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ajay banga
The World Bank’s Private Sector Cult Endangers the Planet
Larger Sums, Lagging Standards
From FY2017 to 2023, the IFC trade finance portfolio saw a hefty 86% increase. In FY2023, trade finance amounted to 58% of the IFC’s total portfolio. (Trade finance refers to a range of financial instruments and services designed to facilitate international trade. It provides liquidity and risk mitigation for exporters and importers, enabling transactions that might otherwise not be viable. Instruments such as letters of credit, guarantees, and working capital loans ensure that buyers and sellers can engage in global trade with reduced financial risks.)
The private sector’s profit orientation is incompatible with the World Bank Group’s public service mandate.
While the sums for trade finance are growing exponentially, the checks and norms for their disbursal are stagnating. The environmental and social standards that apply to trade finance have not been updated for at least a decade, and financial flows are shrouded in mystery.
The stated goal of ending poverty on a livable planet presupposes transparency, accountability and sustainability. And yet the meteoric rise of IFC trade finance transactions in recent years comes with opacity, outright unwillingness to disclose basic information about individual transactions, and the long shadow of fossil fuel favoritism.
More Trade Finance for More Fossil Fuels
So, what’s the number? In FY2023, $4.7 billion, or nearly one-third of total IFC trade finance commitments, may have supported fossil fuel-related projects. This figure represents a 28% increase compared to FY2022.
The Global Trade Finance Program (GTFP) alone accounted for $3.7 billion of possible oil and gas-related financing, 41.7% of its total commitments. Transparency issues persist as the IFC fails to disclose detailed information about specific trade transactions and beneficiaries.
The World Bank Group’s own Independent Evaluation Group (IEG) indicates that in the past, significant shares of IFC trade finance investments went into fossil fuel financing, particularly in Africa (50%) and the Middle East (28%).
Money Out the Private Sector Window
The dangerous trend of enabling fossil fuel transactions in fragile countries expands when we look at the IFC Private Sector Window (PSW). It was established in 2017 to encourage private sector investments in high-risk, low-income countries, particularly in IDA-designated regions. The PSW provides risk-sharing mechanisms and facilitates trade finance and other investments that might otherwise be deemed too risky. Between FY2020 and FY2024, $1.03 billion, or about a quarter of PSW approvals, were allocated to trade finance projects. These funds enabled $5.1 billion in trade finance, underscoring the PSW’s leveraged impact.
This fivefold impact, however, remains controversial. Despite its commitment to sustainable development, the PSW lacks exclusion criteria for fossil fuels. Thus, it allows for investments in oil and gas. Transparency remains a significant issue, and information about specific projects and the traded commodities is sparse. PSW-supported trade finance’s environmental and developmental impacts are questionable at best.
Pitting Private Sector Logic Against Public Sector Goals
Many of these problems precede President Banga’s tenure. However, it is vital to highlight and address them now because his laser focus on mobilizing private capital is likely to exacerbate the issues highlighted above. The private sector’s profit orientation is incompatible with the World Bank Group’s public service mandate. The IFC’s growing trade finance portfolio highlights the organization’s critical role in shaping global trade. The significant share of fossil fuel commitments in that portfolio undermines the World Bank Group’s mission of fostering sustainable development.
To align with international climate objectives, the IFC must adopt urgent reforms to enhance transparency; exclude harmful investments; and prioritize clean, fair, decentralized renewable energy—especially in poor and high-risk regions of the world that need them most. To better align the PSW with its mission, the allocation of Private Sector Window funds should prioritize renewable energy and sustainable development projects. Additionally, stringent exclusion criteria and improved reporting standards should ensure greater accountability and alignment with climate and social goals.
These changes are clearly at odds with President Banga’s agenda, and yet only through them can the World Bank Group stay true to its noble goals.
Activists Greet New World Bank President With Demands for Global Just Transition
"It's not often we feel hope in the climate movement, but today, with a new World Bank president having publicly committed to taking climate change seriously, we're feeling hopeful," Glasgow Actions Team director Andrew Nazdin said in a statement. "But President Banga doesn't have a moment to lose; the time is now to announce plans to move away from fossil fuels and help the globe transition to clean energy in a just and equitable manner."
Activists hand their "First 100 Days" demands to World Bank staffers in Washington, D.C. on June 2, 2023.(Photo: Eric Kayne/AP Images for Glasgow Actions Team)
Climate advocates cheered in February when former World Bank President David Malpass, nominated to lead the bank by then-U.S. President Donald Trump in 2019, said that he would step down this spring, nearly a year ahead of schedule.
The early resignation announcement followed a sustained pressure campaign against Malpass, who was condemned as a "climate denier" after refusing to acknowledge that burning fossil fuels causes the planet-heating pollution underlying increasingly frequent and intense extreme weather disasters.
U.S. President Joe Biden's ensuing decision to tap Banga for the role angered progressives, who argued that the erstwhile private equity executive and former Mastercard CEO is likely to advance the powerful international financial institution's historically pro-corporate and pro-fossil fuel agenda. When the World Bank's board of governors ratified Banga's presidency in early May—appointing the Biden nominee to a five-year term with a June 2 start date—the bank's new leader suggested that a "climate change shift" was coming.
On the eve of Banga's first day in office, Big Shift Global acknowledged that his stated belief in climate science is an improvement over the status quo. But whether he leads the World Bank in "the right direction on climate" remains an open question, the international campaign noted, reiterating its demands for "a phaseout of fossil fuel finance and support for a just, clean energy transition."
Luisa Abbott Galvao, senior international policy campaigner at Friends of the Earth U.S., pointed out that "Ajay Banga has spent his career chasing profits for shareholders rather than working in the public interest."
"But he could still commit to a different legacy from his climate change-denying predecessor, David Malpass," said Galvao. "We call on Banga to pledge an end to World Bank financing for fossil fuels on his first day in office. When science says new fossil fuel developments are incompatible with the 1.5°C pathway, a failure to act is effectively climate denial."
For its part, the Glasgow Actions Team tweeted, "While Ajay Banga is inside addressing his staff, we're outside showing him how easy it is to truly shift the World Bank to act on climate change!"
"You can't address poverty in a world of climate chaos," the group added. "End fossil fuel finance now!"
Big Shift Global showed in a recent report that the World Bank has directly financed at least $14.8 billion in fossil fuel production since the signing of the Paris agreement in 2015—reneging on its 2017 pledge to stop supporting oil and gas projects within two years.
The Intergovernmental Panel on Climate Change and the International Energy Agency have made clear that fossil fuel expansion will cause the climate emergency's consequences to grow even deadlier, especially for humanity's poorest members who have done the least to cause the crisis.
Global Citizen noted Friday that impoverished countries on the frontlines of mounting socio-ecological catastrophes "can't tackle climate change when they're drowning in debt" and urged Banga to implement a debt jubilee in addition to subsidizing a green overhaul of the global economy.
The group also took out a full-page ad in The Wall Street Journal, calling on Banga to begin transforming the World Bank into an instrument for genuinely sustainable development on his first day.
"As the new president, what will your legacy be?" the ad asks. "In the face of the triple climate, poverty, and hunger crises, the world's biggest development bank stands at a critical juncture."
"Under your guidance, the World Bank could serve as an invaluable partner for low-income countries and those vulnerable to climate change," it continues. "The solutions are on the table."
"Make your first steps bold," says the ad. "Working alongside other multilateral development banks, help mobilize $1 trillion more in financing to help the world's poorest and most vulnerable countries quicken their transition to clean energy, withstand disasters, and power our planet."
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