22 Mar 2023, 13:26
(International | Clean Energy Wire)
Clean Energy Wire
Germany and the U.S. are jointly pushing for a fundamental reform of the World Bank with an increased focus on the climate crisis, and agreed that it should be finalised at the institution’s next annual meeting in October, German state secretary Jochen Flasbarth told a press briefing. The latest IPCC climate report had shown that “greenhouse gas reduction at high speed” was needed, and this was only possible if the international financial system were to be geared towards the transformation, he said. That is why development minister Svenja Schulze and U.S. treasury secretary Janet Yellen had initiated their push for a reform last year. During a meeting earlier this week (20 March), the two agreed a speedy reform process, Flasbarth said. At the next spring meeting in April in Washington, D.C., the bank’s management must be given a precise mandate to work out a reform proposal “so that everything is ready for a decision by the annual meeting in autumn,” the development ministry state secretary said. “A window has opened that may not be open for very long.”
Flasbarth named three key areas for the reform: a new guiding principle so that the whole bank can get behind the transition; more effective use of the institution’s capital to enable it to provide more loans without losing the AAA rating; and a reform of the business model that makes conditions more attractive for countries that contribute to public goods beyond their own national concerns. “A country that invests in the energy transition also contributes to global climate protection,” Flasbarth said. “Such investments must be more attractive in order to increase demand for them.”
For some time, the role of the finance sector in emissions reduction has taken a back seat, but gearing financial sectors to address challenges of climate change and take advantage of the impending transition is picking up speed, with the reform of crucial international institutions only one example. The World Bank is an international institution, which provides loans and grants to low- and mid-income countries. “In order to successfully tackle global challenges, such as the climate crisis, trillions of dollars in investments are needed – including in particular in developing countries and emerging economies,” Schulze said, adding that the World Bank reform was one key lever for this.