World Bank Safeguards Review

For the past 30 years, safeguards have served as an important “foot in the door” for CSOs into the international development institutions. While not perfect by any measure, safeguards help to raise community voices in international decision-making, to prevent harm from happening, and to seek justice from international institutions when harm occurs.

The original safeguards were created largely as a collective call from communities and organized pressure from CSOs. In the 1980s and 90s, in response to strong public criticism of its involvement in controversial projects such as the Narmada Dam in India, which displaced over 300,000 people, the World Bank developed safeguards to help identify and minimize harms to people and the environment. Since that time, other international institutions have also created their own safeguards. These safeguards require borrowers to mitigate certain risks in order to receive bank financing. Examples include conducting an environmental and social impact assessment, consulting with affected communities, and restoring the livelihoods of displaced people.

When communities believe that World Bank-financed projects have not complied with the safeguards, they can bring their concerns directly to the institution. Since 1993, communities have been able to bring complaints to the World Bank’s Inspection Panel. This opens up additional avenues for dispute resolution, particularly when governments are not responsive to communities’ concerns.

The World Bank’s safeguards review has affected the future design of development projects and has changed the ways we hold international institutions accountable for the problems that development projects can cause for people and the planet.

The World Bank was the first international organization to adopt safeguards, and its safeguards have since become the most influential model. The new safeguards shape how other international donors and investors approach environmental and human rights protection.

In recent years, global crises such as climate change, food and fuel shortages, and financial instability have emerged that affect all development projects. The Bank created the safeguards before these issues rose to prominence.

The balance of power has shifted, as well, with the rapidly expanding influence of emerging economies such as China, Brazil, and India, among other large middle income countries, at international institutions. At the same time, the World Bank is facing new competition from banks in emerging economies. In 2009 and 2010, China’s Export Import Bank and its Development Bank lent more to developing countries than the World Bank did. Financial institutions from emerging economies are providing governments with low cost alternatives to the Bank. This has led to a sense of competition and uncertainty over the World Bank’s role as a leader in development finance. The Bank has responded by making its safeguards more flexible in an effort to attract large borrowing countries. These changes have made it more difficult for CSOs to monitor and hold the Bank accountable for its use of public funds.

Nevertheless, the World Bank’s safeguards continue to serve as de facto international standards for other development banks and governments. As a result, the reforms to the World Bank’s safeguards have far reaching global impacts. See our specific concerns with how the new safeguards will address child rights, persons with disabilities, gender identity and sexual orientation, climate change, forests, information disclosure and stakeholder engagement.

The World Bank announced the start of the safeguards review in early 2011, and formally initiated its two-year safeguards review in July 2012, in the midst of a Bank-wide strategic reorganization. Upon release of an “approach paper” for the Safeguard review process in early October 2012, the Bank began a three-stage consultation process. Phase I ran from October 2012 to April 2013, and consisted of more than two-dozen multi-stakeholder consultations, as well as meetings with government officials, international experts, and civil society representatives.

The first draft Environmental and Social Framework (ESF), released in July of 2014, was met with wide criticism. The ESF contains the safeguard policies intended to protect communities and the environment in World Bank investment projects. For many CSOs and stakeholders, it ran contrary to World Bank President Jim Yong Kim’s promise that the new framework would not represent a weakening or dilution of current Bank social and environmental policies. Of significant concern is the proposed ESF’s use of ‘weasel words’, which protect the Bank from having to assume responsibility for compliance with the safeguards. Phrases such as ‘as appropriate,’ ‘where possible’ and ‘within a timeframe acceptable to the Bank’ allow for deferred risk appraisal, unclear supervision requirements and ‘opt-outs’, all of which undermine the past thirty years’ progress in protecting the poor and the environment from harm in Bank-funded projects. For a collection of media coverage and CSO reactions to the first draft, see our Safeguards Reactions Roundup.

The second draft ESF was released for public consultation in August 2015, beginning Phase III of the review process. The draft was met with wide criticism from governments, civil society organizations (CSOs), UN experts and local communities alike. Click here (العربية|Arabic) (Spanish|Español) for BIC’s Guide to a First Look at the World Bank’s Revised Environmental and Social Framework on the second draft. Click here (العربية|Arabic) for BIC’s Safeguards Training Packet for consultation participants.

Many see the revised ESF, approved in August of 2016, as a shift away from the rules based approach and a threat to the ability of the Bank to effectively manage the significant risks posed by its projects. The Bank argues that a more flexible approach will modernize the policies and bring the Bank in line with the Busan Partnership on Effective Development Co-operation, which highlights the importance of cooperation and country ownership of development efforts.

However, the lynchpin of a successful, adaptive model is genuine understanding of local context, which requires the voices of civil society and communities to be at the heart of the development agenda. Context—in all its complexity—is not something that the Bank can understand based solely on engagement with its client governments, and the Bank has not excelled in listening to alternative voices. When the World Bank plans and implements projects based upon faulty assumptions of local context, those projects frequently cause significant harm to local communities, including in particular the poor and marginalized among them.

