KATOWICE, Poland — Last week, on the first day of the international climate negotiations in Poland, World Bank CEO Kristalina Georgieva unveiled the institution’s new climate targets.
Not surprisingly, the money got most of the headlines: The World Bank pledged to double its climate finance over its current five-year commitment, with plans to direct $200 billion to climate-related projects between 2021 and 2025, and $50 billion of that total to climate change adaptation.
In addition to pressing the World Bank to be a leader among multilateral development banks on climate finance, civil society groups and climate change advocates have long pressed for the institution to do more to limit the emissions that result from its own finance and lending portfolio. Some of them were hoping to see even clearer commitments in the bank’s new targets.
In 2017, the World Bank announced it would report on its own aggregate— in addition to project-level — greenhouse gas emissions for the first time. A few months later, at the One Planet Summit organized by French President Emmanuel Macron, World Bank President Jim Kim announced that the bank would no longer finance upstream oil and gas projects after 2019.
In October the bank also dropped a previous plan to finance a controversial coal power project in Kosovo, which had been a subject of particular ire in the climate change community.
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As COP24 opened in Katowice, the multilateral development banks issued a “joint framework for aligning their activities with the goals of the Paris Agreement,” which signaled a further commitment to scrutinizing their investment strategies.
While acknowledging these positive steps, the bank’s watchdogs have asked whether the institution should go even further. If the bank is now tracking the emissions generated by its project financing and investments, shouldn’t the institution set a clear target for reducing those emissions over time?
That question was the subject of intense internal debate as the bank’s staff deliberated over what its latest set of five-year targets should and should not include, according to John Roome, senior director for climate change at the World Bank.
“We debated this one backwards and forwards. What we came to … is that we’re not putting a target on at this time. We didn’t think it made sense for a number of reasons,” he said in response to a question at an event on the sidelines of COP24.
The first reason, according to Roome, is that setting a baseline and tracking emissions against it would be difficult, because of how significantly the bank’s project portfolio tends to fluctuate over time.
“Depending on the sectoral composition of that portfolio, the numbers can move quite dramatically,” he said.
For example, if the bank’s board approves a major energy efficiency project, then all of a sudden the bank’s emissions reduction numbers will spike. If instead the bank initiates a transportation infrastructure project, its exposure to carbon emissions could increase dramatically.
Second, the bank’s leaders were not convinced that an explicit emissions reductions target would be the best way to maximize the institution’s climate change impact, according to Roome.
“In terms of policy, in terms of leverage, in terms of demonstration — sometimes the impact we get is not because of the short-term emissions savings that we have now, but the savings that we create in the future,” he said.
The bank will still report and track the emissions in its project portfolio, and will try to determine, when the numbers go up and down, “what does that mean for our effectiveness,” Roome said.
Finally, the bank sought to set climate change targets that would create clear and action-oriented incentives for project managers, and it wasn’t obvious that an overall institution-wide emissions reductions target would do that.
“The beauty of some of the other targets we have is that if you’re a manager, you know early on exactly what you’ve got to do to move that target by a certain amount,” Roome said.
At the individual project level, the bank’s managers are able to judge whether their investments are creating climate co-benefits, and then make the adjustments necessary to ensure that they are — “and it could change behavior,” Roome said.
“This aggregate mitigation target would not have that incentive built into it,” he added.
Civil society groups will no doubt continue to push the bank to take more decisive action, even if they do acknowledge some sound reasoning behind the decision to hold off on an institutional emissions reduction target for now.
“But it does leave them in a situation where they haven't really built on recent announcements in [their] 2025 targets,” Jon Sward, environment project manager at the Bretton Woods Project, wrote to Devex.
As the multilateral development banks work together to align their portfolios with increasingly urgent demands for climate action, their civil society counterparts will be watching closely.