World Bank steps up its climate finance target, but still lacks legitimacy without details

Enormous solar panels were installed by Oxfam.
Oxfam installed a solar-powered pump just outside the town of Gol’Anod, home for about 350 households. Ethiopia. Photo: Petterik Wiggers

During the second day of COP28, Ajay Banga, President of the World Bank Group announced a new climate finance target of 45% of the Bank’s total financing by 2025.

Most definitely a very welcome and overdue action.

This level of ambition is something many have been advocating for since the Bank’s first Climate Change Action Plan (CCPA) was approved in 2016 with a commitment to provide 28% of its portfolio as climate finance or climate co-benefits, as the Bank calls it, by 2020. Yet, the Bank quickly met and exceeded its own target two years early with climate finance reaching 32% in 2018.

And again, during the discussions over the new CCAP in 2021, we argued that the Bank had much greater capacity to scale up its climate finance beyond their proposed target of 35% -just 3 percentage points more than the 32% that was already achieved in 2018. Even now, looking at the Bank’s reported climate finance for FY22 and FY23, we see the Bank again easily exceeded its goal early, reaching 36% and 41% of its total financing as climate finance respectively.

Whether the new target of 45% is now an ambitious enough target or relatively low hanging fruit could be an interesting question to explore, but unfortunately, the Bank’s published data is currently insufficient for these targets and achievements to have real meaning or inspire confidence that the Bank is truly stepping up its investment. Instead, it’s worth focusing on the question of how the Bank’s climate co-benefit targets are met and what the impact is of this reported climate finance.

After all, Ajay Banga himself has also said during the announcement of this new 45% climate finance target… “Our legitimacy must be earned daily through impact.” But how can we begin to assess impact without transparency?

Throughout 2023 and during the discussions of the Bank’s Evolution Roadmap, we have argued for the crucial importance of transparency and accountability when it comes to climate finance generated by the Bank.

This is critically important given that, despite Oxfam’s best efforts, a lack of effective transparency and reporting practices on the World Bank’s claimed climate finance meant we could not verify about 40%, or $7 billion of what the Bank claimed as climate finance in FY20. This is very concerning for us. We found it impossible to verify at the project level the numbers that the World Bank has reported as climate finance with the information currently disclosed.

Improving current climate finance reporting practices is a growing concern. After Oxfam’s report was published, a number of recent reports including from the Center for Global Development and Overseas Development Institute have also questioned the Bank’s project-level reporting and demonstration of the value of its claimed climate finance. In the broader climate finance arena, the recent findings of the ONE Data Commons that “no one knows with certainty how much actual climate finance has been committed, much less delivered”, is absolutely worrisome.

Even though the Bank has a public list of projects that have climate co-benefits, project-level reporting is often patchy, and even where some project level data is reported, the basis on which the climate component is calculated is inconsistent — or in many cases, absent. World Bank project documents provide insufficient and inadequate information to verify where the money is going, what it is being spent on, the type of activities claimed to address adaptation or mitigation, and, importantly, how the Bank is attributing the money they report as climate related, with determinations seemingly being applied with a high-level of subjectivity.

The World Bank is uniquely important among all providers of climate finance in that its practices often set standards for other institutions. It has an immense responsibility to set a high bar for other climate financiers by disclosing its detailed climate finance assessments and internal methodology in a way that allows for independent verification of its claims and whether its efforts are having positive impacts on adaptation and mitigation goals. This is especially important given the Bank plans to ramp up its financing for climate action, and even more critical since most of the World Bank’s climate finance comes in the form of debt that will have to be repaid by lower- and middle-income countries. Otherwise, it is very difficult to have full confidence in the Bank’s numbers.

Without an explanation of how the climate finance component of the project costs and activities were calculated, and explanations of its usage, the Bank’s climate co-benefits reporting does not tell the whole story of the Bank’s efforts, preventing accountability and independent scrutiny of huge volumes of climate finance.

Therefore, in light of this welcome announcement of the new 45% target, we will continue to ask Ajay Banga and the World Bank to earn its legitimacy by:

1. Disclosing its internal methodology for calculating climate finance at the project level and explain its processes and practices for making these assessments.
2. Disclosing the Bank’s detailed climate finance assessments, including the evidence and justifications in support of its calculations for all projects which are reported to have climate finance, in a way that allows for independent verification of its claims.
3. Creating a public climate finance database to track climate finance reported at the level of individual investment activity for each World Bank Group arm including the International Finance Corporation (IFC).
4. Assessing and reporting on its climate finance expenditures within its mid-term implementation and completion reports (a critical step for measuring impact), and include this ex-post reporting in a comprehensive database, updating its actual climate finance numbers.

This blog was written by Oxfam International’s Christian Donaldson, Senior Policy Advisor on IFIs & Economic Justice, with contributions from Jason Farr, Senior Policy Advisor on Just Energy Transition, Daniel Mule, Policy & Programs Manager, Just Energy Transition and Extractives, and James Morrissey Research Lead, Climate, Energy and Extractive Industries from Oxfam America.