zation, using its high credit rating to make up for the low interest rate of loans.
The Bank's mission is to aid developing countries and their inhabitants achieve the MDGs through the alleviation of poverty by developing an environment for investment, jobs, and sustainable growth, thus promoting economic growth, and through investment in and empowerment of the poor to enable them to participate in development. The World Bank focuses on four key factors necessary for economic growth and the creation of a business environment: capacity building (strengthening governments and educating government officials), infrastructure creation (implementation of legal and judicial systems for the encouragement of business, the protection of individual and property rights and the honoring of contracts), development of financial systems (the establishment of strong systems capable of supporting endeavors from micro credit to the financing of larger corporate ventures), and combating corruption (eradicating corruption to ensure optimal effect of actions).
The Bank obtains funding for its operations primarily through the IBRD's sale of AAA-rated bonds in the world's financial markets. Although this does generate some profit, the majority of the IBRD's income is generated from lending its own capital. The IDA obtains the majority of its funds from 40 donor countries, who replenish the bank's funds every 3 years, and from loan repayments, which then become available for relending.
The Bank offers two basic types of loans: investment loans and development policy loans. The former are made for the support of economic and social development projects, whereas the latter provide quick disbursing finance to support countries' policy and institutional reforms. Although the IBRD provides loans with a low interest rate (between 0.5 and 1 percent for a standard Bank loan), the IDA's loans are interest free. The project proposals of borrowers are evaluated for their economical, financial, social, and environmental aspects to ensure that they are viable before any amount of money is distributed.
The Bank also distributes grants for the facilitation of development projects through the encouragement of innovation, cooperation between organizations, and participation of local stakeholders in projects.
IDA grants are predominantly used for debt burden relief in the most indebted and poverty-struck countries, amelioration of sanitation and water supply, support of vaccination and immunization programs for the reduction of communicable diseases such as HIV/AIDS and malaria, support to civil society organizations, and the creation of initiatives for the reduction of greenhouse gases.
With respect to its work addressing issues of global warming, the World Bank has created and funded a number of climate-related partnerships and programs with other agencies and national governments, including the United Nations Framework Convention on Climate Change (UNFCCC), the Global Environment Facility (GEF), Carbon Finance, the Energy Sector Management Assistance Program (ESMAP), the Asia Alternative Energy Program (ASTAE), the Global Facility for Disaster Reduction and Recovery (GFDRR), the Vulnerability and Adaptation Resources Group (VARG), and the Global Gas Flaring Reduction partnership (GGFR).
The UNFCCC is an international treaty through which countries consider ways to reduce global warming and cope with inevitable temperature increases. The World Bank is an observer to the UNFCCC and also takes part in a number of technical discussions conducted by the UNFCCC Secretariat, such as by the Subsidiary Body for Implementation and the Subsidiary Body for Scientific and Technological Advice.
The GEF is the financing mechanism for the UNFCCC, as well as other key international environmental agreements. As a GEF-implementing agency, the World Bank helps identify, prepare, and implement projects that reduce poverty and benefit the local and global environment. Climate change was the second most active focal area of the GEF active portfolio at the end of fiscal year 2006.
The World Bank's Carbon Finance Unit offers a means of leveraging new private and public investment into projects that serve to mitigate climate change by reducing greenhouse gas emissions, while promoting sustainable development. Projects relate to rural electrification, renewable energy, energy efficiency, urban infrastructure, waste management, pollution abatement, forestry, and water resource management.
Was this article helpful?