David Malpass fumbled on climate. Will the World Bank get a rethink?

David Malpass put his foot in it. He cannot go anywhere these days without being asked whether he believes climate change is real and human-made. It’s a problem entirely of his own making after the World Bank president dodged questions last month about what is causing global warming — sparking outrage and renewing climate activists’ calls for his firing.

It was a misstep he could ill afford. It comes at a time when the world expects leadership from the bank on pressing issues such as a cost-of-living crisis, inflation, war, and debt distress. It’s also his busiest time of the year, with the bank’s annual meetings set to kick off Monday.

For Malpass, 66, winning over progressives was never going to be easy. The former Wall Street economist was once an outspoken critic of multilateralism and the very lender he now leads, accusing global institutions in 2017 of being “corrupt” and “not very efficient.” And of course, he was nominated for the job by former President Donald Trump, who is himself deeply skeptical of international bodies and climate science.

Climate activists have long demanded more from the World Bank, and Malpass has failed to take the big steps they have sought on ending its project finance for fossil fuels. By last year, they were spearheading efforts to remove him. Recently, former U.S. Vice President Al Gore called Malpass a “climate denier.”

The latest, and loudest, calls for his removal came last month, after Malpass was asked at an event alongside the 77th United Nations General Assembly whether fossil fuel burning is warming the planet. He demurred, saying: “I’m not a scientist.” He immediately set out on a multiday apology tour, running from CNN to Politico to Stanford University to insist that greenhouse gas emissions cause climate change and that he had uttered a “poorly chosen line.” Meanwhile, 27 Democrats in the U.S. House of Representatives have urged President Joe Biden to oust him. So far the White House has settled for condemning Malpass’ remarks.

Still, by not affirming the scientific consensus on climate change from the start, Malpass only added fuel to his critics’ campaign, bank insiders tell Devex.

“It’s not what he believes,” one World Bank employee said of Malpass’ “scientist” gaffe. The person seemed shocked by the misstep, noting that Malpass has supported climate programs and has never voiced denialism in internal settings.

Malpass apologized to staff in a closed-door meeting last week, according to three people present, saying he regretted his “poor performance” — a phrase that rankled some employees who wanted a deeper self-reflection on how their workplace is in the spotlight for the wrong reasons.

His defenders point out that the bank has drastically increased climate spending under Malpass’ tenure — across all its wings, the bank spent a record $31.7 billion on climate-related projects in fiscal year 2022, exceeding its 35% financing target. It also regularly publishes reports on the economic and social consequences of climate change, such as mass migration and food insecurity.

Environmentalists, though, are demanding much more action from the lender to limit global warming, whether through its lending activities or by leveraging its influence over governments. They complain that even if Malpass does not deny climate change, he is at best leading from behind.

For now, Malpass, whose five-year term runs until April 2024, seems to be safe. But the incident has focused attention on his suitability for the job at a time of urgency around climate change. It also homed in on questions around whether the World Bank, like other massive institutions created in the ashes of World War II, is ripe for reforms if it is to address today’s challenges. 

“There has been a lack of leadership on climate change from the very top of the World Bank,” said Sonia Dunlop of climate think tank E3G, adding that in her view it extends to other top officials, not just Malpass. “That is affecting the institution's ability to lead on all kinds of technical processes and nitty-gritty policy issues all the way down the chain.”

From World Bank skeptic to chief

Malpass’ career has taken him back and forth between Washington to Wall Street — making him, on paper at least, an ideal candidate to head a major financial institution with global policy objectives.

In the 1980s, he worked for the U.S. Departments of Treasury and State. He was later chief economist at Bear Stearns in the lead-up to the investment bank’s cataclysmic collapse.

In a totally mistaken analysis that haunts him, in 2007, just as markets were being rattled, Malpass penned an op-ed in the Wall Street Journal telling investors and policy makers not to overreact. Bear Stearns itself was in deep trouble at the time.

He went on to run as a Republican for the U.S. Senate seat for New York, a failed campaign in which he painted himself as a fiscal conservative. And in 2016, he was a senior economic adviser to Trump’s presidential campaign. As president, Trump then made him assistant secretary of Treasury before tapping him to head the World Bank.

