WB raises climate change funding facility
Such a fund may attract bilateral donor resources separate from shareholder budget lines supporting the WBG, and potentially include donors beyond shareholders
The World Bank on Tuesday seeks to increase its lending capacity to handle climate change and other global challenges through a capital increase and to make new lending tools.
In a roadmap document, WB’s middle-income lending arm International Bank for Reconstruction and Development, warned that an increase in lending for requirements such as food security, health care, and climate change might necessitate a capital increase.
The document said IBRD’s $13 billion capital increase in 2018 “was designed to be prepared for one mid-sized crisis a decade, and not multiple, overlapping crises,” including the Covid-19 pandemic, the war in Ukraine, and the effects of accelerating climate change. Mid-2023 will likely deplete IBRD’s crisis buffers.
The roadmap also suggests that World Bank shareholder nations increase their regular contributions to the International Development Association, the lender’s fund for the world’s poorest countries, which have decreased in recent years despite rising needs.
The plan also allows the setting up a new trust fund for middle-income nations that would provide concessional loans with a focus on global public goods and a structure akin to IDA, with recurring cash replenishments that would be distinct from the capital structure of the bank.
“Such a fund may attract bilateral donor resources separate from shareholder budget lines supporting the WBG, and potentially include donors beyond shareholders,” such as private foundations, the bank said.
The bank stated that extra staff and budget resources, which have decreased by three percent in real terms over the previous 15 years, are necessary to carry out its aim to boost climate lending while retaining positive development outcomes.
But the development lender said in the same document it would investigate options such as a potential new capital increase, adjustments to its capital structure to enable more lending, new financing tools like guarantees for private sector loans, as well as other approaches to mobilize more private capital.
“The challenges the world is facing call for a massive step up in the international community’s support,” the bank said in the document.
“For the (World Bank Group) to continue to play a central role in the development and climate finance, it will need a concerted effort by both shareholders and management to step up WBG financing capacity,” it added.