World Bank to boost climate financing share to 45%, broaden climate debt clauses

The Washington-based development bank, whose new president Ajay Banga is leading reforms, said it will spend $40 billion, $9 billion more than was previously programmed.

World Bank President Ajay Banga said on Friday the development lender will devote 45 per cent of its annual financing to climate-related projects by 2025, up from a target of 35 per cent, and extend debt repayment pauses following climate disasters.

Banga made the announcements at the COP28 climate conference in Dubai as the next steps in a broad overhaul of the World Bank to better respond to climate change and other global crises.

"We're putting our ambition in overdrive and putting to work more than $40 billion per year -- around $9 billion more than the original target," Banga said.

Under the plan, he said that resources would be deployed equally for climate mitigation and adaptation in both the bank's main lending arm, the International Bank for Reconstruction (IBRD) and Development, and its fund for the poorest countries, the International Development Association (IDA).

Banga also said that the World Bank would broaden the scope of Climate Resilient Debt Clauses in its loans to cover all existing World Bank loans for the most vulnerable countries.

The clauses provide for a suspension of repayments in the event of climate-related disasters such as cyclones or floods that can sap countries' resources.

Banga said that such pauses would now cover not only the principal repayments but also debt interest payments, leaving leaders to focus on maintaining access to food, water, power and other recovery efforts.

Founded as World War Two drew to a close to alleviate poverty, the bank is seeking under Banga to expand programmes to respond to climate change and hunger, while boosting its lending power with new funding and balance sheet rules.