The Roadmap sets out a newly integrated vision and mission, recognising that the twin goals of poverty eradication and shared prosperity can only be achieved through sustainable, resilient and inclusive development. Some of the proposals in the G20 expert group’s review of multilateral development banks’ (MDBs’) capital adequacy frameworks (CAFs) have also been adopted, including the creation of additional lending space by slightly lowering the benchmark equity-to-loans ratio and the piloting of hybrid capital instruments. The World Bank plans to flesh out its proposals between now and the World Bank/IMF Annual Meetings in Marrakesh in October.

But client countries are facing a multitude of challenges, from the increased risk of debt distress to food price inflation and environmental disasters. Since we are nowhere near the billions – if not trillions – of dollars needed to match the scale of these crises, it is clear that the Roadmap in its present form is sorely lacking in ambition.

Back in January, we reviewed what was missing in the Roadmap and the discussions it should focus on. While some of our points have been reflected in subsequent drafts, several others have not, particularly the value of spelling out a growth trajectory for the Bank and explaining how it could boost private capital mobilisation, streamline its processes and work more effectively with other MDBs. There is also more work to be done to integrate the climate and development agendas in the World Bank’s mission and take forward the G20 expert group’s full set of recommendations on CAF reform.

It is vital that we urgently address the following four recommendations in particular: ignoring them will put the reform process at risk and will lead to missed opportunities in responding meaningfully and sufficiently to the needs of client countries.

1. Take decisive action on the climate crisis, recognising it as the biggest threat to poverty reduction and economic growth

While the Roadmap proposes the integration of sustainability, resilience and inclusivity into the twin goals, some of the internal narrative continues to emphasise trade-offs between climate and development (see this Project Syndicate piece, for example). As a consequence, the Bank is missing opportunities to support countries in realising synergies (e.g. around public health) or in crafting long-term economic strategies fit for a climate-changed world. Siloed decision-making and short-term financial horizons will hamper the fostering of low-carbon, climate-resilient development. To help address global challenges – particularly the climate crisis – and better integrate these priorities into the current mandate of the World Bank, the Roadmap should focus on the following:

• Define a bolder vision for a low-carbon transition and a more robust methodology for Paris alignment. The World Bank has faced persistent calls from civil society to phase out its ‘brown’ lending: it has spent $16 billion worth of project finance on fossil fuels since the signing of the Paris Agreement, and continues to impose very soft limits on lending to fossil fuel-based industries (apart from coal and upstream oil and gas industries). The World Bank should be proactively considering what a 1.5°C world would look like and allocate concessional finance accordingly. This implies a much more rigorous and transparent approach to Paris alignment, with climate goals integrated into the Bank’s core operations and decision-making as opposed to tagging a subset of finance with the relevant Rio marker or siloing it into a new trust fund. Rather than re-inventing the wheel, the Bank could learn from front-running MDBs such as the European Bank for Reconstruction and Development and the European Investment Bank.
  
  
• Help countries design climate-smart economic development strategies. The analytical work in the Country Climate and Development Reports (CCDRs) tends to be excellent, but the ideas often lack ownership either by country partners or other donors. The World Bank has two options: either it gets behind existing national efforts to develop and deepen climate-smart development strategies or other donor efforts to support country-led strategies, or it adopts much more inclusive approaches to the CCDRs, with a greater emphasis on drawing in national expertise, facilitating national dialogue and coordinating donors to unlock the concessional finance necessary to implement these strategies.
  
  
• Work more closely with other donors. Climate finance is notoriously fragmented. It is disbursed through more than 20 bilateral channels, eight MDBs and 15 multilateral climate funds. The result is that even developing countries with remarkable levels of climate ambition and delivery capabilities struggle to secure the concessional resources necessary for a structural shift towards low-carbon, climate-resilient development. This is not the World Bank’s fault, but its exceptional convening power and financing capabilities could enable it to play a uniquely coordinating function. Such coordination might be undertaken by country offices in contexts where climate is a clear priority (e.g. in small island developing states) or globally to enable learning in climate-relevant sectors where MDBs play a significant role (e.g. energy and transport).

2. Go much further on the recommendations of the CAF review

While World Bank management has addressed some of the G20 review’s recommendations on CAF reform, several areas require a substantial amount of work to ensure that scarce shareholder capital is being used to maximum effect.

• Signs of progress on CAF reform, but a need to tackle the more structural issues. The slight reduction in the equity-to-loans ratio, the elimination of the statutory lending limits and progress on hybrid capital instruments – as proposed in the draft Roadmap – are all positive steps and will generate an estimated $50 billion in lending space over the next 10 years. Nonetheless, World Bank management has resisted grappling with the more fundamental aspects of the CAF reform proposals, particularly whether the Bank (as well as rating agencies) are overestimating financial risks to the detriment of lending capacity.
  
  
• Lead the MDB group on CAF reform. The World Bank should lead by example to coordinate with other MDBs on modernising CAF policies, rather than just focusing on how CAF proposals affect it directly. Bond market actors view the World Bank as the paradigmatic MDB: it must assume a more active role for its own benefit and for that of the MDB system as a whole. This requires energetic engagement and structured mechanisms to work with other MDBs on the CAF agenda, above and beyond current meetings among MDB risk teams.
  
