The world bank (or the Bank) was established on December 27, 1945, following the ratification of the Bretton Woods agreement. The World Bank was conceived of in July 1944 at the United Nations Monetary and Financial Conference to provide development assistance to facilitate the reconstruction of Europe following World War II. Since then, the Bank has provided financial assistance to developing countries following natural disasters and humanitarian emergencies to facilitate postconflict rehabilitation and economic liberalization and development.
The organization of the World Bank consists of two agencies of the five that make up the World Bank Group (WBG): the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The Bank consists of 185 member countries, all of whom are shareholders, represented by a board of gover-nors—the ultimate policymakers of the Bank. The board of governors consists of member countries’ ministers of finance or development, and it meets annually. The governors delegate specific duties to 24 on-site executive directors.
The five largest shareholders—France, Germany, Japan, the United Kingdom, and the United States— each appoint one executive director, and the remaining member countries are represented by 19 other executive directors, thus making up the 24. The president of the Bank, currently Robert B. Zoellick, is responsible for chairing the meetings of the board of directors and for overall management of the Bank. The president of the Bank serves a renewable five-year term. The president is, by tradition, a U.S. citizen nominated by the president of the United States—the bank’s largest shareholder. The presidential nominee is confirmed by the board of governors.
The World Bank’s activities are focused on the reduction of global poverty, especially on the achievement of the Millennium Development Goals (MDGs), goals calling for the elimination of poverty and the implementation of sustainable development. The constituent parts of the Bank, the IBRD and the IDA, achieve their aims through the provision of low- or no-interest loans and grants to countries with little or no access to international credit markets. The Bank is a market-based, nonprofit organization, using its high credit rating to make up for the low interest rate of loans.
MISSION AND FUNDING
The Bank’s mission is to aid developing countries and their inhabitants achieve the MDGs through the alleviation of poverty by developing an environment for investment, jobs, and sustainable growth, thus promoting economic growth, and through investment in and empowerment of the poor to enable them to participate in development. The World Bank focuses on four key factors necessary for economic growth and the creation of a business environment: capacity building (strengthening governments and educating government officials), infrastructure creation (implementation of legal and judicial systems for the encouragement of business, the protection of individual and property rights and the honoring of contracts), development of financial systems (the establishment of strong systems capable of supporting endeavors from micro credit to the financing of larger corporate ventures), and combating corruption (eradicating corruption to ensure optimal effect of actions).
The Bank obtains funding for its operations primarily through the IBRD’s sale of AAA-rated bonds in the world’s financial markets. Although this does generate some profit, the majority of the IBRD’s income is generated from lending its own capital. The IDA obtains the majority of its funds from 40 donor countries, who replenish the bank’s funds every 3 years, and from loan repayments, which then become available for relending.
The Bank offers two basic types of loans: investment loans and development policy loans. The former are made for the support of economic and social development projects, whereas the latter provide quick disbursing finance to support countries’ policy and institutional reforms. Although the IBRD provides loans with a low interest rate (between 0.5 and 1 percent for a standard Bank loan), the IDA’s loans are interest free. The project proposals of borrowers are evaluated for their economical, financial, social, and environmental aspects to ensure that they are viable before any amount of money is distributed.
The Bank also distributes grants for the facilitation of development projects through the encouragement of innovation, cooperation between organizations, and participation of local stakeholders in projects.
IDA grants are predominantly used for debt burden relief in the most indebted and poverty-struck countries, amelioration of sanitation and water supply, support of vaccination and immunization programs for the reduction of communicable diseases such as HIV/AIDS and malaria, support to civil society organizations, and the creation of initiatives for the reduction of greenhouse gases.
THE WORLD BANK AND CLIMATE ISSUES
With respect to its work addressing issues of global warming, the World Bank has created and funded a number of climate-related partnerships and programs with other agencies and national governments, including the United Nations Framework Convention on Climate Change (UNFCCC), the Global Environment Facility (GEF), Carbon Finance, the Energy Sector Management Assistance Program (ESMAP), the Asia Alternative Energy Program (ASTAE), the Global Facility for Disaster Reduction and Recovery (GFDRR), the Vulnerability and Adaptation Resources Group (VARG), and the Global Gas Flaring Reduction partnership (GGFR).
The UNFCCC is an international treaty through which countries consider ways to reduce global warming and cope with inevitable temperature increases. The World Bank is an observer to the UNFCCC and also takes part in a number of technical discussions conducted by the UNFCCC Secretariat, such as by the Subsidiary Body for Implementation and the Subsidiary Body for Scientific and Technological Advice.
The GEF is the financing mechanism for the UNFCCC, as well as other key international environmental agreements. As a GEF-implementing agency, the World Bank helps identify, prepare, and implement projects that reduce poverty and benefit the local and global environment. Climate change was the second most active focal area of the GEF active portfolio at the end of fiscal year 2006.
