Marcos Vinicius Chiliatto & Michael & Krake
Marcos Vinicius Chiliatto is World Bank Group Executive Director for Brazil, Colombia, the Dominican Republic, Ecuador, Haiti, Panama, the Philippines, Suriname, and Trinidad and Tobago. Michael Krake is World Bank Group Executive Director for Germany.
WASHINGTON, DC – After decades of industrialization powered by fossil fuels, the costs of climate change are becoming ever more apparent in both the Global South and the Global North. In Germany, flooding in 2021 left 190 people dead, displaced 40,000, and caused $40 billion in damage. And in Brazil, the 2024 Rio Grande do Sul flood claimed 183 lives and displaced more than 600,000 people, and Amazon wildfires destroyed an area the size of New Jersey and wreaked havoc on the regional economy, destroying livestock and agriculture, and causing tourism to plummet.
Even as US President Donald Trump has loudly proclaimed America’s withdrawal from the Paris climate agreement (again), a silent revolution is taking place just about everywhere else. Most countries know that they cannot ignore climate change in pursuing their economic development agendas. They understand that climate policies boost investment in important industries such as energy and manufacturing, support the development of new technologies that enhance productive capacities, and improve job quality. They also understand that climate and development financing are not at odds with one another or moving on separate tracks; rather, they are closely aligned with goals of driving productivity growth and social development.
This is certainly true for most countries served by the World Bank and its regional peers. These countries are demanding financing and expertise for “climate-smart” investments. They want to develop renewable energy sources as part of a broader strategy to improve energy access, cut emissions, and reduce dependencies. And they are strengthening the resilience of their infrastructure to more frequent floods, droughts, and storms, ultimately saving far more than they would spend on disaster recovery.
In response to these demands, the World Bank Group announced, in 2024, that it will raise its climate-finance target to 45% of its total loan portfolio. At the United Nations Climate Conference in Baku (COP29) last November, multilateral development banks collectively committed to providing $120 billion in annual climate financing for low- and middle-income countries by 2030.
To be sure, humankind has made real progress in slowing climate change over the past few decades. But now more than ever, partnerships between development banks and their clients are crucial to restore destroyed natural resources, and to develop new industries, standards, designs, and technologies to cope with a changing climate.
For example, the International Finance Corporation, the private-sector arm of the World Bank Group, was instrumental in designing climate-friendly “green” building standards. Now, buildings constructed according to these standards are cheaper to operate. Not only do they have lower energy and maintenance costs; they are more resilient to damage and tend to outperform in terms of property value.
As the host of the next climate summit, COP30, the Brazilian government is implementing important structural reforms that recognize climate-change adaptation, mitigation, and biodiversity protection as essential drivers of productivity and growth. And in March, the World Bank, in close collaboration with the Inter-American Development Bank and the Asian Infrastructure Investment Bank, announced a $1 billion loan to support these efforts.
Among other things, this project will establish Eco Invest Brazil, an initiative to offer currency hedging (protection against exchange-rate volatility) for green investments, thus creating the structural conditions for more private investment in the country’s green transformation. Moreover, the project provides cash transfers to vulnerable families engaged in forest protection, thus combining climate action and social inclusion.
Uruguay is another good example of a country that is aligning its economic and development policies with climate goals. The country’s first sustainability-linked bond, issued in 2022, attracted 188 investors from around the world, far exceeding supply. In recognition of this success, the World Bank Group’s Board of Directors approved an innovative $350 million loan that linked financing conditions to ambitious environmental targets, lending further momentum to the country’s pursuit of a more sustainable economy built on robust, resilient growth.
Meanwhile, the Philippines, one of the countries most vulnerable to natural disasters, has set the gold standard in disaster-risk financing with World Bank support. Facing frequent earthquakes and severe climate-related weather events, the Philippines has suffered billions in annual losses. So, to protect public finances and strengthen resilience, it developed a sophisticated risk-management strategy that includes innovative tools like Cat (catastrophe) bonds and parametric insurance (which pays according to the scale of the event, not the size of the loss). As extreme weather becomes more frequent, such preparedness is essential – not only for national stability but also to reduce reliance on international aid.
Despite polarizing political rhetoric, there is no going back. Developing countries will continue to grapple with persistent poverty and inequality, and the effects of climate change will only intensify. Since these challenges overlap and reinforce each other, they require integrated solutions.
That is why most countries are no longer treating climate action as a separate agenda. They are embedding adaptation and mitigation within their development strategies and aligning economic growth, job creation, and social inclusion with environmental sustainability. This shift is well underway. It is driven not by ideology, but by necessity and pragmatic governance.
