World Bank shifts climate strategy: from quotas to economic impact

The organization will no longer adhere to the goal of directing 45% of its annual loan portfolio to projects related to combating climate change. Instead, the bank intends to evaluate the effectiveness of financing based on the final results for the economic development, employment, and resilience of borrowing countries, Reuters reports.

The Gist

• The World Bank has abandoned the goal of directing 45% of its loan portfolio to climate projects.
• Instead of a fixed quota, the organization will evaluate projects based on their contribution to economic development, job creation, and country resilience.
• Climate financing will continue, but the main criterion will be investment effectiveness, rather than its share of total lending.
• The new approach may change requirements for projects seeking World Bank financing, including in Central Asian countries.
• For Kazakhstan, this means initiatives that combine climate impact with economic returns — in areas such as water resources, energy, infrastructure, and agriculture — may have a better chance.

From Climate Quotas to 'Smart Development'

The goal of directing nearly half of credit resources to climate projects was approved under the previous US administration and was considered one of the main indicators of the World Bank's environmental agenda. Now, the organization's leadership has stated that this metric has served its purpose and no longer aligns with the new operating model.

World Bank President Ajay Banga has proposed focusing on the concept of "smart development." This involves supporting projects that simultaneously stimulate economic growth, create jobs, and deliver climate benefits. Examples cited include building renewable energy facilities, modernizing infrastructure, and projects to enhance resilience to the impacts of climate change.

At the same time, the World Bank emphasizes that it is not abandoning the climate agenda. The current Climate Change Action Plan, which was set to expire at the end of June, will be extended, and the organization itself will continue to track and publish climate finance metrics.

The Decision Reflects a Shift in the Political Agenda

The change in approach comes amid disagreements among the World Bank's shareholders. The United States, the organization's largest shareholder, advocated for the bank to return to its traditional mission of financing economic development and poverty reduction. Russia, Saudi Arabia, and Kuwait took a similar stance. At the same time, a number of European countries, including France, insisted on maintaining ambitious climate targets.

According to the bank's leadership, abandoning the fixed share of climate financing will allow for more flexible allocation of resources among infrastructure, energy, and social projects, focusing primarily on their real impact on the economies of borrowing countries.

What This Means for Kazakhstan

For Kazakhstan, the World Bank's decision is unlikely to reduce opportunities for attracting financing. Rather, the criteria for evaluating projects will change.

If previously purely climate metrics could be an additional advantage, now projects that simultaneously ensure economic growth, increased productivity, and resilience to climate risks will likely carry more weight. This approach could benefit initiatives in the areas of irrigation modernization, water conservation, renewable energy development, sustainable agriculture, and transport infrastructure.

Author's Conclusion

The World Bank's abandonment of the quantitative target for climate financing does not mean abandoning the fight against climate change. Rather, it is a change in approach: international institutions are increasingly evaluating projects not by the volume of "green" investments, but by their ability to simultaneously address the tasks of economic development, job creation, and enhancing countries' resilience to climate challenges. For states, including Kazakhstan, this means that in the coming years, projects capable of combining environmental impact with tangible economic returns will have the main advantage.