US Treasury sued over Asian Development Bank energy rules

The US Treasury is facing a lawsuit demanding that it reveal whether it used its influence to ensure the Asian Development Bank would continue to allow financing of some uses of fossil fuels.

The ADB adopted a revised Energy Policy and a list of Prohibited Investment Activities in November, which dismayed environmentalists by allowing scope for the support of projects with high greenhouse gas emissions, such as liquefied natural gas (LNG) terminals. It also opened the way for the ADB’s first investments in nuclear power.

The revisions came after at least 15 months of development and consultations. During that time, Donald Trump was re-elected as US president, and his new administration made it clear that it disapproved of climate financing targets at multilateral development banks and wanted them to support more fossil fuel and nuclear infrastructure.

The US is the ADB’s joint largest shareholder, with Japan, holding 15.6% of the capital and 12.7% of the votes.

Bank Climate Advocates, a San Francisco-based NGO that uses legal arguments and actions to persuade MDBs to act against climate change, filed a suit on May 28 in the US District Court for the Northern District of California.

Jason Weiner, BCA’s executive director, said people familiar with discussions between the shareholders had told him that “the US had outsize influence on the content of the energy policy at ADB”.

“This case is seeking to understand the influence the US has had in determining what goes into these policies,” he added, “and what the communications between member states reveal about how different countries have been responding to US influence.”

The suit complains the US Treasury Department “unlawfully withheld” records about this when BCA submitted a Freedom of Information Act request in February.

Asked why BCA was bringing the action, Weiner said the ADB’s new policies “largely give them free rein to invest in and guarantee multiple types of fossil fuel projects, which will contribute to the 1.5°C global warming objective being exceeded. It will allow them to invest in fossil gas, heavy fuel oil power plants, LNG infrastructure — even when renewables are economically and technically feasible.”

The ADB, which issued $38bn of bonds last year, maintains that all its new projects have been aligned with the Paris Agreement on Climate Change since July 2023. It is also a big issuer of green bonds, with over $9bn outstanding, mostly tied to renewable energy and public transport projects, and it has issued $18bn of other sustainably themed bonds.

Nevertheless, environmental and civil society groups across Asia have criticised some of the ADB’s projects and believe its climate policies are too weak.

BCA is part of an international network of NGOs that have been pressing MDBs to exclude financing of fossil fuel installations, unless thorough, published studies show the industrial objective cannot be achieved using renewable energy.

Weiner said the ADB’s due diligence on climate impacts of projects and possible lower carbon alternatives is “typically exceptionally cursory”, with sometimes only one or two paragraphs justifying decisions not to use renewable energy.

Last year’s amendments to the ADB’s Energy Policy are slight, except in the area of nuclear power.

Precisely establishing the amendments is difficult because the ADB has not published its new Energy Policy on its website or a definitive list of the amendments adopted.

Instead, the updates were described in a brief press release and in more detail in an August draft and response to feedback from civil society.

The ADB has ruled out support for oil trading, previously allowed in limited circumstances.

It modified its policy on supporting the early retirement of coal-fired power plants, broadening it to include those burning oil and producing heat.

In the draft policy, it added support for co-firing of “clean” fuels such as green ammonia, green hydrogen and “sustainably sourced” biofuels in coal, oil and gas plants. This appears to have been taken out in response to criticisms from NGOs.

While the ADB retained language saying that it would not renovate coal facilities in ways that extended their lives, this prohibition did not mention oil or gas plants.

The ADB does not support upstream oil and gas projects, but will henceforward permit investments to reduce methane emissions and flaring in existing oil and gas fields, as long as it results in net GHG emissions reductions and does not extend a field’s life.

On nuclear, the bank has made a big shift, from supporting only policy work to an active commitment to help countries that want to use nuclear power, although this support will likely focus at first on developing human and institutional capacity.

What has not changed in the ADB’s new Energy Policy are the bigger problems for green campaigners.

The 2021 policy remains largely intact, apart from a few modified paragraphs, and it is still presented as the bank’s Energy Policy on its website.

The ADB can finance midstream and downstream gas supply infrastructure and gas-fuelled power plants. It classifies gas as a transition fuel and has not included it in its Energy Transition Mechanism — a programme to help countries phase out “coal and heavy fossil fuels”. This means it could support the expansion of gas demand and supply.