At the time of Malpass’ nomination, some fretted that he was biased against global institutions, after he questioned if they had grown too big and said multilateralism had “gone substantially too far.” In a 2017 confirmation hearing for the treasury job, he told Congress that the World Bank largely benefited a small elite. As far back as 2001, he said it was “tempting to argue for the abolition” of the International Monetary Fund, the World Bank’s sister organization, amid criticism of how it handled economic crises in Argentina and Turkey.

Concerns about his climate credentials stem from his role in the Trump administration. As Malpass took over at the bank in 2019, the United States was about to exit the Paris Agreement, a landmark 2015 international achievement meant to cut emissions and keep global warming at the 1.5 degrees Celsius level. Trump regularly backed the oil and gas industry, at times mocking renewable energy, especially wind turbines.

Surviving, but barely

Time and again Malpass has sought to alleviate concerns about his views on climate change. In his first staff meeting in 2019, he mentioned the subject twice, leaving colleagues “visibly relieved.” He also publicly insisted that he would not reverse a longstanding bank policy by reengaging with coal — another key moment.

Malpass has also espoused support for low-income countries on the frontlines of the climate crisis. “The poor generally emit less in greenhouse gasses, and yet are impacted the most by climate change,” he said in December 2020. The bank, officials often note, has worked to align its work to the Paris Agreement, even when Trump was pulling out.

It ceased funding coal projects over a decade ago and stopped supporting most — but not all — new fossil fuel projects.

“Under the leadership of David Malpass, the World Bank Group more than doubled its climate finance, published an ambitious Climate Change Action Plan, and initiated country level diagnostics to support countries’ climate and development goals,” a World Bank spokesperson told Devex last week.

Malpass seems to have fended off calls for his dismissal. In response to questions from Devex, the U.S. Treasury Department — whose current secretary, Janet Yellen, has increased pressure on multilateral development banks to prioritize climate finance — denied the Biden administration wants to fire Malpass.

While the White House condemned Malpass’ remarks last month, the conversation seemed to die, and some sources suggest the moment to remove him has passed.

An unclear mission

Environmentalists are not the only players in the conversation about the bank’s role, particularly on fossil fuels. There is also pushback from low-income countries to what some see as an overly aggressive climate agenda led by green activists and some Western governments. Some argue that cutting off access to development funds for projects such as gas pipelines only punishes the low-income countries.

The African Development Bank, for example, views gas as a transitional energy source, something environmentalists dispute. Uganda just inked a $200 million deal with the Afreximbank for a new crude pipeline, while Senegal hopes to exploit offshore reserves. That Europe is hunting now for more fossil fuels from Africa has raised questions about hypocrisy among wealthy shareholders at the World Bank.

Critics on the right say the bank was designed to make fighting poverty its top agenda, not climate — and that the two missions do not necessarily align. Environmentalists and many global development experts counter that the two go hand in hand and that neglecting climate will exacerbate poverty and inequality.

And, as experts point out, there is no clear guidance from the bank’s major shareholders — the highest-income countries that are major polluters — on what exactly they want the bank to do.

“World Bank shareholders should end support for fossil fuels at home so they have more climate credibility on the international stage,” said Jake Hess, a former World Bank researcher who has been calling for both Malpass’ ouster and an end to the lender’s support for fossil fuel.

Hess urged high-income countries to “give much more money to poor countries to help them transition away from fossil fuels and toward clean energy.”

For the bank, it’s a delicate balancing act, as it needs to get clients on board with its climate spending. And these days, the countries that receive the most World Bank support, and over whom it has the most influence, are generally nations that historically emitted the least greenhouse gasses.

Ultimately, the bank has become a battleground for ideas over the role and remit of major institutions that are owned by the states they serve. A bank designed to clean up the rubble of World War II in Europe was converted into a global development lender and anti-poverty fighter, and its next steps are unclear.

It’s all coming to the fore during a moment of profound economic hardship, conflicts, rising global inequality, and an ever louder warning of climate doom.

At next week’s World Bank annual meetings, Malpass will have to choose his words carefully.