In a surprising move, in early January World Bank President Jim Kim announced he would leave his post three years early to take a position with a private equity firm. The search is now on for a new leader of the international financial institution. By virtue of the size of its investments ($64 billion in fiscal year 2018) and its research and technical assistance capabilities, the World Bank can have a huge positive or negative influence on climate action and sustainable development.
The President is selected through a simple majority of the votes cast by the World Bank Board's Executive Directors, weighted according to countries' capital contributions. By unwritten arrangement dating back to the Bank's founding in the 1940s, a U.S. national is nominated by the U.S. President to head the institution, though a number of observers have suggested many times in the past that a more open and competitive process would be preferable.
Donald Trump now nominated David Malpass, previously Chief Economist at Bear Stearns before its collapse, and currently Under Secretary of the Treasury for International Affairs, for the position. The deadline for other applications is March 14th, and the aim is to have a new head in place by the Bank's Spring meetings in mid-April.
To be sure, the World Bank Group's primary mission is to end extreme poverty and to promote shared prosperity. Yet, fighting poverty and increasing incomes for the poorest everywhere cannot be done successfully without addressing the causes and impacts of climate change. The Bank's own work has made the point compellingly. After intensive analysis, the Bank's own economists concluded that by 2050, over 140 million people in three developing regions of the world could become climate migrants, internally displaced within their own countries because of climate change impacts. The Bank also estimates that without urgent action to cut greenhouse gas emissions, climate change could push 100 million people into poverty by 2030. At the same time, there is ample evidence that accelerating the shift toward a low carbon and resilient growth path can deliver real economic and social dividends. A recent report of the Global Commission on Economy and Climate, of which the World Bank's Interim President is a member, found bold action on climate change could deliver at least $26 trillion in economic gains globally through to 2030. It could also result in 65 million new low carbon jobs in 2030 alone (equivalent to the total workforces of Egypt and the UK today), and lead to 700,000 fewer premature deaths from air pollution.
Given that Malpass was nominated by a President who has announced that the United States will be the only country in the world not to be part of the Paris Agreement, it is especially important that he is crystal clear that he in aligned with the development community's understanding of the links between climate action and poverty reduction.
With that in mind, here are six questions on climate and development the Board ought to ask any candidate for World Bank President:
1. What is your view on the relationship between climate change and the Bank's mission to promote development and eliminate poverty?
Climate change will have a significant impact on the development goals of the World Bank. The UN's Sustainable Development Goals (SDGs), for example, recognize that "climate change is one of the greatest challenges of our time and its adverse impacts undermine the ability of all countries to achieve sustainable development." The World Bank President should have a keen understanding of climate impacts and the interlinkages between climate action and development goals in order to help the institution and its partners succeed in its goals, and should consider where to position the Bank's within the complex ecosystem of climate finance institutions to play to its strengths.
2. How would you shift the World Bank's portfolio away from high-emissions activities, consistent with its commitment to support the goals of the Paris Agreement?
In December 2018, the World Bank, along with eight other multilateral development banks (MDBs), announced a joint framework for aligning their activities with the goals of the Paris Agreement. A joint MDB working group will develop methods and tools to operationalize this effort. According to the Intergovernmental Panel on Climate Change, to reach the Paris temperature goals the world needs to get to net zero in carbon emissions by 2050. To accomplish this, all electricity generation will need to be carbon free by then. WRI's recent report looked at how MDBs can better align with the Paris Agreement.
3. Do you commit to upholding the existing World Bank Group commitments on sharply limiting financing for coal and upstream oil and gas?
In 2013, the World Bank released its energy sector directions paper that limits financing for coal-fired power plants to "rare circumstances." In practice, the Bank has stopped directly financing coal-fired power plants however, the private sector arm of the Bank, the International Finance Corporation, continues to indirectly finance coal through its support for financial intermediaries who have investments in the sector. At the One Planet Summit in December 2017, the Bank announced it would no longer finance upstream oil and gas from 2019, (exploration, drilling and operating wells) except in the poorest countries where there is a clear benefit to energy access and it is consistent with countries' Nationally Determined Contributions under the Paris Agreement.
4. How will you enable the World Bank to uphold its commitment to invest $200 billion in climate finance in the period 2021-2025?
In December 2018, the World Bank Group announced that it will invest $200 billion in climate action for the five-year period 2021-2025. Around $100 billion of this would be direct finance from the International Bank for Reconstruction and Development and the International Development Association arms of the Bank, and the remaining $100 billion from a combination of direct finance from the International Finance Corporation and Multilateral Investment Guarantee Agency and mobilized private capital. WRI's previous analysis highlights progress to date and how all MDBs can further scale up their climate finance.
5. What will you do to ensure that the World Bank delivers on its commitment to provide $50 billion for climate adaptation between 2021-2025 and support resilience of the poorest and most vulnerable countries?
Many of the World Bank's clients are highly vulnerable to climate change. In January 2019, the World Bank released its Action Plan on Climate Change Adaptation and Resilience, which includes a goal to increase direct adaptation climate finance to $50 billion between 2021 and 2025, more than doubling from the amounts finance during 2015-2018. (This goal is a subset of the overall $200bn climate finance goal mentioned in question 4 above.) The Plan also includes commitments to mainstream climate risk management throughout planning, investment design and implementation of World Bank investments.
6. What would you do to ensure the World Bank's social and environmental safeguard policies are fully implemented?
The World Bank's Executive Directors have a responsibility to pick a President that understands climate change and who will ensure the institution treats it as the urgent humanitarian and development crisis that it is.