World Bank drops climate lending target amid US pressure
The World Bank will abandon its 45% climate lending target after US pressure, shifting focus to smart development and measurable outcomes
- The World Bank is dropping its target of directing 45% of its annual lending to climate-related projects.
- This policy change was made following pressure from the United States, which argued the target was "distortionary" and hindered economic growth and poverty reduction efforts.
- Instead of a fixed percentage, the bank will now focus on the results of its financing, framing climate action within a broader "smart development" strategy that links it to jobs and growth.
- The decision exposed a divide among major shareholders, with France opposing the move while the U.S., Russia, Kuwait, and Saudi Arabia did not support the climate target strategy.
The World Bank Group will abandon its target of directing 45% of annual lending towards projects with climate co-benefits, marking a major shift in how the development lender frames climate finance amid pressure from the United States.
The bank said it would retire the lending target and move away from fixed “input” goals, while continuing to extend its Climate Change Action Plan, or CCAP. The shift means the bank will place greater emphasis on the results of its financing rather than a predetermined share of lending devoted to climate-related projects.
The move follows pressure from the administration of US President Donald Trump, which has pushed the World Bank to drop climate finance targets adopted during the Biden administration. US Treasury Secretary Scott Bessent said in April that the bank should abandon what he called a “distortionary” 45% climate finance target, arguing that it impeded market efficiency, distorted incentives and undermined efforts to reduce poverty and spur economic growth.
The 45% target had become one of the World Bank’s most visible climate commitments. It followed an earlier goal, announced in 2020, for 35% of World Bank Group financing to have climate co-benefits on average over five years. That target replaced a previous 28% goal and included an ambition for half of climate finance from the World Bank’s IBRD and IDA arms to support adaptation and resilience.
World Bank president Ajay Banga has increasingly shifted the institution’s language towards “smart development”, a framework that links growth, jobs and climate resilience rather than treating climate finance as a separate lending category. Under that approach, projects may include drought-resistant agriculture, storm-resilient infrastructure and renewable energy where appropriate.
The bank says demand from client countries for projects with climate benefits remains high, even as the formal lending target is being dropped. Its climate materials show that the World Bank Group delivered US$50.8 billion in development finance with climate co-benefits in fiscal year 2025, equal to 48% of total financing under the shared multilateral development bank methodology.
The World Bank will also continue to track climate indicators through its Climate Scorecard and project-level reporting. Its climate materials say the bank discloses climate co-benefits for each project and began publishing sub-project level climate co-benefits data from April 1, 2025, with climate co-benefits at project close disclosed from July 1, 2025.
The Climate Change Action Plan will remain in place while the bank’s Independent Evaluation Group conducts a review. The CCAP was first introduced in 2016 and was later renewed under the 2021–2025 plan, which aimed to guide World Bank Group support for emissions reduction, adaptation, resilience and the alignment of financial flows with the Paris Agreement.
The decision has exposed a divide among major shareholders over the bank’s future direction. France had urged the World Bank not to scrap the 45% climate finance target, while several shareholders backed continued climate action. However, the United States, the bank’s largest shareholder, did not join a shareholder letter supporting the climate strategy, and directors representing Russia, Kuwait and Saudi Arabia also declined to sign. India and Japan abstained.
The change does not mean the World Bank is leaving climate finance behind. Rather, it signals a more politically cautious approach: climate-related projects will continue, but the bank will frame them around development outcomes such as jobs, resilience, productivity and poverty reduction.
For developing countries, the practical question will be whether the shift changes the volume or terms of finance available for climate adaptation and mitigation. For the World Bank, the decision reflects a balancing act between shareholder pressure, borrower demand and the need to keep climate risks embedded in development lending without relying on a fixed headline target.
Source: Reuters, Reuters, treasury.gov, Worldbank.org, Worldbank.org
