World Bank Group exceeds new climate finance target – $31.7 billion in funding for climate action

NIGERIA: Helping communities adapt to changing dryland conditions. Photo: Arne Hoel / World Bank

Story highlights
In fiscal year 2022, the World Bank Group delivered a record $31.7 billion for climate-related investments.

$31.7 billion – or 36% of overall lending – exceeds the climate co-benefits target set out in the Climate Change Action Plan, 2021-2025: an average of 35% over the duration of the plan.
What do these climate co-benefits look like in reality? Country snapshots from Nigeria, India, Morocco, Romania, Thailand and Malawi illustrate ways how the World Bank Group is supporting countries act on climate.

Investing in climate during turbulent times
While countries are facing rising inflation and uneven recoveries from the COVID-19 pandemic, climate change has not slowed down. 2022 is already set to rank among one of the 10 warmest years on record. Climate impacts threaten to push millions into poverty.

The World Bank Group is committed to supporting developing countries to mitigate greenhouse gas emissions and increase resiliency to climate impacts, while also meeting core development priorities. This is the central approach of the Bank Group’s Climate Change Action Plan, 2021-25, which is already delivering results.

Some of these include:
A significant boost for climate finance overall: In fiscal year 2022, Bank Group lending for climate-related investments reached 36% or $31.7 billion, exceeding the Bank Groups new climate finance target of 35% as outlined in the 2021-2025 World Bank Group Climate Change Action Plan. The $31.7 billion comprises the total share of financing that is directly tied to climate action across all Bank Group projects and is calculated based on the agreed joint Multilateral Development Bank (MDB) methodology. It is a 19% increase from the $26.6 billion record reached in the previous fiscal year.

A major step up for adaptation finance in particular: In addition, adaptation finance for the World Bank (IDA/IBRD) also increased to a record high of $12.9 billion, representing 49% of its overall share of climate finance. This figure reaches close to the Bank’s commitment to achieve parity between mitigation and adaptation financing.

Analytical innovations that bridge development and climate priorities: The Bank Group announced a new core diagnostic report for all World Bank Group client countries: the Country Climate and Development Reports (CCDRs) analyze how a country’s development goals can be achieved while seeking to mitigate and adapt to the impacts of climate change. So far, the Bank Group has published CCDRs for Türkiye and Vietnam, with a further 20 CCDRs to be finalized by the end of this year.

Here is a snapshot of the Bank Group’s climate co-benefits in action, looking at how this type of climate finance is delivering results:

•Helping 3.4 million people adapt to a changing climate in Nigeria

Climate change is causing severe water stress in Nigeria, causing droughts to increase in frequency and intensity. This affects Nigeria’s economic growth – it could cost the country as much as 30% of its GDP by 2050, affecting the livelihoods of millions of households, worsening food security and livelihoods, and increasing the risk of violent conflict.

Sustainable landscape management can help boost the resilience of local communities and adapt to changing dryland conditions. A $700 million Agro-Climatic Resilience in Semi-Arid Landscapes Project aims to develop 20 watershed management plans covering all of Northern Nigeria. It will prioritize investments that can slow desertification while supporting natural resource-based livelihoods, for instance investing in sustainable oases and wetlands can be vital for adaptation and provide alternative incomes for communities. The project is designed to ensure community level participation, building local capacity and coordination between different groups, and ensuring transparency across different agencies so that climate solutions also strengthen the institutional systems in place.

88% of the financing for the project supports activities focused on building climate resilience and adaptation.

Catalyzing private financing to help green India’s economy
India is among the most vulnerable countries to climate change, experiencing more frequent extreme weather events such as floods, droughts, and cyclones. While India has made major strides in reducing poverty in recent years, these gains are at risk from a number of factors, including climate change which threatens the stability of India’s financial system, poses potential massive economic losses to Micro, Small and Medium enterprises (MSMEs), as well as extensive damage to infrastructure.

The Catalyzing Private Financing for Sustainable Recovery and Growth development policy operation (DPO) will support India’s efforts to launch its first sovereign green bond with proceeds expected to finance investments in sustainable infrastructure; to enhance corporate environmental social governance (ESG) disclosures for listed companies; and to develop a domestic carbon trading market. These reforms are critical for implementation of the ambitious announcements made by India at COP26, including the net zero target and its Nationally Determined Contribution (NDC).

With 26% of its financing supporting economy-wide climate actions, this project seeks to improve the enabling environment for the private sector to play a critical role in unlocking long-term financing for national climate action.

Boosting health and climate outcomes for over 11 million Moroccans
The dual crises of the COVID-19 pandemic and climate-related agriculture shocks forced Morocco into a deep recession in 2020, contracting its real GDP by 6.3%. Even though the government’s response to COVID was swift and key reforms were undertaken, climate change continues to threaten a reversal of development gains and to worsen existing economic and social vulnerabilities. There are also some significant health impacts associated with rising temperatures and heatwaves, including the risk of vector borne diseases such as dengue fever and malaria or sun or heat exposure for those working outdoors in sectors like tourism or agriculture. Climate change is also likely to increase the frequency of droughts and floods that threaten the livelihoods of vulnerable subsistence and small-holding farmers.

A $500 million project – the Morocco Health and Social Protection Reform Project – is the first in a series supporting the government’s efforts to improve protection against health risks; human capital losses especially during childhood as well as related to poverty in old age; and to strengthen climate risk management and resilience against catastrophic events. The project supports the expansion of health insurance to 11 million people, the delivery of climate resilient health services, an adaptive social protection system, stronger local capacity to manage climate and disaster risks and the development of insurance mechanisms to protect vulnerable farmers against floods and droughts.

37% of this project directly supports climate-related actions.

Financing healthy oceans and clean water: IFC’s first blue investments in Romania and Thailand
This year, IFC, the private sector arm of the World Bank Group, provided a landmark €100 million loan – the first of its kind for Central and Eastern Europe – to Banca Transilvania SA (BT), enabling the bank to help expand access to water and and improve wastewater treatment in Romania. In addition, TMBThanachart Bank Public Company Limited (ttb) became the first commercial bank to issue a blue bond in Thailand, thanks to a $50 million loan from IFC aimed at increasing access to finance for climate-smart solutions and blue economy projects. IFC has been pushing to promote a global, blue economy finance market aimed at safeguarding access to clean water, protecting oceans and waterways, and further curbing carbon emissions.

The climate co-benefits percentage for these projects is 100%.

Malawi’s first solar plus battery utility-scale project
Malawi has among the lowest electricity access rates in the world, just 11.2% in 2019. Most of the existing generation capacity — 75% — is dependent on hydropower (a significant portion of it from Lake Malawi), which makes the country vulnerable to the impacts of climate change and leads to frequent and lengthy blackouts. Furthermore, peak demand is currently managed by using expensive and polluting diesel generators. The government of Malawi proposes to increase electrification levels to 30% by 2030, seeking to increase electricity supply by new independent power producers and connecting new customers to the grid.

Earlier this year, MIGA issued guarantees of $24 million for investments in a new 20-megawatt solar photovoltaic plant. The plant includes a battery energy storage system — the first in Malawi. The photovoltaic plant, the second independent power producer in Malawi supported by MIGA, adds a new source of clean energy supply that will reduce CO2 emissions by 45,000 metric tons over its lifecycle. The 5 MW/10 MWh battery storage system was installed and made operational at the same time as the plant and has an expected useful life of up to 15 years.

The climate co-benefits percentage for this project is 100%. The project is also consistent with both the low-carbon and climate-resilient dimensions of the Paris Alignment.

Source: The World Bank Group