Multilateral development banks are caught in a tricky dynamic: responding to pressures from key shareholders — notably the U.S. — to loosen restrictions on financing for fossil fuels while working to limit greenhouse gas emissions that negatively affect development. Credit: IPS

By Philippe Benoit
WASHINGTON DC, Oct 14 2025 (IPS)

The World Bank and other multilateral development banks recently have begun reconsidering their self-imposed restrictions on financing fossil fuel projects. This change is being prompted in part by the new U.S. administration and is also supported by developing country experts. Yet, the reality remains that greenhouse gas emissions (GHG) from fossil fuels, and specifically the climate change they induce, can severely undermine multilateral development bank projects and overall developing country growth prospects.

Most of these emissions, however, come from richer big economies, not poorer developing ones. Given the negative effects of these emissions, multilateral development banks need to push richer economies away from fossil fuel-produced GHG emissions, even as they consider softening restrictions on lending for fossil fuel projects in poorer countries.

Last decade, multilateral development banks began restricting funding for fossil fuel projects due to concerns about the negative impact of emissions-induced climate change on development, but also under pressure from the U.S., European and other key stakeholders.

The emissions reduction needed to avoid dangerous levels of climate change must come, unsurprisingly, from the world’s biggest economies. This includes China, with 33 percent of carbon dioxide emissions in 2022, followed by the U.S. with 13 percent, the European Union taken as a block, Russia and then Japan. Together, these countries generate 60 percent of the global total

For example, the World Bank announced in 2017 it would largely stop funding gas drilling and extracting projects. Other multilateral development banks followed suit.

Many have noted the economic benefits being denied to poor countries by these restrictions, such as export revenues and power plants fueled by domestic gas reserves. In contrast, Sub-Saharan Africa and South America have contributed little to historical global emissions — 2 percent and 3 percent, respectively, a trend projected to continue.

As the International Energy Agency consistently highlights in its climate scenarios, the emissions reduction needed to avoid dangerous levels of climate change must come, unsurprisingly, from the world’s biggest economies. This includes China, with 33 percent of carbon dioxide emissions in 2022, followed by the U.S. with 13 percent, the European Union taken as a block, Russia and then Japan. Together, these countries generate 60 percent of the global total. India is also a large emitter, but its level is driven more by a massive population than wealth.

These emissions, and specifically the climate change they drive, present two significant risks for multilateral development banks. First, they undermine the development benefits sought by multilateral development bank projects. Second, they create financial risks for these banks by potentially weakening the capacity of developing country borrowers to repay their loans.

The massive 2022 flooding in Pakistan illustrates the potentially devastating economic impact of climate change, as the country suffered over $30 billion in losses — nearly 10 percent of its GDP. This degree of devastation is not feasible to plan for or adapt to. It needs to be avoided.

Unfortunately, various factors stunt a proper appreciation of climate change’s potential destructive impact. First, there is the ‘past is not prologue’ phenomenon, namely the inevitable uncertainties regarding the future. Looking back or even to the present does not provide a full sense of the future potential destructive impact of climate change.

Second, climate change’s impact grows over time, producing more destruction in a more distant future. Its small impact on today’s stock market where short-term horizons drive valuation contrasts significantly with its potentially large-scale economic damage 15 to 20 years from now as climate change predictably worsens over time. That longer period is particularly relevant to multilateral development banks, whose projects often take years to mature, and whose corresponding loans extend beyond 15 years.

Third, the uncertainty inherent in predicting the future is being exploited by climate minimizers to play down the long-term perils of emissions relative to the shorter-term benefits of fossil fuel projects.

As a result, multilateral development banks are caught in a tricky dynamic: responding to pressures from key shareholders — notably the U.S. — to loosen restrictions on financing for fossil fuels while working to limit greenhouse gas emissions that negatively affect development.

Earlier this year, the World Bank’s president proposed an “all of the above” shift in approach, with more natural gas development projects, as well as nuclear power and other alternatives. Although this proposal was welcomed by some, the World Bank’s board in June deferred a decision on natural gas, even as it approved nuclear power.

This debate will continue, including at the World Bank Annual Meetings this October. But the writing is on the wall as the U.S. pushes multilateral development banks to fund more fossil fuel projects.

This discussion, however, hides a thornier and more important development issue: the pressing and inescapable need in supporting the long-term development of poorer countries to address the fossil fuel emissions of the world’s biggest and richest emitting countries. The prospective destructive impact of climate change on the economies of developing countries is too large to ignore.

In order to reduce this risk to multilateral development banks and their poorer developing country borrowers, these banks should launch an initiative to encourage the largest greenhouse gas emitting countries to reduce their emissions [the “Undertaking to Reduce Global Emissions to support Development” (URGED)].

Although these richer countries aren’t susceptible to being influenced through multilateral development bank lending policies (China’s loan levels have dropped significantly, while the US, most EU countries and Japan aren’t even borrowers), they are all leading shareholders of these banks, active on the executive boards and at shareholder meetings and other convenings. This involvement provides an avenue for multilateral development banks to engage with these countries on this emissions topic that affects development.

For example, the “URGED” initiative — built around analytic work, convenings and outreach regarding the negative development impact of wealthy country emissions — could even be launched at the World Bank’s October annual meetings.

