The World Bank is facing the biggest test in its history. Next week, Bank executives are attending the Cop26 global climate summit in Glasgow, where key decisions about the fate of humanity will be made. If the Bank wants to achieve its official goals of eradicating poverty and building shared prosperity, now is the time to step up. Because nothing will increase poverty and undermine prosperity more than runaway global warming.
It is likely to fail this test, however. At a time when the world needs to move away from dirty energy as quickly as possible, the Bank has spent more than $12bn on direct fossil fuel project financing since the landmark Paris climate agreement. And its overall credibility is weaker than ever after a data manipulation scandal involving senior leaders.
I have watched this drama unfold from the inside, because I work at the World Bank. Sadly, I have little confidence that my employer will become a climate leader any time soon. In my view, the organisation’s own internal processes have been vandalised by political pressure from the highest levels of management. An external investigation alleged that the Bank applied “undue pressure” on its own researchers to rig a process that ranks countries according to how easy it is to start a business there.
This is indicative of wider institutional practices that weaken the Bank’s ability to lead on global development priorities, including climate. The World Bank loves to boast about how much “climate finance” it provides, but it is less eager to discuss its support for the dirty energy sources that drive global warming. This opacity may be hiding a darker truth: that the institution is continuing to promote the dirty energy sources that drive global warming.
The Bank has made some progress on climate, including ending direct financing of coal-fired power plants. But there’s a catch: it still supports coal through backdoor channels. The World Bank’s private sector lending arm is still indirectly supporting coal plants through its commercial bank clients, for example in Indonesia. Such projects are incompatible with a serious commitment to climate action, and it is dishonest for the Bank to back them in an underhand way.
The World Bank is ultimately funded by taxpayer money from its member states, and it has a specific mandate to end poverty and build shared prosperity. If it wants to maintain its international credibility, it cannot be seen to be stalling on climate action. The Bank should phase out all direct and indirect support to fossil fuels and instead fund and assist a just transition toward clean energy worldwide. Saddling developing countries with soon-to-be obsolete technology does not put them on a path to green development.
But it’s hard to imagine the World Bank meeting global climate challenges without first undergoing some major institutional changes of its own. As the old saying goes, a fish rots from the head. The World Bank is currently led by David Malpass, a functionary who worked for Donald Trump’s anti-climate presidential campaign in 2016 and, in 2010, was reported to have denied that human-made carbon emissions cause global warming.
In 2019 Trump picked Malpass to run the World Bank, where he was mostly silent on climate before delivering a plan that watchdog groups denounced as a failure due to its refusal to phase out support for fossil fuels. His record suggests that Malpass has neither the vision nor credibility to make the World Bank a climate leader.
It’s time to end the tradition of Americans running the World Bank; the world can’t afford development institutions to be paralysed by the corporate-dominated US political system. The next World Bank leader – ideally not a man – should come from a developing country on the frontlines of the climate crisis, and be genuinely committed to climate solutions.
My co-workers are decent, smart, forward-looking people. They work at the World Bank because they believe in the institution’s stated goals of ending poverty and building shared prosperity. They want it to lead on climate.
Too often though, our ability to meet these ambitions is thwarted by what the World Bank staff association described as a “much larger systemic problem of senior management caving to political pressure”. An audit by the law firm WilmerHale found that during the recent data manipulation scandal, senior officials pressured and sometimes intimidated staff into rigging numbers so as to artificially boost China’s score on investment conditions.
Workers tried to speak out. But, according to the staff association, our internal justice system is “unable to hold senior management accountable” and failed to protect the browbeaten employees when they complained.
A World Bank that was truly responsive to its staff would be a more effective development leader. This sordid episode has badly wounded our credibility. I never worked in the unit where the scandal occurred, and I’m lucky enough to be a full-time staffer with a decent salary and good benefits. But conditions can be especially harrowing for women and the Bank’s masses of mistreated short-term consultants.
I have spent six happy years at the Bank. Ultimately, I decided to speak out publicly because the recent scandals convinced me there is no internal path to reform. Institutional failures are destroying our ability to deliver on climate, which is the most pressing global development priority. Instead of catering to the selfish whims of powerful interests, the World Bank needs to marshal its unmatched resources and lead on this critical issue. Civil society campaigners, as well as World Bank staffers, have been raising these issues for years. It’s time for our bosses to start listening – because poverty cannot be eradicated on a planet whose ecosystems are unravelling.
Jake Hess is a researcher at the World Bank in Washington DC.