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The World Bank Group said it will “retire” its previous goal of devoting 45 per cent of annual lending resources to projects with climate co-benefits, a significant policy shift that comes as Europe endures a severe heatwave and as the institution faces pressure from the Trump administration to narrow its focus back to core development priorities.
At the same time, the multilateral lender said it would extend its Climate Change Action Plan (CCAP), which was due to expire on Tuesday, while moving away from input-based lending quotas toward a framework that measures project outcomes.
The decision marks a broader recalibration in the World Bank’s approach: rather than tracking how much of its portfolio is labelled climate-related, it will increasingly assess whether projects deliver concrete development gains and climate resilience benefits.
“Our framework has served its purpose well, embedding smart development in all we do in response to client needs and priorities. We will therefore extend the CCAP,” the World Bank said in a statement.
Shift from climate targets to outcome-based lending
The move reflects months of pressure from the Trump administration, which has argued that international financial institutions should return to their traditional mandates of poverty reduction, infrastructure and macroeconomic stability instead of expanding into climate, gender and other policy areas.
US Treasury Secretary Scott Bessent has been among the most vocal critics of the World Bank’s climate agenda. Earlier this year, he urged both the World Bank and the International Monetary Fund to refocus on their “core missions.” In April, he described the bank’s emphasis on climate financing targets as “myopic” and called for those metrics to be dropped.
Ajay Banga, who became World Bank president in 2023, was initially tasked with expanding climate lending by making greater use of the bank’s balance sheet. Over time, however, he has shifted the institution toward what he calls “smart development” — an approach that seeks to combine job creation and economic growth with climate resilience where relevant.
In practical terms, that means financing projects such as drought-resistant agriculture, storm-resilient infrastructure, renewable energy and improved water systems when they align with client country priorities. The bank says the emphasis is now on whether projects produce measurable development outcomes rather than whether they meet a fixed climate lending share.
The World Bank said it will continue to report climate-related indicators, including net greenhouse gas emissions and the number of beneficiaries with improved resilience to climate risks. These will be tracked at the project level and through quarterly and annual portfolio reporting.
It also said it would examine ways to strengthen its work on adaptation, biodiversity and pollution.
Climate action plan remains, but lending quotas are gone
Although the lending target will be removed, the World Bank is not abandoning its broader climate framework.
The institution has asked its Independent Evaluation Group to review the Climate Change Action Plan, which was first introduced in 2016 and has been renewed in rolling five-year cycles. Extending the plan allows the bank to preserve its climate architecture while stepping back from politically sensitive lending targets.
The previous benchmark of allocating 35 per cent of lending to climate-related projects has also been dropped. Bank officials have argued, however, that demand for climate co-benefit projects remains strong among borrowing countries, suggesting that the operational shift may be more about reporting and accountability than about a wholesale retreat from climate-related financing.
The decision also highlights divisions among the bank’s shareholders. Last October, France and 18 other shareholder countries signed a letter supporting continued World Bank engagement on climate change. The United States declined to sign, as did executive directors representing Russia, Saudi Arabia and Kuwait, while India and Japan abstained.
French Development Minister Eleonore Caroit had made a last-minute appeal for the bank to preserve the climate finance target, underscoring the political sensitivity of the issue among major shareholders.
Europe heatwave highlights the stakes of climate policy
The timing of the World Bank’s decision is notable. Europe is currently experiencing one of
its most intense heatwaves on record, with temperatures above 40 degrees Celsius in several countries and widespread disruption to transport, health systems and infrastructure.
According to World Health Organization Director-General Tedros Adhanom Ghebreyesus, more than 1,300 excess deaths linked to high temperatures have been recorded across Europe since June 21. He warned that Europe is warming at roughly twice the global average, increasing the strain on already vulnerable infrastructure.
The heatwave has affected Germany, France, the Czech Republic, Switzerland, the UK and other countries, with national temperature records broken in several places. Roads have softened, railway tracks have buckled and signalling systems have been disrupted. In Germany, sections of the Autobahn were damaged as concrete slabs expanded and cracked under extreme heat. In France, train delays, melting roads and power outages were reported, while EDF reduced output at some nuclear plants because high river temperatures affected cooling.
Hospitals have also come under pressure. Paris public hospitals activated emergency measures after emergency departments saw nearly 3,000 patients in 24 hours, about one-third more than normal. Cases of heatstroke, dehydration and heart-related emergencies have risen sharply, particularly among older people.
Scientists say the heatwave has been intensified by an Omega block, a weather pattern that traps hot air over a region for extended periods. Climate researchers have long warned that such events are becoming more frequent, more intense and longer lasting as global temperatures rise.