Is that likely in today’s political environment? No, but that doesn’t mean it doesn’t make sense.


Philippe Benoit is managing director at Global Infrastructure Advisory Services 2050. He previously worked as division chief at the World Bank and the International Energy Agency, as a director at SG Investment Bank and as senior adjunct research scholar at Columbia University-SIPA’s Center on Global Energy Policy.

[Previously published in The Hill]

By Hazel Henderson
MIAMI, Florida, Nov 17 2015 (IPS)

We humans are acutely aware of risks. From our earliest times, the risks we faced were from hunger, predatory animals, extreme environmental conditions and, as our numbers grew, from other human tribes.

Hazel Henderson

Today, in the 21st century, new risks dominate our political and social issues from terrorism, barbarous attacks on civilians as in Paris, nuclear meltdowns and weapons, financial crises, desertification and famines, disappearing glaciers in the Himalayas, Greenland and Antarctica, water shortages, polluted air, rising sea levels, new pandemics and drug-resistant diseases.

Yet views about these risks and priorities in addressing them are all over the map. This disparity is largely due to different views on how these new risks arose, who is to blame (since they are mostly humanly self-inflicted). This underlying debate about causes of today’s risks still hampers agreement on how to address let alone solve them or mitigate their effects.

Take the view of risk prevalent in the global financial system and its millions of traders in London, Wall Street, Frankfurt, Tokyo and Shanghai. They focus on risks to corporate earnings and profitability, interest rate risk, weak GDP growth, volatile gasoline prices, grassroots opposition, government regulation, political demands for rising wages, democratic demands to reduce inequality.

I attended a conference on “Playing for the Long-term” in New York, November, 3, 2015, hosted by the New York Times convening some 500 Wall Streeters. Their views focused on these risks, as well as those disrupting finance posed by the incursions of Silicon Valley startups threatening to bypass Wall Street: crowdfunding, peer-to-peer lending, cellphone banking, social media and electronic startups based on Internet platforms. Risks from cyber attacks also focused much attention. Risks from the wider world received little attention – even those now impinging on coal and oil stocks from activists divesting from fossil fuels. I asked Morgan Stanley CEO James Gorman if he agreed with Bank of England head Mark Carney that many fossil fuel reserves could never be lifted or burned without further damage to the global climate and that these assets would be devalued. Mr. Gorman allowed that climate change was a problem, but that it was “not our business.”

Climate risk was hardly raised until one of the last speakers, former US Vice President Al Gore, explained how his London-based investment firm Generation Investment Management had produced healthy financial returns on $10 billion dollars of client assets by investing beyond fossil fuels in the more efficient, knowledge-rich technologies of renewable energy companies and the growing next economy: the Solar Age. Unfortunately for the rest of us, financial players like economists see risk in terms of money – forgetting that currencies are simply units of account which track and keep score of human transactions and interactions with nature’s resources.

So it still seems a question of “What risks?” – where and how they arise. How can we come together to share responsibility for our common future on this planet, powered daily by free energy from the Sun? As the beleaguered beautiful city of Paris prepares to host the UN Climate Summit from November 30 to December 11, 2015, even the world’s scientists of the Convention on Climate Change find their assessments of climate risk challenged not only by those denying that humans caused it, but that their models under-estimated these risks.

A UNEP Emissions Gap Report assessed the 119 Intended Nationally Determined Contributions (INDCs) submitted by the UN Framework Convention on Climate Change (UNFCCC) October 2015, covering 88 per cent of global GHG emissions in 2012. This indicates these efforts could cut up to 11 gigatons of CO2 equivalents from projected emissions by 2030. But, this is only half of the total required if there is a chance of staying below the target of below 2 degrees Celsius of warming by 2100. UNEP Executive Director Achim Steiner said that these INDC levels are an increase in ambition levels but not sufficient to reach this 2C target.

Several scientists warn that sea level rises are now inevitable due to long feedback processes measured by Earth-observing satellites. These risks focus on melting glaciers in Greenland and Antarctica, reported by scientists James Hanson, Erick Riguot, Richard Alley, Andrea Dutton, John Englander and others. David Wasdell, director of the London-based Meridian Programme, critiques the official IPCC report’s Summary for Policy Makers for downplaying the risks for political and economic expediency. Wasdell’s Climate Dynamics: Facing the Harsh Realities of Now (September 2015) concludes that human greenhouse gases already emitted, moving heat through Earth’s atmosphere and oceans, have already exceeded the 2C target and notional “available carbon budget.” Wasdell’s report concludes that any notional carbon budget allowing further emissions has already collapsed and we face a carbon debt instead.

Are these new climate risks insurmountable? Most experts say that there is time, but it is fast running out.

The good news is that more decision-makers and citizens in all sectors have ended their focus on fossil fuels and now recognize that our planet has always been amply powered by the Sun’s daily shower of free photons. Atmospheric CO2 can be returned to soils, deserts can be greened and ecosystems regenerated as finance is redirected by the 2° Investing Initiative. We humans have all the technology we need to scale up the next economy of efficient renewable resource technologies, as we track in our Green Transition Scoreboard® currently showing 6.22 trillion dollars of private investments in these Solar Age companies and technologies.

Risks also offer opportunities, and stress is evolution’s tool. Breakdowns drive breakthroughs!

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