UN warns against fossil fuel investments as World Bank face criticism

The United Nations (UN) Secretary-General Antonio Guterres urged development banks to avoid backing fossil fuel enterprises.

The call comes after a study found that after the 2015 Paris Agreement that decided to combat climate change, the World Bank, the international financial institution, had invested $12 billion in the industry.

For years, environmental groups have tried to prevent the oil, coal and gas industries from generating harmful levels of greenhouse gases that cause climate change by persuading commercial banks to stop lending them money.

But the world’s state-backed development banks, whose funding is often vital in deciding whether such projects proceed in developing countries, are also facing increasing calls to starve the industry of finance.

A group of finance ministers and economic policymakers from dozens of countries around the world have been urged by Guterres to ensure that development banks put an end to investment in fossil fuels and promote renewable energy.

“We need speed, scale and decisive leadership,” Guterres said in a video message to a virtual meeting of the group.

World Bank under scrutiny 

A recent study by the Germany -based environmental organization Urgewald reported that, since the Paris Agreement, the World Bank has spent more than $12 billion in fossil fuels, of which $10.5 billion was direct funding for new ventures.

That put the World Bank well ahead of other development banks in supporting the sector, said Heike Mainhardt, Urgewald’s senior advisor, who wrote the report.

The report questioned why the World Bank would promote increased oil and natural gas production in countries such as Mexico, Brazil and Mozambique, with the world already on track to generate much more fossil fuels than would be consistent with the temperature targets agreed in Paris.

The bank’s support for fossil fuels, Mainhardt said, delayed the transition to cleaner energy needed to achieve the Paris agreement’s objective of preventing catastrophic climate change.

“It’s so misleading for them to act like they are a champion of the climate when they really are such a huge part of the problem. Because the World Bank keeps giving billions in public assistance, that distorts the market for fossil fuels, it slows down the energy transition,” Mainhardt said.

World Bank’s response

The World Bank reported that the study offered a “distorted and baseless view,” adding that it dedicated almost $9.4 billion from 2015-19 to fund renewable energy and energy management in developing countries.

The US headquartered bank also said the report overlooked its mandate to help about 789 million people, mostly in rural Africa and Asia, who live without electricity.