The World Bank’s climate mission: new risks on the horizon?

It’s been over a year since the World Bank Group (“the Bank”) more explicitly incorporated climate into its vision and mission — raising important questions about human rights and project accountability. Addressing climate change through mitigation and adaptation efforts is one of the most important challenges of our time. Unfortunately, climate projects can pose significant human rights risks. This concern is highlighted by data from the Business and Human Rights Resource Centre, which documented more than 200 allegations linked to renewable energy projects between 2011 and 2021 among the 15 largest renewable energy companies.

To understand risks from this new approach, this piece examines the Bank's implementation of its new mission and reviews six recent complaints filed with the Bank's accountability mechanisms. Analysis reveals several emerging patterns including: 

• Traditional development project challenges — like displacement, inadequate compensation, and biodiversity concerns — persist even as projects adopt climate-focused objectives.
• Climate adaptation projects can increase community vulnerability.
• Traditional development projects are being rebranded with climate components.
• The Bank's shift in financing tools can pose challenges to accessing accountability mechanisms. 

Reviewing these complaints offers insights into the challenges ahead for climate progress and sustainable development in international finance institutions.

The Bank’s new mission

The Bank's new mission to "end extreme poverty and boost shared prosperity on a livable planet" formally gives the Bank a mandate to address climate change. The Bank's playbook provides insight into how the Bank plans to implement the new mission, and indicates the Bank plans to focus on the following strategies:

1. Adaptation over decarbonization: The playbook indicates the Bank will focus on resilience, conservation, and reducing emissions rather than aiming to accelerate decarbonization. The Bank has not pledged to actively advance the goals of the Paris Agreement, but rather promises the less ambitious goal of not undermining these objectives by promoting carbon lock-in.
   
   
2. A rise in private capital: There's a growing emphasis on mobilization of private capital, using financial intermediaries, capital markets and other innovative financial instruments. However, the use of private capital also often means weakened environmental and social safeguards, leading to heightened risks for project-affected communities and the environment. 
   

A rise in Development Policy Financing (DPF)

The Bank's financing patterns since adopting its climate mission also show a transition towards Development Policy Financing (DPF).

Unlike Investment Project Financing (IPF), in which the Bank funds specific projects, in DPF, the Bank provides general budget support to the recipient government, conditional on the implementation of a program of policy and institutional reforms. Recent investments reveal that DPF investments are on the rise. According to an analysis from Bretton Woods Project, the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD) financed a total of 71 projects in the ‘energy & extractives’ category in Fiscal Year 2024, with significantly more allocated to DPF:

• 38 were DPF ($13 billion) 
• 27 were IPF ($5.31 billion)

Unlike IPF, DPF operations fall outside the Bank's Environmental and Social Framework, and DPF projects undergo only lighter assessments such as the Poverty and Social Impact Analysis (PSIA). Although communities affected by DPF operations can access the Bank’s public sector mechanism, the Accountability Mechanism, it can be hard for communities to know what a DPF is supporting or a project’s tie to DPF support. With an increase in DPF operations, this could pose serious challenges for communities to raise concerns about the Bank’s climate financing.

Complaints filed in 2024

The following six complaints filed in 2024 spotlight emerging risks relating to Bank-funded projects. These complaints were submitted to the Inspection Panel (“the Panel”)* and Compliance Advisor Ombudsman (CAO) in 2024. Although these complaints correspond to projects approved before the Bank's adoption of its new mission, they offer valuable insights into recent projects and the types of challenges that may arise as climate finance becomes increasingly central to the Bank's operations. 

1. Cameroonian farmers' complaint about transmission line found ineligible

In January 2024, a resident of the village of Ntui, Cameroon filed a complaint to the CAO on behalf of 15 villagers. The complaint alleged that a planned transmission line in their area would acquire villagers' land and affect their livelihoods as cocoa farmers. Ultimately, the CAO determined that the planned transmission line did not relate to an active IFC/MIGA project and therefore fell outside of the CAO’s mandate. In August 2024, the CAO closed the case.

While this complaint was not related to an IFC or MIGA project, it highlights important risks in the Bank's new climate mission. A Bank project, Cameroon Power Sector Reform Program, was approved in 2023 and is tagged as a climate mitigation (57%) project with the aim of improving the sustainability of the country’s energy mix. Although the CAO determined these villagers' experiences were not directly funded by IFC/MIGA, the Bank's broader financing of the country's energy sector may have indirect impacts on communities like Ntui. Indeed, the existence of the Bank's project likely led the complainants to believe they could file a complaint with the CAO.

This case underscores the challenges project-affected people face in understanding how projects are financed and where to file complaints. Accessing accountability mechanisms remains challenging — especially in the context of complex internationally-financed climate and energy projects. As climate-related infrastructure projects increase, effective communication about available grievance mechanisms will be increasingly important in ensuring affected communities can voice their concerns.

