Tag: Bank

The resignation of David Malpass, president of the World Bank, was greeted with relief and joy on Wednesday evening by climate experts and campaigners, who said it should open up a new era for financing the global shift to a low-carbon economy.

Malpass, who was appointed to the role by the then US president Donald Trump in 2019, had been facing mounting calls to step down after a series of missteps, including lacklustre plans for green investment, and appearing to deny climate science when confronted by a journalist.

In a statement, Malpass said the World Bank Group, which provides investment and finance to alleviate poverty and build services and infrastructure in developing countries, was “fundamentally strong, financially sustainable, and well-positioned to increase its development impact in the face of urgent global crises” and that he would “pursue new challenges”.

His departure, which will take place on 30 June to give time to find a successor, should herald sweeping reform of the bank and its sister institutions to focus much more on the climate crisis, experts said. Al Gore, former US vice-president, said: “Humankind needs the head of the World Bank to fully recognise and creatively respond to the civilisation-threatening danger posed by the climate crisis. I am very happy to hear that new leadership is coming. This must be the first step towards true reform that places the climate crisis at the centre of the bank’s work.”

Developing countries have grown increasingly frustrated with the paucity of World Bank funds available for their pursuit of clean energy and to help them adapt to the impacts of extreme weather. Donor nations were also grumbling and pushing for reform, impatient with the bank’s slow progress in delivering a comprehensive climate plan.

Jake Schmidt, strategic director for climate at the US Natural Resources Defense Council, said: “Malpass’s departure allows the World Bank to hit the reset button and finally commit to the leadership needed in the climate finance space. The world needs more and better climate finance to meet the scale of the climate crisis and the needs of developing countries. With new leadership, the World Bank now needs to rapidly evolve, as a growing chorus of countries and experts have been urging.”

Calls for Malpass’s resignation gathered strength after an incident last September, on the fringes of the UN general assembly, when a New York Times journalist asked him on stage to confirm his acceptance of climate science. He fumbled for words and refused to validate climate science. Although he later attempted to clarify his position and insisted he was not a climate denier, the impression had been clearly given and his leadership irrevocably damaged.

Then at the Cop27 UN climate summit last November, arriving late after the plane he was on was hit by lightning, Malpass flew into another storm. Mia Mottley, prime minister of Barbados, spearheaded a carefully coordinated attempt to gather international backing for a new global system of climate finance, with a reformed World Bank at its centre.

The World Bank and its subsidiaries were set up under the Bretton Woods framework, developed by the allies of the second world war in 1944. Mottley told world leaders: “Institutions crafted in the mid-20th century cannot be effective in the third decade of the 21st century. They do not describe 21st-century issues. Climate justice was not an issue then [when the bank was set up].”

Some of the criticisms of the World Bank are that its climate spending is too small, too scattered, uncoordinated and badly targeted, and hard to access by the poorest countries. The bank has also continued to fund fossil fuel projects, despite claiming to phase it out. According to data published last year, the bank has provided $15bn to fossil fuel projects since the Paris agreement was signed in 2015.

Mottley, whose country is one of the many small island states at gravest risk from the climate crisis, was cheered and feted at Cop27, and country after country came forward to support her plans. World leaders including France’s Emmanuel Macron, Germany’s Olaf Scholtz, Rishi Sunak of the UK and the US climate envoy John Kerry discussed what reform could look like.

Malpass, when he finally arrived, could only reiterate that his leadership was delivering a record $32bn (£26bn) for climate finance – sums derided as falling far short of the hundreds of billions and even trillions needed for the green transition.

Yet reform of the World Bank need not involve vast new expenditure by developed country donors, according to its former chief economist Nicholas Stern. He estimates that because of the structure of the bank’s capitalisation, investment of about $9bn from developed countries over several years could enable it to raise about half of the $2.4tn a year he calculates will be required in total climate finance by 2030, to put the world on a low-carbon path.

“These sums are not scary,” Lord Stern told the Guardian at Cop27. “They are about 5% more than the current investment [much of which goes to fossil fuels and high-carbon infrastructure]. We could, if we wanted to, get started quickly.”

Mottley is expected to set out her proposals, known as the Bridgetown Agenda, in some detail in the coming weeks, to be discussed by world governments before the spring meetings of the World Bank Group in April. Then in late June, Macron will hold a climate finance summit in Paris, by which time – if nations can keep up their constructive spirit – the new plans may be ready to start putting into action.

By then, a new World Bank president should be ready to take over. Since the Bretton Woods institutions were set up, that appointment has always been made by the US president, while European leaders choose the head of the International Monetary Fund. Some developing countries would like to see that convention reformed, too, and have a global competition to find a new president – but that might be a step too far for Malpass’s successor.