The World Bank is under mounting pressure. International threats to poverty — from global warming, the spread of disease, and war — have become increasingly apparent over recent years. Meanwhile, global debt has surged, geopolitical rifts are denting co-operation, and estimates suggest $125tn of climate investment is needed by 2050 to meet net zero targets. The world is looking to the multilateral development bank (MDB) to provide leadership and finance. With its president David Malpass stepping aside early, now is a vital moment to reform the bank and find the right leader to take it forward.
Since its initiation as part of the Bretton Woods system in 1944, the World Bank has undergone several shifts in focus: from rebuilding economies after the second world war, to confronting poverty and supporting the UN’s Millennium Development Goals. Its strategic direction needs refreshing once more. Its country-level approach risks underinvesting in pressing cross-border issues like climate change and public health. This does not mean the bank’s existing goals of ending extreme poverty and boosting shared prosperity should be diluted. But a deeper recognition of how global challenges are interwoven with them is now required.
The World Bank needs, then, to take a leading role in addressing climate change at scale and with urgency. Its own estimates suggest that if left unchecked, rising sea levels, droughts, and other harmful effects could drive over 130mn people into poverty in the next decade. Raising its efforts on the green transition and adaptation is key. The bank lags behind other large MDBs in its target for the share of funding going to climate projects. The special adviser to the UN secretary-general on climate action recently accused it of fiddling “while the developing world burns”.
Meeting demands for sustainable, inclusive and resilient development means mobilising more finance. The poorest countries, burdened by pandemic debts, must take priority. The World Bank should leverage its existing capital better by considering proposals in a recent G20-commissioned report showing that MDBs could generate hundreds of billions in new lending simply through more efficient use of their balance sheets. They should not, however, take undue risks that undermine their triple-A credit ratings. Encouraging richer shareholders to inject more capital could also significantly boost the World Bank’s lending capacity with only modest increases. More crucial will be drawing on private sector finance and expertise, including through partnerships with investment funds, innovative financing, and by de-risking projects.
Operational changes are needed too. The bank has been criticised for being too slow: the average time taken to disburse funds is 465 days, though there are often delays beyond its control. Either way, tackling bureaucracy and working more closely with private sector expertise — from fund managers, to clean tech and construction outfits — to deploy and finance projects quickly is important. With the transformative impact of technological change and the energy transition, the bank will also need to go beyond its national approach and operate at regional and subnational levels, while co-ordinating development efforts at the heart of the MDB system.
Malpass’s replacement needs to command the respect of the bank’s shareholders, whose backing is crucial in tackling issues beyond their borders. They will need a mastery of finance and private sector experience, alongside a deep knowledge of development and a commitment to tackling climate change. These are challenging criteria. But making a success of reform will require a leader of the highest calibre.