World Bank seeks more funds to address climate change, other crises -document

WASHINGTON, Jan 2 (Reuters) - The World Bank is seeking

to vastly expand its lending capacity to address climate change

and other global crises and will negotiate with shareholders

ahead of April meetings on proposals that include a capital

increase and new lending tools, according to an "evolution

roadmap" seen by Reuters on Monday. The roadmap document - sent to shareholder governments -

marks the start of a negotiation process to alter the bank's

mission and financial resources and shift it away from a

country- and project-specific lending model used since its

creation at the end of World War Two. The World Bank management aims to have specific proposals to

change its mission, operating model and financial capacity ready

for approval by the joint World Bank and International Monetary

Fund Development Committee in October, according to the

document. A World Bank spokesman said that the document aimed to

provide details on the scope, approach, and timetable for the

evolution, with regular updates for shareholders and decisions

later in the year. The reform of multilateral development banks was a topic of

fierce debate in recent months after developing countries faced

mounting pressure from inflation, energy and food shortages

fueled by Russia's war in Ukraine, slowing growth, mounting debt

burdens and growing vulnerability to climate shocks. The pressures laid bare the inadequacy of the World Bank

and International Monetary Fund's (IMF) structures - designed at

the end of World War Two to focus on rebuilding peacetime

economies - to deal with current global calamities. AAA RATING TO STAY The development lender will explore options like a potential

new capital increase, changes to its capital structure to unlock

more lending and new financing tools such as guarantees for

private sector loans and other ways to mobilize more private

capital, according to the document. But the World Bank Group (WBG) is not ready to bow to

demands from some non-profit organizations to abandon its

longstanding top-tier credit rating to boost lending, stating:

"Management will explore all options that increase the capacity

of the WBG whilst maintaining the AAA rating of the WBG

entities." U.S. Treasury Secretary Janet Yellen has called for the

World Bank and others to revamp their business models to boost

lending and harness private capital to fund investments that

more broadly benefit the world, such as helping middle-income

countries transition away from coal power. A U.S. Treasury spokesperson declined comment on the World

Bank document. A spokesperson for Britain's foreign office said the UK

"strongly supports" the World Bank proposals to explore all

options to further increase support to developing and emerging

economies. The bank said proposals under consideration include higher

statutory lending limits, lower equity-to-loan requirements and

the use of callable capital - money pledged but not paid in by

member governments - for lending. Development experts say this shift would greatly increase

the amount of lending compared to the current capital structure,

which only utilizes paid-in capital. "The challenges the world is facing call for a massive step

up in the international community's support," the bank said in

the document. "For the WBG to continue to play a central role in

development and climate finance, it will need a concerted effort

by both shareholders and management to step up WBG financing

capacity." INADEQUATE FUNDING The roadmap document cautions that a build-up of lending for

climate change, health care, food security and other needs may

require a capital increase to boost the capacity of the World

Bank's middle-income lending arm, the International Bank for

Reconstruction and Development (IBRD). IBRD's $13 billion capital increase in 2018 "was designed to

be prepared for one mid-sized crisis a decade, and not multiple,

overlapping crises" including the COVID-19 pandemic, the war in

Ukraine and the effects of accelerating climate change, the

document said. IBRD's crisis buffers will likely be depleted by

mid-2023, it said. Another option, according to the roadmap, is for World Bank

shareholder countries to step up periodic contributions to the

lender's fund for the world's poorest countries, the

International Development Association (IDA), which have declined

in recent years despite increasing needs. The roadmap also offers the option of creating a new

concessional lending trust fund for middle-income countries that

would focus on global public goods and be similar in structure

to IDA, with regular funding replenishments that would be

separate from the bank's capital structure. "Such a fund may attract donor bilateral resources separate

from shareholder budget lines supporting the WBG, and

potentially include donors beyond shareholders," such as private

foundations, the bank said. But environmental campaign group Friends of the Earth said

the proposal did not go far enough and World Bank shareholders

needed to ensure the lender was not "part of the problem". "A true evolutionary roadmap must commit to ending financing

for fossil fuels, industrial animal agriculture, petrochemical

infrastructure, corporate-friendly false solutions, and harmful

activities in biodiverse areas," Luisa Abbott Galvao, Senior

International Policy Campaigner for Friends of the Earth, said

in an emailed statement. The World Bank also said that the evolution of its mission

to increase climate lending while maintaining good development

outcomes will require additional staff and budget resources,

which have declined 3% in real terms over the past 15 years.

(Reporting by David Lawder; additional reporting by David

Milliken in London, additional writing by Karin Strohecker,

editing by Grant McCool)