President Joe Biden’s nominee to lead the World Bank said there’s sufficient scientific evidence that burning fossil fuels contributes to climate change, seeking to address criticism about the lender’s commitment to the issue under its outgoing chief.
(Bloomberg) — President Joe Biden’s nominee to lead the World Bank said there’s sufficient scientific evidence that burning fossil fuels contributes to climate change, seeking to address criticism about the lender’s commitment to the issue under its outgoing chief.
“There’s enough scientific evidence that I’m a big believer in,” Ajay Banga said in a group interview Thursday at the US Treasury Department, adding that poverty alleviation and environmental issues are “intertwined.”
Banga added that he’s preparing to embark on a three-week trip to both creditor and borrower nations to shore up support for his nomination. Stops will include Africa and Europe as well as China, the largest bilateral lender to developing economies.
The former Mastercard Inc. chief executive officer was tapped last month as the US choice to lead the anti-poverty lender. That came after current head David Malpass, picked by President Donald Trump, unexpectedly announced plans to step down by the end of June, almost a year before the scheduled end of his term.
Malpass came under fire last year after appearing to dodge questions on whether he accepted the scientific consensus that climate change is driven by the burning of man-made greenhouse gas emissions.
“Climate change is not just greenhouse gases,” Banga said in the interview. “It’s also the quality of water development. It’s soil, it’s biodiversity, it’s carbon capture. There’s a lot of things involved in those two simple words of climate change, and I think we need to focus attention on them for sure.”
While the official nomination process to replace Malpass opened just a week ago — and the bank has signaled that the final selection may not come until early May — Washington’s candidate has traditionally taken the top spot at the World Bank, where the US is the largest shareholder.
Bank Evolution
It also comes as Treasury Secretary Janet Yellen is pushing the development lender to evolve from its traditional focus on country-specific lending, to global challenges like fighting climate change, and to more aggressively extend its balance sheet.
One of Banga’s key challenges over the coming weeks will be to appease critics who have questioned whether he’s the right pick for the job.
While his nomination drew praise from high-profile climate allies including the US special presidential envoy John Kerry, it also raised eyebrows among groups that view him as someone who hews too closely to the typical mold of male World Bank presidents with deep ties to Wall Street and corporate America.
Banga said he will bring “a different way of thinking” to the bank’s leadership and stressed his upbringing and education in India, adding “you should credit the administration with taking a huge leap forward into finding somebody who wasn’t born here, wasn’t educated here.”
‘American Today’
“I’m American today, but I grew up where the rubber hits the road, in the Global South,” he said, using a broad term for developing economies in Asia, Africa and Latin America.
Banga, 63, currently serves as vice chairman at US investment firm General Atlantic LP. Before that, he spent a decade as president and chief executive officer of Mastercard Inc. He also held various positions at Citigroup Inc., including as CEO of the Asia-Pacific region.
The World Bank’s next president will be tasked with reforming the almost 80 year-old institution, a process spurred along by a Group of 20 review released last year and promoted by Yellen.
Among other recommendations, the bank has been urged to tackle global and transnational issues, particularly climate change, and expand its so-called capital adequacy, allowing it to share more funds and take on more risk, all while continuing its traditional role of poverty reduction and project finance.
Protecting AAA
While Banga said that the World Bank should have an “open mind” about implementing the G-20 recommendations, he underlined the need for the Washington-based institution to maintain its AAA credit grade, the highest qualification from ratings agencies.
Some non-government organizations and civil-society groups have advocated for the World Bank to lend more by using greater leverage and taking on more risk. Critics say that this would endanger its top credit rating, which they argue is core to the bank’s model of borrowing and lending at the lowest possible rates, a point Banga seemed to embrace.
“Let’s protect our AAA rating, because the AAA rating is what allows the World Bank to be in the unique position of raising funds at a price that can make a difference to borrowing countries,” Banga said.
Banga’s nomination comes at a time when the World Bank and its twin Bretton Woods institution — the International Monetary Fund — face growing demand for their assistance, with 60% of low-income nations at or near debt distress on hundreds of billions of dollars of loans.
The World Bank is at the center of a major debate over how to overhaul the framework overseeing the treatment of the debt for low-income countries. The issue of debt relief has emerged as yet another front in an increasingly bitter geopolitical tussle between China and the US, with the former demanding loans made by the World Bank and other multilateral lenders be included in any restructuring.
(Updates with additional comments from Banga from 11th paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.