Malpass: Poverty reduction and climate change are 'the same breath'

David Malpass says the world is facing “huge challenges” but sees no contradiction between two of the biggest tasks on his desk: fighting poverty while combating climate change. The head of the World Bank is facing mounting pressure as he heads to COP 27, the first major climate conference he will attend since his gaffe over whether human activity is causing global warming.

“You have to think of poverty reduction and climate change in the same breath,” Malpass tells Devex in an interview.

It’s a tune more aligned with the messages coming from the Biden White House in these times of sharp economic headwinds battering low-income countries. It’s also far less harmonious with the language of the Trump administration, which nominated Malpass for the job as head of the Washington-based lender back in 2019.

Malpass talked to Devex on Friday, just before he flew to South Africa, where the World Bank is leading a partnership investing $497 million to decommission and repurpose a coal-fired power plant. He’ll then head straight to COP 27 in Egypt.

Malpass will use his time in Sharm el-Sheikh to focus on the climate projects he has on the table, including a methane reduction initiative and a trust fund for incentivizing low-carbon development. He notes in particular plans for the bank to “surge” financing for adaptation projects for low-income countries.

Indeed, this is expected to be a key demand at the climate summit, with the countries that have historically emitted the least carbon piling pressure on advanced economies to put up capital for them to adapt to a more hostile environment caused by their pollution.

“It’s important that we recognize that avenues need to be expanded for adaptation,” Malpass says.

“We are exploring all the different methods by which the bank can absorb resources and then apply those resources to countries,” he added. Just under half of the $26 billion the core bank allocates to climate spending goes towards adaptation in low- and middle-income countries, while billions more come from wings like the private sector International Finance Corporation. 

While under pressure from the Biden administration, Germany, and other countries to fight climate change, Malpass and the bank have it coming at them from all sides.

Some low-income countries are focused on clawing out money for adaptation, especially those in treacherous areas, like island states. Others are upset that high-income nations, and to a large extent the bank, have cut off development finance for gas projects, which they say can help lift them out of poverty but which contribute to greenhouse gas emissions. Some conservatives in the United States do not want the bank touching climate at all, preferring it focus solely on classic poverty reduction schemes.

Malpass then blew the issue out into the open in September when he told an event hosted by The New York Times “I am not a scientist” when asked if emissions caused climate change. He apologized to his staff for his ill-fated words. The clumsy remark that landed him in trouble, though, has a silver lining, he says.

“What it has done is allowed the world to observe, and draws a spotlight on all that the bank is doing and all that the bank staff are doing,” he says, quickly listing off targets hit, including that 35% of all spending goes to climate.

In fact, bank spending on climate under Malpass has more than doubled from around $14 billion when he took over in 2019, to nearly $32 billion in the last fiscal year.

“The bank and the bank staff are happy to have the opportunity to repeat for the world the huge progress being made by the bank directly on the goals of the global community, on climate,” he says.

He digs an elbow in the direction of high-income countries and their increased use of coal and scramble for gas this year as a result of Russia’s invasion of Ukraine, saying it points to the “fragility” of climate efforts.

“Countries, including the advanced economies, are reopening coal-fired power plants and drawing in high carbon intensity energy from around the world in order to keep their grids operating,” he says.

Malpass repeatedly turns the conversation to the stagnation in poverty reduction around the world, in large part as a result of the COVID-19 pandemic and now the war in Ukraine that has exacerbated food and energy inflation trends. The world is no longer on track to end extreme poverty by 2030, the bank announced last month.  

“We're very concerned about the reversal in poverty alleviation. Also, the reversal in education,” Malpass says, referring to rising rates of “learning poverty” stemming from Covid-related school closures — which a recent bank study found are worse than initially expected.

Another area putting pressure on the bank is the question of whether it should reform its lending so that it can loan more money to countries in need. In a speech last month before the World Bank’s annual meeting, U.S. Treasury Secretary Janet Yellen called on the lender to “evolve” for a changed era.

This includes moving to more regional and global projects that meet the moment of pandemics and climate change. And to an extent, it dovetails with a recent report to the Group of 20 which argued the multilateral banks have more lending headroom. Some credit ratings analysts agree that the various multilateral banks can take on more risks without hurting their coveted AAA rating, though how much is up for debate.

Malpass says he’s “embraced” the idea of reforms. “We are working with the shareholders on a menu of approaches towards accomplishing that goal,” he says.

The bank has key milestones coming up, including a meeting with the board later this month on reforms, and Yellen wants a roadmap for evolution by the end of the calendar year.

Before he had to run to catch his flight to South Africa, Malpass took one last question, about whether he thinks he will be at the helm of the bank to the end of his term in early 2024 to preside over this ambitious agenda of changes. There had been speculation that a campaign was mounting in Washington, D.C. for his ouster.

“I’m just focused on getting the job done month by month. We’ve got these huge challenges going on,” he says. “If you look through the three years that I've been at the bank, [you can see] the massive progress that we've made in many of our missions, as far as the effectiveness of the bank, lending and grant programs, and also the effectiveness of the leadership of the bank.”