What we committed
At COP28, the World Bank announced it would broaden the scope of its climate resilient debt clauses (CRDCs), first announced in June 2023 as part of establishing a broader Crisis Toolkit. This package included: (i) pausing debt repayments (through CRDCs); (ii) linking crisis preparedness and pre-arranged financing; (iii) backstopping development projects with private sector support, and (iv) building enhanced catastrophe insurance without debt.
What we delivered
We have put in place a comprehensive set of options that helps countries invest in crisis preparedness and response:
- We have expanded the CRDCs to cover all existing loans in small islands and other small states, allowing borrowers to defer principal and interest payments, and enabling fees to be covered by concessional resources.
- We are providing countries with fast access to financing for emergency response through flexible resource reallocation. Through our Rapid Response Option, countries can now repurpose a portion of unused Bank financing across their portfolio to address emergency needs when a crisis occurs.
- We have substantially scaled up access to pre-arranged financing for emergency response. Countries can now more easily put in place measures that allow them to access resources quickly in case of crises. We have also made it possible for countries to access new financing for budget support when disasters hit.
- We have also expanded catastrophe insurance, offering increased protection against large-scale disasters. We are offering all countries the option to embed catastrophe bonds, insurance, and other risk management products into their Bank financing operations. Governments then can be eligible for a payout from an insurance mechanism in the event of a crisis, without having to take on more debt at that time.
Impact
- Forty-five countries have at least one element of the Crisis Toolkit in place. These countries have $3.7 billion in pre-arranged contingent resources and $1.4 billion in catastrophe bonds/insurance.
- Twenty-nine countries have already established the Rapid Response Option in their Bank portfolio. More have expressed interest and are working closely with the World Bank to prepare similar arrangements.
- Fourteen eligible small states have signed the CRDC, allowing them to pause the repayment of their debt in case of a major disaster – of which one country has already activated the clause.
- Twenty-one countries with a Catastrophe Deferred Drawdown Option feature are benefitting from the expanded flexibilities.
Next steps
At COP29, we will announce that we have further expanded the Crisis Toolkit by broadening the CRDC scope to cover not just the impact from earthquakes and tropical storms but any natural disaster, including droughts, floods and public health emergencies caused by biological events such as pandemics in eligible countries. By significantly expanding the scope of CRDCs, we are doing more to help vulnerable countries access early—and more meaningful—support.