World Bank nominee Ajay Banga should trade climate finance

In January 2020, then-Mastercard CEO Ajay Banga posted a corporate call to arms on the payments company’s website. “I don’t think I need to tell you why we need to act on climate change,” he began. “Hectars of forest are burning every moment. Trillions of tons of glacial ice are melting. The temperature is rising.”

Three years later, that urgent rhetoric is being scrutinized by bewildered World Bank officials as they try to grasp who the man who will soon be the institution’s president is and what he stands for.

With the support of other shareholder nations, Banga, the new US nominee, faces the enormous task of transforming the bank’s mission against a backdrop of divided countries and a cumbersome, uncooperative bureaucracy. The multilateral lender, created after the 1944 Bretton Woods accords, has come under sustained criticism from smaller, less wealthy nations that have sought help to deal with the ravages of climate change.

Richer countries have recently encouraged the bank to offer more concessional financing for climate change projects, engage in stronger mobilization of private finance and implement reforms to free up more existing cash. The sudden exit of Trump appointee David Malpass gave the United States, which typically chooses the head of the bank, an opportunity to install a new person.

But the 63-year-old Indian-born Banga, who is favored by Wall Street, is not who development financiers and others thought of when they were considering who could accelerate the bank’s transformation into a green-hued development lender. “They landed someone no one in the world had ever heard of,” says one development official.

Banga, a naturalized US citizen who describes himself as a “Made in India guy”, studied economics at Delhi University before working for Nestlé, then launching fast-food franchises including Pizza Hut and KFC as the Indian economy liberalized. He joined Citigroup in 1996, eventually becoming CEO of its Asia-Pacific business, before joining Mastercard in 2009. A year later, he became CEO.

The son of a military officer, Banga previously told the FT that moving frequently as a child paid off later. “I make friends easily. I easily adapt to new situations. I was always the new kid on the block, so I had to learn to break into established groups.”

Widely liked, those who know him describe him as humble and approachable, a good listener and a personal touch. The music lover’s tastes range from Sikh radio and jazz to Elvis Presley and Lady Gaga. “As a person, you can talk to anybody,” says Rick Haythornthwaite, who as CEO was president of Mastercard.

Banga also presided over financial success. During his time at Mastercard, he tripled revenues, increased net income sixfold, and increased its market capitalization from under $30 billion to over $300 billion. “Ajay has an incredible track record at Mastercard,” says Ken Moelis of Moelis & Company. “He is one of the most respected figures in finance.”

In recent years, Banga was the chairman of investment holding company Exor, which holds a majority stake in the Juventus football club, and an independent director of Temasek, the Singapore state-owned investment fund. He was also a vice chairman of General Atlantic, a US private equity group, and advised the climate-focused fund.

In 2020, he launched Mastercard’s pledge to plant 100 million trees. “We see it as a platform to unite corporate sustainability efforts and meaningful investments to protect the environment,” he wrote. On the website, it boasted “green certified offices” and its efforts to achieve a “zero waste footprint”.

But these efforts are raising eyebrows in the development world. “Cutting single-use plastics in the office cafeteria is all well and good, but implementing and implementing climate investments in the developing world is a whole different ballgame – and I’m not sure you have the experience,” says another development official. “This is not at all what I expected. The US government says it would be a climate man.

A successful review of the bank’s approach to climate means taking the more delicate measures recommended by the G20 panel last year and tackling the highly technical process of measuring a lender’s financial risk. Banga’s backers hope his corporate experience, which includes work in microfinance and financial inclusion, will be an advantage here — and when he raises more money from the private sector.

According to Rachel Kyte, dean of Tufts University’s Fletcher School, Banga’s previous work with governments will help her take the multilateral baton. “It’s an inspired choice,” he says. “Proven change management leader.”

This is what is needed at the bank, which Janet Yellen is urging for a “stronger” mobilization of private financing. Some shareholders want the reform effort to set new targets instead of the proportion of private capital the bank lends.

Nominations close at the end of March, and if there are no surprises, Banga will start in May. Meanwhile, bank watchers and the climate world will continue to analyze its past for clues. It may be “a bit weak on the climate and development credentials,” says Claire Healy, director of climate consultancy E3G in Washington. But he seems to be ‘like a GSD guy – he does everything. And we need that now more than ever.”

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James Fontanella-Khan and Antoine Gara contributed reporting