As part of its Climate Change Action Plan (2021-2025), the World Bank announced that 100% of its operations would be Paris-aligned after July 1, 2023. It explained that this “means that 100% of our operations will be vetted to manage and reduce climate risks of a project and to demonstrate that our financing supports the lower-carbon options where technically and economically feasible.” It also announced that it would produce World Bank Group Sector Notes with “guidance on how the Paris Alignment Instrument Methods (for the World Bank) and joint MDB Paris Alignment Approach (for IFC and MIGA) apply to sector-specific issues.”
While the content of these notes at least provides transparency as to what Paris alignment means at the World Bank, they are also hugely disappointing to anyone expecting that 100% Paris-aligned meant 100% advancing the goals of the Paris Agreement. This becomes clear as soon as one reads the notes. Instead of answering the question, “how should the World Bank use its finance in this sector to contribute to the Paris Agreement goals?,” they address the question, what of our business as usual financing must we tweak to avoid promoting carbon lock-in and major risks from climate impacts to our projects?
This hugely finessed Bank definition of Paris alignment – that 'Paris alignment' is not how to advance the objectives of Paris, but only how to avoid actively undermining them – means that there is often little that will be done differently. Frequently, the sector notes only require that climate impacts be ”considered,” but do not say how they should be addressed, i.e. specifically that Bank-supported activities must contribute to low-carbon, resilient transformation. Similarly, many activities are considered Paris-aligned if they respond to climate-related harms even if they don’t address the causes. A disaster risk management project can use carbon-intensive concrete and steel, provided it reduces disaster risk. Immediate food security can be addressed without considering food supplies’ sustainability.
This model of climate response misses the opportunity to build back better–contrary to earlier Bank promises. In line with this, the notes lack any clear commitment to mitigation: on measures that reduce emissions, the sector notes only say they “could” be done, not that they should be done. While suggesting that projects should avoid ‘carbon lock-in,’ the Bank fails to provide a basic definition for what that means, or what is required to achieve it in each sector.
Agriculture and Food (AGF) Sector Note
How the Agriculture and Food Sector Note addresses issues is instructive. The Note describes how livestock contributes to emissions and can also lead to deforestation through clearing of land, but falls short of stating that investments in large-scale livestock production should be considered non-aligned. Similarly, when discussing crop production, the Note describes activities that can lead to land use change and deforestation, but fails to specify that these are not Paris-aligned and should be avoided. The one welcome exception to this ambiguity is the section on Integrated land management. It states clearly: “to be considered aligned, integrated land management projects should not involve expansion into areas of high carbon stocks or high biodiversity areas.” The Note could be greatly improved by stating the same for livestock, crop production, and agri-food value chain projects.
The section on Development Policy Finance (DPF) also fails to offer clear or complete direction on how AGF's DPF operations can contribute to the goals of the Paris Agreement. This should include policies on reducing food waste, increasing access to healthy foods/diets, and a shift away from livestock toward plant-based diets and alternative proteins. The Bank could apply DPF to advance this efficiently and fairly by promoting measures to apply the social cost of GHGs throughout the sector, along with social protection, technical assistance, and investment finance to support food system public goods (improving food access through local market infrastructure, nutrition awareness-raising, green technology transfer, etc.).
In sum, not using AGF Paris alignment to advance Paris Agreement goals is a huge missed opportunity, not only for climate action, but for sustainable development and food systems transformation.
Other Sector Notes
Other Sector Notes similarly define Paris alignment in an expansive way that allows them to continue business as usual without making the changes necessary to actually be Paris-aligned. Each has exceptions that expand the definition of Paris-aligned in ways that are inconsistent with Paris Agreement goals. In the Energy & Extractives Sector Note, technical assistance for “an operation that will increase oil and gas production—such as in a new producing country—is not automatically non-aligned”—and the Note offers multiple open-ended circumstances where it may be considered aligned.
The Transport Sector Note is somewhat better in that it states that “risks identified should be mitigated or managed through appropriate measures for decarbonizing road transport5 such as the “Avoid-Shift-Improve” framework.” However, it also asserts that “the risk of carbon lock-in is generally low for ICE [internal combustion engine] vehicles (e.g., diesel buses),” which defies logic, given the 12 to 15-year lifespan and high emissions of diesel buses and even longer lifespans of other ICE vehicles. [See BIC’s update with recommendations for decarbonizing transport.]
The Note for Environment, Natural Resources and Blue Economy (ENB) activities generally provides helpful guidance on how ENB activities advance Paris alignment. However, it suggests that support may be provided within ENB operations for cross-sectoral activities for which alignment definitions are weak at best– for example, the expansion of livestock production. ENB experts should be looking more critically at how these activities are considered aligned.
While the Sector Notes have many positive suggestions about what might be a lower GHG-producing or more adaptive way to undertake activities, most of these are mentioned only as options to be considered in the context of ongoing activities. They fail to state clearly what activities are misaligned. Given this, we recommend that the Notes be re-written to state clearly what activities should not be undertaken and to provide guidance to Bank teams on how to advance the Paris Agreement goals across the entire portfolio.
- Be clear – It is insufficient to suggest consideration of alternatives as sufficient for Paris alignment in the context of emissions-intensive activities like production of oil and gas, industrial animal agriculture, and internal combustion engine vehicles. Support for such activities should be assigned to an exclusion list, and be clearly identified as misaligned.
- Be positive (mind the gap) – The Sector Notes reflect the lowest and loosest definition of Paris alignment, “not misaligned,” in fulfilling the Bank’s initial commitment to be 100% Paris-aligned. This “double negative” approach entails reducing activities that actively run counter to Paris Agreement goals. Yet it leaves many gray areas, and fails to exclude activities and policies that may contribute to climate harm based on “productivity,” immediate needs, and other exceptions. The world needs the World Bank to be contributing positively to Paris Agreement goals, beyond the 35% that it has committed to having climate co-benefits. Being 100% Paris-aligned should ultimately mean having 100% climate co-benefits.
- Be consistent – The Sector Notes should apply across all the Bank’s financing instruments consistently and appropriately. This is especially important with respect to Development Policy Finance given that DPF is a powerful lever for change. It also is important for technical assistance, since it is often a precursor to much larger investment finance and to financial intermediary (FIs) finance, since this carries the risk of supporting FIs with much more limited commitment to Paris alignment.
- Be current – We are pleased to see the Sector Notes “will be updated periodically to reflect lessons learned, incorporate the latest evolution of technologies,” etc. Given the rapid evolution of climate change and responses to it, this is indeed important. “Periodically,” however, is hardly timebound; this commitment should be. We suggest a minimum of once in three years – consistent, for example, with the IDA replenishment timetable.