In April, the Bank Information Center (BIC) won an appeal for the release of 51 climate finance accounting documents by the World Bank. The documents include guidance notes on calculating climate co-benefits, tip sheets on opportunities to implement mitigation and adaptation in projects, and case studies detailing the process of calculating the adaptation and mitigation co-benefits of projects. They cover a number of sectors, including transport, education, and agriculture and vary in terms of importance, but we found there is not enough guidance for sectors contributing the most to climate change. Still, the disclosed case studies allow us to examine what climate co-benefit calculations look like in practice through specific project examples, often with a sectoral focus. The disclosed reference guides and guidance notes provide insights into the Bank’s more general procedures of climate finance. By examining these various documents together, we could compare the procedures and guidelines of climate finance to the reality of its calculation within Bank projects.
Although the Bank recognizes that “transparency and accountability are of fundamental importance to the development process,” the time and effort that went into obtaining these documents shows that such access to information can remain quite a challenge. The Bank should have released these documents in response to BIC’s first Access to Information request because there is no evidence of documents containing corporate administrative, financial, or sensitive deliberative information to a degree that they would qualify as exceptions to the policy requiring their disclosure.
We assessed the 51 documents by comparing them to the guidance in the Joint Multilateral Development Bank (MDB) Assessment framework for Paris Alignment (BB1/BB2 Technical Note). This framework provides a methodology for the World Bank and other MDBs to incorporate and calculate mitigation and adaptation co-benefits in projects to confirm that project objectives and components are aligned with the Paris Agreement. Mitigation opportunities, or actions that reduce greenhouse gas (GHG) emissions, are assessed based on whether they are compatible with the activities designated as universally-aligned with a low-GHG emissions pathway and the Paris Agreement. Adaptation opportunities, or actions that increase climate resilience by adapting to changing conditions, are assessed based on three steps: (i) the project’s climate change vulnerability context; (ii) a statement of intent regarding how to address the previously identified vulnerabilities; and (iii) linking climate risks to the specific project activities.
Using this framework, the Bank assesses the total climate co-benefits for their projects. The disclosed documents included case studies presenting and explaining the process of calculating climate co-benefits. We found, however, clear limitations and a significant disconnect between documents outlining the methodology and the actual practice of calculating climate co-benefits in the case studies contained in the 51 documents.
Within many of the disclosed case studies from the documents, the Bank did not actualize the potential for climate co-benefits. A case study of the Guyana Education Sector Improvement Project notes that climate co-benefits could have been higher, demonstrating that the Bank understands how mitigation and adaptation opportunities can be implemented, but even with consultations, co-benefits aren’t necessarily maximized. There must be a measure in place to check that projects truly maximize climate co-benefits through implementing all effective mitigation and adaptation efforts within the scope of the project.
While these case studies do break down the projects into their components and subcomponents to assess climate co-benefits, the disaggregation does not apply to the funding. Instead, in climate finance calculations shown within the case studies, the total budget for the project is evenly distributed among the components, neglecting the fact that some components will receive significantly more funding than others. The 2015 Joint MDB Common Principles for Climate Change Adaptation Finance Tracking (previously disclosed and referenced within the documents) require that assessments of adaptation co-benefits be “disaggregated from non-adaptation activities as far as reasonably possible;” the cases disclosed fail this test.
For example, in the Sri Lanka Climate-Smart Agriculture Project, adaptation co-benefits for Component 2 are assessed simply based on the percentage of the component’s focus areas that qualify as climate co-benefits. This project component, with two of four focus areas addressing climate adaptation, received an assessment of 50 percent in adaptation co-benefits. Yet, this assessment did not take into consideration the amount of funding to support each focus area. Instead, the funding was assumed to be divided evenly among the focus areas.
This practice is replicated in other disclosed case studies and indicates there are inconsistencies between the calculated and real climate co-benefits resulting from these projects. The lack of disclosure on the amount of funding for each focus area could lead to over-reporting of climate co-benefits. Although the MDB Joint Methodology for Tracking Climate Finance asserts that “estimations are made conservatively to reduce scope for over-reporting,” the reality of such calculations – as observed through the case studies – exemplifies the potential for frequent over-reporting of climate co-benefits.
Not only do these documents display a disconnect in calculations, but they reveal a lack of clarity during climate finance methodology training that leads to inconsistencies within the procedures for practical climate co-benefit assessments. The North Eastern Transport Improvement Project case study is intended to serve as an educational guide for Bank staff by outlining the process of calculating climate co-benefits. Yet, it fails to clearly present how the percentage of climate co-benefits is calculated, thus hindering its ability to serve as a useful guide. Further, this case study demonstrates that the Bank is insufficiently disseminating its climate finance methodology because the presentation highlights the task team’s failure to consult with the Climate Change Group (CCG) or GP Focal Point due to a “lack of understanding of procedure and required actions.” This presents a question around what the Bank is doing to guarantee universal application and implementation of the Joint MDB Assessment Framework for Paris Alignment. If the Bank is not properly educating staff on the methodology and procedures, it is unlikely to meet its climate finance targets.
The case studies presented demonstrate the gap between the theoretical and practical application of climate finance methodology and indicate there are systemic flaws that the Bank must address. To improve its practice of tracking and calculating climate co-benefits, we recommend the Bank:
- Increase transparency in climate finance accounting so that activities producing climate co-benefits are accurately counted and the accounting process is uniformly implemented across all projects being assessed for climate co-benefits.
- Provide greater clarity in procedures for these calculations in order to minimize individual discretion in calculations and procedures.
- Alongside further clarity and transparency, provide more guidance for highly emitting sectors, such as industrial sources. Adaptation and mitigation measures must be applied to projects across various sectors, particularly those that are currently contributing to climate change, not just projects directly impacted by climate.
- Implement measures to promote maximizing climate co-benefits within projects.
See the full summary of the 51 World Bank climate finance accounting documents released under access to information appeal Case No. AI7768 here.
See the AIC decision on appeal #92 CASE NUMBER AI7768 MDB CLIMATE FINANCE ACCOUNTING RELATED INFORMATION (Decision dated April 27, 2022) here.
The World Bank uses the term “climate co-benefits” to address their contributions to climate finance, meaning that the funds have an underlying development purpose, but also will contribute to attaining certain goals related to climate change. Climate co-benefits are divided into mitigation and adaptation co-benefits.
This paper was co-authored by Olivia Whittle, BIC Intern.