World Bank Continues to Fund Fossil Fuels – The Post

[ad_1]

Loading the player

At the 28th UN Conference on Climate Change, abbreviated COP28, one of the topics discussed is the establishment of a compensation fund for developing countries most exposed to the effects of climate change (“loss and damage” in English). The World Bank could play a role in setting up this fund. There are many political and economic doubts about the possibility that the World Bank alone could manage the fund. Among other things, the institution has long been the center of strong criticism for the significant funding it provides to the fossil fuel sector that causes greenhouse gas emissions and increases in atmospheric temperatures: oil, gas and coal.

Recent research developed by Urgewald, which is responsible for tracking economic resources going to polluting sectors, shows that in 2022 the World Bank Group provided more than $3.7 billion in financing, which in various forms reached companies operating in the sector fossil fuels.

By “World Bank Group” we mean a set of international institutions that deal with the financing of long-term projects in the poorest and developing countries, where, among other things, fossil fuels are notoriously still highly subsidized. Many observers and researchers have been calling for reform of the rules for the disbursement of funds for some time: they often have opaque and convoluted mechanisms that do not allow us to trace exactly where the money ends up. With the result that the World Bank also finances sectors from which most international organizations and governments are gradually, at least intentionally, distancing themselves.

The link between the World Bank and polluting sources has been much discussed recently, also because of its president David Malpass, who has been accused of denying his stance on climate change: in 2019, the then president of the United States, Donald Trump, hinted at it, and this February he announced his resignation due to strong criticism , which he got. With the arrival of a new president in June, Indo-American businessman Ajay Bang, the World Bank appears to have begun a period of rethinking how to try to turn things around.

What is the World Bank
The World Bank is an institution created at the end of World War II. It was born together with the International Monetary Fund, and the intentions of both institutions were to have different but complementary tasks, with the common goal of guaranteeing economic cooperation that would be truly effective at the international level: the IMF was to serve to ensure international monetary policy. stability and the provision of emergency loans in the event that the country finds itself in a serious situation of economic imbalance; The World Bank was instead tasked with helping to rebuild the countries most affected by the war by financing the governments.

After its creation, it became clear that in fact the task of reconstruction was primarily undertaken by the Marshall Plan, a large economic aid project originating in the United States and directed to European countries. Over the years, therefore, the purpose of the World Bank has changed and evolved: today it is concerned with the study of the processes that lead nations to economic development, and above all with offering long-term capital, aid and advice to the poorest countries so that they can grow and begin to flourish.

In current consolidated practice, the appointment of the President of the World Bank rests with the United States, while the appointment of the Director of the IMF rests with European governments.

Initially, the World Bank was born under the name International Bank for Reconstruction and Development (IBRD) and over time it was joined by other institutions, the most important of which areInternational Financial Corporation (IFC), whose sole mission is to stimulate foreign investment and provide capital to companies in developing countries andInternational Association for Development (IDA), which provides loans on favorable terms to particularly disadvantaged countries. The term World Bank generally refers only to IBRD and IDA, while the term “World Bank Group” refers to all the various institutions together.

How and in what the World Bank Group invests
In 2022, the World Bank Group secured a total of $104 billion in financing worldwide. For the most part, it finances projects that must guarantee economic profit over time and that must also have social value and be oriented towards the development of the countries where they start. They concern a wide variety of sectors: from agriculture to infrastructure creation, from health to research and so on.

Among them are investments in the development of energy from renewable sources, but there is still a significant share of funds that finance fossil fuels, even though most international organizations and states are gradually reducing ties to the energy sectors. coal. There is nothing illegal about continuing to invest in these sectors, but in the case of an international organization that participates in governments around the world and that has the fight against climate change among its specific goals, a significant ethical and reputational question arises.

However, the World Bank has stated that from July this year, all funding it will provide must be in line with the goals of the 2015 Paris Agreements, which, simply put, count on limiting the increase in average global temperature to two degrees. degrees Celsius compared to pre-industrial levels. Even if it does manage to align, there is still some fundamental opacity when it comes to classifying its various operations, so some might appear to be aligned with the goals even though they are actually financing fossil fuels.

The problem is that, given the way the World Bank’s operations are structured, it is very complicated to understand precisely where the funding provided would be needed. Partly because some of the financial instruments used by the bank and very common in international trade, perfectly legitimate but rather opaque in nature, do not allow detailed verification of where the funding is going. Second, because currently the World Bank is not really equipped to monitor the climate impacts of its investments.

Many experts and organizations fighting climate change have long called for institutions belonging to the World Bank to make their criteria for classifying funding more transparent, so that compliance with environmental goals can be more easily and immediately assessed. According to a recent report by the international non-profit organization Oxfam, approximately 40 percent of the funding provided by the World Bank cannot be verified in this sense.

In the case of the World Bank, until this July – when the institution declared its intention to comply with the parameters of the Paris Agreement – ​​there were not even precise parameters on which to base an assessment of whether there were quotas or not. investments that could be allocated to polluting industries. In addition, investments in the oil, gas and coal sectors are not excluded from the list of investments prohibited by law.

However, things could also change after the recent events regarding the change of president. In February, President David Malpass announced that he would step down: in the last months of 2022, he was sharply criticized by environmental activists – including former US Vice President Al Gore, known for his environmental campaigns – because during a public event organized by New York Timesdeclined to say whether he accepts the prevailing scientific consensus that global warming is caused by the use of fossil fuels. Since then, there have been several calls for his resignation.

In June, Ajay Banga, a businessman who was also the CEO of electronic payments company Mastercard, became president of the World Bank. He was singled out by US President Joe Biden for his experience in pushing for climate change measures: the president is elected by the bank’s board of directors, but it is standard practice for a person designated by the US administration to be chosen. In the announcement, Biden said Banga has decades of experience building international companies and public-private partnerships to finance possible solutions to climate change and migration, as well as the ability to interact with a variety of global leaders.

Before becoming president of the World Bank, Banga was vice president of General Atlantic, a company that invested more than $800 million in research into new solutions for electric vehicles, solar energy, and sustainable agriculture. During her twelve years at Mastercard, she often led projects related to climate, gender equality and sustainable agriculture.

– Read also: Where do polluting emissions come from?

[ad_2]

Source link

Leave a Comment