Welcome back. The World Bank and IMF spring meetings, which kick off today in Washington, offer a valuable chance for economic and development finance experts to take stock of an extraordinarily turbulent few months. The Trump turmoil is threatening the Bretton Woods institutions themselves in very direct ways, as I highlight below.

Also today, Patrick has an update on how the US tariff shock is rippling through the clean energy sector. Thanks for reading. — Simon Mundy

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multilateral development banks

Banga strikes pragmatic tone on climate as Trump threat looms

The sword of Damocles has never hung so heavy over the World Bank’s annual spring meeting.

Since the body’s foundation in 1944, the US has been its driving force and biggest shareholder. But in February, President Donald Trump ordered secretary of state Marco Rubio to conduct a review on whether the US should withdraw from intergovernmental organisations. This stoked fears about a potential exit from the World Bank and IMF — which had been circulating since the Heritage Foundation’s controversial Project 2025 manifesto, a blueprint for Trump’s second term, called for such a move.

So it’s hardly surprising that World Bank president Ajay Banga has been striking an amenable tone in recent weeks, using public engagements to stress the body’s pragmatic approach to its work, and openness to discussion with the Trump administration. This has put the World Bank’s climate policies firmly in the spotlight.

Banga took over at the World Bank in June 2023 following the exit of Trump appointee David Malpass, who had faced growing public pressure over his supposed lack of enthusiasm for climate finance.

Banga swiftly adopted a different tack, stressing the need for the World Bank to address the threats that climate change poses to the lower-income countries that it supports. Analysts — notably, the Independent High-Level Expert Group on Climate Finance — have said that scaled-up action from the World Bank and other multilateral development banks will be crucial if the world is to meet the Paris agreement goals on limiting climate change.

During his first months in charge, Banga promised that climate finance — from renewable energy to disaster resilience — would account for 45 per cent of the bank’s lending by 2025. In recent remarks, he’s indicated that this commitment will stand — but perhaps with a more expansive view of what climate-friendly lending looks like.

Last week he told reporters that a June meeting of the World Bank’s board will discuss an “all of the above” energy strategy, entailing “not just renewable energy, but a transition plan for everyone”.

Banga said he wanted the board to abandon a decades-old ban on lending for nuclear power projects — something that would please the Trump administration, which has expressed strong support for that industry.

He had previously spoken approvingly of fossil gas projects, telling the New York Times in February that this was “a cleaner fuel which helps with the transition”. Again, increased lending for gas would go down well with Trump, who has long railed against supposed unfair treatment of the fossil fuel industry.

None of this necessarily signals a U-turn by the World Bank on its climate stance. The World Bank had never stopped providing finance for gas projects, even as it halted support for coal and various kinds of oil projects. Nuclear power, while controversial, may have a long-term place in a net zero future. Meanwhile, the institution has already been subject to heavy scrutiny from non-profit groups over how it is assessing progress towards its climate targets.

The big question now is whether these shifts in emphasis will be enough to satisfy Trump — or whether the administration will push for a more serious retreat on climate as the price of its continued support. (Simon Mundy)

renewable energy

Solar, wind and batteries hammered by tariffs

The Trump administration’s trade policies have been roiling retail investors since the president’s April 2 “liberation day” tariff announcements. For eco-conscious investors, the tariffs layer new risks on top of the administration’s already hostile approach towards renewable energy.

For solar products, the US imports very little directly from China. However, if the president’s “reciprocal” tariffs are applied as planned in July, imports from the rest of south-east Asia will be hit with steep levies on top of the baseline 10 per cent tariff that is already in effect. These tariffs could drive up the cost for utility solar projects by 2.5 to 3.5 per cent “purely accounting for the impact of reciprocal tariffs on solar panels”, Morgan Stanley estimated in a research report on April 14.

Despite Trump suspending the disbursement of grants, loans and other financial incentives included in the Inflation Reduction Act, the renewable energy tax credits remain in place. If those were to be eliminated, then project costs would shoot higher, the bank said. But so far this year, there is little appetite in Congress for repealing the credit. In an April 9 letter, Republican senators urged the Trump administration to refrain from repealing tax incentives that promote US manufacturing.

Shares in US solar companies First Solar and Sunrun have sunk 31 and 33 per cent this year respectively.

There has been one safe harbour in the turbulent sea of solar investing. Nextracker, which makes trackers to shift solar panels as the sun arcs across the sky, has enjoyed a modest share price rise of 2 per cent so far this year.

To capitalise on tax credits from the IRA, Nextracker has been sourcing steel in the US. “We see no direct tariff exposure” given 100 per cent of the company’s products have been made in the US since the end of 2024, Bank of America said in an April 16 research report. 

“The entire [solar] tracker industry is well positioned” to withstand tariffs, the bank said.

Batteries, a crucial piece of the solar ecosystem for energy storage, are highly dependent on China, which accounts to nearly 70 per cent of lithium-ion supply, Morgan Stanley said.

The 145 per cent tariff on China would “substantially” raise the price of battery storage equipment in the US, Morgan Stanley said. South Korea, the second-largest battery supplier to the US, is facing a 26 per cent reciprocal tariff when Trump’s 90-day pause, announced on April 9, ends.

“We expect uncertainty around IRA policy and potential adverse impacts from tariffs to continue to weigh on cleantech valuations,” Morgan Stanley said.

Wind turbine parts are also being hit with tariffs, although the impact should be fairly limited, Morgan Stanley said. Up to 60 per cent of wind blades and other parts come from Mexico, and appear to be spared tariffs for now. But Germany supplied two-thirds of wind towers. Germany, Vietnam and Spain supply 80 per cent of generator parts for wind turbines, the bank said.

If the Trump administration’s goal with tariffs is to encourage domestic manufacturing, the renewable energy companies might have been expected to benefit. But they will be hurt by these tariffs on imported raw materials, and the sector will suffer further if Trump targets subsidies that the Biden administration adopted. (Patrick Temple-West)

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