He Could Uncork Trillions to Help Fix the Planet

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He Could Uncork Trillions to Help Fix the Planet

What if a new world leader came on the scene who could potentially free up trillions to help developing countries cope with climate change?

That’s essentially what could be happening soon at the World Bank. The bank’s mission is to help countries develop sustainably and reduce poverty. The bank advises countries on what they need to do, lending them money to get projects off the ground and guaranteeing investments from other financial institutions.

For years, though, it’s been accused of being insufficiently responsive to the needs of countries battered by climate change and heavy debt.

Enter Ajay Banga, a business executive who was nominated by President Biden to lead the bank and confirmed by its board. He’ll formally take over leadership next month. Will he move quickly to free up the vast sums needed to wean humanity from fossil fuels and adapt to climate change?

I asked Rachel Kyte, dean of the Fletcher School of international affairs at Tufts University, what we should expect from the new administration. Kyte, a former World Bank vice president and climate change envoy, has followed the bank’s change in leadership closely.

Kyte said many of the bank’s owners, wealthy nations, have long felt that the institution is not doing enough to help developing countries turn the corner on the green transition. They hope Banga will change that.

Here is our conversation, condensed and edited for clarity.

Will Banga need to ask wealthy countries for more money to tackle climate change?

Kyte: There is much more sort of aggressive, innovative, creative, smart risk-taking that the bank can take. And, then, what everybody’s hoping that Banga can do is to look at how to build different partnerships with the private sector. Then at some point he might have to turn around and say, you know what, I can be this creative and do all this, but I need more.

But there is a growing chorus of developing countries saying this has got to be done differently, we need more. And the owners of the bank, they need the capital in the multilateral system to do more as well. So he probably has more wind in his sails for reform than any president has had in modern times.

Can you give one example of the sort of thing people want to see the bank do.

About half of the countries in Africa at the moment, about 60 percent of low-income emerging market countries, are debt distressed. But what’s different about this debt crisis than the one we had 20 or 30 years ago is that the debt is not just owned by the West. The creditors are China, in large part, countries like the U.S. or France. But a large part of the debt is actually held by private equity or private banks. So one of the things that’s going to happen is that the World Bank is going to have to find a new way to sit down on a different sort of table to work to resolve this. So it’s very important that he knows all of these private financiers.

Are there any measures you think he will take right away?

A lot of people talked about the culture of the bank. It’s packed full of really smart people. And, as a manager, what’s the tone from the top that you can send that empowers people to take risks, to be client focused, to be solutions oriented? It’ll be interesting to see how quickly his managerial style takes hold.

Can the bank encourage wealthy nations to deliver the climate aid they promised to developing countries?

I think where the bank comes in is that it can turn around to donors and say, hey, guys, here is another creative way to do it. It’s not the bank sitting back and saying, well, the owners haven’t found the money. It’s the bank sort of going to them and saying, if you do this, you will save yourself hundreds of millions of dollars in costs incurred in humanitarian aid, responses to disasters, in refugees. The bank has to be an advocate for smart development, smart climate action. I think that’s what people are looking for Ajay to do.

Related: My colleagues Alan Rappeport and Coral Davenport wrote about Banga’s career and why the Biden administration nominated him to lead the bank.

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Claire O’Neill, Chris Plourde and Douglas Alteen contributed to Climate Forward.

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