Multiple studies have found that the global warming impact of gas can be worse than coal’s, since methane is a more powerful greenhouse gas than CO₂ over 20 years and some of it leaks from the supply chain.

The ADB’s Energy Policy requires that gas investments — like all its financing — be aligned with the Paris Agreement. But it says it is “mindful of the principle of common but differentiated responsibilities [in] the Paris Agreement, which allows countries to reflect their unique circumstances”.

The Agreement leaves space for developing countries with low carbon emissions to decarbonise more slowly than rich countries with high emissions.

In BCA’s view, the ADB’s Paris alignment methodology is inadequate.

“It allows the bank to consider something Paris-aligned as long as it is consistent with the nationally determined contribution or long term strategy in the country where the project is located,” said Weiner, “regardless of whether that’s consistent with 1.5°C.”

That standard means the ADB could support serious harm to the climate.

The ADB and US Treasury did not reply to GlobalCapital's invitations to comment on the issues in this article.

NGOs are particularly concerned by ADB’s $410m of financing for the new $6.6bn Reko Diq copper-gold mine in Pakistan, agreed last year.

When finished, Reko Diq could be the world’s fifth biggest copper mine. The International Finance Corp and International Development Association are also backing the project.

The joint venture between Canada’s Barrick Mining, the government of Balochistan province and Pakistani state companies is in an arid region. While the mining company has mounted projects to improve the quality of the local population’s drinking water, which has deteriorated due to climate change, local residents are worried water extraction for the mine could exacerbate shortages.

The project will need 150MW of power in its first phase and 265MW in its second. Despite its sunny location, the mine will draw 80% of its power from generators burning heavy fuel oil, and 20% from solar panels. Combining solar power with battery storage was not judged “economically feasible” in an environmental impact assessment.

Barrick Mining and the ADB have rebutted these concerns and argue that the mine does not consume drinking water and is making a strongly positive contribution to the local community.

Environmentalists are also worried that the ADB, IFC and Asian Infrastructure Investment Bank might support a fourth production train at BP’s Tangguh site in West Papua, Indonesia’s largest LNG production facility.

Those concerned about climate change are using several legal angles to push MDBs to tighten up.

In July 2025, the International Court of Justice wrote an advisory opinion, in response to a request by the UN General Assembly, that states have a duty to “use all means at their disposal to prevent activities… causing significant harm to the climate system”.

BCA commissioned an analysis by two legal scholars, published in November, which found that this duty extended to inter-governmental bodies like MDBs, and to states acting as the banks’ shareholders.

Groups of NGOs have written to the eight biggest MDBs and their executive directors — civil servants of their shareholder states — presenting them with the analysis.

“We have been trying to get the banks to acknowlege and meet their obligations, by improving some of their policies like their Paris alignment methodologies,” said Weiner.

While some of their executive directors have been interested and met BCA, the MDBs have been guarded in their response.

The ADB has forthrightly rejected the NGOs’ argument, telling BCA last October that it “possesses an independent legal personality distinct from that of its member states and does not assume or enforce their legal obligations”. As a result, the ADB said, the ICJ opinion did not apply to it.

BCA travelled to Manila in December to talk to ADB officials about the legal opinion.

“Neither the president, his climate team, climate directors, energy policy directors nor their general counsel were willing to sit down at a table and discuss the opinion and where the ADB stands and what it could do to get closer to meeting its obligations,” said Weiner.

GlobalCapital put this to the ADB but it did not respond.

The movement to urge more decisive action against global warming scored a big win on May 20 when, after intense political wrangling, the UN General Assembly voted to welcome the ICJ opinion. The motion was proposed by diverse countries from Vanuatu to the Netherlands and Singapore.

The majority was convincing: 141 countries including China, Japan, Indonesia, South Korea, Australia, Canada, the United Arab Emirates and most European countries supported it.

Eight voted against: Belarus, Iran, Israel, Liberia, Russia, Saudi Arabia, the US and Yemen.

Weiner called the vote “an exceptionally positive development, making this opinion more likely to be applied by courts in different countries. It ups the stakes for MDBs and their member states to meet their climate change due diligence obligations.”

