Major economies call for World Bank climate overhaul
Germany has joined the U.S. and other major economies in calling for a “fundamental” overhaul of the World Bank to better address climate change and other global crises.
German Development Minister Svenja Schulze, a governor of the bank, said Tuesday that the bank’s “current model, which is mainly based on demand from borrowing countries, is no longer appropriate in this time of global crises.”
Berlin, Washington and “other shareholders” have proposed a series of reforms to World Bank management and asked it to deliver a roadmap by the end of the year, a statement from Schulze’s ministry said.
A spokesperson for the German ministry said the group amounted to around 50 percent of the shareholders of the bank and included the full G7, Australia and some others.
A U.K. official confirmed that much of the G7 were involved, although the final makeup was still under negotiation. Other G7 member countries and Australia did not confirm this.
Schulze said the reforms could include “climate lending on better terms” or “targeted budget support for governments which want to pursue policy reforms to make their economies climate neutral.”
The bank “has to make it more attractive for developing countries to use World Bank loans for climate action and biodiversity conservation,” said the minister, who will be in Washington for the annual meeting of the bank this week.
Last week, U.S. Treasury Secretary Janet Yellen called for the bank to “evolve.” Together, the U.S and Germany command 19.8 percent of the bank’s shares.
The World Bank’s role in fighting climate change has come under scrutiny in recent weeks after comments from President David Malpass that cast doubt on the science underpinning concerns about warming that he later walked back.
“We have to work so fast now to create space for the climate problems that are facing many of the developing countries most,” Malpass said Monday, adding later that the bank was “looking for all ways to improve and expand resources.”
Most multilateral development banks (MDBs) are constrained by strict rules regarding financial risk that constrain the type of projects and countries where they can lend.
It’s “not an unreasonable argument” for poorer countries to ask rich countries that have done the most to cause climate change to lend to them at below-market rates, said Harry Boyd-Carpenter, managing director for the green economy and climate action at the European Bank for Reconstruction and Development. “But that’s a discussion between shareholders of MDBs … we don’t have that mandate.”
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