An alarming trend has emerged regarding the World Bank’s method of categorizing certain financial measures as climate initiatives. A recent report from the Bretton Woods Project (BWP) highlights how policy-based budget support is being utilized to drive energy sector reforms favoring private interests, while simultaneously labeling these efforts as contributions to climate finance. This practice raises questions about transparency and the true impact on global environmental goals.

Further analysis reveals that the World Bank employs Development Policy Finance (DPF), a tool for providing non-earmarked loans or grants to governments contingent upon specific reforms. While these funds are not directly tied to climate projects, the institution justifies their classification as climate finance by asserting that the implemented policies enhance climate action. According to data obtained in 2024 through an Access to Information request, billions of dollars in DPF loans have been classified as climate finance between fiscal years 2018 and 2023. Notably, the majority of these so-called “prior actions” involve market-oriented reforms designed to attract foreign investors, often at the expense of local populations facing increased energy costs.

A call for reform echoes through the BWP report, emphasizing the necessity for a paradigm shift in how the World Bank approaches energy transitions. Advocates argue for a model centered on climate justice and equitable transitions that prioritize workers and communities over corporate profits. By re-evaluating current practices, there is an opportunity to align financial strategies with genuine environmental progress, fostering sustainable development and shared prosperity worldwide.