A new Oxfam report published this month outlines significant issues with the World Bank’s contribution to climate financing. The report ‘Climate Financing Unchecked: How much does the World Bank know about the climate action it claims?’ reveals that up to $41 billion in World Bank climate finance is unaccounted for due to poor bookkeeping and data reporting, with a lack of clarity and transparency within its data.
According to the Oxfam report, MDBs have been “increasingly channelling their financial resources for climate-related projects in their member countries.” Indeed, in 2022 multilateral development banks (MDBs) contributed US $60.9 billion to low and middle-income countries in 2022. The World Bank contributed 52 per cent of this sum, sealing its status as the single largest source of climate funding in the world.
However, Oxfam found that for each World Bank project, the average deviation between budgeted amounts and expenditures lies between 26 per cent and 43 per cent.
The deviation between project budget and expenditure between 2017 and 2023 is approximately US $24.28 billion and US $41.32 billion. The impact of this amount is unknown, the report said.
Oxfam has reported on climate finance commitments every two years since 2016. The most recent research found that “developed” countries claim to have mobilised US $166 billion in 2022, a figure which is likely overstated by up to US $88 billion.
On the crisis of trust in climate finance, the Oxfam report references a recent report by ONE, which stated: “High-income countries make it incredibly difficult to accurately track how much money they’re actually contributing and where it’s being spent. That’s because reporting is confusing, slow and imprecise. As a result, no one knows with certainty how much climate finance has been committed, much less delivered.”
The report noted that in 2023, the Bank updated its mission as an international financial institution to “end extreme poverty and boost shared prosperity on a livable planet,” recognising the intersection between development finance and climate finance as part of its mandate. At the Conference of the Parties (COP) 28, the Bank also announced a new climate finance target of 45 per cent of its total financing by 2025. However, the report said that while important, these changes are not sufficient without greater transparency and better reporting on climate finance.
As outlined in the report, the Bank’s climate data only includes ex-ante figures—the amount of climate funding projects are determined to receive based on assessments before they are approved. The Bank does not conduct analyses of projects to report the actual amount of climate financing delivered.
The report said the Bank’s lack of transparency in its data reporting on climate financing is exasperated by the fact that it is delivered in the form of loans that will need to be paid back by low- and middle-income countries.
The Bank also operates with taxpayers’ contributions, which is another source of scepticism and another reason why there is a need for clarity and transparency in its data records.
The report highlighted that one reason to be concerned about the Bank’s approach to reporting only ex-ante climate finance data is that projects change throughout their lifespans for various reasons, including budget changes. Further, when reporting on ex-post project spending, the Bank does not indicate which activities are climate finance, how much those activities cost, and how much is actually spent on them.
Indeed, the Bank only provides the total amounts budgeted at the projects’ component level and the final expenditure – though the quality of this data is inconsistent.
The report stated that it was not uncommon for researchers to find multiple climate finance figures for the same item(s) across multiple sources, such as the Bank’s annual PDF, project web pages and project Completion and Results Reports.
The report makes a number of recommendations to ensure that the Bank’s data reporting is clear and accurate. This includes:
- At the outset of projects, the Bank should disclose detailed climate finance assessments, including evidence in support of calculations for all projects reported to involve climate finance, in a way that allows independent verification of its claims.
- Once projects have closed, the Bank should undertake climate finance assessments and report on relevant expenditures in its Implementation Completion and Results Reports.
- The Bank should create a public finance database – the database should track climate finance aimed at the level of investment activity.
- The Bank should standardise how it reports on ex-ante and ex-post climate finance in projects instead of haphazardly providing different levels of information on climate finance for different projects.
For the full Climate Finance Unchecked report, head here.