The World Bank’s Carbon Finance Unit offers a means of leveraging new private and public investment into projects that serve to mitigate climate change by reducing greenhouse gas emissions, while promoting sustainable development. Projects relate to rural electrification, renewable energy, energy efficiency, urban infrastructure, waste management, pollution abatement, forestry, and water resource management.
The atrium of the World Bank in Washington, D.C. It has funded a number of climate-related partnerships and programs.
ESMAP, cosponsored by the World Bank and the United Nations Development Programme, is a global technical assistance program that provides policy advice on sustainable development issues to the governments of developing countries and economies in transition. ESMAP also contributes to technology and knowledge transfer in energy sector management and, since its creation in 1983, has operated in 100 different countries through some 450 different activities. Recently, a new window in ESMAP has opened to support the goals of the Clean Energy Investment Framework.
The ASTAE program, established in 1992, aims at mainstreaming renewable energy and energy efficiency in the World Bank’s lending operations in the power sector in Asia. The World Bank is cooperating actively with the GFDRR, which aims at integrating hazard risk reduction strategies in development processes at local and national levels. The potential exacerbation of extreme climatic events as climate changes suggests significant overlap between the areas of adaptation to climate change and disaster risk reduction.
The VARG is an informal network of multi- and bilateral development institutions that aim to facilitate the integration of adaptation to climate change in the development process. The World Bank is one of 19 organizations that are partnering in this open-knowledge network.
The GGFR partnership, a World Bank-led initiative, facilitates and supports national efforts to use currently flared gas by promoting effective regulatory frameworks and tackling the constraints on gas utilization, such as insufficient infrastructure and poor access to local and international energy markets, particularly in developing countries. Launched at the World Summit on Sustainable Development in August 2002, GGFR brings around the table representatives of governments of oil-producing countries, state-owned companies, and major international oil companies, so that together they can overcome the barriers to reducing gas flaring by sharing global best practices and implementing country-specific programs.
THE SUSTAINABLE DEVELOPMENT NETWORK
Another World Bank initiative is the Sustainable Development Network, a part of which includes a Climate Change Team within the Environment Department of the Bank. The Climate Change Team provides resources and expertise for the World Bank’s participation in international climate change negotiations under the UNFCCC and provides technical advice to the World Bank’s GEF Program on the preparation of GEF climate change mitigation projects in energy efficiency and renewable energy and on the development of strategic initiatives with the GEF. The team also is leading the Bank’s efforts related to climate change vulnerability and adaptation issues for its client countries.
The Bank recognizes that achieving objectives related to climate change is a long-term process requiring the integration of the greenhouse gas (GHG) mitigation and the vulnerability and adaptation agendas into mainstream operational work. These instruments include planning, policy dialogue, generation and dissemination of knowledge, and investment lending, all of which are primarily aimed at promoting national development priorities. Bank support to clients for better managing climate change occurs in three key areas: mitigation of GHG emissions, reduction of vulnerability and adaptation to climate change, and capacity building. In the area of GHG mitigation, the bank promotes policy and regulations, as these tend to have large and sustainable effects on improving the efficiency of resource use and, consequently, reduction of GHG emissions. In the context of these reforms, the Bank mobilizes resources from the GEF and the Prototype Carbon Fund to support GHG abatement measures that simultaneously address poverty reduction and sustainable development goals.
In areas of vulnerability and adaptation, where the decision on UNFCCC support is pending, the Bank will mobilize donor financing for a Vulnerability and Adaptation Facility to better prepare for climate change. Over the medium term, the Bank will focus on improving the understanding of the potential effects of climate change and on identifying and implementing no-regrets measures to reduce vulnerability to current climate and to climate change. Finally, the Bank will assist clients in building the capacity needed to deal with GHG abatement and with vulnerability and adaptation.
As part of its work in climate change, the World Bank has developed a variety of resource and training materials addressing the fundamental issues underlying climate change, examples of successful mainstreaming of climate change concerns into project work or underlying analysis, and basic tools for accurately identifying the climate change effects of projects, baselines, and alternatives. The climate risk screening toolkit is referred to as ADAPT (Assessment and Design for Adaptation to Climate Change), which is a prototype tool that will screen proposed development projects for potential risks posed by climate change and variability. The Bank has also developed a variety of tools and examples to help its staff and clients more readily address the methodological, technical, and economic issues underlying the incorporation of GHG issues in project development and economic analysis. In the area of renewable energy, the Renewable Energy Toolkit comprises a range of tools to help Bank staff and country counterparts improve the design and implementation of renewable energy projects. It aims at providing practical implementation needs at each stage of the project cycle and also helps project staff determine sustainable business models, financing mechanisms, and regulatory approaches.