BCA’s suit against the US Treasury Department came after the NGO asked it in February to produce all its documents since 2019 containing “information, analysis, details, opinions, studies, or deliberations” about the ADB’s 2021 Energy Policy and Prohibited Investment list and the revised versions adopted in 2025.

As the US government department that oversees the MDBs, the Treasury will have been shown drafts of the energy policy and decided how to vote on the amendments. It may also have held more detailed deliberations and tried to shape the policies.

The Treasury did not make a determination on BCA’s request within the 20 days required by the US Freedom of Information Act, the suit says, nor has it indicated to BCA that it has searched for the required documents, nor stated when it expects to provide them.

Proceedings in FOIA cases can move quite fast, because the Act requires that public bodies respond to suits within 30 days, unless the court directs otherwise.

This is BCA’s second FOIA lawsuit. The first, filed last July, was to compel the Treasury to disclose what environmental analysis the IFC relied on when it financed 13 gas, cement and livestock projects in developing countries that BCA believes have high greenhouse gas emissions.

The tactic has produced results. In February, the Treasury came to an agreement with BCA, under which it could avoid hearings, if it produced the records BCA wanted by June 30, in instalments.

“They have produced four of them so far, on time,” said Weiner. “We are in the process of reviewing them.”

BCA will give its view on whether the Treasury has disclosed fully, and without improper redactions, a week before a case management conference on August 13.

Whether NGOs can make the MDBs change course remains to be seen. The US is pushing hard in the opposite direction.

In a speech at the Institute of International Finance in April 2025, Scott Bessent, the US treasury secretary, set out a “blueprint” for the Bretton Woods institutions that would end what he called “mission creep”. In particular, the World Bank should focus on “increasing energy access”, prioritising affordability rather than pursuing “distortionary climate finance targets”.

In most cases, he said, this would mean investing in “gas and other fossil fuel-based energy production”, though sometimes it could mean renewables.

Bessent was more explicit at the International Monetary Fund and World Bank’s joint Development Committee meeting in April, saying that the World Bank must scrap its “nonsensical” target that 45% of its financing should be for climate projects.

In its last financial year to June 2025 it exceeded the goal, at 48%.

The clash between the US and greener countries over MDBs will come to a head this month, as the World Bank’s Climate Change Action Plan, introduced in 2021, is set to expire on June 30.

So far, the World Bank has not explained what will replace it.

Last October, Reuters reported that 19 of the World Bank’s 25 executive directors, representing 120 countries, signed a statement calling on the Bank to keep working on climate change.

The current US administration’s stance is clear. In April, Bessent said: “We welcome the coming expiration of the Climate Change Action Plan, and upon its long-overdue expiration, expect the [World] Bank to immediately shift its myopic focus on climate and financing volumes to one that emphasizes high quality, durable projects.”

Bessent said the World Bank should support “an all-of-the-above approach to energy technologies — including fossil fuels such as gas, oil, and coal, rather than restrict borrower choice. We call on the Bank to further expand its support for affordable, reliable energy by removing constraints on its support for natural gas and increasing the number of gas projects in the pipeline.”

Last week, 90 civil society organisations wrote an open letter to Ajay Banga, president of the World Bank Group, and the Bank’s executive directors, asking for clarification about what will replace the CCAP, and calling on the World Bank to maintain its climate commitments.

The organisations said that when shareholders agreed to contribute $23.7bn to the 21st replenishment of IDA in March 2025, the World Bank Group had said in the agreement that it “commits to developing a successor” to the CCAP. If the bank fails to do this, it would raise governance concerns.

The ADB also has a climate finance target. In 2024, it committed this would form 50% of its annual financing by 2030, and $100bn of cumulative investments between 2019 and 2030. In 2024, it reached 46% and $42bn.

The ADB’s goals may also come under pressure from the US.

In light of that, Weiner said that BCA’s FOIA request to the Treasury was “critical to the policy improvements that are needed, and specifically also the next scheduled update of the ADB Energy Policy, which is in 2030”.

“We want to prevent," Weiner said, "a repeat of the past severe climate mis-steps at ADB and try to more fully understand what went on internally and what were the roles of the various member states, so we can help ADB come closer to meeting its climate change obligations under international law.”