The World Bank may end its 45% climate project lending goal, signaling a significant shift in how the global development lender approaches climate finance. The World Bank Group announced that it will retire its target of allocating 45% of annual lending to projects with climate co-benefits, while extending its Climate Change Action Plan (CCAP) beyond its original expiry date. The decision comes amid growing pressure from the United States to prioritize economic development over climate-specific funding targets.

Despite the policy change, the bank has reaffirmed its commitment to supporting climate-resilient development, renewable energy, and adaptation projects based on client countries’ needs rather than predefined lending quotas.

A Shift from Climate Targets to Development Outcomes

The World Bank said it is transitioning from measuring success through lending percentages to evaluating development outcomes. Under the leadership of World Bank President Ajay Banga, the institution is emphasizing a strategy known as “smart development,” which integrates climate resilience into broader economic growth initiatives.

Instead of focusing on whether a fixed share of lending is climate-related, the bank plans to prioritize projects that create jobs, strengthen infrastructure, improve food security, and enhance resilience to climate risks wherever appropriate.

Why the Lending Target Is Being Retired

The decision follows sustained pressure from the Trump administration, which argued that multilateral financial institutions should concentrate on their core missions of economic development and financial stability.

Earlier this year, U.S. Treasury Secretary Scott Bessent called on both the World Bank and the International Monetary Fund (IMF) to move away from climate-focused lending targets, describing them as a distraction from their primary development objectives. In April, he criticized what he called the bank’s “myopic” emphasis on climate finance benchmarks.

At the same time, the World Bank has maintained that demand for projects delivering climate co-benefits remains strong among borrowing countries, suggesting that climate-related investments will continue even without formal lending quotas.

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Climate Action Plan Will Continue

Although the World Bank may end its 45% climate project lending goal, it has chosen to extend its Climate Change Action Plan (CCAP), first introduced in 2016 as a rolling five-year framework.

The bank also announced that, at the request of its Executive Board, the Independent Evaluation Group (IEG) will conduct a comprehensive review of the Climate Change Action Plan to assess its effectiveness and guide future climate strategies.

Importantly, the World Bank will continue tracking key climate indicators, including:

• Net greenhouse gas emissions associated with projects.
• Number of beneficiaries with improved climate resilience.
• Portfolio-wide climate performance through quarterly and annual reporting.

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Global Reactions Reflect Divided Priorities

The proposed shift has generated mixed reactions among shareholder countries.

• Last year, France and 18 other World Bank shareholders publicly supported maintaining strong climate commitments.
• However, the United States, along with representatives from Russia, Kuwait, and Saudi Arabia, declined to endorse that position, while India and Japan abstained.
• French Development Minister Éléonore Caroit recently urged the bank to preserve its climate finance target, emphasizing the importance of sustained international support for climate action.

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