World Banks financing will focus on five target areas: direct financing from the bank, private financing and building markets for "climate business," adaptation support, integrating climate change issues into all areas in society and increasing action in the energy, transportation and food and land sectors.
The bank will invest US$133 billion in systematically increasing direct financing, and "deepening climate mainstreaming throughout World Bank Group," according to the target statement.
That will include disclosing gross and net carbon emissions of all World Bank projects, and screening their projects for climate change risks in order to protect against them.
To leverage private finance and create more marketplaces for climate business, the bank will spend US$67 billion, and $50 billion alone will go towards adaptation measures.
"“Climate change is an existential threat to the world’s poorest and most vulnerable. These new targets demonstrate how seriously we are taking this issue, investing and mobilising $200 billion over five years to combat climate change,” World Bank Group President, Jim Yong Kim said.
Adaptation is a major focus of the World Bank for the next five years. In a dedicated action plan, the bank spells out how through financing, a "whole of government approach" and a new rating system on adaptation improvements, it can help countries plan better for the impacts of climate change.
"By looking across the full range of barriers to climate adaptation, [the Action Plan] will help countries go beyond climate-smart projects to designing and building systemic resilience to climate-related risks," said the bank.
"It aims to change incentives and ensure better information and decision making to reduce the scale of investments needed for adaptation, and to reduce the risk of maladaptation (poorly designed projects or policies becoming uneconomic in the face of worsening climate change)."
The rating system, the plan's new innovation is intended to improve on the "Common Principles for Climate Change Adaptation Finance Tracking," in use since 2015.
That system has limitations. According to the Action Plan, the methodology failed to address adaptation "co-benefits" from mitigation projects, and doesn't factor in work with little to no expenses, like regulatory reforms.
In the last five years, the World Bank has also identified the barriers between the private marketplace and climate adaptation work. There is not yet a guide for climate resilient investment. Defining what that looks like then lead to defining bonds which could be invested into green projects.
"Establishment of definitions for resilient assets would help build a pipeline of climate-resilient projects and accelerate the structuring of an asset class similar to green bonds, channeling external financial flows for climate resilience," the plan explains.
"This system will be designed to create incentives for countries, donors, and the private sector to engage in more and better adaptation; to more effectively report on what the WBG and clients are doing; and to establish a global standard for financial markets and public procurement. The new metrics will be developed by building on past methodological work and case studies and will complement the co-benefits methodology currently used."