Development banks must stop financing fossil fuels, say legal experts

Multilateral development banks have legal responsibilities to stop funding fossil fuels, a new expert opinion has found, as have the major countries bankrolling them.

The document, written by Dr Johanna Aleria P Lorenzo and Dr Jolene Lin and commissioned by clean banking campaign group Bank Climate Advocates, focuses on three of the biggest development banks: the Asian Development Bank, the International Finance Corporation (the World Bank's private sector arm) and the International Bank for Reconstruction and Development.

It argues that they have failed to align their financing activities with the 1.5°C temperature threshold set out in the Paris Agreement, even though they have an outsized role in development and electrification in the Global South. 

The opinion rests in part on the International Court of Justice's advisory opinion on climate change, which found that a state’s failure to control the production and consumption of fossil fuels, the granting of fossil fuel exploration licences or the provision of fossil fuel subsidies, “may constitute an international wrongful act which is attributable to that state”, as well as customary international law and treaties on human rights, climate change and the law of the sea.

Continuing to finance fossil fuels opens up these institutions and their backers to litigation, it says.

Campaigners have shared the opinion with the World Bank Group and Asian Development Bank, as well as their state backers. They urge the institutions to fully stop funding fossil fuel projects and associated infrastructure, and to make sure their climate policies align with the best available science.

The Asian Development Bank is scheduled to vote on an energy policy review on 24 November. Campaigners say that as it stands this will continue to lock in fossil fuels, and have urged the bank to delay the vote.

A World Bank Group spokesperson said in a statement: "Doing development the right way - smart, high quality, and fiscally responsible - means building resilience into everything we do.  We surpassed our own projection that at least 45 percent of our development finance should produce climate co-benefits for our clients by fiscal 2025, reaching 48% this past year.”   

The Asian Development Bank did not respond to a request for comment.