Photo: Women's livelihoods placed at risk by Tata power plant. Ⓒ Joe Athialy
Vince McElhinny, Senior Policy Advisor, Bank Information Center
The perceived high costs of World Bank safeguards are often put forward as the motive for simplification of the safeguard policies. Such claims have fueled Bank Management’s efforts to shift from obligatory safeguards to less binding standards, a proposal now under review as part of a larger Bank reorganization. Invariably, Bank officials justify many of the diagnosed ills of World Bank inefficiency and lost competitiveness on the spiraling, unregulated costs of oversight. Safeguard costs are frequently singled out for blame.
It would seem that such a common refrain in the rationale for “modernizing” the Bank’s safeguard policies rests upon the solid empirical backing of gold plated evidence. In fact, the evidence at the World Bank behind the claims of excessive safeguard costs is surprisingly flimsy.
To assess the validity of the safeguard over-spending hypothesis, I asked a simple question. How much does the World Bank in fact spend now on safeguards? After over a year, I am still waiting for an answer. When I looked more closely, it became clear that the World Bank does not know how much it spends on safeguard implementation. Unlike the IFC, the World Bank does not budget for safeguards work with a single, line item amount that is traceable to staff activities.
It is often said that an organization measures what matters most. As it became more clear that many of the claims about safeguard costs and benefits are not based on evidence, but perception, a different question emerged. Does the Bank really know the true value of safeguards? As the Bank prepares to formulate its first strategic Bank-wide budget for FY16, which could reflect the safeguard resource needs associated with a massive overhaul of its long-standing protections for the poor and the environment, the lack of an immediate and persuasive answer should be a warning sign.
The lack of accounting for safeguards expenditure or budget is just one indication of an alarming state of disarray, described in a leaked assessment of the Bank’s safeguard system by the Bank’s internal audit department (IAD). The IAD report validates long standing Independent Evaluation Group (IEG) and civil society concerns that World Bank’s commitment to “do no harm” to people or the environment has become increasingly compromised by an obscure and underfunded system that allows safeguards to be routinely shoved to the margin of decision making. This report does not discount the good intentions of many World Bank staff, but rather draws into sharp relief a system in shambles that has not set them up to succeed.
Effective implementation of any future World Bank Safeguard policy framework ensures uniform treatment of similar risks regardless of the lending instrument, does not dilute core Bank responsibility and matches the highest standards. However, any good policy also depends on the proper enabling environment. IEG, among others, has signaled that the optimal organizational arrangements for effective safeguard implementation are not in place at the World Bank.
For a Bank poised to introduce sweeping safeguard reforms, the success of which is premised on a more accountable provision of implementation support, fixing the existing budgetary roadblocks to effective safeguard implementation can be seen as nothing less than a litmus test for delivering on this promise.
Bank Management has so far declined to present any content related to a safeguard implementation plan to CODE as part of the plans for Phase II consultations on the proposed safeguard framework. Bank management missed an important opportunity to provide more detail on safeguard reorganization and implementation plans at the July 30th Board briefing. Going forward, the World Bank must clarify how the proposed Environment and Social Policy framework and implementation plan are to be consulted simultaneously.
A proper housecleaning is long overdue for the World Bank to not only know the value of safeguards, but more importantly to effectively convey this value proposition to its stakeholders. The options for internal reform must involve greater public discussion. This paper identifies and makes reform recommendations for seven areas that should be reform priorities in any Bank proposal to reorganize the safeguard function and broader enabling environment.
Overall Recommendation: The World Bank’s proposal for strengthening the safeguards must explain the key elements of a safeguard implementation plan that includes a proposed annual or multi-year budget, staffing baseline capacity, targets and gap filling actions for relevant skill sets, reforms to the safeguards organizational structure, roles and responsibilities of key safeguard actors that ensure independent checks and balance, requirements for the independent monitoring and reporting of environmental and social outcomes, and incentives for achieving consistent, reliable best practice.
Download the full paper,Recommendations for Reorganizing the World Bank Safeguard Function and Annex, Explanation of Calculations for Safeguard Budget.
Specific recommendations for any reorganized Safeguard Implementation Plan at the World Bank include:
- Increased staff capacity: Based on estimates of gaps in current baseline Bank capacity and projected shifts in portfolio risk and Safeguard coverage, increased World Bank Group safeguard staffing capacity (by at least 100%) and skill mix are needed to enhance Safeguard support and effective policy compliance during project planning, preparation, supervision, and evaluation.
- Incentives: Revise rewards and recognition for Safeguards work in World Bank Performance Evaluations. Performance evaluations should transparently reward higher quality of operation outcomes or impacts (including positive safeguards implementation outcomes) in addition to contribution to volume of lending approvals, among other factors.
- Increased resources for safeguard capacity strengthening: Provide dedicated resources for greater Safeguard implementation training for Bank and Borrower specialists, managers and executives.
- Budget size and control: The World Bank should allocate to the appropriate Safeguard Director or Manager level independent control over adequate, off-the-top resources approved on an annual basis to ensure effective implementation of the safeguard policies. Based on World Bank and other MDB safeguard systems, a minimum safeguard annual budget should be between $60 – $80 million, depending on several factors.
- Independence: The Safeguard organizational structure must ensure independence and accountability at all phases of the project cycle, at a minimum, by strengthening the Regional Safeguard Advisor project clearance authority at concept and appraisal stages.
- Clear line management: The World Bank requires a Vice-President level champion for safeguards and a single, clear line management of authority and guidance to ensure that senior, more experienced Safeguard staff are assigned to higher risk projects.
- Reporting safeguard outcomes: Strengthen accountability for better planning, tracking, reporting and learning about portfolio environmental and social risk, Safeguard costs and development benefits, including expanded use of independent and community monitoring of higher risk projects, input from independent experts, and the publication of an annual Global Reporting Initiative (GRI) format Sustainability report that discloses disaggregated portfolio risk and Bank capacity to manage that risk.
To download the full paper: Recommendations for Reorganizing the World Bank Safeguard Function
To download the Annex 1: Explanation of Calculations for Safeguard Budget