New research produced by Germany-based civil society organisation Urgewald in September found the World Bank Group invested an estimated $3.7 billion in oil and gas developments in 2022 via trade finance. Despite claims it is refocusing on the low-carbon transition, the Bank’s private sector arm , the International Finance Corporation (IFC), is still making climate-wrecking investments – including in oil, gas and coal projects (see Observer Winter 2022). The research focused on trade finance provided by IFC, an opaque indirect financing instrument that involves complex financial products such as bonds, stocks and guarantees used by banks and other institutions to guarantee payments or provide short-term capital to governments or businesses.
Since 2019, the IFC has doubled the amount of trade finance it offers, accounting now for over 60 per cent of its annual funding commitments, but there is still a lack of transparency around how the funds are spent, with over 70 per cent of IFC trade finance given out in secrecy. “The easiest way for an oil company or coal operation to hide public funding is through complex, opaque trade finance. It represents a huge loophole that must be closed by the World Bank Board by requiring public disclosure of trade finance transactions and by finally adding coal, oil and gas to IFC’s exclusion list for both direct and indirect finance,” highlights Heike Mainhardt of Urgewald. As long as this lack of transparency continues, the World Bank will be a long way from its stated commitment to align with the Paris Agreement (see Observer Summer 2023, Winter 2021).