The World Bank has abandoned a key climate finance target following sustained pressure from the United States, its largest shareholder, marking a significant shift in the institution’s approach to addressing global climate change. The move ends a goal that sought to allocate 45 percent of the bank’s financing toward projects with climate-related benefits.

The decision, announced after months of negotiation, signals a departure from decades of international collaboration on climate financing. While European shareholders and many developing countries pushed to preserve the target as part of the bank’s climate action plan, the US, wielding effective veto power, advocated for scrapping it. The bank stated it will continue its broader climate change program but will no longer uphold the specific financing benchmark.

In a memo to staff, World Bank President Ajay Banga emphasized that the institution’s climate efforts would remain “firmly client-driven,” supporting countries in achieving their individual goals. However, an official close to the talks described the optics of the decision as “terrible” and suggested that countries were compelled to accept what he described as “the voodoo science of the US.” This friction echoes recent US policy shifts under former President Donald Trump, who dismissed climate change as a hoax and withdrew the country from UN climate agreements.

The US Treasury had previously characterized the climate finance target as counterproductive, asserting it “breeds inefficiency, distorts economic decision-making and moves the bank away from its core mission.” Despite this, the World Bank had already surpassed the target, having financed $39.2 billion—48 percent of its total lending—in projects with climate co-benefits in the previous year.

Analysts note that multilateral development banks’ financing is critical to fulfilling global climate commitments, including the $300 billion annual pledge by developed nations by 2035 to support developing countries in adapting to climate change, agreed at the upcoming COP29 conference in Baku. Danny Scull, senior policy adviser at environmental think tank E3G, underscored the importance of the bank’s prior alignment with the Paris Agreement and its ongoing tracking of climate finance flows.

Some officials suggest that despite retiring the formal target, the World Bank’s continued climate action plan and its record of exceeding the benchmark may allow it to still play a substantive role in financing green initiatives. One insider commented that while the US achieved its objective to eliminate the target, other stakeholders still retain a framework for climate-related support. However, there are concerns that abandoning the target could prompt donor countries to redirect funds through other development banks to meet their climate finance commitments.

Requests for comment from the US Treasury were not returned.