The World Bank’s Climate Finance Prioritization: A Historical Review
By Niki Linganur
Introduction:
Across its nearly eight decade history, the World Bank has increasingly
prioritized climate as a focus of its programmatic portfolio. The
World Bank’s climate finance projects are integral to combatting the
harshest impacts of the global climate crisis. Recent
data, published by the World Bank and aggregated by Development Initiatives, gives us a
unique new understanding of how climate finance projects have been
allocated. This policy brief analyzes the data set to better understand
key trends and highlights in the World Bank’s climate finance project
prioritization throughout its history. The World Bank has set many
ambitious, but vital, climate finance goals for itself. In his December
2023 remarks,
World Bank President Ajay Banga committed 45% of annual funding to
climate finance by 2025. He also committed to deploy IBRD and IDA resources equally for
mitigation and adaptation programs. To provide context to these goals,
it is paramount to understand how the World Bank has focused its climate
finance programs to date.
This brief provides retrospective answers to key questions related to the World Bank’s future goals including:
1. What share of World Bank programs to date have been climate finance oriented?
2. What countries have been most prioritized by World Bank climate finance?
3. How has the World Bank prioritized adaptation vs mitigation in its programming?
The Distribution of Climate Finance Programs
It can be difficult to define what constitutes a climate finance oriented program by the World Bank. The data aggregated by Development Initiatives transposes what is called the climate coefficient (or percentage of the project dedicated to climate finance) of each World Bank project. This data is accessible on individual World Bank project pages, but had never before been collected into a public data set. Depending on the reviewer, many climate finance designated project might actually be projects where only a small percentage is dedicated to climate aspects. Using the data set, our insights show that throughout the World Bank’s history only 16% of projects have been dedicated to climate finance in any respect.
Within that 16%, only 6% of these projects have a 50% or higher climate focus. This finding highlights the relatively small portion of World Bank programs where climate has been the primary priority. Additionally, 4% of overall projects have a climate finance focus of 25%-50% and 6% have a focus of 0-25%. It is unclear if projects with only a minor portion dedicated to climate finance should be counted as climate finance programs at all. While counting projects is not the same as pinpointing the exact amount of World Bank budget distributed to climate finance, the percentage of projects primarily focused on climate finance to date is considerably lower than the World Bank’s 45% climate finance target for the 2025 annual budget or even the 35% targeted in the 2021 annual budget.
Even when we look at purely pipeline projects, only 2.6% of projects boast a climate finance percentage of more than 50%. This indicates that a very small percentage of planned World Bank projects will be prioritizing climate finance. While these could be high cost projects, indicating a larger overall investment in climate finance, the statistic is still concerning and should be closely monitored.
The Top 10 Climate Finance Target Countries
The countries the World Bank prioritizes for projects also change when it comes to climate finance. Overall, the top 10 countries with the most reported World Bank projects are Argentina, Bangladesh, Brazil, China, Colombia, Ethiopia, Indonesia, India, Mexico, and Pakistan.
This changes when we only take into account climate finance projects. If we only look at projects with a reported climate finance percentage of 50% or more, Argentina, Bangladesh, and Mexico drop out of the top 10 and are replaced by Mozambique, Philippines, and Vietnam. Overall, each of these countries, with the exception of Ethiopia, have large coast lines which may play a role in their need for climate finance due to the imminent threats to global oceans.
While the top climate finance target countries do not constitute a radically different list from the top overall world bank target countries, some countries in the top 10 have significantly more projects than others. Interestingly, China and India historically have had a disproportionately high percentage of climate finance projects compared to other top World Bank project recipient countries. The disproportionate prioritization of China and India is likely a reflection of each country’s rapidly growing economy, population, political will, and climate challenges. It will be important to scrutinize in the future if the World Bank can have similarly high climate finance project percentages in other countries with significant climate need.
The Historical Balance of Adaptation vs. Mitigation Projects
Development Initiatives’ data also reported the breakdown of mitigation vs. adaption focus within the percentage of climate finance focus of a given project. The historical distribution of mitigation vs. adaption projects is an important point of context given the World Bank’s recent commitment to balance these approaches. Funding has been disproportionately mobilized for projects that have a 50% or higher mitigation focus as opposed to projects with a 50% of higher adaptation focus.
The imbalance in mitigation vs. adaptation prioritization by the World Bank historically has concerning implications. Disproportionately prioritizing mitigation over adaptation risks neglecting the immediate problems communities are facing from climate change. This is a clear environmental equity concern, as many of the communities living in areas experiencing negative impacts of climate change are socioeconomically disadvantaged. It will be critical to continue to monitor this data as the World Bank attempts to balance these approaches.
Moving Forward
The World Bank has achieved amazing successes when it comes to the impact of its climate finance programs, but it is clear from the data that its approach has been historically imbalanced. This policy brief has highlighted three particular areas of imbalance including percentage of overall climate finance projects, countries prioritized for climate finance, and the balance of mitigation vs adaptation programs. The World Bank is clearly aware of this imbalance which is why it is committing to reform, but this retrospective analysis underscores the urgency of change in this space. Particularly, it is important that the World Bank continues to publish transparent data, including clearer definitions of what it considers to be a climate finance oriented project, so that its programs can be monitored for balance and equity.
