Earlier this week, the World Bank announced the extension of its Climate Change Action Plan (CCAP) - and alongside it the abandonment of its 45 per cent climate finance target. While the CCAP extension is a welcome response to pressure  from many shareholders and civil society organisations (CSOs), dropping the concrete climate finance target ultimately undermines the Bank’s commitment to climate action.

It has been clear for some time that the USA, the World Bank’s biggest shareholder, was on a mission to weaken the integration of climate change into the Bank’s work. This has had - and will have - further implications for the broader Multilateral Development Banks (MDBs) landscape. A clear sign of this was a joint statement on collaboration issued by 10 MDBs at the 2026 Spring Meetings which made no mention of financing climate action.

The World Bank's new decision has direct consequences for the collective MDB goal to provide $120 billion annually for climate finance in emerging economies by 2030, which was announced in November 2024 at COP29. Since the World Bank was expected to be a major contributor to this target, scaling back its own fixed commitment puts significant strain on its ability to deliver. This also places pressure on other banks like the Asian Development Bank (ADB), the European Investment Bank (EIB), and the African Development Bank (AfDB) to fill the gap. 

With global climate action so reliant on MDB funding, this decision has also left a lot of uncertainty about the banks’ role in the future.  

The contradictions in climate finance expansion

The 2024 New Collective Quantified Goal on climate finance (NCQG), and the 2025  Baku to Belém Roadmap to 1.3 Trillion, fundamentally shifted the climate finance landscape. These frameworks pivoted the focus away from bilateral sources and Multilateral Climate Funds (MCFs), designed to help Global South countries mitigate and adapt to climate change, including the Green Climate Fund (GCF), Adaptation Fund (AF), the Global Environment Facility (GEF) and the Fund for Responding to Loss and Damage (FRLD). Instead, they elevated the role of MDBs. 

This was largely the result of pressure by Global North countries to move the focus to channels that would require minimal contributions from their own budgets, while also being able to account for the climate finance contributions from other emerging economies. This was part of their larger agenda to expand the contributors’ base for climate finance.

Yet proponents of an expanded role for the MDBs did not adequately address the apparent contradiction between advocating for greater reliance on these institutions and the growing evidence of their climate retrenchment. Even if MDBs’ climate finance lending were to continue under different headings, the symbolic and practical pushback against climate priorities remains deeply concerning for climate vulnerable regions, which need predictable finance at scale. 

Where do we go from here?

The question now is where do we go from here? This deeply concerning moment could be an opportunity to rethink the potential role MDBs could play in the climate finance landscape, under which conditions and for what specific purposes.

First there should be a renewed emphasis on the role of the MCFs, which provide better quality finance with a larger share of grants, have a more representative governance, place more decision-making power in the hands of Global South countries, and have more capacity to finance locally-led climate solutions. Global North countries should ensure that these funds are successfully and adequately replenished, in line with the NCQG decision to triple their outflows by 2030.

Second,  MDB shareholders should ensure that banks focus on getting ‘better before getting bigger’. They should reassess their approach to the private sector and draw lessons from the ‘Billions to Trillions’ agenda, which has failed to deliver the quantity and quality of finance promised to and needed by the Global South. Rather than relying on private capital mobilisation, MDBs should expand concessional finance and make greater use of non-debt-creating instruments to avoid worsening debt burdens in Global South countries. 

Third, the banks need to resolve contradictions in their approach to climate and the energy transition. While the World Bank and other MDBs are retreating from some climate commitments, they are simultaneously expanding finance for critical minerals and manufacturing value chains to attract private investment. They should instead help countries develop green industrial strategies and regional value chains, rather than merely mitigating the negative impacts of the transition. They should also support economy-wide transitions that align with countries' Nationally Determined Contributions (NDCs) and long-term low-emission development strategies. 

Finally, they must place human rights at the centre of decision-making by integrating robust safeguards to prevent the harmful impacts and rights violations associated with their financing. 

Beyond the CCAP: put Just Transition at the heart of climate action

Accelerating a Just Transition is a fight for climate action that creates decent work (which aligns with World Bank President Ajay Banga’s claims that ‘jobs’ should be front and center of the Bank’s priorities), protects communities, and respects the development rights and differentiated responsibilities of the Global South. It is an agenda that aligns social, economic and environmental priorities while tackling structural inequalities. 

In that context, MDBs must urgently rethink their climate approach, aligning it with sustainable development pathways for the Global South and rooting it in core principles of climate justice, including in the World Bank’s proposed discussion on ways to better structure their engagement on adaptation, nature and pollution. COP31 and the establishment of a Just Transition mechanism (BAM) presents a critical opportunity to foster that deeper transformation by bringing all relevant actors on board and aligning their climate portfolios with the key Just Transition principles adopted in Belém.