A group of 10 major economies are building momentum to scale-up climate finance for developing countries by reforming how development banks spend money, starting with the largest: the World Bank.

On Tuesday, Germany and the US handed a joint proposal for “a fundamental reform of the World Bank” to its management, during this week’s annual meetings in Washington DC.

The proposals aim to make the bank fit to address global challenges, including climate action and biodiversity conservation.

A spokesperson for the German government told Climate Home News the proposed reforms were backed by 10 countries, including all of the G7 group.

Development minister Svenja Schulze, who serves as Germany’s representative on the World Bank’s board of governors, said: “The World Bank’s current model…. is no longer appropriate in this time of global crises. Challenges and investment needs are so great that the model needs to be adjusted.”

Schulze said the reforms should include “climate lending on better terms” and “targeted budget support for governments which want to pursue policy reforms to make their economies climate neutral”.

Germany expects a response from the bank by the end of the year.

Developing countries have warned they need affordable financing options to transition to clean energy and invest in resilience without being pushed into unsustainable levels of debt. But finance isn’t flowing to those that need it most.

Last week, Janet Yellen, US secretary of the treasury, said multilateral development banks, including the World Bank, had to “evolve” to address global challenges such as climate change.

The US, the bank’s largest shareholder, and the group of reformers are calling for its management to develop “an evolution roadmap” by December, she said.

Yellen said development banks should increase concessional funding, including grants, to support middle-income countries transition away from coal.

Besides from governments, the banks could support regional and sub-national entities, such as green city initiatives, adopt stronger targets and develop new instruments to mobilise private finance.

Source: Climate Home News