  
• Undertake a root-and-branch examination of CAF components and risk tolerance to inform future CAF reform. The G20 panel highlighted that further work on key issues like preferred creditor treatment and callable capital are essential to give shareholders the tools they need to make evidence-based policy choices, balancing operational goals, shareholder risk tolerance and available capital. Basing future CAF changes on a systematic workstream across the MDBs – with explicit shareholder support – would clarify poorly-understood aspects of CAFs for the benefit of shareholders, MDB management and MDB bond buyers, as well as inform the methodologies used by credit rating agencies to evaluate MDBs.
  
  
• Standardise hybrid capital and other innovative instruments. As per the G20 report’s recommendations, the World Bank should work with other MDBs to standardise approaches to innovations related to hybrid capital and risk transfer mechanisms. All of these instruments are complex, bespoke and take a very long time to initiate. Collaborating across MDBs to set up templates for these instruments, in discussion with market participants and rating agencies, will accelerate the ability of MDBs to deploy them when needed, tailored to individual MDB needs.

3. Adopt a different approach to private sector mobilisation

A renewed, more systematic push for private capital mobilisation (PCM) would require MDBs and their private sector arms to take action in three ways:

• Move from packing their balance sheets to an originate-and-share or originate-and-transfer business model. For instance, MDBs might focus on higher-risk/earlier-stage funding while handing assets with stabilised cash flows to the private sector. They might use guarantee powers to crowd private capital into risky regulatory environments, make greater use of intermediary vehicles that allow the aggregation and diversification of exposures (including on a pooled basis across multiple MDBs), and expand offers to mitigate private sector currency risks. It will be important to develop differentiated strategies for both low-income countries (LICs) and middle-income countries (MICs). In MIC strategies, the focus should be on high-mobilisation tools, on the aggregation and standardisation of assets to meet institutional investor demand, and on portfolio-level or platform approaches that maximise the benefits of diversification. PCM expectations would be more modest in LIC strategies, with a greater need for concessional tools and blended finance, as well as individually-tailored solutions. The key issue in LICs is not just risk but also cost, which impacts risk-return considerations.
  
  
• Help develop capital markets. MDBs and development finance institutions must be catalytic; otherwise, their origination capacity will become a key constraint. The aim should be to create MDB and sustainable infrastructure asset classes, which require the development of taxonomies, transparency and the availability of data, and a steady and sizable supply of standardised assets.
  
  
• Provide technical assistance and policy operations to help countries unblock projects ‘upstream’ at the sector level, for instance with the help of advisory support or policy loans, and develop projects in a ‘hands-on’ way so they become investable propositions. In this context, country platforms such as the Just Energy Transition Partnerships could be especially helpful. The World Bank should help apply the experiences from South Africa and Indonesia to a broader range of countries and ensure the full engagement of both official donors and the private sector in these country-led exercises.

4. Address the barriers that prevent a greater uptake from client countries

While the volume of lending is critical, how the World Bank lends matters too. The Roadmap does touch on its operations, but in a fairly limited way. It still remains largely silent on how the World Bank could better address some of the long-standing frustrations borrowers express about working with the Bank and other MDBs. For example, policy conditionality creates barriers to borrowing and can potentially shift priorities away from what countries and their citizens want; lending approval and disbursement processes can be lengthy; and advice and ideas are not always tailored to country needs. The Roadmap should prioritise at least four areas:

• Scale up lending for sustainable infrastructure. This is one way to marry a greater emphasis on climate with borrower priorities: it can support development ambitions in a climate-changed world. MDBs are well positioned to lend for infrastructure because they can offer ‘patient capital’ at lower-than-market rates and support projects at scale.
  
  
• Streamline requirements and safeguards. For instance, MDBs could harmonise their rules and procedures, and further delegate project approval to management (something that the Asian Infrastructure Investment Bank already does more than the other MDBs). Much more of this process could be digitised rather than being paper-based. Safeguarding units also require proper resourcing, as is partly mentioned in the Roadmap. This might require non-borrowing shareholders to invest grant-based resources in specialist implementation teams to help governments work through complex processes, especially in lower-income contexts. Changed approaches to procurement and monitoring could potentially better balance the need for both speed and quality of investments.
  
  
• Change the approach to technical cooperation, revisiting how advice and analysis are funded, and find ways to prioritise longer-term relationship-building over fly-in, fly-out standalone reports. MDBs should attract a wider range of expertise, while staff should be rewarded for the impact of their advice rather than for the quality of their report writing.
  
  
• Provide more information on the long-term impact of MDB lending. MDBs should commit to making information about their lending practices as well as client surveys and administrative data with useful metrics (e.g. project approval times) more easily accessible. Citizens could be far more engaged in monitoring and verifying outcomes and key performance indicators, especially in combination with big data, machine learning and artificial intelligence.

The next six months will be the real litmus test for the Roadmap. Revolutionary reform – at least in terms of its mission, operations and finances – may not be on the cards, but shareholders must ensure that the World Bank works much harder to align with the priorities and needs of its client countries and maximise its lending capacity.