Key reasons to read this article:
- Find out why, after allocating billions, the World Bank has dropped its 45% climate finance target, and what comes next.
- Discover what this policy shift could mean for developing countries seeking climate finance.
- Learn whether the new approach will strengthen or weaken climate action.
- Understand the political tensions among major World Bank shareholders that have driven the policy change and why opinions remain divided over its impact.
- See what to watch next and whether other multilateral development banks will follow the bank’s lead.
The World Bank has dropped the 45% climate-finance target it adopted about three years ago, replacing it with a new framework that measures development outcome rather than the percentage of lending classified as climate finance. The target has already effectively been met, with the bank allocating US$42.6 billion in climate finance in 2024, or 44% of its total financing, and US$50.8 billion in 2025, which represented 48%.
For developing countries, however, the number that has always mattered the most was never simply 45%. It was what that figure represented: a public benchmark against which borrowing countries and shareholders could judge whether the world’s largest multilateral lender was delivering on its climate ambitions. With that benchmark gone, critics argue that measuring progress will become more subjective.
“The previous target was a transparent benchmark,” Jessica Mwanza, Head of Climate Finance at the Pan African Climate Justice Alliance, told DevelopmentAid. “Once you remove it, the bank gives itself greater discretion over how success is defined and measured.” Without that benchmark, she argues, the predictability that climate-vulnerable countries rely on to plan long-term investments becomes harder to guarantee and verify.
Pauline Owiti, a Kenya-based climate specialist, sees an opportunity alongside the uncertainty. She argues that if the World Bank shifts its focus from spending targets to measurable development outcomes, borrowing countries will be able to judge the institution through tangible results such as resilience and improved livelihoods, rather than simply by the percentage of lending labeled as climate finance.
What has changed?
The World Bank has formally scrapped the 45% climate co-benefits target, along with the earlier 35% goal embedded in its Climate Change Action Plan (CCAP). The broader CCAP will survive while the bank’s Independent Evaluation Group reviews its implementation.
In its place, the bank is rolling out a ‘smart development’ approach. Rather than committing to a target percentage of lending being classified as climate finance, the bank has confirmed that climate will be embedded across investments in jobs, poverty reduction, and resilience: from flood-resistant roads to drought-tolerant agriculture. Success will be judged by outcomes, such as emissions avoided or people protected from climate risk, rather than by the proportion of the funding portfolio labelled climate.
In an internal message to staff reported by the Financial Times, World Bank President Ajay Banga described climate work as remaining “firmly client-driven”, arguing that development and climate objectives should increasingly be pursued together rather than treated as separate spending categories.
The bank has stated it will continue to report climate finance figures and remains bound by existing commitments, including the New Collective Quantified Goal agreed at COP29.
Why the bank made this decision
Officially, the World Bank has said the 45% target has achieved its purpose. The dozens of billions of dollars allocated over the past two years have generated climate co-benefits, surpassing the goal agreed at COP28. Having embedded climate considerations across much of its lending, the bank argues that the next stage should focus on what those investments achieve rather than how they are categorized.
“Our framework has served its purpose well, embedding smart development in all we do in response to client needs and priorities,” the World Bank commented.
That official rationale was accompanied by a harder-edged negotiation among shareholders with acutely different priorities. The United States, the bank’s largest shareholder, pushed for months for the target to be scrapped with Treasury Secretary Scott Bessent arguing that climate spending quotas distracted the institution from its core development mandate.
Several European shareholders, including France, opposed the move, arguing that climate action and development are inseparable and that publicly reported targets remain an essential tool for accountability.
Danny Scull, a senior policy advisor at the think-tank E3G, called the outcome less damaging than it could have been, noting that a scenario in which the bank suddenly reverses direction and starts to scale back its climate lending remains unlikely.
A reporting tweak, or something bigger?
Mwanza rejects the framing that this is simply a housekeeping adjustment. “This is a major policy shift. It’s not a mere reporting change,” she said. “The more important question is whether it will affect the volume, composition, and terms of climate finance over time.”
Clemence Landers of the Center for Global Development takes the opposite view, arguing that targets mainly signal institutional direction rather than drive actual lending decisions. She expects the bank’s clean-energy portfolio to hold steady “with or without this target”, with client-country demand, not Washington scorecards, being the real engine of growth.
Is accountability weaker without a target?
The Centre for Environment and Development for the Arab Region and Europe argues that removing the target makes it harder to track whether climate finance is growing, holding steady, or being quietly absorbed into broader development spending and therefore reduces institutional accountability.
One target has survived this overhaul. The International Development Association, the bank’s concessional arm for the poorest countries, has committed to providing 45% of its funding to climate-related activities until 2028. Joe Thwaites, a climate finance expert at the Natural Resources Defense Council, argues that targets such as this matter precisely because they “can be a backstop against the bottom falling out.”
What changes tomorrow
Whether the World Bank’s decision ultimately changes the amount of climate finance remains unclear. The more immediate consequence, Mwanza explains, is uncertainty over how future climate finance will be prioritized, allocated, and monitored.
She cautions that it is too early to conclude that concessional finance will become more difficult for developing countries to access, but says the direction of travel is of concern, particularly as several major donors have already scaled back their own climate spending.
Whether concessional finance becomes harder to access will only become apparent over successive lending cycles rather than in this year’s disbursements alone. The more consequential shift, for now, is one of incentive and discretion rather than volume: the bank has more latitude to define what counts as success. That discretion, according to Mwanza, is the mechanism through which allocation and terms could eventually move.
What to watch
Mwanza points to two trends worth tracking. Firstly, other multilateral lenders: as the sector’s most influential institution, the World Bank tends to pull peers like the African Development Bank toward “the World Bank way” over time.
Secondly, and already visible, is the commercialization of climate finance: grants and concessional lending are steadily being crowded out by loans and blended, market-rate instruments, a shift she expects to accelerate regardless of the outcome at COP31.