The final ESF does not appear to have taken on board the vast majority of the input provided by civil society, with Bank management instead clearly prioritizing the desires of client governments. For the new, more flexible approach to be successful, the views of communities and civil society must be prioritized. The Bank can start demonstrating this commitment now by better integrating the participation of civil society and communities, along with those of think tanks, International NGOs, and UN bodies, in the process of implementing the new ESF to ensure it is responsive to the needs of those it seeks to protect.

Traditionally, the World Bank finances specific development projects, such as dams, roads, and oil and gas infrastructure. These are called “investment loans.” Safeguards were designed to manage the environmental and social risks associated with these specific projects. However, financing is now being channeled in ways where the borrower’s actual use of World Bank funds is often unknown and less accountable. These instruments are called “development policy loans” and “ programs for results.” The environmental and social impacts of these new investments can be significant and negative, but are extremely difficult for CSOs to monitor and are not safeguarded with the same rigor and transparency as investment lending. The World Bank has developed assessment tools that are appropriate for these new types of lending, although their use is not guided by the same requirements as for investment lending.

Non-investment lending activities are growing as a percentage of Bank lending.

World Bank (IBDR+IDA) Lending Not Covered by Safeguard Policy OP 4.01 - Environmental Assessment

Other IFIs, such as the Asian Development Bank and governments provide safeguards coverage of non-IL activities. The Bank has fallen behind international best practice.

The World Bank safeguards should not be limited to investment lending, but rather should include full and systematic consideration of possible safeguards application to all Bank activities and operations with potential for significant environmental, social, or human rights impacts. CSOs will continue to push hard for safeguards application to all types of Bank activities with potential for significant social, environmental, and human rights impacts.

Globally, donors are expressing a desire to shift away from exclusive reliance on an IFI’s environmental and social safeguards towards greater support for a borrower’s systems for managing environmental and social risk or reliance on developing countries’ local laws. CSOs insist that support for greater country ownership of safeguards and support for borrower systems is not at odds with maintaining high, common, minimum standards for risk management.

The Bank, for example, has developed a “country systems” approach, which allows borrowing governments to rely on their own local laws instead of following the safeguards. This helps to build countries’ own capacity, but can also mean that development projects go forward in the short term in the absence of strong environmental and human rights protections. Many poor communities do not have a voice in how their government chooses a development path or decides on specific high risk investments. While it is important to ensure country ownership over development projects, this ownership should be democratic, environmentally sustainable, and socially just.

The new safeguards transfer of responsibility for safeguards implementation to borrowing countries. Some borrower governments see this transfer as burdensome. Civil society shares this concern, especially considering that the Bank lacks the jurisdiction to ensure that Borrowers assume accountability for harm when safeguards fail. Both government and civil society concerns are exacerbated by the lack of 1) An updated safeguards budget and implementation plan 2) A methodology for determining whether borrower frameworks offer protections equivalent to Bank safeguards.

The Bank’s safeguards can work better before projects are identified. For many types of risk (climate, human rights) the Bank’s country assistance strategy (which determines, in part, the kinds of projects that are funded in a particular country for 4-6 years) represents the earliest opportunity to assess cross-cutting risks and to set priorities. The Bank seems to agree. The new corporate strategy calls for a more strategic, evidence-based approach to designing Country Partnership Frameworks.

It is crucial that certain safeguards are triggered before World Bank Executive Directors approve them. Timing requirements for the crucial evaluations ensure that plans are in place to protect the communities and ecosystems that a project will affect, before the project begins.

Most governments and international institutions use human rights standards as a way to manage risks and recognize the rights of disempowered people, particularly the poor. In many cases, CSOs have helped to incorporate human rights—ranging from the rights to life, food, and health to freedom from discrimination—into national constitutions and laws. When these same governments sit on the World Bank’s Board of Directors, however, they refuse to explicitly incorporate human rights into Bank policies. The World Bank continues to base this refusal on its Articles of Agreement, established at the time of the Bank’s founding in 1944, which prohibit it from involving itself in the politics of member countries.

According to many from civil society, and even former World Bank General Counsel Roberto Dañino, this excuse no longer holds water, as country governments and other international institutions have made concrete commitments to respect universal human rights. UN Special Rapporteur on extreme poverty and human rights Professor Philip Alston has also been very vocal about the World Bank’s aversion to human rights, which he denounces in a recent UN report on the subject.  At a Tom Lantos Human Rights hearing in September 2015, he noted that the Bank currently “treats human rights more like an infectious disease than universal values and obligations.”

While the Vision Statement of the approved safeguards includes language on human rights, and specifically references the Universal Declaration of Human Rights, the language is ‘aspirational’ and in no way binding. The Bank is sending a clear message to the world, and to its own staff, that respect for human rights is discretionary. Civil society continues to push for the Bank to respect human rights in all of its lending activities, and enforce borrower international treaty obligations.