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Draft shows that EU will push for climate-focused development banks despite US opposition

A draft EU document revealed that the European Union would increase its support for reforming international development banks in order to combat climate change. This stance puts Brussels at odds against the U.S. before World Bank and IMF meeting this month.

The International Monetary Fund (IMF) and World Bank Group prepare for their annual meeting in Washington, against the backdrop of Trump's climate change scepticism and aid cuts.

In April, U.S. Treasury Sec. Scott Bessent stated that the institutions need to refocus their efforts on their core mandates. They were spending too much time and money on topics such as climate change.

The draft conclusions of a meeting of EU Finance Ministers, held on Friday, revealed that the EU would reiterate its support for the work of development banks to combat climate change, and will push for reforms in order to unlock more funding.

The draft stated that the EU "calls upon all shareholders to support necessary strengthening of MDBs (multilateral Development Banks) in order to deliver at scale, and to align themselves with the Paris Agreement goals for accelerating global climate action."

The United States has the largest shareholding in both the World Bank and IMF. EU members, including Germany and France, have smaller voting rights in the institutions.

The EU document could change before it is adopted by ministers. It stated that the bloc supported reforms for de-risking projects, offering local currency financing, and making credit risk data more visible, in order to unlock greater private investment.

The report said that multilateral development bank should stop financing fossil fuels and "report comprehensively on their efforts and progress".

In the past few years, World Bank and MDBs began reform processes that could lead them to increase funding or accept more climate-related risks. Barbados and other countries vulnerable to extreme weather have been leading the call for reforms in order to tackle developing nation's challenges such as high debt levels, slow growth, and climate change.

The World Bank's annual meeting is scheduled for 13-18 October. Despite the fact that the United States under Trump has withdrawn from the global effort to combat climate change, campaigners have called on the World Bank not to abandon this path.

The European Investment Bank has made climate change a priority. It aims to double its investment in climate change adaptation to 30 billion euro by 2030. (Reporting and editing by Peter Graff, Simon Jessop)

(source: Reuters)