Environmental and Social Assessment

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The World Bank’s Environmental Assessment policy is the umbrella policy that triggers the other safeguards, determines the potential level of risk of any given project, and sets forth requirements for how the assessment and management of social and environmental risks will be carried out. Because of its central role in how safeguards are applied to projects and sub-projects robust implementation of the Environmental Assessment policy was a key priority for the Bank Information Center and other CSOs during its World Bank safeguards campaign that concluded in 2016.

During the initial phase of the safeguards review (now concluded), BIC led the preparation of a model assessment policy proposal intended to articulate not only our position on what should be addressed in the Bank’s new assessment policy, but also how it could be done. With input from a wide array of allies and experts, the Environmental and Social Assessment Model (ESAM) policy integrated lessons learned from CSOs’ experiences with Bank projects to date and laid out a clearer, more comprehensive, robust, and accountable assessment policy that could be structured and properly implemented to help the Bank and the borrower meet the key development challenges of the future. See below for further details on the BIC-led ESAM policy.

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BIC submitted the ESAM policy proposal and supporting documents to the World Bank on April 20, 2013 as a contribution to the first phase of the Bank’s safeguards review. The ESAM policy recommended changes to some of the Gaps in the Bank’s current OP 4.01, which include:

Expanding coverage of safeguards to apply to all lending instruments

Safeguards were designed to manage the environmental and social risks associated with 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 recently introduced 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 lending instruments, although their use is not guided by the same requirements as investment lending is.

The ESAM policy recommended that the Bank ensure compliance with the Pelosi amendment by providing for uniform, effective application of social and environmental risk management requirements to all Bank activities (including projects and sub-projects) resulting in similar treatment/requirements for similar risks. All Bank funded activities should be appropriately categorized with significant risk activities requiring an Environment and Social Impact Assessment, or ESIA; then, these risks should be disclosed to CSOs and other relevant third parties and result in a collaborative consultation before appraisal. Adequate risk assessments and management plans of risky projects must be provided to the Board before approval of the project.

Clarifying the roles and responsibilities of the World Bank and borrower

The Bank has experimented with delegating the responsibilities for risk management to borrowers in several ways: through Country Systems, programs for results, investment lending frameworks and the IFC’s reliance on private sector borrower systems. Without adequate capacity and procedural guarantees in place beforehand, the devolvement of safeguard responsibility to others can fall short of Bank standards and result in harm to people and the environment. The IFC model is based on substantial tolerance for open-ended compliance (“over a reasonable period of time”) and is not a desirable approach for the World Bank to emulate. Similarly, Investment Lending Reform (ILR) at the Bank also eliminated/downgraded formerly mandatory supervision and economic evaluation requirements to de facto non-binding guidance standards for projects that receive Bank investment lending.

The ESAM policy recommended that the Bank must retain original responsibilities under OP 4.01 for any projects with potential adverse social or environmental risks, which included performing initial risk identification, requiring verification and sign-off on quality of information at key steps in the process, ensuring greater transparency of monitoring information and grievance redress during implementation.

Clarification of what are significant impacts

Internal evaluations have shown that the social and environmental risks of a project, program, or policy operation are frequently miscategorized. Often, high-risk activity for the World Bank is not categorized in the same way by IFC or other co-financing agencies of a multi-donor project. To ensure consistent treatment of risk, the definition of what World Bank constitutes to be a significant risk should be simplified and streamlined.

All proposed activities for Bank funding that are determined to have significant risks without the presence of mitigation efforts (either positive or negative) will be classified as Category A. To reduce discretion in the categorization of a project’s risk, the ESAM proposal included a robust presumptive list of Category A activities and an exclusion list (See Annex B & C). Positive risks often involve the unequal or exclusionary distribution of project benefits.

Upstream consideration of impacts

Safeguards can be more effective when risk is addressed early, before projects are identified. The climate expert session concluded that climate risks and opportunities can only be addressed at the upstream strategic stage of Bank-country planning. The Bank has developed a variety of effective environmental and social assessment tools appropriate for upstream assessment, including: Environment and Social Impact Assessment (ESIA), Strategic Environmental and Social Assessment (SESA), Sectoral Environmental Assessment (SEA), Regional Environmental Assessment (REA), Country Environmental Assessment (CEA), among others.

