The World Bank Is Getting a New Chief. Will He Pivot Toward Climate Action?
Under pressure from world leaders, development experts and shareholders, the bank opens its spring meeting on Monday, poised for big changes.
As World Bank shareholders gather in Washington for their annual spring meeting on Monday, the global institution appears to be on the brink of significant change.
World leaders, led by Prime Ministers Emanuel Macron of France and Mia Mottley of Barbados, along with a constellation of academics and development experts want the bank to do more to help poor countries grappling with climate change. The bank has set out its own vision for transformation, in response to calls for action from the United States and others. Major shareholders have approved some initial reforms, including agreements to let the bank lend more money and attract more private investment.
At the center of the discussions will be Ajay Banga, who is widely expected to be confirmed as president of the bank in the coming weeks. When he takes over this summer, he will face high expectations and urgent questions about whether the bank will change its lending model, whether it will seek more money from shareholders and how he will direct the bank to address issues including poverty, global warming and the war in Ukraine.
“He’ll get a honeymoon, but he better use that honeymoon well,” said Mark Malloch-Brown, the president of the Open Societies Foundation and a former vice president of the World Bank. “These institutions do not change quickly.”
A longtime finance executive, Mr. Banga, 63, became chief executive at Mastercard in 2010, shortly after the company, which had been owned by a coalition of more than 25,000 financial institutions, went public. During 10 years as C.E.O., he built Mastercard into a powerhouse now worth $350 billion.
“He fundamentally transformed what was a slow, bank-association culture into a high-performing, agile, innovative, proactive, now Fortune 20 company,” said Mike Froman, a longtime Mastercard executive who is preparing to take over the Council on Foreign Relations. “That involved everything from leadership, motivation, vision, but also very importantly, changing culture.”
Critics of the bank complain that, in addition to being insufficiently focused on climate change, it is woefully slow to respond to major crises and lacks ambition and creativity.
Mr. Banga said he intends to bring a new sense of urgency to the bank’s core mission of alleviating global poverty, while also taking on some of the biggest crises in the world today.
“Inequality is intertwined completely with challenges like climate change, challenges like fragility of the world with refugees and the like being caused by conflict, with challenges like the pandemic, with challenges like with Russia and Ukraine, with what that does to food and fertilizer,” he said in an interview. “I don’t think you can segregate these into buckets and hope that you can deal with one without dealing with the other.”
Mr. Banga also will be faced with a delicate diplomatic task when he assumes the job. Although he has been nominated by the Biden administration, he will have to navigate the tension between the United States and China and he will need to press all of the major shareholders to make sure that their investments in the bank match their stated ambitions.
At a congressional hearing last month, Treasury Secretary Janet Yellen, whose portfolio includes overseeing the United States’ investment in the World Bank, made clear that she hopes the bank can help weaken China’s effort to exert influence in the developing world, which the United States views as predatory.
She wants the World Bank to provide an alternative lending option that provides “quality infrastructure investment” that is “responsible.”
“I’m very, very concerned about some of the activities that China engages in globally, investing in countries in ways that leave them trapped in debt and don’t promote economic development,” Ms. Yellen said. “We are working very hard to counter that influence in all of the international institutions that we participate in.”
Securing more funding for the World Bank that would allow it to increase its lending capacity could also be difficult. Ms. Yellen said that she thinks the World Bank can initially boost its capacity by stretching its existing resources and being more innovative.
However, the United States is not currently calling for increasing the capital available to the bank. “We do want to see federal mobilization of private resources alongside World Bank investments,” Ms. Yellen said. “But we’re not we’re not requesting a capital increase at this time.”
Scott Morris, a senior fellow at the Center for Global Development, said the debate over more funding for the World Bank will likely circle back to the question of China and the question of why the world’s second largest economy continues to borrow from the bank.
He said China’s borrowing from the bank is likely to find more acceptance if it is for projects with global benefits, such as reducing emissions, rather than for traditional local projects. “I definitely think it’s still an area of tension,” Mr. Morris said.
But among the areas where Mr. Banga will be most closely scrutinized is how he uses the bank to confront climate change.
Mr. Banga was tapped to lead the World Bank in February after David Malpass, the current president of the bank, said he would retire a year ahead of schedule. Mr. Malpass, who was nominated by President Donald Trump, opted to step down early after he came under fire because he declined to say if he accepted the scientific consensus that fossil fuels were rapidly warming the planet.
For years, the bank has been denounced by critics who say it hasn’t adequately responded to the economic devastation from climate change, which is disproportionately felt by poor countries. The bank has defended its record, saying it has ramped up its lending for climate projects in recent years.
Mr. Banga, who grew up in India, will be the first World Bank president from the developing world. And he says he is attuned to the urgency of the threats posed by a warming world. “I care about climate,” Mr. Banga said. “Because we’re running out of time.”
Michael Bloomberg, the former mayor of New York and a major funder of climate action, said he believed Mr. Banga was up to the task.
“He has made clear that climate change will become more fully integrated into the bank’s work and mission,” Mr. Bloomberg said in a statement. “And his background positions him to capitalize on the eagerness of financial institutions to form new partnerships with the World Bank that increase access to clean energy.”
Mr. Banga will be in Washington this week but not have a formal role in the meetings, given he has not yet been confirmed. Substantial reforms are unlikely to be codified at the bank’s spring meetings..
“Civil society will say this has got to go a lot further, and that it’s still missing a level of ambition,” Mr. Malloch Brown said. “People will be expecting a much bigger installment by the time of the annual meetings in the fall.”
Instead, world leaders and development experts will be looking for clues about shifting priorities, whether the bank is likely to request more money from its shareholders and how Mr. Banga is prepared to approach his role.
“This is a very important job, but it’s not his job alone,” said Rachel Kyte, dean of the Fletcher School at Tufts University and a former vice president at the World Bank. “Other governments have to do what they need to do, other institutions have to do their part too. The worst thing in the world would be to hang around Banga’s neck expectations that he alone can solve these problem. The system is bigger than one person.”