The World Bank's climate retreat

In this piece, Future Horizons Institute’s Chief Technical Adviser Knut Lakså and NTNU’s Hilde Refstie examine the World Bank’s climate retreat and call on Norway and other donors to defend its climate commitments and political independence.

Under pressure from the Trump administration, the World Bank recently abandoned its climate finance target. As the Bank increasingly bows to US political pressure, other donors must question its commitment to climate action and its political independence, argue Knut Lakså and Hilde Refstie.

In June 2026, the World Bank made a decision with potentially far-reaching consequences for global climate finance: it abandoned its target of allocating 45% of annual financing to climate-related activities. This decision followed continued pressure from the Trump administration, which has demanded that the Bank return to its traditional focus on economic growth and poverty reduction.

Climate action has become an increasingly central priority for the World Bank over the past two decades. Following the Paris Agreement in 2015, the Bank adopted its first Climate Change Action Plan, committing to increase climate-related financing to 28% by 2020. This ambition was subsequently raised to 35% in 2021 and 45% in 2023.

For an institution that has increasingly positioned itself as a leading financier of climate action in developing countries, abandoning this target represents a significant political turning point.

The question now is how the world's most influential development bank will be able to implement its vision to “create a world free of poverty on a liveable planet”, while focusing less on climate finance in response to the U.S.

The U.S. administration’s call for the Bank to return to its core mandate also rests on a questionable assumption: that poverty reduction, economic growth and climate action are competing priorities. For many developing countries, the opposite is true. It is well known that climate change is already undermining agricultural productivity, threatening food and water security, and damaging infrastructure. Climate action is therefore not an additional development objective, but a prerequisite for lasting development.

A changing political agenda

Since taking office in 2023, World Bank President Ajay Banga has placed increasing emphasis on job creation, energy access and mobilising private investment. These priorities are not inherently at odds with climate action. Indeed, expanding access to clean energy and investing in climate-resilient infrastructure can contribute to all three.

Yet the Trump administration has pushed the Bank in a more explicitly political direction.

US Treasury Secretary Scott Bessent has criticised what he calls “mission creep”:  The World Bank (and the IMF’s) gradual expansion into areas such as climate change, biodiversity and other global challenges. Washington has called for a renewed focus on economic growth, affordable and reliable energy, and greater openness to fossil fuel investments.

Some of these demands have been reflected in recent policy changes. In 2025, the World Bank lifted its longstanding restrictions on financing nuclear energy and began reconsidering its approach to natural gas, signalling a broader shift in its energy financing policies. Then, in June 2026, it abandoned its 45% climate finance target.

According to Reuters, the decision followed considerable pressure from the Trump administration and was politically contested. France publicly opposed abandoning the target, while a broader coalition of World Bank executive directors had previously expressed support for maintaining the Bank's climate commitments.

The Bank maintains that climate action remains important and that it will continue financing climate-related investments .  Climate finance targets are admittedly imperfect measures of actual impact. However, simply abandoning them under political pressure, without equally clear alternative commitments, sends a strong signal that climate action is becoming negotiable.

Political connections at the top

The Bank's evolving relationship with Washington also warrants closer scrutiny of the political and personal connections of some of its senior figures.

World Bank President Ajay Banga was appointed to the executive board of Trump's Board of Peace, alongside U.S. Secretary of State Marco Rubio, Jared Kushner and Steve Witkoff. Banga has defended the Bank's involvement, stressing that its role is limited to administering a trust fund for Gaza's reconstruction. Whereas the Bank has often served U.S. interests, Banga’s participation in a body that explicitly undermines United Nations  raises questions about the Bank’s commitment to multilateralism.

Another notable appointment is Susana Cordeiro Guerra, who became the World Bank's Vice President for Latin America and the Caribbean in September 2025. She previously headed Brazil's national statistics agency under far-right President Jair Bolsonaro. Cordeiro Guerra also has close personal ties to figures associated with the Trump administration. She is married to Elbridge Colby, the US Under Secretary of Defense for Policy, and, according to Brazilian newspaper Folha de São Paulo, is a close friend of Ivanka Trump and Jared Kushner, and godmother to one of their daughters.

Such connections do not, in themselves, demonstrate political interference or explain the Bank's policy decisions. However, against the backdrop of documented U.S. pressure to scale back climate commitments, they raise legitimate questions about political influence, institutional independence and the future direction of the world's most influential development bank.

Multilateralism under pressure

The World Bank's changing direction reflects a broader challenge facing multilateral institutions in an increasingly fragmented geopolitical landscape.

As the Bank's largest shareholder, the United States exercises considerable influence over its priorities. Yet climate change, biodiversity loss and sustainable development are global challenges that cannot be addressed according to the political preferences of any single government.

The Bank should not be immune to political debate or reform. The effectiveness of climate finance and development assistance deserves scrutiny. Yet improving climate investments is fundamentally different from allowing the Trump administration to reshape the priorities of a global development institution to suit its own political agenda. This sets a troubling precedent.

Ultimately, the question is whether the World Bank will continue to serve the collective development interests of its member countries, or increasingly reflect the domestic political priorities of its most powerful shareholder.

The responsibility of other donors

These developments raise important questions for countries whose development priorities increasingly diverge from the direction in which the World Bank is being pushed.

Norway is one example. In 2025, Norway channelled approximately NOK 5.2 billion (USD 520 million)through the World Bank Group, equivalent to nearly 9% of its total development assistance. Despite a decline from NOK 6.6 billion in 2024, the World Bank remained Norway's largest individual multilateral aid recipient.

Yet while Norway remains a strong advocate for international climate action, the Bank is coming under growing pressure to scale back its climate commitments. In fact, Norway's recently launched a new World Bank strategy (2026–2030) explicitly identifying the Bank's 45% climate finance target as a key commitment. The Bank's decision to abandon this target stands in direct contrast to Norwegian policy priorities.

This creates a fundamental tension: Norway is investing heavily in an institution whose strategic direction risks undermining its own development and climate policy objectives. Norway and other European donors must therefore ask whether their contributions are advancing their stated priorities - and use their influence to ensure that they do.

Otherwise, they risk financing the gradual erosion of the very climate and development commitments their aid is intended to support.

Knut Lakså is a PhD Research Fellow at NTNU and Chief Technical Adviser, Food Systems at Future Horizons Institute. Hilde Refstie is Associate Professor at the Department of Geography and Social Anthropology, NTNU.