It follows the International Energy Agency’s warning that two-thirds of the world's coal must stay in the ground to avoid a 2C rise in average temperature that would leave millions of people trapped in poverty.

"The World Bank's mission is to assist developing nations out of poverty and part of this solution is to address global warming," Greens Leader Christine Milne said.

In its Energy Sector Directions Paper approved by the board on Thursday, the bank said it would only finance coal-fired power plants in “rare circumstances”, echoing US President Barack Obama’s policy to curb climate change.

The bank said an example of rare circumstances was when it needed to “meet basic energy needs in countries with no feasible alternatives”

"Climate change will be a major barrier to development in many parts of the world because it will exacerbate water and food shortages, extreme weather events and a wide range of diseases,” Milne said.

"The primacy of coal as the world's main fuel for electricity generation is clearly coming to an end. Better late than never.”

Milne said the Greens wanted other multilateral lending institutions, such as the Asian Development Bank, to follow the World Bank's lead.

"We also reiterate our call for the Future Fund to divest itself of coal assets.

"Fossil fuel investments account for about three per cent of the Future Fund's assets so replacing coal with less risky investments would not only be possible but potentially more profitable.”