Safeguards and Sustainability Policies in a Changing World

World Bank/IMF Annual Meetings

October 7, 2010

Korinna Horta, Ph.D.

Urgewald

IEG Safeguards Evaluation 2010

Frame of reference for:

• Review of IFC Sustainability Framework

• Comprehensive Review of WBG’s Safeguard System

• Investment Lending Reform

• Review of oversight and accountability mechanisms

Three Points

• Systemic weakness in the WBG’s approach to safeguard frameworks;

• The continued need for safeguards as an accountability mechanism to avoid unintended negative consequences;

• Grievance Mechanism;

Systemic weakness in WBG’s approach to Safeguard System

“Supervision and monitoring deficiencies constrain the World Bank’s ability to evaluate safeguard results.” (p.xvii)

Knowledge GapPoverty Reduction

OED «Poverty Reduction in the 1990s – An Evaluation of the Strategy and Performance» 2000:

«After two decades of experience, not enough is known about what has been achieved for the poor with investments in the social sectors.»

_____________________________________________________IEG «Improving Effectiveness and Outcomes for the Poor in Health,

Nutrition and Population» 2009:

«Lack of M&E has had consequences for the design and efficacy of projects and for improved governance…. Very few of the closed projects with pro-poor or equity objectives were able to demonstrate an improvement in HNP outcomes among the poor.»

Knowledge GapEnvironmental Sustainability

OED «Promoting Environmental Sustainability in Development» 2002:

The report concluded that the Bank had little knowledge about the effects of its lending on environmental sustainability and concluded that the lack of supervision and monitoring reflected a lack of commitment to the environment and of accountabilty structures to ensure compliance with environmental safeguard policies.

_______________________________________________________

IEG «Environmental Sustainability: An Evaluation of WBG Support» 2008:

WBG does a poor job of monitoring and evaluating the environmental impacts of the projects it supports.

On the IFC

“…verification, disclosure and community ownership have been lacking, and impacts on environmental and social outcomes are not yet known.” (p.xiii).

“…the Performance Standards approach would be the riskier option with respect to environmental and social outcomes.” (p.xx).

Involuntary Resettlement

IEG estimates that at any given time involuntary resettlement in WBG-supported projects affects more than one million people (both physical and economic displacement).

Moratorium on WBG Support for Palm Oil

“Because commercial pressures dominated the IFC’s assessment process, the result was that environmental and social due diligence reviews did not occur as required.”

(CAO Audit of IFC Investments in Wilmar Trading, Delta Wilmar CIS, Wilmar WCAP, Delta Wilmar CIS Expansion, June 19, 2009, p.2)

Inspection Panel Reports

• 2004 India

Mumbai Urban Transport Project

• 2005 Democratic Republic of Congo

Transition Support for Econ. Recovery Project

• 2007 Albania

Integrated Coastal Management Project

IEG Evaluation 2009C Chad-Cameroon Project

“The logic was textbook perfect - except for the revealed weakness of every link in the chain” (IEG, p. 38)

Chad’s oil revenue windfall “...was associated with a resurgence of civil conflict and a worsening of governance” (IEG, p.viii).

Deterioration of the other vital sectors of the economy.

Minimum governance pre-requisites, capacity to manage oil income and address environmental and social impacts must be in place BEFORE investments are launched.

Grievance Mechanism

Grievance redress has to happen at all levels and it is management’s responsibility to address problems as they arise.

But effective Grievance Mechanism must be functionally independent of Bank management.

Unacceptable Risk

In the name of “unclogging the system” we run the risk of undermining the existing regulatory framework instead of strengthening and broadening it.

Current review processes

Must lead to greater transparency and tougher environmental and social standards that lead to better development results

(US Government comments on IFC Sustainability Framework Changes Proposed by IFC in April 2010).

Country ownership & WBG due diligence

Safeguards are critical because DOING HARM IS UNACCEPTABLE

How to address possible conflict:

“…up-stream work be done in partnership with clients to ensure that appropriate rules and resilient enforcement arrangements are in place prior to Bank financing.”

(OED, July 24, 2000, p. 7)

Reforms

• Strengthen independent monitoring and evaluation of results and impact.

• Expand scope of evaluation activity.

• Provide accountability for implementation of evaluation recommendations.

• Establish mechanism to assess learning from evaluation in project design or institutional reforms.