The World Bank and other multilateral lenders are being urged to change the way they lend to poor countries as research shows economies that contribute virtually nothing to climate change are taking on billions of dollars in debt to mitigate it.
A new study to be released next week but seen by GlobalMarkets shows that 63% of climate-related funding by multilateral development banks in 2022 went towards mitigation — measures to reduce the amount of greenhouse gases entering the atmosphere.
Yet the study by the Breakthrough Institute, an environmental research centre in Berkeley, California, found that low income countries with under $1,145 of income a head contribute less than 0.5% of global emissions.
These countries, which are among the most vulnerable to climate change, facing severe consequences such as extreme weather, food insecurity and economic disruption, receive some finance to help them adapt to climate change. But they are also taking on substantial debt to finance mitigation measures.
Vijaya Ramachandran, a lead researcher on the study, said the current allocation of climate finance risked pushing low income, low emitting countries further into debt for projects that did not meet their most urgent needs.
“They’re paying for the consequences,” she told GlobalMarkets. “They’re being asked to borrow money to finance projects to tackle climate change, and we think it is unfair, given how they’re not responsible for the problem.”
She said analysis of data on the World Bank’s portfolio over the period 2000 to 2024 for 29 low income countries that were responsible for very few emissions showed an allocation of $14bn on adaptation and $12bn on mitigation.
“For the poor countries, we felt $14bn for adaptation was much too low,” she said. “That’s a very small number, over a span of 24 years, [when] it’s adaptation that needs to be the focus.”
Half right?
World Bank president Ajay Banga has committed the Bank to deploying 45% of its lending toward climate, with public financing split half for mitigation and half for adaptation, by 2025.
Ramachandran said a 50-50 split might make sense for the overall portfolio but for the poorest countries the Bank must rebalance towards adaptation as much as possible, given countries’ capacity and borrowing constraints.
“I think they’ve got the message, and I think they’re moving in the right direction,” she said. “I would like for them to say that they are going to be funding more adaptation in the poorest countries, and that they’re going to do so on the cheapest terms possible.”
A spokesman for the World Bank Group said: “While our climate financing stood at 44% in our last fiscal year [to June 2024], we recognise the need to keep pushing on adaptation, because the poorest people on the frontlines of climate change need our support more than ever.”
He said the Bank designed its projects “to ensure they are resilient and deliver development benefits despite the changing climate, and we support countries through a range of tools to enhance their resilience to climate shocks.”
The International Development Association, which provides concessional funding for low income countries, has committed nearly $100bn to climate action since 2011, with 54% going to adaptation.