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The World Bank and IMF say they’ll do more to address climate change

Staff in the field are reporting firsthand how climate disasters are hurting vulnerable countries. That may help shift institutional policies.

- October 20, 2022

Climate change was at the fore of last week’s International Monetary Fund and World Bank annual meetings in Washington, D.C. Protesters gathered outside the meetings to demand that the two preeminent international financial institutions take urgent action on climate change.

Inside the meetings, IMF Managing Director Kristalina Georgieva announced the launch of the new Resilience and Sustainability Trust to help the world’s most vulnerable countries manage long-term challenges like climate change. This came shortly after World Bank President David Malpass faced calls to resign after expressing skepticism over the human causes of global warming.

The World Bank and IMF offer financial assistance and policy advice to countries to promote development and bolster economic stability. The annual meetings provide a forum for governments and international financial executives to set the agenda for the coming year. In recent days, for instance, the United States and Germany led a push to modify World Bank policymaking to scale up climate finance. Existing research suggests that policy changes in international institutions, including to address climate change, often result from top-down pressure from powerful member nations.

Yet our new research attributes international organizations’ pivots to climate to a surprising and understudied phenomenon: an internal process of staff learning and rotation that shapes institutional policymaking from the bottom up.

How can international financial organizations help?

The IMF and World Bank have faced criticism for moving too slowly to account for the effects of climate change on economic growth and stability. Activists in and leaders of developing countries want these institutions to expand their use of low-interest loans to fuel decarbonization of the global economy and help climate-vulnerable states adapt to the physical impacts of climate change. And they want greater acknowledgment of the impact of climate change on countries’ ability to repay their debts to lenders.

The World Bank and IMF embrace of climate action has been limited. Developing countries have met resistance within the IMF in their attempts to renegotiate debt burdens made more onerous by climate-related disasters. Nongovernmental organizations have accused the World Bank of funneling billions of dollars toward fossil fuel projects since the conclusion of the Paris agreement in 2015, as well as dramatically overstating financing of climate change adaptation and mitigation projects. Barbadian Prime Minister Mia Mottley recently called for a broad restructuring of these institutions, declaring that they “no longer serve the purpose in the 21st century that they served in the 20th century.”

Yet we find that these institutions are paying greater attention to climate change in other ways. For example, IMF economists regularly deploy to member countries to help identify risks to economies, with their findings publicized in IMF reports that shape governmental policies and access to financing. Our research shows that reports highlighting climate change as an economic threat — including risks to public finances and creditworthiness — have become dramatically more frequent in the last decade.

We identify similar patterns in IMF research papers, which inform its policymaking. And the launch of the IMF’s Resilience and Sustainability Trust was a product of years of research by the organization’s rank-and-file staff. These trends indicate that international financial institutions increasingly see climate change as material to the economic well-being of member nations and, in turn, to the institutional missions of promoting economic development and stability.

Field agents play an important role

Existing research typically attributes shifts in institutional agendas and policies to the preferences of powerful member nations and institution executives. For instance, the United States, which holds the most formal power in the World Bank and IMF, regularly alters these institutions’ policies to lessen the strain placed on allies. Concern over the Malpass comments on climate skepticism largely stems from the distinct sway of international financial executives over policy and strategy.

We instead attribute the growth in climate attention to the actions of field agents — the technocrats employed by an international organization who live and work abroad. The process begins when field agents are deployed to highly climate-vulnerable member countries, such as low-lying island nations, where climate damages are readily apparent. These countries often deal with extreme weather events and climate-related disasters, and have become some of the loudest voices urging international financial institutions to take a more active role in the climate arena.

World Bank and IMF staff stationed in such countries often experience climate-related disasters, and their impacts on local economies, firsthand. This leads them to learn about climate’s significance to their institution’s mandate, particularly via the potential of climate-related events to impede economic development and sow financial instability. These technocrats subsequently become more likely to advocate for policies intended to slow climate change and bolster resilience to physical climate impacts. When these experts transfer to other countries or are promoted to new roles, they remain attentive to climate risks to member economies. We show how the processes of staff rotation and promotion — common features of political bureaucracies — have fueled the rapid surges in climate attention at both the IMF and World Bank.

Staff learning in the field is good news for international financial institutions and their members, as other research confirms. By calling attention to the immediacy and severity of climate crises in small and often overlooked countries, field agents enable weaker developing countries to affect global climate governance outside traditional negotiating forums like the U.N. Framework Convention on Climate Change, where they often find powerful nations hesitant to enact ambitious climate policies. As such, rotating bureaucrats to an array of countries may boost aggregate welfare — as well as the performance of international organizations.

There’s also reason to think this on-the-ground work on climate issues by World Bank and IMF experts can prompt policy changes at a broader range of institutions. The IMF sits at the center of a global web of financial institutions and regulators, including central banks. As a forum for interstate dialogue, the IMF is well situated to work with domestic agencies to help identify climate risks and gird economies against climate disruptions. Likewise, the World Bank works closely with domestic institutions in developing countries. Better understanding the situation in such vulnerable countries can improve international financial institutions’ climate-focused policies and help them avoid imposing costly and poorly targeted climate requirements in the developing world.

Richard Clark (@Ricky__Clark) is assistant professor of government at Cornell University. His research on international financial institutions has been published in journals including the American Journal of Political Science, Journal of Politics and International Organization.

Noah Zucker (@noahzucker) is postdoctoral research associate at Princeton University and incoming assistant professor of international relations at the London School of Economics. His work has been published in journals including the Journal of Politics and World Politics.