Multilateral lenders vow openness about their carbon footprints

THE World Bank gets a lot of flak. Developing countries clamour for a bigger role in its management. President Donald Trump’s administration lambasts it for lending too much to China. Last year employees openly griped about a crisis of leadership under their boss, Jim Yong Kim. Now the embattled institution faces criticism from a traditionally friendlier quarter: environmentalists. They accuse it and other multilateral development banks (MDBs) of not being upfront about their true carbon footprint.

That must hurt. After all, MDBs pioneered climate-friendly finance. Ten years ago the European Investment Bank issued the world’s first green bond to bolster renewables and energy-efficiency schemes. The World Bank has not backed a coal-fired plant since 2010. In 2011-16 it and the five big regional lenders in the Americas, Asia, Africa and Europe offered developing countries a total of $158bn to help combat climate change and adapt to its effects. They disclose the amount of carbon dioxide emitted by their day-to-day operations, from lighting offices to flying bankers around the world. But many greens point out they have been more coy about their continued support of dirtier development.

Oil Change International, an advocacy group, estimates that, excluding low-carbon but disruptive projects such as large hydropower plants, for every dollar invested in the past three years in green energy such as solar or wind farms, MDBs funnelled 99 cents to the fossil-fuelled sort (see chart). Helena Wright of E3G, a think-tank in London, says that about $1.5bn in “green” lending between 2013 and 2015 looks, closer up, distinctly brownish. The European Bank for Reconstruction and Development (EBRD), for example, counted 9% of a €200m ($222m) loan to build a port terminal in Morocco as climate finance, although the facility would handle and store crude oil and coal.

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The banks dispute such findings. Many of the supposedly brown loans go through national treasuries or financial intermediaries. They can choose to finance fossil-fuel projects from general expenditure, not the MDBs’ cash specifically. Other “brown” loans bankroll cleaner alternatives to grubby coal plants, such as gas-fired ones. The EBRD explains that the Moroccan loan is to adapt the port to rising sea levels.

Yet many development bankers concede that their institutions could be more forthcoming about the greenhouse-gas emissions embedded in their portfolios. Some private-sector financial firms such as AXA, a giant French insurer, and public-sector pension funds in America and Britain have been reporting such totals for several years now. Among the MDBs, only the Inter-American Development Bank and the EBRD do so comprehensively.

Others are belatedly piling in. At the World Bank’s annual jamboree in Washington this month Mr Kim vowed to report total carbon dioxide produced and avoided by bank-funded projects. A framework for monitoring net emissions should be ready next year. The Europeans are refining their approaches. So was their African counterpart, before an administrative overhaul last year put the initiative on hold. Last month the Asian Development Bank pledged to gauge and reduce its portfolio’s net contribution to global warming.

Chinese-led newcomers to development banking also look keen, at least on paper. The New Development Bank focuses on “sustainable infrastructure” and dedicated its first batch of loans entirely to clean-energy projects. In June the vice-president of the Asian Infrastructure Investment Bank, Thierry de Longuemar, affirmed that the bank will not finance coal-fired power plants. “We will not consider any proposals if we are concerned about the environmental and reputational impacts,” asserts a spokeswoman. Their Western-led forebears can tell them how closely critics will monitor that promise.

Correction (October 20th, 2017): We said in this piece that employees of the World Bank are “in open rebellion against their boss”. This is an outdated and misleading statement based on a letter from the staff association written in 2016. Sorry.

Read more http://www.economist.com/news/finance-and-economics/21730448-environmentalists-allege-their-lending-has-been-less-green?fsrc=rss

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