Development finance institutions face unprecedented pressure to mobilize private investment. With climate goals looming and public budgets stretched thin, the World Bank Group (WBG) is being asked to step up its game—including when it comes to supporting the clean energy transition. In a new paper published by the German Institute of Development and Sustainability (IDOS), my coauthor Adrian Schmieg and I ask whether the WBG is effectively translating that ambition into reality.
To answer this question, we zoom in on how the WBG supports energy-sector reforms, with a particular focus on renewables. We examine how various World Bank instruments—diagnostic reports, strategic planning frameworks, and policy-based lending—line up in practice. Do these tools form a coherent chain that delivers reform on the ground? Or are they more siloed than synergistic? The answer leans toward the latter.
We focus our analysis on three case countries: Romania, Bangladesh, and Cameroon. In all three, we find that while the World Bank produces solid diagnostic analysis and often highlights key policy constraints, these insights don’t consistently inform its country strategies—or its lending programs. The Country Partnership Frameworks (CPFs), which are meant to operationalize the World Bank’s work in each country, often fail to reflect the most critical reform needs identified in diagnostics. Even when CPFs do pick up on these themes, the policy-based lending instruments that follow—especially the Prior Actions and Disbursement-Linked Indicators—tend to fall short. In many cases, these instruments are unambitious, disconnected from the diagnostics, or too vague to drive reform momentum.
This pattern has serious implications for the World Bank’s efficiency in mobilizing private capital. Investors need confidence not only in project pipelines but also in the underlying policy and regulatory environment. That said, we don’t suggest in our paper that the WBG is ignoring the problem. On the contrary, current leadership—under President Ajay Banga—has signaled that greater coherence across institutions is a top priority. The World Bank leadership has introduced organizational changes to improve internal coordination and bring private-sector insights into the heart of bank operations. It has established the Private Sector Investment Lab—a collaboration between the WBG and CEOs of leading global private sector institutions—to develop scalable approaches to mobilizing private capital. But structural change takes time, and the real test is whether these new initiatives can improve country-level performance in practice.
We make four targeted recommendations that could help the World Bank promote private sector investment in green energy:
- Diagnostic reports should clearly identify the most binding policy constraints and suggest specific steps to tackle them. That would make them much more actionable and useful for shaping country strategies.
- CPFs should include an annex summarizing the key recommendations from the diagnostics and explain how they are being carried forward—or why they are not. This would build transparency and help ensure that strategy follows evidence.
- The World Bank should make better use of fiscal policy tools to drive decarbonization. Given the influence of public budgets in shaping energy systems, stronger integration of fiscal reform into energy policy support is essential—especially as the World Bank is now revising its energy strategy.
- Public sector representatives should be part of the Private Sector Lab, as workable solutions require the collaboration of both public and private perspectives.
Our paper is both a critique and a constructive guide. It underscores the potential of the WBG to act as a true catalyst for private investment in the clean energy transition—but warns that potential won’t be realized unless key institutional linkages are strengthened. For policymakers, the message is straightforward: if we want the World Bank to deliver on private finance, we should insist on greater coherence between its analysis, strategy, and funding instruments.
