US pressure is pushing development banks away from explicit climate-finance targets

This is probably the most consequential economic-policy story today. The FT reports that US pressure is prompting the World Bank, Inter-American Development Bank and Asian Development Bank to rethink targets that earmark large shares of lending for climate-related projects.

The World Bank has already moved. In June it formally retired its target that 45% of financing should have climate “co-benefits.” That target had been introduced only a few years ago; in FY2024 the bank was already at 44%, providing $42.6bn in climate finance. Its official explanation now is that it wants to measure outcomes — actual emissions reductions and people made more resilient to climate risks — rather than the percentage of loans classified as climate spending. That critique is not absurd: spending targets can create incentives to relabel ordinary development projects as climate projects.

The political pressure

But the FT reports that the political context is decisive. The Trump administration wants fewer climate commitments and fewer restrictions on fossil-fuel financing, while the IDB and ADB are reviewing similar targets. Britain and Germany are simultaneously squeezing aid budgets. The risk therefore is not merely better accounting; the absolute quantity of climate money could fall just as developing countries are supposed to be scaling toward a collective $300bn a year by 2035.

What to watch

The distinction to watch is simple: abolishing a bad metric could be sensible; abolishing the metric while also reducing the underlying financing is a retreat. The next few budgets will tell us which one this is.

Trump is starting to alter global climate policy not primarily through US domestic rules, but by changing the incentives of institutions that finance infrastructure across the developing world.