New World Bank Guidelines Should Mainstream Climate Change in Loan Portfolios, Says WRI Report

New World Bank Guidelines Should Mainstream Climate Change in Loan Portfolios, Says WRI Report

As the Group of 8 Summit opens in Gleneagles, Scotland, a new World Resources Institute (WRI) report offers a recommendation for world leaders seeking to address climate change: require the World Bank to mainstream climate change considerations into its global operations in partnership with developing countries.

In just the last year, the World Bank Group has spent $7.6 billion in fossil fuel intensive sectors (37% of total lending for the year) with only marginal efforts to address the climate change implications. During the same period, lending for cleaner energy remained small despite positive targets set in key developing countries such as China, India and Brazil.

"The G8 should call on the World Bank to increase efforts to stop climate change. The Bank should identify and then help fund the incremental costs of financing a clean energy future," said Jon Sohn, a senior associate at WRI, who co-authored "Mainstreaming Climate Change Considerations at the Multilateral Development Banks" along with WRI's Smita Nakhooda and Kevin Baumert.

The new WRI report investigates the limited extent to which climate change issues have been included in the World Bank Group's country assistance strategies, energy-sector loans and project lending and recommends structural reforms to improve Bank lending practices. For example, in the last five years, more than 80% of all World Bank lending in the energy sector did not even consider climate change in project loans.

Additionally, the report reviews national obligations under the Framework Convention on Climate Change (noting commitments by countries to develop national mitigation programs), as well as current actions being taken by key World Bank clients. For example, China recently passed a renewable energy law and pledged to increase its installed renewable energy generating capacity to 60 gigawatts -- about 10% of its total power capacity -- by 2010. The report also highlights efforts by the Bush Administration to slow down support for specific projects and initiatives of the World Bank to reduce greenhouse gas emissions in key developing countries.

If multilateral development banks (MDBs) like the World Bank were to identify the additional costs of financing greenhouse gas emissions reductions, it would help mobilize the international community to finance these costs. To this end, the new WRI report recommends that the World Bank and other MDBs:
  • Revise guidelines for country and sector strategies to explicitly integrate climate change considerations

  • Develop a GHG accounting and options analysis framework

  • Integrate the analysis framework into operations in key sectors

  • Initiate pilot work to reduce GHG emissions at the sector level in partnership with interested client countries.
On June 11, the G7 Finance Ministers Pre-Summit statement endorsed this direction, noting that "we stress the importance of energy efficiency, technology and innovation in ensuring energy security. To help meet the challenge of climate change, we urge the World Bank and other multilateral development banks to increase dialogue with major borrowers on energy issues and put forward specific proposals at their Annual Meetings that encourage cost effective investments in lower carbon energy infrastructure."