World Bank wins $11b donations from 11 countries to fight climate change and global crises.

World Bank wins $11b donations from 11 countries to fight climate change and global crises.

In an effort to address pandemics, climate change, and other global issues, the World Bank announced on Friday that 11 nations had committed to contributing more than $11 billion to new hybrid capital and portfolio guarantee instruments.

These measures are intended to increase the bank’s financing capacity by $70 billion over the course of ten years. 

The largest single improvement to the World Bank’s balance sheet since the United States and other shareholders broadened the organization’s goal beyond combating poverty in 2022 was made possible by the voluntary contributions, which were revealed during the World Bank and International Monetary Fund spring meetings in Washington.

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The expansion of bilateral guarantees to unlock an additional $10 billion in funding and an increase in the bank’s leverage ratio, which would raise lending capacity by almost $40 billion over ten years, were approved by World Bank shareholders in April 2023. 

The U.S. contributed the majority of the most recent financial pledge, or about $9 billion, to the new Portfolio Guarantee Platform, which supports equity investments and private loans in projects that meet eligibility requirements.

However, Washington’s contribution won’t be entirely financial. According to a U.S. Treasury official, it will be given in part as a guarantee by the United States for the World Bank’s platform, supported by a request for $750 million in appropriations to Congress.

According to the official, this will restrict the leverage of the commitment to four times, allowing for an additional $36 billion in financing over a ten-year period. 

Japan announced that it will provide $1 billion to the guarantee programme, while France is anticipated to provide $500 million and Belgium, an amount not yet specified.

Norway, the Netherlands, Denmark, Germany, Italy, Latvia, and Britain are among the countries that contribute to the mechanism for hybrid capital, which is a vehicle that combines elements of both debt and equity to leverage loans.

Britain announced a 100 million pound contribution. The facilities will only fund initiatives that have cross-border benefits, like those that lower greenhouse gas emissions or aid in the prevention of pandemics, according to Anshula Kant, chief financial officer of the World Bank.

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“These instruments encourage donors to contribute on a voluntary basis for these causes and projects,” Kant stated. “On the other side, it incentivizes borrowing countries to invest in these kinds of projects, where the benefits are not limited to within their borders.” 

CHARITY FUND 

Furthermore, Japan is the first country to contribute to a new “Liveable Planet Fund” that aims to collect donations from philanthropies, governments, and the corporate sector in order to support programmes ranging from healthcare delivery to energy transition investments.

As part of its efforts to better represent its position in climate finance, the bank last year supported an extended mission statement, “to create a world free of poverty on a liveable planet,” which is what the fund is named after.

The announcement of the contribution pledges was initially made public by German Development Minister Svenja Schulze, who stated that additional bank lending capacity expansion was required due to the growing demands of developing nations.  “Reform will not stop here,” she assured reporters of the World Bank.

Since taking office almost a year ago, World Bank President Ajay Banga has been working on several other projects to increase the organization’s balance sheet.

One of these projects is to use callable capital, which is emergency funds that governments that own shares have pledged but have not yet paid in. If successful, this could result in hundreds of billions of dollars more in lending capacity. 

An “extremely remote” event, according to a report released by the World Bank last week. In order to maintain its top-tier AAA rating, which enables it to borrow money at low rates and transfer the savings to its client countries, the bank has been working hard to persuade rating authorities that lending against such capital shouldn’t have an impact.

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