Ajay Banga, the new president of the World Bank, stated on Sunday that the institution must employ “informed risk-taking” to encourage private investors to become more involved in assisting developing nations to combat climate change and transition away from fossil-fuel energy sources.
Banga told CNN’s ‘Fareed Zakaria GPS’ that current initiatives to expand the World Bank’s lending capacity and restructure its business model could potentially free up “tens of billions” of dollars, but not the estimated trillions of dollars required to ensure a just energy transition.
Government, philanthropic, World Bank, and other multilateral development banks (MDBs) funds would never be sufficient to help impoverished countries acclimate to and mitigate climate change, said Banga, a former CEO of Mastercard who assumed office on June 2.
“The only way forward is to find a way to convince the private sector that this is part of their future,” said Banga, who will visit Peru and Jamaica this week as part of a tour of all regions where the bank operates.
“What I believe we must do is… develop a different playbook within the MDB system in order to assume the risks that they cannot,” he said.
World Bank must promote private climate transition investment.
He stated that private companies were obligated to generate returns for their shareholders and could not assume the associated risks, but the bank could assist.
“That’s the kind of thing we can do with informed risk-taking,” Banga said, noting that advances in storage and duration have made renewable energy cheaper than fossil fuels in many cases.
In emerging economies, affordable electricity was essential for social and economic development, but new solutions were required to prevent the “emissions-intensive growth model” adopted by advanced economies, or there would be no chance of reducing emissions by 2050, he added.
Because of his private sector experience, the U.S. nominated the Indian-born executive for the position, and he has pledged to identify barriers to greater investment and find methods to maximize the bank’s impact.
Banga told CNN he would also work closely with other multilateral lenders and development organizations, stressing that Inter-American Development Bank President Ilan Golfajn would accompany him on his visits this week.
“We have so much work to do. “We need all hands on deck,” he stated. In this endeavor, we cannot afford divisions.