2. A flood management project floods a community in Nigeria

The Ibadan Urban Flood Management Project in Nigeria, approved in 2014, aims to address climate change adaptation by managing flood risk in the city of Ibadan through improved infrastructure and an integrated flood early warning system. Ironically, in June 2024, three residents of Odija, Ibadan North filed a complaint alleging that project-related construction activities had blocked a nearby water channel, leading to flooding that damaged their houses, shops, and other property.

The complainants initially attempted to resolve the issue with project authorities but were unsatisfied with the results. Then, the project contractor offered compensation, which the requesters deemed inadequate given the extent of the damages. When the complaint reached the Panel, Bank Management acknowledged the issues and confirmed that the contractor had not followed proper protocol in attempting to settle directly with the complainants. Bank management then engaged directly with the requesters to ensure the company provided appropriate compensation. The complaint was ultimately not registered as the complaint issue had been addressed outside of the formal complaint process.

This case demonstrates how a climate adaptation project can inadvertently increase vulnerability for communities it is aiming to help. It also shows the potential impact of the involvement of IAMs in exerting pressure on bank management and project companies, and in facilitating the expedient resolution of the issue. 

3. Wind farm in Uzbekistan raises concerns about biodiversity impacts 

In 2022, the IFC invested in the 500MW Zarafshan wind power plant in the Navoi region of Uzbekistan, supporting its development, construction, operations, and maintenance.  In March 2024, CEE Bankwatch Network submitted a complaint to CAO, as well as to other banks, on behalf of anonymous complainants. The complaint raised concerns about impacts on threatened bird species, inadequate environmental assessment and monitoring, and insufficient consideration of cumulative impacts. The complaint also argues that a planned nature reserve was allegedly relocated to accommodate the wind farm, and that the new location lacks comparable biodiversity value.

In May 2024, the complaint was found eligible for assessment. Both parties agreed to participate in dispute resolution, and in September 2024, CAO began coordinating a joint mediation process with the Asian Development Bank's accountability mechanism, while EBRD's mechanism suspended its compliance assessment.

This case exemplifies challenges typical of large-scale wind projects, particularly regarding biodiversity impacts, including migratory birds. As climate finance for renewable energy expands, similar tensions between clean energy development, wildlife protection, and community consultations are likely to increase.

4. Digital social registry allegedly harms vulnerable populations in Serbia

The Public Sector Efficiency and Green Recovery Development Policy Loan (DPL) in Serbia, approved in 2021, aims to increase government efficiency, promote sustainable economic growth and build resilience to economic shocks. The project has a small but significant climate change component (16%, split evenly between adaptation and mitigation). In August 2024, a complaint was registered with the Panel alleging that the digital system for managing social benefits, introduced as part of this project, has had negative impacts on vulnerable populations.

The complaint alleges that over 44,000 people have been adversely affected by the new system, resulting in the loss of financial benefits due to errors in income classification and calculation. The IP deemed the complaint eligible and registered it in August 2024.

This case illustrates a paradox: the project aims to increase economic resiliency – a climate adaptation effort – and yet the complaint alleges that the project has the potential to have the opposite effect. By building community resilience to economic shocks, this project has the potential to help communities survive and even thrive in the case of climate change-caused economic shocks. But the complaint highlights the potential for unintended negative economic consequences of digitalization and data integration efforts.

5. A complaint is filed too late to address concerns about gender equity in India

The India Ecosystem Services Improvement Project, approved in 2017, had a significant emphasis on climate change mitigation (84%) and a smaller adaptation component (16%). In February 2024, two individuals from an NGO working on the rights of Scheduled Tribes and women in India filed a complaint with the Panel. They alleged that the project had led to a deterioration of women's access to community forests, denying them their constitutional and cultural rights to forest resources, therefore negatively impacting women's livelihoods and incomes. The complaint was not registered by the Panel; it was deemed ineligible for review because the project had already closed by the time the complaint was received. 

The discrepancy between the project's official evaluation (it was rated as "Satisfactory") and the concerns raised by community representatives highlights a potential gap in reporting accountability since many project impacts may not become apparent until after the funds have been disbursed.** Furthermore, the concerns in the complaint are directly related to the climate-related aspect of the project. 

6. Displacement concerns lead to complaint in Pakistan

The Khyber Pass Economic Corridor Project in Pakistan, approved in 2018, aims to expand economic activity between Pakistan and Afghanistan by improving regional connectivity and promoting private sector development. It has a modest climate change component (21% for adaptation), which is likely due to an afforestation component. In July 2024, a complaint was registered with the Panel alleging concerns about potential "mass displacement" and substantial losses in housing, food security, and livelihoods for affected communities. 

Though the Bank Management stated that it believes all concerns to be adequately mitigated through the project design, the Panel recommended an investigation in September 2024 which the Board approved.

