There's a Simple Solution for the Big Discrepancies in the World Bank’s Climate Finance Claims

An audit of the World Bank’s 2017 to 2023 climate portfolio revealed that a huge portion of the financing went unaccounted for between the time projects were approved and closed. Poor recordkeeping is at the center of the discrepancies, but the auditors say this can be fixed if the World Bank changes how it tracks climate funds.

“The bank is celebrating all the time that it is the largest financier of climate finance,” Christian Donaldson, a senior policy advisor at Oxfam International and one of the report’s authors, told TriplePundit. “And it's celebrated only on the basis of what they plan to do, but they don't double-check what's happened down the road.”

Reported climate finance based on approvals, not deliveries

In its 2022 fiscal year, the World Bank reported $31.7 billion in climate finance disbursements, accounting for more than half (52 percent) of total worldwide climate financing. With an increase to $42.6 billion the past year, the bank boasts that a whopping 44 percent of its overall financing went to climate action over the course of the 2024 fiscal year.

But actual outlays vary 26 to 43 percent from what was originally claimed, according to the Oxfam report. The recordkeeping is so muddled that it’s not clear whether those expenditures were lower or higher than the bank reported. Overall, its climate finance funds could be off by as much as $41.32 billion.

“On the expenditure side, they only are reporting what they are planning to do at board approval,” Donaldson said, adding that the bank doesn’t track expenditures throughout the implementation and closure of those approved projects. “That's where the failure is, because there's no granular information.”

Need outweighs available funds, making accurate reporting even more important

It’s likely this breakdown in reporting is not limited to climate finance and is instead a systemic problem in which the World Bank doesn’t track enough information, Donaldson said. But it’s the enormous ramifications for climate action that make it especially concerning.  

“The implications … are huge, because we're talking about a massive amount of climate finance needed, and at the same time they are very limited,” Donaldson said. The limited nature of those funds makes it all the more important that they’re used as promised.

In one scenario, the bank could be spending less on projects than it claims, he said. That could mean not enough money is used to support countries experiencing the effects of the climate crisis. Or it could be a case of over-reporting, which could mean it’s not actually meeting financing targets.

“It could be cases of even greenwashing, [spending] on actions that might not have anything to do with climate mitigation or adaptation,” he said. “So without this information, after a project is implemented and closed, there is a huge level of uncertainty whether what you plan actually makes some ground.”

The Center for Global Development names low disbursement rates as one of the primary issues with climate finance, along with the rising number of loans issued to lower-income countries with high risk of debt distress and a lack of follow-up on the effectiveness of projects.

Simple solutions

To start, it’s critical that the World Bank improves its bookkeeping, Donaldson said. As it stands now, the bank simply lists its projects and the total amount of climate finance without detailed information.

“They need to give more granular information because that's where the climate finance aspect has to be more understood, especially for adaptation,” he said. That detailed funding information should go beyond the approval stage all the way through the closing phase.

Researchers combed through PDF files for Oxfam’s audit, but effective and transparent bookkeeping should include a public database with usable data, including a spreadsheet that is downloadable and machine-readable, Donaldson said.

Next, a finance assessment should be done on individual projects, similar to the precedent set by the Asian Development Bank, Donaldson said. “Each project has a standalone document that is called ‘Climate Assessment,’ and it details what component has climate finance, the justification of that, and what is the expected outcome,” he said. “If the Asian Development Bank is doing it, the World Bank can easily do it, and especially if they have public finances.”

Tracking expenditures is the first step to measuring impact

Improved recordkeeping and adding project assessments will help determine whether climate finances approved by the World Bank are actually delivered as planned. Accuracy in reporting is critical to proving the bank’s claim as the top climate financier, but it’s important to note the limitations. While better bookkeeping can tell us whether or not projects were funded, it won’t reflect the effectiveness of those projects. 

“Implications are even greater now that the bank is talking all about impact, trying to measure their … climate finance impact. And for us, we are not saying that expenditures equals measuring impact, but it's the most basic information,” Donaldson said. “If you want to measure the impact of an action, first you have to know if that action was implemented — if the money that you claim for that action was expended.”