France, Other World Bank Shareholders Seek Solution to Preserve Climate Strategy

France, Shareholders Seek Ways to Preserve World Bank Climate Strategy

World Bank Climate Change Action Plan and Shareholder Responses

By David Lawder

WASHINGTON, April 17 (Reuters) - World Bank shareholders are looking for ways to keep the development lender's climate change financing strategy alive in some form after its official expiration at the end of June, France's development minister Eleonore Caroit said.

Caroit told Reuters late on Thursday she has been discussing plans to keep the basic benefits of the World Bank's Climate Change Action Plan intact at this week's International Monetary Fund and World Bank spring meetings in Washington.

France's Position on Climate Strategy

"We don't find it acceptable that there is the expiry of this current action plan, and we want to find a solution so that we can find a way to continue acting in this field," said Caroit, whose formal title is Minister Delegate for Francophonie, International Partnerships and French Nationals Abroad.

U.S. Opposition and Policy Shift

U.S. President Donald Trump's administration is demanding the World Bank abandon its target to devote 45% of its annual lending resources to climate-related projects, and focus instead on core development lending, including a return to fossil fuel energy projects.

U.S. Treasury Secretary Scott Bessent this week welcomed the expiration of the Climate Change Action Plan, calling the World Bank's climate targets "distortionary" and "nonsensical."

Statements from U.S. Officials

"Upon its long-overdue expiration, expect the (World) Bank to immediately shift its myopic focus on climate and financing volumes to one that emphasizes high-quality, durable projects rather than shaping and selecting projects to chase arbitrary financing targets that do little to lift people out of poverty," Bessent said in a statement to the World Bank's and IMF's steering committees.

Global Economic Context

Oil Shock and Political Implications

OIL SHOCK 

He made similar statements a year ago, but the looming expiration and the massive oil and gas price and supply shock caused by the war in the Middle East that is now threatening to tank the global economy prompted more intense discussions this week.

A senior development official at the IMF and World Bank meetings said that allowing the action plan to lapse would be "an important political signal."

Risks to Climate-Focused Projects

"Projects that have an ostensible, very obvious climate focus, like solar power, well could be at risk at the (World Bank) board in the future," said the official, who spoke on condition of anonymity.

Shareholder Divisions and Board Dynamics

A group of 19 of 25 World Bank shareholders signed a statement last October calling for continued support of the bank's climate goals, but the directors representing the U.S., Japan, India, Saudi Arabia, Russia and Kuwait declined to sign.

A second source familiar with World Bank board deliberations on the matter said that executive directors representing just over half the board's voting power support continued climate engagement, but it was unclear whether that would translate to the finance minister or leadership level.

World Bank Leadership and Project Strategy

Ajay Banga's Approach

World Bank President Ajay Banga, whose mandate under the Biden administration was to scale up climate financing quickly and focus on renewables, last year ended a ban on nuclear power and launched a push for more gas projects.   

In October he rebranded climate-linked projects as "smart development" that creates jobs and lifts people out of poverty while building resilience against droughts, storms and floods.

Climate "Co-Benefits" and Project Examples

He said 48% of the World Bank's project financing had climate "co-benefits," and projects such as flood-resistant roads, railways that move goods more efficiently than trucks and water-saving drip irrigation systems counted towards the goal.

Future of Climate Projects and International Commitments

Caroit said there was still strong demand from developing countries for these types of projects that were considered part of the climate strategy - regardless of how they are labelled - including wind and solar energy as well as climate adaptation projects.

"We're talking about adaptation to climate change. We're talking about mitigation, so limiting its impact," she said. "And ultimately, we're talking about making people's lives better, helping them to fight against hurricanes, floods and all of these disasters that we're seeing everywhere."

France's Advocacy for Paris Agreement Goals

Caroit added that France would advocate for preservation of the 2015 Paris Agreement's climate change goals as part of its Group of Seven presidency this year. Finance ministers and central bank governors are due to meet in Paris on May 18-19, ahead of a leaders summit in Evian-les-Bains in June. 

(Reporting by David Lawder; Editing by Paul Simao)