This week, the World Bank holds its annual meeting. Amid the delegates rushing in and out, the Bank is expected to discuss a number of organizational changes ushered in by President Jim Yong Kim. As usual, a large number of civil society events critical of the Bank are planned, including a protest outside the Bank’s headquarters. This year, the protests have a specific focus: backsliding on the Bank’s commitment to environmental, social and human rights safeguards in Bank-financed projects.
Ever since the 1970s, affected communities and activists have complained that some development projects, despite the promise of raising living standards or incomes, have done more harm than good. Starting with the Narmada Dam in the late 1980s, communities began targeting financing of these projects by international financial institutions (IFIs). Pressure to avoid or minimize these harmful collateral effects has over the last quarter century led to an expanding set of guidelines, operational procedures (OPs), and impact assessment requirements for IFIs. These were joined over time by monitoring and redress mechanisms of various sorts, all aimed at improving the quality and outcomes of projects and programs as well as avoiding controversy, bad publicity and legal challenges from dissatisfied local communities or workers. For example, in 1993 the World Bank created the Inspection Panel; the regional development banks soon after created their own accountability mechanisms. The World Bank’s private sector arm, the International Finance Corporation, created a Compliance Advisor Ombudsman; the US Overseas Private Investment Center has an Office of Accountability.
In all these cases, the performance of the lender is measured against a set of internal guidelines and operating procedures. The most common complaints involve failure to do an adequate environmental and social assessment, or to comply with involuntary resettlement rules and those involving indigenous peoples. Other current safeguards involve dam safety, pesticides, and cultural heritage. In 1997, the World Bank grouped ten Operational Policies as specific safeguard policies – six environmental, two social, and two legal policies.
The safeguards system for IFIs created in the 1980s is being pulled in two directions. On the one hand, growing lending in infrastructure and natural resource-related sectors has made it even more imperative that those providing the funding have some way of assessing, and avoiding or reducing, harmful effects on local communities, water and land. In particular, investments in Reduced Emissions from Deforestation and Forest Degradation (REDD) projects in countries with tropical forests have raised concerns that indigenous and forest communities will be the losers in a global market for forest carbon. To the extent that other actors, especially multilateral and bilateral aid agencies, fund similar projects, they become subject to the same pressures. Indeed, UNDP and several bilateral aid agencies now have – or are developing – their own safeguards. Combined with this, social, environmental and human rights assessment and monitoring, and accountability for unanticipated effects of private as well as public projects is becoming a key demand of civil society in forums ranging from the negotiation of the post 2015 Sustainable Development Goals to the UN Working Group on Business and Human Rights. Businesses, private banks and bilateral aid agencies are all, to one degree or another, developing their own safeguard, assessment, and due diligence systems.
On the other hand, the IFIs have to contend with the rise of new financial and political actors. Sovereign wealth funds and Chinese and Brazilian development banks now provide alternative sources of development project finance, often without any environmental or human rights strings attached. According to the Economist, these banks’ lending “already dwarfs the $52.6 billion the World Bank disbursed last year. In 2013 BNDES of Brazil doled out $88 billion. Its Chinese equivalent made loans worth $240 billion.” (“An Acronym with Capital,” July 19, 2014) Last July, the BRICS countries created a New Development Bank (NDB) and Contingent Reserve Arrangement (CRA) as potential alternatives to the World Bank and IMF. The NDB has an initial capital of $50 billion and the CRA of $100 billion. The Bank must figure out how to compete in this new landscape.