As America First casts doubt on plans to route climate finance through Multilateral Development Banks, climate finance efforts must be recentred on delivering climate justice

Jon Sward, Bretton Woods Project

Last month the World Bank scrapped its institution-wide 45 per cent climate finance target, as part of a last-minute compromise among its executive board members that saw its wider Climate Change Action Plan extended ‘indefinitely’.

The CCAP extension was agreed by the World Bank’s board after months of wrangling. The plan had initially been devised to cover 2021-2025, was hastily extended for 12 months last year, and was due to expire on 30 June.

The negotiations occurred amid the US’s wider war on climate action and slashing of development finance. In his statement to the World Bank’s Development Committee in April, US Treasury Secretary Scott Bessent called the CCAP’s 30 June expiration “long overdue” and criticised the World Bank’s 45 per cent climate finance target as “distortionary”.

In this context, the compromise that extended the CCAP, while a notable watering down of the Bank’s climate commitments, prevented the plan from lapsing altogether.

A key factor in ensuring the plan was extended was a joint letter sent from the G11+ group in May, representing the executive directors from World Bank borrowing countries, calling for a one-year extension and independent review of the 2021-2025 CCAP by the Bank’s Independent Evaluation Group. The review will now go forward and help shape the future of the CCAP.

Paradise lost? The limits of World Bank climate finance amid a global climate crisis

The mainstream media’s reaction to these developments has been to assume that the World Bank will stop providing climate finance at the volumes seen in recent years. For context, in 2025, according to the Bank’s own reporting, it provided $50.8 billion in climate finance across its public and private lending arms (see the Bretton Woods Project’s assessment of how well this finance aligns with climate justice, i.e. the ‘polluter pays principle’, here).

However, the fact that the Bank’s 45 per cent target has been retired does not mean World Bank climate finance will simply disappear: In fact, the Bank’s 29 June statement confirmed that it will continue reporting on ‘climate co-benefits’ (which is Bank-speak for ‘climate finance’).

This is important, as even with the axing of the CCAP’s climate finance target, climate finance goals remain embedded in various World Bank replenishment agreements and capital increase policy packages which remain in force and are essentially legally binding.

For example, a 45 per cent climate finance target remains in place for the current three-year funding cycle for the Bank’s International Development Association (IDA), which began 1 July 2025 and provides grants and concessional finance to low-income countries. Projects that have ‘climate co-benefits’ in other arms of the Bank will also continue to be tallied as part of its annual climate finance totals.

In short, it’s too early to say whether the Bank’s climate finance – which has grown substantially over the last five years – will go up or down following the removal of the target. This will depend – among other things – on the extent to which Bank management remains committed to tracking climate finance and the level of demand from the Bank’s clients for green projects.

However, the reduced predictability of future World Bank climate finance does have important implications for the global climate finance goal reached at COP29 in 2024 (commonly referred to as the New Collective Quantified Goal, or NCQG), where the Bank and its multilateral development bank (MDB) peers were positioned as a key delivery channel – as I shall discuss below.

What’s really missing from most postmortems of the retirement of the Bank’s climate finance target, however, is a discussion of the quality and transparency of this finance – which has long been a key concern of civil society.

Serious issues with World Bank climate finance have been extensively documented by civil society over the past decade, including concerns regarding overly generous MDB definitions of what counts as climate finance.

There is a troubling lack of transparency over which projects are counted as climate finance by the Bank’s private investment and commercial insurance arms – the International Finance Corporation and the Multilateral Investment Guarantee Agency, respectively – which means that this part of the Bank’s climate finance can’t be independently verified by civil society.

The vast majority of the Bank’s support is also provided as loans that have to be repaid, rather than as grants, with the latter forming just 9 per cent of the climate finance the Bank provided to governments in 2025.

In the case of the World Bank’s policy-based lending instrument (i.e. Development Policy Finance) – where budget support is provided to governments in exchange for agreed policy reforms – the Bank is counting neoliberal reforms of countries’ energy sectors as climate finance, including privatisation of state-owned utilities and the creation of market-based energy systems supplied by independent producers, on the basis that these are key to promoting green energy projects (see our analysis here). The evidence that this approach will lead to an equitable green transition that benefits workers and frontline communities is very thin indeed, with such changes often leading to higher energy tariffs for most consumers. These reforms are increasingly opposed by trade unions in countries in which the Bank works, in favour of a ‘public pathways’ approach to the energy transition.

World Bank climate finance and the accounting changes behind the NCQG: Climate justice deferred

It’s also important to situate the CCAP row within the fraught politics of climate finance more generally. The climate finance channelled via the World Bank and other MDBs currently forms a core part of climate finance flows, totalling $50.5 billion in terms of flows attributable to developed countries in 2024, the latest year for which OECD figures are available.

Under the NCQG, MDBs’ flows are potentially set to grow further, due to changes in accounting proposed by developed countries. Previously, only MDBs’ climate finance that could be attributed to developed countries’ paid-in capital was counted towards a $100 billion per year climate finance target. Under the NCQG, the total amount of MDBs’ climate finance will count towards a target of mobilising $300 billion of public finance annually by 2035.

This is significant because developing countries also contribute to the capital base of these institutions both via repayment of loans with interest and paid-in capital contributions. This accounting shift effectively grows the MDBs’ climate finance pot on the back of developing country contributions (for reference, the amount of MDBs climate finance attributable to developing countries was $20.8 billion in 2024, per the OECD).

According to an investigative report by Follow the Money published in September 2025, the change in MDBs’ climate finance accounting under the NCQG was part of a wider set of accounting changes that allowed rich countries to claim a threefold increase in the global climate finance target, without increasing the amount of public climate finance they would be required to provide in the short term. The report drew on a freedom of information request that detailed hundreds of pages of Dutch officials’ communications related to the COP29 negotiations.

With the arrival of America First at the World Bank, and the subsequent scrapping of the CCAP’s climate finance target, this approach is now under attack.

This requires us to hold two truths in our minds at the same time: Firstly, that the US’s attack on the Bank’s climate work is part of a coordinated effort to undermine climate action and climate science globally; and, secondly, that an over-reliance on MDBs’ climate finance is part of an NCQG that falls dramatically short of developing countries’ financing needs – an outcome which civil society branded a ‘betrayal’ at the time.

Amid geopolitical upheaval, in the coming years global civil society must redouble its efforts to rebuild government support for the public climate finance needed to avert the worst impacts of the climate crisis, including through the creation of new and additional forms of financing, such as taxes on polluters. We urgently need a properly resourced climate finance ecosystem beyond the MDBs, including robust funding for the Green Climate Fund and the Fund for Responding to Loss and Damage.

Beyond climate finance, reforms to the international financial architecture remain essential to ensure developing countries have the fiscal and policy space to pursue their climate goals, including unconditional debt relief amid a worsening Global South debt crisis, and the creation of a UN-based sovereign debt workout mechanism – among other changes.

At the World Bank, the question is not only about future levels of financing (while important). It is also about whether its policies and projects are well aligned with climate and economic justice and enable countries’ green economic transformation. This requires a step change in how the Bank engages with governments, communities, civil society and trade unions, to ensure its work is truly ‘country owned.’

Jon Sward is the Environment Project Manager at the UK-based Bretton Woods Project, a World Bank and IMF watchdog

Photo Credit: Kevin Wolf/Alamy Images

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