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For years, the World Bank measured its commitment to climate action by the share of its lending that went towards projects with climate benefits. That benchmark has now been set aside.
In a significant policy shift, the global development lender has decided to abandon its goal of directing 45% of its annual financing to climate-related projects. The move has drawn attention because the bank has been one of the world’s biggest sources of funding for developing countries tackling climate change.
However, the institution insists the decision should not be interpreted as a retreat from climate action. Instead, it says the emphasis will now be on ensuring projects deliver meaningful development outcomes while also strengthening resilience against climate change, rather than simply meeting a percentage target.
The change comes as the World Bank extends its Climate Change Action Plan beyond its original deadline and launches an independent review of its climate strategy. Under President Ajay Banga, the bank has increasingly argued that climate action and economic development should go hand in hand rather than being treated as separate priorities.
From Meeting Targets to Delivering Results
The 45% climate finance goal was introduced to ensure that nearly half of the World Bank’s lending generated climate-related benefits. These included investments in renewable energy, climate-resilient infrastructure, sustainable agriculture, cleaner transport systems and projects aimed at reducing greenhouse gas emissions.
According to the bank, the target helped increase climate-focused financing over the years. But officials now believe that concentrating on a numerical benchmark can sometimes shift attention away from whether projects actually improve people’s lives.
Going forward, the World Bank says it will adopt what it describes as a “smart development” approach. Rather than asking whether a project fits into a climate category, the bank wants to evaluate whether it creates jobs, supports economic growth, reduces poverty and makes communities more resilient to increasingly frequent climate shocks.
For example, strengthening irrigation systems can help farmers cope with prolonged droughts while improving agricultural productivity. Expanding renewable energy not only cuts emissions but also provides reliable electricity to underserved regions. Better roads and transport networks designed to withstand floods can protect communities while supporting trade and economic activity.
The bank maintains that climate considerations will remain embedded across its lending operations. It also plans to continue reporting climate-related indicators and assessing the environmental impact of its investments, even without a formal lending quota.
Decision Sparks Debate Among Shareholders
The policy change has generated mixed reactions among the World Bank’s member countries.
Several European nations, including France, had urged the institution to retain the 45% target. They argue that climate change remains one of the biggest threats facing developing economies, particularly countries already dealing with rising temperatures, severe floods, droughts and extreme weather events. In their view, setting a clear financing benchmark helps maintain accountability and signals the bank’s long-term commitment to climate action.
On the other hand, the United States, which is the World Bank’s largest shareholder, did not support keeping the target. Washington has argued that the bank should place greater emphasis on its core development mission, including reducing poverty, promoting economic growth and financing essential infrastructure. Other countries, including Russia, Saudi Arabia and Kuwait, also opposed continuing the climate lending goal.
The differing views reflect a broader debate over the role of multilateral development banks. While some governments believe climate financing should remain a top priority, others argue that flexibility is more important, allowing countries to decide which development challenges need immediate attention.
Supporters of the World Bank’s revised approach believe the change could result in better-quality investments. They argue that successful development projects naturally deliver climate benefits even if they are not formally labelled as climate initiatives. Removing the lending target, they say, gives the bank greater freedom to design projects based on local needs rather than fixed spending ratios.
Critics, however, fear the decision could gradually reduce the emphasis on climate action at a time when vulnerable countries require increasing financial support to adapt to global warming. Without a measurable benchmark, they warn, it may become harder to track whether climate finance remains a genuine priority.
The World Bank has sought to reassure stakeholders that climate remains central to its mission. By extending its Climate Change Action Plan and reviewing its broader climate strategy, the institution says it is not stepping away from environmental commitments but changing how success is measured.
As climate-related disasters continue to place growing pressure on economies around the world, the effectiveness of this new approach will be closely watched. Whether the shift delivers stronger development outcomes while maintaining momentum on climate action could shape the future direction of global development finance for years to come.
References:
https://www.worldbank.org/ext/en/country/unitedstates
https://www.sciencedirect.com/science/article/pii/S0301479724017687
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