This case showcases an example of a project that appears to be primarily focused on economic development, that has been categorized as having a significant climate component. Despite this climate categorization, the types of negative impacts caused to communities are similar to other large infrastructure projects. It does not appear that the climate component is central to the concerns highlighted in the request.

Takeaways

Having reviewed the complaints submitted to the Panel and CAO, it’s worth noting some overall high-level trends that can be observed from reviewing these complaints and what these indicate about 

1. Persistent development risks

Many of the issues raised in these complaints – displacement, inadequate compensation, biodiversity concerns, loss of livelihoods – are longstanding challenges in development projects. Their presence in climate-related projects indicates that the shift towards climate finance hasn't eliminated these fundamental challenges. 

This underscores the importance of ensuring accountability for projects that fall under the umbrella of “climate finance”. This is especially important in the context of the Bank shifting away from direct financing which contains clearer avenues for redress (IPF) and towards indirect financing in which it’s less clear what projects are in fact tied to Bank support (DPF and financing involving financial intermediaries and capital markets instruments). Those concerned about transparency and accountability should continue advocating to ensure that project-affected people have clear avenues for redress. This is increasingly important in circumstances where the urgency of climate action has pressured MDBs to commit to the facilitation of “faster and easier development”, and as funds flow to project implementers that are not bound by strict environmental and social requirements.

2. The adaptation paradox

Complaints reveal that climate adaptation projects can ironically increase vulnerability. All climate-related complaints submitted to the Panel in 2024 were associated with climate adaptation projects or those with a significant adaptation component. This trend reflects the fact that the Bank is increasingly focusing on adaptation in its climate finance strategy. 

The 2024 complaints reveal a paradox: climate adaptation efforts, designed to increase resilience, can sometimes increase vulnerability. The Nigeria flood management case illustrates this issue: a project aimed at mitigating flood risks actually led to flooding and property damage for some residents. Similarly, the Serbia case highlights how green recovery initiatives could potentially lead to economic hardship for vulnerable populations.

These examples underscore a risk in climate adaptation projects: poorly designed or implemented initiatives may not only fail to achieve their goals but could actively set back climate resilience efforts. Whether through physical interventions that alter local environments or policy changes that affect economic structures, adaptation projects have the potential to either support the development of resilient communities – or exacerbate existing vulnerabilities.

3. Blurred lines and greenwashing concerns

Economic development projects are increasingly incorporating adaptation components, blurring the line between traditional development and climate adaptation. For example, the Pakistan economic corridor project is a primarily economic development project, but is considered to have a 25% climate component. 

This has important implications for the potential for greenwashing. The blending of development and climate goals could potentially dilute the Bank's accountability towards its mission of ensuring a livable planet. 

Ultimately, there's a risk that labeling a wide array of projects as climate related allows the Bank to continue "business as usual" while giving itself undue credit and appearing to take significant action on climate change. This could lead to a false sense of progress and divert attention and resources from more impactful climate initiatives.

4. Weakened accountability

The movement toward DPF and other innovative financing mechanism significantly weakens accountability of the Bank’s portfolio, raising concerns about oversight and safeguards:

1. Less safeguards. The rise in DPF projects is concerning because these operations are not subject to the Bank's comprehensive Environmental and Social Framework and only light-touch risk assessment tools. Civil society organizations criticize DPF's weak transparency and oversight.
   
   
2. A complex grievance landscape. The proliferation of projects with different financing mechanisms increases complexity for people trying to understand where to file complaints, and understanding whether a project is funded by an entity with a grievance mechanism. As seen with the electricity transmission complaint in Cameroon, multiple projects with various funding sources in a region can make it challenging for affected communities to understand who is financing a project and navigate the complaint process. This can potentially waste the limited time and funds of resource-constrained communities.

As a result of these factors, project-affected people may find significantly increased challenges in seeking redress for negative impacts resulting from DPF-supported policy changes or reforms.

Looking Ahead

The Bank's new climate mission represents a major opportunity for global development. However, it’s clear that its new approach comes with risks. To realize its potential, the Bank must ensure its climate finance flows represent meaningful change towards decarbonization, and not just a rebranded version of “business as usual”. It will be increasingly important to consider how to ensure that all Bank-supported activities, regardless of the financing instrument used, maintain high standards of environmental and social responsibility and provide adequate channels for affected communities to seek redress.

ENDNOTES

* The World Bank Accountability Mechanism houses the Inspection Panel and the Dispute Resolution Service. Once a complaint to the Inspection Panel is deemed eligible, communities filing the complaint are given the option to choose between continuing with a compliance review through the Panel or a dispute resolution process through the DRS. 

** The Panel allows complaints filed up to 15 months after project closure for projects approved after September 2020; this project was excluded from this since it was approved prior to 2017. The World Bank's post-closure filing window and caveat for pre–September 2020 project lags behind other peer institutions, many of whom allow up to 24 months for all projects.