World Bank Climate Pivot
World Bank Drops Climate Targets, Shifts Focus to Development Outcomes Amid US Pressure
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Key Points
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The World Bank's board has asked for an evaluation of its Climate Change Action Plan to assess its effectiveness and future direction.
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The 45% climate co-benefits target had previously been raised from 35% to 45% before its removal, indicating an evolving framework that is being stepped back from formal targets.
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The Climate Change Action Plan's quantitative targets are set to expire on June 30, 2026, with the bank signaling a move toward evaluating outcomes rather than fixed input shares.
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The United States has pressed to loosen constraints on fossil fuel lending, including natural gas projects, as part of the bank's pivot to traditional economic development.
The World Bank Group has dropped its 45% climate co-benefits target, bowing to pressure from the Trump administration to refocus on core economic development and poverty reduction. Middle East Online reported the bank is retiring the fixed lending benchmark and shifting to a results-based framework, with quantitative targets set to expire on June 30, 2026.
The timing is striking: just as the bank walks away from the target, its own 2025 data shows climate-linked lending hit a record $50.8 billion — roughly 48% of total financing — exceeding the 45% goal it is now abandoning. RenewEconomy noted the move comes despite pushback from European shareholders urging the bank to hold the line on climate commitments.
U.S. Treasury Calls Climate Targets Distortionary
U.S. Treasury Secretary Scott Bessent has been the loudest critic of the fixed-target approach. "Fixed climate targets have become distortionary," Bessent said in an official statement. "They have pulled the Bank away from its core mission of economic development and forced a 'one-size-fits-all' green agenda on developing nations that need affordable, reliable energy — including natural gas."
Washington has also pressed to loosen restrictions on fossil fuel lending. Perth Now reported the U.S. push includes support for natural gas projects, framing them as essential for energy access in developing countries. The Trump administration has consistently questioned climate-focused policies across international institutions since taking office in January 2025.
Climate Target Rose From 35% to 45% Before Being Scrapped
The 45% target was not the original benchmark. The World Bank launched its Climate Change Action Plan in 2021 with a 35% goal. In December 2023, during COP28, President Ajay Banga raised the target to 45% — a response to pressure from the Biden administration and European allies. Less than two years later, that higher target is now being retired entirely.
Muswellbrook Chronicle reported the bank's board has requested a full evaluation of the Climate Change Action Plan to assess its effectiveness. The results of that review will shape whatever framework replaces the fixed targets after June 30, 2026. Banga recently reframed the bank's goal: "The metric of success is no longer how many dollars we label 'green,' but how many lives are improved through resilient infrastructure and expanded energy access."
European Allies Warn of a Global Climate Retreat
European shareholders are not staying quiet. German and French officials issued a joint statement warning that retiring the 45% target "risks signaling a global retreat from the Paris Agreement at a moment when climate-vulnerable nations are at a breaking point." The World Bank board is now split between a U.S.-led "Development First" bloc and an EU-aligned "Climate Alignment" coalition.
Junee Southern Cross noted that independent auditors previously found roughly 30% of projects counted as climate co-benefits had only a tenuous link to actual climate action. That finding cut both ways: critics say it exposed greenwashing, while climate advocates argue it shows the need for better tracking — not fewer targets. The EU wants stricter accounting, not abandonment.
Other Development Banks May Follow the World Bank's Lead
The World Bank's shift could trigger a chain reaction. The African Development Bank and the Asian Development Bank have historically followed the World Bank's lead on lending policy. A move away from fixed climate benchmarks at the world's largest multilateral lender could push the entire international finance system toward a looser, outcomes-based standard.
Developing nations — many of which pushed back against the old "green" restrictions on energy projects — may welcome the flexibility. But small island states and climate-vulnerable communities face a real risk: without dedicated targets, adaptation funding could quietly shrink as industrial infrastructure projects take priority. The U.S. Treasury estimates the infrastructure financing gap in sub-Saharan Africa alone exceeds $100 billion annually.
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