As the world moves deeper into climate emergency, more so the developing countries with their funding demands getting louder but no clear road map in sight, the World Bank recently increased anxiety levels by announcing that it would scrap its earlier declared target of 45% dedicated lending for climate finance, scaling back a key commitment on mitigation and adaptation finance for such countries. The commitment was made during COP 28 at Dubai in 2023.
The rollback was made apparently under US pressure. In a statement ahead of the World Bank meeting in April, US Treasury Secretary Scott Bessent demanded that the World Bank should “jettison” the 45% climate finance target, arguing that it “breeds inefficiency, distorts economic decision making, and moves the Bank away from its core mission”.
In a statement issued on June 29, 2026, while abandoning the target, the World Bank pointed out that its work on climate “is and will remain firmly client-driven”, supporting countries in delivering their national development priorities and Nationally Determined Contributions (NDCs) under the Paris Agreement.
A group of 19 of the Bank’s 25 shareholders had previously backed continued support for the Bank’s climate goals, although the US, Japan, India, Saudi Arabia, Russia and Kuwait did not sign the statement, according to information received.
Programme remains, not the target
The Bank pointed out that it would continue to report on the climate finance it provides to developing countries, but will no longer be bound to dedicate 45% of its total annual spending to climate-related activities, the target it had announced earlier.
However, it added that it will extend its Climate Change Action Plan (CCAP), which would have overseen the target. “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 Climate Change Action Plan,” the Bank announced, without mentioning the duration of the extension.
The World Bank announced the rollback of its flagship climate finance commitment after negotiations among shareholders about extending its CCAP.
The rollback decision was made despite appeals from France and developing countries to continue with the 45% target. This is expected to have major negative impact on the initiatives to mobilise at least the USD 1.3 trillion annually in climate finance for developing countries by 2035 under the roadmap agreed at the COP29 organised by the United Nations Framework Convention on Climate Change (UNFCCC).
Financial roadmap under scanner
The announcement has put the global effort to raise adequate climate finance for developing and underdeveloped countries under scanner.
The Baku to Belém Roadmap is a landmark climate finance framework designed to mobilise at least USD 1.3 trillion annually by 2035 to support developing countries. Launched jointly by the COP29 and COP30 Presidencies, the roadmap is a key to generating the funds and has depended heavily on the both public and private finance. It required that the multinational financial organisations, including the World Bank, had to play a key role in the process.
Bank underlines strategy
The Bank said it would continue to report on climate finance and track climate-related outcomes.
It said it would shift its focus “from inputs to outcomes” and continue reporting progress on two indicators, net greenhouse gas emissions and beneficiaries with enhanced resilience to climate risks. It will also continue reporting climate co-benefits for projects through its existing quarterly and annual reporting mechanisms.
The Bank added that it would strengthen methodologies for measuring climate outcomes and continue collaborating with other multilateral development banks.
Adaptation and resilience finance to be affected
Labanya Prakash Jena, director, Climate and Sustainability Initiative, a global research organisation, said the immediate impact on financing for commercially viable renewable energy and mitigation projects are likely be limited, but warned that climate adaptation and resilience financing could be disproportionately affected.
“There will be a limited impact on capital flows to bankable renewables and mitigation projects, since these are commercially attractive. The real risk is to climate adaptation and resilience financing, including urban heat resilience, flood defences and climate vulnerable agriculture, which relied on subsidised capital and development assistance precisely because they are harder to make commercially attractive.”
On India, Jena said the country was relatively better placed than many developing economies because it has multiple sources of capital, even though it remains the World Bank Group’s largest borrower. “India has been able to raise private capital for climate mitigation projects, although not as much as desired. The World Bank’s contribution to imported capital is not very high, hence the impact is not significant. But the world’s largest development bank offers concessionary and patient capital for climate adaptation projects. Hence, removing the quota for climate projects will be felt disproportionately in adaptation financing in India as well.”