The World Bank Group (WBG) announced a significant update to its climate strategy: extending its Climate Change Action Plan (CCAP) and retiring its 45% long-standing climate finance targets. Instead of measuring success by the percentage of loans directed toward climate-related projects, the institution will focus on development outcomes. This is an important change in how the WBG approaches climate and development finance.
Pressure and Opposition to Target Removal
The change comes after months of pressure from the United States, the World Bank’s largest shareholder, whose administration, along with Russia and Saudi Arabia, pushed to eliminate fixed climate finance targets. The U.S. Treasury Secretary, Scott Bessent, argued that such targets distracted from the Bank’s core mission: reducing poverty, fostering growth, and maintaining financial stability.
The removal of the 45% goal is widely seen as a response to these concerns, enabling climate investments to continue under a broader development framework. However, nearly 100 developing nations and other shareholders strongly opposed the decision, urging the Bank to maintain firm climate finance commitments.
A New Approach to Climate and Development
This decision means the end of the previous 35% target for projects with climate co-benefits and the more recent 45% target introduced in 2023. The World Bank states that its future work will continue to be driven by the priorities of client countries, supporting their national development plans and Nationally Determined Contributions (NDCs) under the Paris Agreement. The bank states that climate action will continue to be integrated into development projects; however, lending will be evaluated based on the economic and social outcomes achieved rather than the percentage of financing labeled as climate-related.
World Bank President Ajay Banga described this approach as "smart development," emphasizing that climate action and economic development should go together. Projects such as renewable energy, climate-resilient infrastructure, drought-resistant agriculture, flood protection, and water management will continue to receive support when they align with countries' development priorities. The bank argues that this approach offers greater flexibility and allows governments to determine the types of projects that best meet their needs.
Despite the removal of numerical targets, the World Bank maintains that climate remains a central component of its mission.
The institution will continue to track and report on key indicators, including net GHG emissions and the number of people who benefit from greater resilience to climate risks. It also plans to improve its methods for measuring development outcomes and will continue working with other multilateral development banks (MDBs) to make climate impact reporting stronger.
An independent review of the Climate Change Action Plan has also been requested. At the direction of the World Bank's Executive Board, the Independent Evaluation Group (IEG) will evaluate the effectiveness of the current framework and assist in developing future strategies for measuring climate impacts, governance, and reporting. This evaluation could influence how the bank balances shareholder priorities with its role in global climate finance.
Global Role in Climate Finance and Implications
Even though climate funding is at historic levels, the announcement drew mixed reactions. In 2025, the World Bank provided over $39 billion for climate projects, which is more than double the $17 billion provided in 2020. Nearly half of its lending went to climate action, surpassing the previous target of 45%. Around $22.6 billion was allocated to clean energy and emissions reductions, and $16.6 billion was designated for adaptation and resilience. The World Bank Group's total climate financing, including IFC, stands at approximately $50.8 billion.
Without a clear quantitative objective, future evaluations will depend more on annual loan data and outcome-based reporting. Some analysts argue that this may complicate the evaluation of climate financing growth.
In addition, it is important to note that removing a formal target for climate finance could reduce the perception of transparency and accountability
These changes are especially significant for developing countries, many of which rely on subsidized financing to invest in renewable energy, resilient infrastructure, water security, disaster preparedness, and climate-smart agriculture. The new approach will keep helping countries that ask for climate projects. But governments focused on other priorities may invest less in climate efforts. As a result, climate funding could vary more from one region to another.
The World Bank's decisions are also important because they often affect other multilateral development banks and international investors. At COP29, multilateral development banks pledged to collectively mobilize $120 billion annually for low- and middle-income countries and an additional $42 billion for high-income countries by 2030. The World Bank is the biggest multilateral development lender, so it's key to achieving these commitments. Following the announcement of policy changes, the institution approved $265 million for a pumped-storage hydropower project in Morocco, signaling that investments in clean energy remain a priority.
Finally, the World Bank's updated strategy represents a shift in how climate finance is measured rather than a reduction in climate support. While climate action is still a part of its development agenda, future lending decisions and outcome reporting will determine whether the institution can continue to lead the global climate finance sector without relying on fixed climate lending targets.
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