In a bleak series of IMF and World Bank annual meetings in Washington this week, policymakers left reeling by the Covid pandemic, war in Ukraine and spiralling inflation were reminded by the IMF of yet another crisis: climate change.
“The world has lived through shock after shock after shock,” said IMF managing director Kristalina Georgieva earlier this week. “And there is no pause button on the climate crisis while we deal with these other crises.”
The point was not lost on David Malpass, the World Bank’s Donald Trump-appointed president, who has been under pressure to resign since refusing to say last month whether he believed in climate change caused by humanity. He insisted several times at the annual meetings this week that he did.
Despite the overall gloom of a week dominated by talk of economic instability, ministers and climate advocates say they left with a sense of optimism that the global financial architecture that has been in place since the second world war could pivot to help tackle climate change.
“I do think that we are moving towards some kind of moment,” said Avinash Persaud, special envoy for climate finance to the prime minister of Barbados. “There’s a recognition that the multilateral development banks need to do a lot more — especially the World Bank, but not just the World Bank — on climate finance”.
Barbados has spearheaded the efforts by smaller, less wealthy nations to secure funds to help tackle the ravages of climate change, in part by pushing the IMF and World Bank, both founded in 1944, to change.
Barbados’s prime minister Mia Mottley, who in a recent lecture said the lenders “no longer serve the purpose in the 21st century that they served in the 20th century”, has called on the lenders to expand their use of low-interest, long-term debt instruments to finance the energy transition, and to offer concessional funding for climate resilience projects.
There were further signs that the so-called “Bridgetown Agenda” was gaining traction among leaders of wealthier countries.
This week the US, Germany and G7 countries handed a written proposal to the World Bank, a leading provider of loans and grants to poorer nations, setting out a series of measures to be considered.
These include offering concessional funding for climate projects, scaling up use of guarantees and lending to subsovereign entities, like green city initiatives, according to the proposals, which have been seen by the Financial Times.
The existing multilateral development finance architecture “was not designed” to address “transboundary” challenges like climate change and pandemics, the paper said, and the world was experiencing “funding gaps”.
It added: “The world is evolving, and the World Bank Group must evolve with it.”
A German official said the World Bank’s management was “now more receptive” to exploring reform proposals linked to climate finance.
“The World Bank is always saying they are the biggest climate financier and that’s right — but they are the biggest animal in town,” said the official. “They need to do more on climate.”
The paper echoed remarks made by US Treasury Secretary Janet Yellen earlier this month, in which she called for Malpass to produce “an evolution road map” by December.
Yellen suggested that the development banks broadly should make greater use of concessional finance, including grants, to fund investments where the benefits are shared globally, and specifically to middle-income countries to help them shift their economies away from coal.
Persaud agreed that the lenders would need to address “the middle income problem”. “It’s less sexy, but 70 per cent of the world’s poor live in these countries, and they rely on market debt,” said Persaud. “If you are climate vulnerable and not having access to funding and not being able to invest in resilience — it’s a problem.”
Claire Healy, Washington director of E3G, a climate policy think-tank, said it was “exciting” to “see the shareholders acting like shareholders and being very clear about what they want to see from their equity”.
“There is a political coalition forming with Barbados and other, larger countries like the US and Germany — to make change at these institutions there has to be a collective political coalition,” Healy said.
Over the week, the IMF announced that its new Resilience and Sustainability Trust, a pot of money earmarked to help low-income and most middle-income countries deal with climate change, pandemics and “structural challenges”, was now operational after receiving initial pledges of $37bn.
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