World Bank Group pledges to stop investing in oil and gas exploration

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World Bank Group pledges to stop investing in oil and gas exploration

One of the world’s most important financial and development institutions, the World Bank Group (WBG), is to stop financing oil and gas exploration, in a bid to help combat climate change.

After 2019, the WBG – which includes the World Bank and three other institutions – will stop investing in upstream oil and gas, it announced at the One Planet Summit in Paris on Wednesday.

The summit was hosted by French president Emmanuel Macron, with 164 world leaders, government members, business leaders and prominent figures joining him at the Elysee presidential palace in Paris.

This moves marks a major change in strategy for the the WBG, which has historically sought to support extraction of natural resources, such as gas, oil and minerals in developing nations, in order to tackle corruption and exploitation, through proper governance.

The World Bank currently holds $961m (£722m) of guarantee operations, set up to support private sector investments in gas and oil explorations.

Upstream oil and gas constitute 2pc of the WBG portfolio. Across the World Bank Group institutions, the total portfolio is worth around $280bn.

This comes as the WBG signed a $1.15bn loan with the Government of Egypt aimed at reducing fossil fuel subsidies and encouraging low-carbon energy investment.

Some of the areas in which the WBG has offered support to the oil industry in 2016 included putting $50m into funding oil exploration of the Africa Oil Corporation in the South Lokichar Basin in Kenya, and $120m into Pan American Energy Llc to develop oil and gas assets in Argentina’s Golfo San Jorge and Neuquen Basins.

In some exceptional circumstances, the organisation may still offer some financial support for upstream gas in poor countries “where there is a clear benefit in terms of energy access for the poor and the project fits within the countries’ Paris Agreement commitments”, the WBG said.

That may include continuing support for projects such as the $700m Ghana Sankofa Gas Project which is intended to increase availability of natural gas for clean power generation.

“Everyday, climate change becomes a more urgent economic, social, and existential threat to all countries and all people,” WBG president, Jim Yong Kim, said. This change in approach was to ensure “alignment of our support to countries to meet their Paris goals,” he added.

Concerns may be raised at the governance gap this may leave in terms of exploitation of new oil and gas discoveries in developing nations.

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