"We are already seeing the consequences of climate change ... we need to see how we can help countries develop in a climate friendly way," Steen Jorgensen, World Bank acting vice president for sustainable development, told reporters in Cape Town at the release of a new report on climate change.

The report, which looks at how the bank must react to this emerging challenge to its development models, was released on the sidelines of the Third Assembly of the Global Environment Facility (GEF).

The GEF is the world's biggest environment financing mechanism that helps developing countries fund programmes to promote biodiversity, fight climate change and land degradation.

Global warming is forecast to have a devastating effect on some developing countries as rising sea levels wreak havoc on small island states and more frequent and more severe droughts destroy crops on marginal agricultural land.

Poorer nations, particularly in sub-Saharan Africa, where agriculture accounts for about 70 percent of employment, would be the hardest hit.

The World Bank said costs associated with global warming would eat into development aid and projects, forcing donors to reassess spending and infrastructure needed to help cut poverty. "Several studies have suggested that in the absence of adaptation, the annual costs of climate change impacts in exposed developing countries could range from several percent to tens of percent of gross domestic product (GDP)," the bank said.

"Much of this damage would come not gradually and incrementally through the years but in the form of severe economic shocks," it added.

More severe storms and drought would also make investment in the affected countries less attractive, World Bank Evironment Director Warren Evans, told Reuters.

"Almost any investment that is potentially impacted by changes in water flow, changes in drought, changes in temperature are at risk."