Rich nations pledge $11bn to World Bank for climate and global crises

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Eleven wealthy countries have pledged a combined $11bn to fund World Bank efforts to tackle global challenges such as climate change and pandemics.

The contributions from countries including the US, Japan, France, Germany and the UK will help to fund the bank’s portfolio guarantee scheme, which allows rich countries to pay borrowers’ debts, and its hybrid capital instrument. 

The two instruments, which can be leveraged between six to eight times by the bank, were launched last year in a bid to boost the institutions’ lending capacity. The World Bank is under growing pressure to help poorer countries deal with the effects of global warming.

Japan will also become the first country donor to the bank’s Livable Planet Fund, with a pledge of $20mn. It has promised $1bn for the portfolio guarantee platform, making it the scheme’s largest declared donor. 

The US has requested $750mn for the portfolio guarantees from Congress and Belgium has announced $70mn. Germany has pledged $325mn towards hybrid capital, while the UK will give $124mn and Denmark $57mn. France, Norway, Latvia and Italy also all contributed.

The World Bank said the money could be leveraged to result in a $70bn boost to its lending firepower.

The contributions follow calls from new president Ajay Banga for a “better” and eventually “bigger” bank. The lender has implemented measures to take on more risk without jeopardising its AAA credit rating, including lowering its equity-to-loan ratio from 20 per cent to 19 per cent, and has switched its goal to reducing poverty “on a liveable planet”.

The announcement came at the end of the annual Spring meetings of the IMF and World Bank this week, where climate ministers and UN officials gathered alongside traditional attendees from finance ministries to supercharge global talks on how the world should pay to combat climate change.

It is estimated spending of $2.4tn a year is needed for developing countries alone to make the shift to green energy.

Tina Stege, climate envoy to the Marshall Islands, said there was a “willingness by everyone to pursue reform”, and that institutions like the World Bank were taking “steps in the right direction”. 

“But the question remains whether systemic reform at speed and scale will be delivered,” added Stege. “If action does not overtake inertia in the [multilateral development banks], people across the world will be paying the cost in lives and livelihoods.”

Outside the official agenda of the World Bank and IMF meetings, the first gathering of a new task force, chaired by the governments of Kenya, Barbados and France to look into how more money can be raised for climate causes through the international tax system, took place.

Laurence Tubiana, one of the architects of the landmark Paris Agreement, said that the fiscal available for financing the energy transition and climate projects was “enormously shrinking” as governments were “obsessed with how we deal with different wars”. 

The levies under consideration by the group include an air passenger levy, wealth tax, maritime fuel levy and global tax on fossil fuel producers. Ideally, such taxes would be adopted by the G20, Tubiana said, or alternatively a smaller coalition of willing countries.

Ministers also met to discuss just transitions away from oil and gas at an event hosted jointly by the World Bank and Beyond Oil and Gas Alliance — a group of countries that have all pledged to phase out oil and gas development. Speakers included representatives from Brazil, Nigeria and Kenya, along with the UN’s top climate change official, Simon Stiell. 

As part of the UN’s annual COP climate summit, countries this year face the challenge of agreeing a climate finance target, known as the new collective quantified goal, aimed at helping poor countries make their economies greener and deal with the effects of climate change.

Dan Jørgensen, Denmark’s global climate policy minister, said the decision at last year’s COP28 in Dubai to transition away from fossil fuels would “need to be matched by bold decisions on how to finance the transition”. 

“The global transition away from oil and gas will have profound implications for developing countries that are economically dependent on fossil fuel exports,” said Jørgensen.

“We need to work with them to address the economic and social barriers they face in making a just green transition.”