Despite the fact that direct funding of upstream fossil fuels was supposed to end in 2019, recent research shows that the World Bank Group has spent $14.8 billion directly supporting fossil fuel projects.
- New analysis shows the World Bank has spent nearly $15 billion on fossil fuels since 2015.
- In 2017 the MDBs and the International Development Finance Club agreed to align investment with the Paris Agreement.
- Development finance must find alternatives to fossil fuels to build resilient, Paris aligned infrastructure.
A group of 50 NGO’s including the Big Shift Global coalition and Glasgow Actions Team released a new report showing that the World Bank has given $14.8 billion to fossil fuels since the Paris Agreement was signed in 2015, despite the institution’s pledges to take action on climate.
What is of most concern is that while the amount of direct funding is nearly $15 billion, and the World Bank Group (WBG) has always prided itself on the leverage its involvement in an investment can provide.
A few years ago it calculated for example that for every $1 it invests in a carbon project a further $6 dollars was leveraged. The World Bank published 2018 figures showing that overall 48 guarantee transactions using $7.4 billion in commitments mobilised $30.2 billion of commercial financing and a further $20 billion of other public financing – leveraging nearly 7 times the amount of overall funding.
Even if the leverage for fossil fuel funding was only 1:1, the indirect investment associated with the World Bank’s funding means that the level of fossil fuel support is effectively doubled.
World Bank leadership under fire on climate change
The timing of this report is not great for the World Bank. Former president Donald Trump nominated David Malpass as president of the World Bank in 2019. At the recent NY Climate Week, Malpass was asked if he believed that human activity was the reason for climate change, and he refused to answer. During the interview, Malpass avoided the question and said “I’m not a scientist.”
Malpass later walked back his comments, saying he doesn’t “always do the best job in answering the questions or hearing what the questions are,” despite that the interviewer posed the same question three times. This rapidly led to accusations that the bank was being led by a climate denier.
Damming report on World Bank activity
Titled Investing in Climate Disaster: World Bank Group Finance for Fossil Fuels, the report specifically highlights ten projects that were financed directly since the Paris climate agreement, largely under the leadership of the current World Bank president, David Malpass.
The report was released the same day US Secretary of the Treasury Janet Yellen called on the World Bank to do more to address climate change. Andrew Nazdin, director of the Glasgow Actions Team, one of the groups behind the report said: “We agree with Secretary of Treasury Yellen that the development finance system needs to be fit for purpose in order to react to global challenges and crises, such as climate change.”
He continued: “If the World Bank wants to be a part of the solution rather than the problem, it needs to stop funding fossil fuels and unlock billions in order to support the transition to renewable energy across the globe and end poverty and inequality.”
The continuation of fossil fuel funding is particularly interesting given the World Bank’s own research which said in 2019 that the net benefit on average of investing in more resilient infrastructure in low- and middle-income countries would be $4.2 trillion with $4 in benefit for each $1 invested.
In addition to the ‘top ten’, the report highlights a further five case studies on policy and indirect financial support that Big Shift Members have actively engaged on, and which show other ways in which the WBG is still more of a fossil institution than it would like the headlines to read.
Bronwen Tucker, Public Finance Co-Lead at Oil Change International said: ” The World Bank Group still funds more fossil fuels than any other MDB, and they continue to lock Global South countries into expensive and volatile fossil fuel contracts through their heavy-handed policy lending programs. They are blocking joint MDB Paris Alignment efforts. Malpass must go.”
Transition investment or business as usual?
While the World Bank has pointed to the large sums it has put into climate finance, $109 billion over the same period, many are concerned that the Group is using a range of loopholes to deliberately continue financing fossil fuels under Malpass.
There are already frameworks in place to ensure credibility in transition bonds and it seems as if the World Bank has a job to do in restoring its credibility in this space.
