World Bank's Ajay Banga on climate: 'My grandchild's time is running out'

The elimination of poverty on a livable planet and fixing the plumbing in the World Bank. The plumbing was Ajay Banga’s retort when asked what imprint he’d like to leave on the anti-poverty lender, while the other encapsulates the World Bank president’s passion for taking on the “intertwined” challenges of poverty alleviation and climate change. Banga — who recently marked 100 days on the job — was just as passionate in pushing back on the notion that the bank can’t juggle its poverty mandate with a “perfect storm” of crises ranging from climate change and pandemics to food insecurity and fragility. “I think this is a false way of thinking that somehow you can solve poverty and not care about the others. I think these are intertwined challenges,” Banga said during an expansive interview with the Council on Foreign Relations in New York City yesterday. “When I was traveling around the world, the first thing you hear is the Western world talks [about] climate as emissions,” he continued. But the developing world “believes climate change is rainfall, heat-resistant varieties of seeds, soil degradation, loss of biodiversity, hurricanes and catastrophes.” “The idea that somehow you can disconnect rainfall adequacy from poverty alleviation is a myth,” he added, giving the example of an Indian farmer who normally grows two crops a year but sees his crops dwindle because of a lack of rainfall. “When it becomes one crop, you can no longer afford the cattle you kept. Because you can no longer afford the cattle, you no longer make the money from dairy. When you no longer make the money from dairy, you no longer keep the farm labor. When you no longer keep the farm labor, guess which child gets taken out of school to help you on the farm — the girl. So for all the poverty stuff we all talk about, four years of lack of rainfall, that girl child is back working on the farm,” he said. Banga didn’t mince words on climate change, blasting those who say taxing fossil fuel emitters is better than issuing carbon credits. “Carbon markets get criticized by everybody because people think it's a cop-out.” Yes, he said, an airline company will buy carbon credits to offset their emissions. The solution then is to figure out a way to fly planes without gas-guzzling fuel. “I refuse to agree that there isn't enough money available. It is the choices we make with the money we have that determine the money we have left over for the choices we do not make.” --— Ajay Banga, president, World Bank But a carbon market that transfers resources from the richer world to countries in the global south that are replete with natural resources is a more realistic solution than taxing people in the Western world. “This idea that somehow we will tax Americans living in Mississippi so the money can be invested in Sudan is a lovely idea, but it ain't gonna fly,” Banga said. “If somebody's got a better idea, you should produce it. Carbon taxes are not a better idea,” he added. “They’re just talk. And we need to get past the talk because my grandchild's time is running out.” Banga also fiercely pushed back on “armchair critics” who lecture him on how to do his job. “I'll be very honest, I think this is a very difficult job and a very serious job, and if it fails, we lose the one instrument we have to make a difference. So these armchair critics who would rather blow it up, they should go and put that bomb under their own chairs, because they're not being helpful. The world needs a World Bank. And the question is how to make it run better. That criticism is welcome [but] it has to be practical.” To that end, he appeared to dismiss a report commissioned by the Group of 20 major economies that calls for a $3 trillion infusion of capital per year by 2030 to help the World Bank and other multilateral development institutions tackle the “triple mandate” of eliminating extreme poverty, increasing shared prosperity, and boosting global public goods such as climate and pandemic prevention. He noted that the G20 has yet to endorse the report and that the expert group that wrote it dropped the idea of the bank tinkering with its cherished triple-A rating to maximize lending. On that subject, Banga was unequivocal. “No I’m not willing to lose the AAA … because if you do, you actually cannot get the magic of the bank to work,” he replied, explaining how the rating allows the bank to leverage money from sovereign governments on the capital markets. The bank could leverage a significant chunk of money if proposed new contributions from wealthy countries — including United States President Joe Biden's $2.25 billion supplemental budget request for the World Bank — come through as part of the capital adequacy framework negotiations, Banga said. “From leveraging the balance sheet to hybrid capital to portfolio guarantees to trust funds to callable capital to using [special drawing rights], there's a whole bunch of technical mumbo jumbo that we can talk about if you want, but those are already launched and people are beginning to subscribe to them,” Banga said. “The U.S. put out a fairly big proposal … Germany has promised stuff, the Nordics, Japan, Korea, Saudi Arabia are all putting money into this capital adequacy. I believe that if all this goes through, including the U.S., we could raise somewhere between $100 to $125 billion of extra lending capacity in the bank, which is pretty good, not enough, but pretty good.” Still, MDBs can only do so much. Banga — the former CEO of Mastercard who also used to work for Citigroup — echoed the refrain that crowding in private capital is essential to drumming up the trillions of dollars needed to tackle 21st-century challenges. At the same time, Banga said the money is already there; it’s the political will that’s often missing. “I believe that a lot of countries can only be helped if they want to help themselves. And one of the things they have to do to help themselves is to care about domestic policy on raising revenue and managing expenses,” he said, citing the lack of tax collection and the use of exorbitant subsidies for fuel and agriculture that are harmful to the environment. “I refuse to agree that there isn't enough money available. It is the choices we make with the money we have that determine the money we have left over for the choices we do not make.” Amid his advice and admonitions, Banga exhibited his straight-talking sense of humor — and his disdain for the acronyms that the World Bank loves to trot out. “I think there’s a senior vice president for acronyms, hiding somewhere in the building,” he mused. “And we need to get rid of those people because they just cause more consternation.”