Nations hope that the World Bank and IMF will no longer deny the climate

At a somber series of annual meetings of the IMF and World Bank in Washington this week, policymakers reeling from the Covid pandemic, the war in Ukraine and rising inflation were reminded by the IMF of another crisis: the climate change.

“The world has been in 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.”

David Malpass, the Donald Trump-appointed President of the World Bank, who is under pressure to step down after refusing to say last month if he believes in human-caused climate change, has not gone unnoticed by David Malpass. He insisted several times this week at annual meetings that he did.

Despite an overall somber week marked by talks of economic instability, ministers and climate advocates said they left optimistic the global financial architecture in place since World War II could help tackle climate change.

“I think we’re moving towards a moment,” said Avinash Persaud, special envoy for climate finance to the Prime Minister of Barbados. “It is recognized that the multilateral development banks need to do much more – particularly the World Bank, but not just the World Bank – on climate finance.”

Barbados has spearheaded efforts by smaller, less affluent nations to secure funds to combat the ravages of climate change, in part by urging the IMF and World Bank, both founded in 1944, for change.

Barbados Prime Minister Mia Mottley, who said in a recent speech that lenders “are no longer serving the purpose in the 21st century that they served in the 20th century,” has urged lenders to scale back their use of soft long-term loans Expand debt instruments to finance the energy transition and provide concessional finance for climate resilience projects.

There were other signs that the so-called “Bridgetown Agenda” was gaining traction among leaders in wealthier countries.

This week, the US, Germany and the G7 countries submitted a written proposal to the World Bank, a leading provider of loans and grants to poorer countries, outlining a range of measures that should be considered.

These include offering concessional financing for climate projects, expanding the use of guarantees and lending to sub-sovereign entities like Green City initiatives, according to proposals presented to the Financial Times.

The existing multilateral development finance architecture “was not designed to address “cross-border” challenges such as climate change and pandemics, the paper said, and the world has “funding gaps.”

She added, “The world is evolving and the World Bank Group must evolve with it.”

A German official said World Bank management is “more receptive now” to considering proposed reforms related to climate finance.

“The World Bank always says they’re the biggest climate financier, and that’s right — but they’re the biggest beast in town,” the official said. “You have to do more for the climate.”

The paper echoed remarks by US Treasury Secretary Janet Yellen earlier this month, in which she urged Malpass to “build a roadmap for development” by December.

Yellen suggested that, by and large, development banks should make more use of concessional finance, including grants, to fund investments where the benefits are shared globally, and particularly in middle-income countries, to help them grow their economies to turn away from coal.

Persaud agreed that lenders need to address “the middle-income problem.” “It’s less sexy, but 70 percent of the world’s poor live in these countries, and they rely on market debt,” Persaud said. “If you’re climate-sensitive 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 expect from their equity.”

“There is a political coalition forming with Barbados and other, larger countries like the US and Germany — to bring about changes to these institutions, there has to be a collective political coalition,” Healy said.

Later in the week, the IMF announced that its new Resilience and Sustainability Trust, a fund intended to help low- and most middle-income countries deal with climate change, pandemics and “structural challenges,” is now operational is after receiving initial commitments of $37 billion.

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