Nations hope the World Bank and IMF are no longer in climate denial
In a grim series of IMF and World Bank annual meetings in Washington this week, policymakers left reeling from the Covid pandemic, war in Ukraine and spiraling inflation were reminded by the IMF another crisis: climate change.
“The world has gone through shock after shock after shock,” IMF Managing Director Kristalina Georgieva said earlier this week. “And there is no pause button on the climate crisis while we deal with these other crises.”
The point was not lost on David Malpass, the World Bank president appointed by Donald Trump, who has been under pressure to resign since refusing to say last month whether he believed in climate change caused by climate change. ‘humanity. He repeatedly insisted at annual meetings this week that he did.
Despite the general gloom in a week dominated by talk of economic instability, ministers and climate advocates say they left with a sense of optimism that the global financial architecture in place since the WWII could pivot to help fight climate change.
“I think we are heading towards a moment of sorts,” said Avinash Persaud, special envoy for climate finance to the Prime Minister of Barbados. “It is recognized that multilateral development banks need to do much more – especially the World Bank, but not only the World Bank – on climate finance.”
Barbados has spearheaded efforts by smaller and less wealthy nations to secure funds to help fight the ravages of climate change, in part by pushing the IMF and World Bank, both founded in 1944, to to change.
Barbados Prime Minister Mia Mottley, who at a recent conference said that lenders “no longer serve in the 21st century the purpose they served in the 20th century”, called on lenders to extend their use of low-interest, long-term loans. debt instruments to finance the energy transition and offer concessional financing for climate resilience projects.
There were other signs that the so-called “Bridgetown agenda” was gaining traction among the leaders of the wealthier countries.
This week, the United States, Germany and the G7 countries delivered a written proposal to the World Bank, a leading provider of loans and grants to the poorest countries, setting out a series of measures to be considered. .
These include offering concessional finance for climate projects, increasing the use of guarantees and lending to sub-sovereign entities, such as green city initiatives, according to the proposals, which have been seen by the Financial Times.
The existing multilateral development finance architecture “was not designed” to address “cross-border” challenges like climate change and pandemics, according to the document, and the world is experiencing “financing gaps”.
He added, “The world is changing and the World Bank Group must change with it.”
A German official said World Bank management was “now more receptive” to exploring reform proposals related to climate finance.
“The World Bank always says they’re the biggest climate financier and it’s true – but they’re the biggest animal in town,” the official said. “They need to do more for the climate.”
The document echoes remarks made by US Treasury Secretary Janet Yellen earlier this month, in which she called on Malpass to produce “a roadmap for evolution” by December.
Yellen suggested that development banks should make extensive use of concessional finance, including grants, to finance investments whose benefits are shared globally, and particularly in middle-income countries to help them move away from their coal economies.
Persaud agreed that lenders should tackle the “middle income problem”. “It’s less sexy, but 70% of the world’s poor live in these countries, and they depend on market debt,” Persaud said. “If you’re climate-vulnerable and you don’t have access to finance and you can’t invest in resilience, that’s a problem.”
Claire Healy, Washington director of E3G, a climate policy think tank, said it was “exciting” to “see shareholders acting like shareholders and being very clear about what they want to see from their equity”.
“There is a political coalition forming with Barbados and other larger countries like the United States and Germany – to bring about change to these institutions there needs to be a collective political coalition,” said Healy.
During the week, the IMF announced that its new Resilience and Sustainability Trust, a fund intended to help low-income and most middle-income countries deal with climate change, pandemics and “structural challenges was now up and running after receiving initial pledges. of $37 billion.