These types of Environmental Assessments (EAs) have been effectively applied by the Bank. For example, SESAs are required for national REDD Readiness Plans funded by the Bank; SEAs and REAs have been used for policy and programmatic lending. The Bank has also conducted over 40 Country Environmental Assessments (CEAs); however, the number of CEAs has declined due to funding instability and unclear responsibility in the newly reorganized sectors based on the Bank lending classification.

For the Bank to make good on the commitment to make risk assessment more a part of a strategic decision making process, clearer requirements are needed for SESA as a pre-project risk assessment tool for CAS/CPS, development policy lending (DPLs), projects for results (P4R) and certain investment lending with significant, adverse potential social and environmental risks. The ESAM policy recommends that SESAs become routine requirements for CAS/CPS, for policy and programmatic lending (See section IV of ESAM model policy Appendix A).

Determining a project’s area of influence

The spatial and temporal boundaries of environmental and economic assessments are defined by a project, program or policy’s area of influence, within which the potential environmental risks and impacts are evaluated. In practice, defining area of influence–whether a watershed, a resettlement area, a regional power pool, or a highway’s impact corridor–is complicated by the possible inclusion of unplanned or induced ancillary aspects (also referred to by the IFC as associated facilities). The Inspection Panel has found repeated problems involving poorly defined areas of influence, which the Panel found to have reduced the boundaries of Bank accountability.

The current EA safeguard lacks a definition of associated facility. In practice, the Bank now follows the IFC’s definition of an associated facility, a definition that determines whether a project would belong to the area of influence for another Bank-financed project only if the first associated project would not be financially viable in the absence of that Bank-supported project and a direct cause of that Bank-supported project. Due to this financial dependence condition, the area of influence is often defined too narrowly, which leads to exclusion of affected people or inadequately assessed or mitigated impacts. Transmission lines are rarely considered as associated with a high impact hydroelectric dam, so when the Bank finances the T-line, the hydroelectric dam often falls outside the area of influence and the risks of each are treated as discrete and unrelated.

The ESAM policy expanded the definition of area of influence and associated facility (ESAM Appendix A, Annex A: Definitions) to refer to projects that are important to the Bank financed project, “irrespective of the source of financing and not necessarily essential for a Bank-financed project to function.” The ESAM proposal also recommended that the Bank cast a wider net for possible associated or cumulative impacts during assessment, in order to ensure that prevention of impacts is chosen over mitigation or compensation.

Area of influence is made more complicated still by the growing number of programmatic or multi-sector operations as well as co-financed projects, where the Bank is financing a process in which some activities have already begun and for which third party adherence to Bank standards must be negotiated.

Provisions for cumulative impact analysis

For energy, water, agriculture, transport and other high risk sectors, a cumulative impact analysis (CIA) is often the most challenging aspect of social and environmental risk management. The current environmental and social safeguard does not clearly define requirements for when and how a CIA should be conducted. International best practice requires project developers, public or private, to ensure that a CIA is conducted when one is needed as part of the ESIA prior to a project’s approval. When and where CIA is needed is decided on a case by case basis.

The trigger for requiring assessment of cumulative impacts is related to the type of valued environmental and social components at risk and their respective carrying capacity thresholds. Gaps in baseline valued environmental and social components and stressor data, country CIA capacity, and cost are often the primary challenges to timely and high quality CIAs. Valued environmental and social components that typically require a CIA involve water or air quality, forest and aquatic biodiversity, public health, labor migration, and economic livelihoods. For certain projects, such as large hydropower projects, a CIA is always required, but often in association with other studies as well. For example, an environmental flows assessment (ESAM Appendix A, Annex A: Definitions) would be required to analyze the sustainability threshold of a river for hydropower projects. Defining temporal boundaries of analysis also involves accepting a time limit for “reasonably foreseeable future actions” that could affect the project. Time horizons should clearly not be limited to the project life, but rather to the national scope of sector planning.

