News: Climate in the World Bank's spotlight

Tuesday, April 16, 2024

Climate in the World Bank's spotlight

Apr 16, 2024

With help from Zack Colman, Allison Prang and Josh Sisco

THE BIG IDEA

Ajay Banga, President of the World Bank Group takes part in a panel discussion at the Annual Meeting of World Economic Forum in Davos, Switzerland, Wednesday, Jan. 17, 2024.

World Bank President Ajay Banga is stuck in the middle of a climate finance fight. | Markus Schreiber/AP Photo

BANGA’S BANK — The World Bank will have its back against the wall this week as financial titans from around the globe descend on Washington for a spring meeting poised to spotlight the tensions roiling climate finance efforts, Zack Colman reports.

President Ajay Banga’s efforts to address global challenges like climate change are on the line as rich and poor nations continue to point fingers around who should bear the brunt of the financial burden to pay for costs tied to more frequent and extreme disasters. Some have expressed concern that the bank has been slow to ramp up to the $2.4 trillion in annual investment economists say is needed by 2030 to meet climate goals.

“The urgent part of that memo somehow got lost,” said Rachel Kyte, a former World Bank Group vice president who is professor of practice in climate policy at the University of Oxford. “You’re starting to see real cynicism and toxic mistrust or lack of trust in the international system.”

The longer the stalemate lingers, the more it allows for other factors to muddy the waters. Elections in the U.S., EU and elsewhere loom this year, and wars in Ukraine and the Middle East threaten to drain resources and attention on climate action.

Other, larger structural challenges are stymying efforts to get climate money out the World Bank’s doors.

G7 countries, which hold more than 40 percent of the World Bank’s voting shares, pushed to handle disputes at the bank’s board meeting — rather than the G20, where countries like China, Saudi Arabia and India have more power. And the U.S. hasn’t increased its World Bank funding because doing so would risk raising voting shares for China, potentially opening up a broader conversation about fairness that reduces G7 power.

Banga is working on reforms to both speed up the timeline for delivering money and drive private capital.

“This is all part of the work that we're trying to do to get the plumbing of the bank to work even better,” he said. “All this sort of adds up to a better functioning machine that we hope can take on bigger and more ambitious projects.”

But time is of the essence to get help to developing countries dealing with the impacts of climate change.

“If we don't make the changes now, in two decades, we lose the fight on climate. Period,” said Rockefeller Foundation President Raj Shah, who served as USAID administrator during the Obama administration.

WASHINGTON WATCH

TRUST ISSUES — Top Biden administration antitrust officials are stressing the view that antitrust enforcement should not be an impediment to companies meeting sustainability goals, but demurring on the idea of engaging directly on when environmental discussions among competitors constitutes illegal collusion.

"Antitrust and competition law enforcement is not supposed to get in the way of progress,” Jonathan Kanter, assistant attorney general in the Justice Department’s antitrust division, said at a panel discussion during an American Bar Association antitrust conference in Washington last week. “The antitrust laws and competition laws address anticompetitive, exclusionary behavior that harms competition. I don't see any impediment to progress with respect to any industry including the importance of sustainability.”

Wall Street firms have come under particular scrutiny for green commitments made through groups such as the Net-Zero Banking Alliance and Climate Action 100+. Republicans in Congress and state governments have accused financial firms of violating antitrust law and have clawed back state investments and business opportunities.

The pressure is working at least on its face: BlackRock and JPMorgan left Climate Action 100+, Bank of America changed its policy on financial coal projects, and insurers fled a net-zero industry group. Whether the firms are actually rolling back environmental pledges or simply trying to defuse antitrust threats isn’t yet clear.

But a Democratic state official acknowledged that conflicting priorities among different states does create confusion for companies.

"The reason why we have a debate about this is because there is a disagreement,” said Gwendolyn Cooley, who heads up antitrust enforcement at the Wisconsin Attorney General’s office and leads the antitrust task force at the National Association of Attorneys General.

Fiona Schaeffer, a partner with the law firm Milbank, called on the Biden administration to provide needed market guidance, noting that these are “hard” issues that can’t simply be left to Congress.

“At the same time companies shouldn't use antitrust as an excuse to shirk their responsibilities to promote progress across a wide range of issues,” Kanter responded.

If companies are actually committed to addressing climate and sustainability issues, competition should spur a “race to the top,” said Federal Trade Commission Chair Lina Khan.

“If firms are really committed to solving some of these problems, they should take the boldness of being market leaders,” Khan said. “And again, there's nothing that our agencies are doing that are inhibiting that.”

AROUND THE WORLD

SHAKY OFFSETS — At least one adviser has resigned from a prominent industry net-zero group amid the continued furor over a plan to let companies use carbon offsets to address Scope 3 emissions, according to people familiar with the matter, Allison reports.

The announcement last week by the Science Based Targets initiative, a group whose standards are widely used by companies to set net-zero targets, was praised by voluntary carbon markets experts and advocates, who said it would boost demand for carbon offsets and help grow climate finance. But it drew an immediate backlash from SBTi advisers who called the announcement by the group's board of trustees “premature and not supported” by recommendations from them.

More than four dozen advisers, in a letter to board members obtained by POLITICO, called for retraction of the Scope 3 announcement. SBTi subsequently issued a statement Friday saying that “no change has been made to SBTi current standards” and that any such change would follow the organization’s standard operating procedure.

One adviser said in an interview with POLITICO that the board’s announcement threatens to undermine SBTi’s role in the climate community.

“This space with the private sector and climate is so important and so polarizing and conflict ridden that I think it actually matters that the institution do things, be very good on process because otherwise it just undermines its credibility,” said the adviser, who requested anonymity to discuss the matter.

SBTi didn’t respond to a request for comment.

YOU TELL US

GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. Join us every Tuesday as we keep you in the loop on the world of sustainability.

Team Sustainability is editor Greg Mott and reporters Jordan Wolman and Allison Prang. Reach us all at gmott@politico.com, jwolman@politico.com and aprang@politico.com.

WHAT WE'RE CLICKING

— The Financial Times takes a deep-dive look at the court rulings around the world that reflect a growing recogintion that governments are obliged to address carbon emissions.

— Researchers are looking into whether heavy household appliances can be equipped with battery storage to keep them working during outages and lighten demand on the electrical grid. The Wall Street Journal has that story.

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