The IFC has recently published guidance on CIA that fails to require that a full CIA be completed prior to project approval, consistent with IFC’s open-ended compliance approach to safeguards. A no-go option is not specified in IFC’s CIA guidance. This approach to CIA is inappropriate for most public sector lending and support. Traced in part to problems noted above with the definition of area of influence, the Bank leaves too much discretion for borrowers to decide when and how conduct a rigorous CIA.

The ESAM policy clarified the triggers for CIAs and delineated the procedural steps to be followed.

The ESAM proposal recommended that the World Bank require borrowers to implement a CIA and Management Plan prior to project approval as an integral part of the ESIA when one or more Bank-financed past, existing or foreseeable activities could contribute to impacts on valued environmental and social components that accumulate over time and space. The selection of spatial and temporal boundaries should be based on the natural boundaries of the resources of concern (valued environmental and social components) and the period of time that the proposed action’s impacts persists, even beyond the life of the project. Identification of valued environmental and social components must be done in conjunction with affected communities and scientific experts.

Impact Benefit Agreements and Community-Controlled ESIA

An Impact and Benefit Agreement (IBA) is a contract made between a community and a company that provides community consent or support for an investment to proceed. These agreements can also be known by other names: community development agreements, participation agreements, benefits agreements, supra-regulatory agreements, benefits sharing agreements, etc. The scope of IBAs can include terms of the negotiation process, a wide variety of substantial elements of the agreement, mechanisms to enforce the implementation of the agreement, and monitoring of impacts. The content of an agreement often extends far beyond a revenue transfer from the project to include the level of participation in environmental management, employment and training, investment in local business development, social investment, infrastructure access, cultural heritage protections, rights and interests in land, and limits on future development. The process of negotiation and mechanisms that ensure effective implementation are equally important aspects of IBAs.^[1]

Community Controlled ESIA (CCIA) is a negotiation-based approach to assessment of risks in which communities and affected peoples have greater decision making authority over the process, the allocation of resources, and the outcome of the ESIA. CCIA is an instrument related to IBA to keep impact research relevant and synchronized with the agreement negotiation process. CCIA provides for more informal, culturally appropriate research methods, carried out primarily in communities, with robust prior and ongoing capacity strengthening resources for participants. Emphasis on early capacity strengthening of affected people and communities extends over the life of the project, which includes participatory monitoring and evaluation of project implementation and the focus not only on preventing harm and minimizing costs but on benefit maximization and distribution. CCIA is designed to produce legally binding agreements with project proponents that are integrated into the project contract regarding impact compensation or benefit sharing.^[2] Often CCIA is appropriate for contexts of weak governance, but may be triggered where legal obligations exist that require negotiation with customary or legal landowners for community development agreements, or where communities or landowners have adequate bargaining capacity to negotiate. CCIA often leads to benefit or impact sharing agreements that are integrated into the project design.^[3]

Current Bank safeguard policies for environmental assessment (OP 4.01), resettlement (OP 4.10) and indigenous peoples (OP 4.12) include requirements for reaching agreements with populations that might be or are affected by Bank financed projects as part of the loan approval process. For any project that presents significant risks to indigenous peoples, prior agreements on an indigenous peoples plan (or framework) to mitigate the potential risk and ensure equal benefits sharing is required as a condition for loan approval. Similar agreements are required for project affected persons that may face resettlement.

Certain similarities and differences exist between IBAs and these World Bank safeguard provisions for reaching agreement with indigenous or other communities or persons that might be affected (positively or negatively) by Bank funded projects. IBA and CCIA have enhanced public, environmental governance and provide a more robust and powerful negotiation platform for affected peoples than current World Bank safeguard provisions. Perhaps the primary difference is that the Bank and its borrowing clients tend to not approach the process as a negotiation, but more as a narrowed, self-limiting form of participation. For that reason, the more circumscribed scope of Bank safeguard provisions for prior community agreements compared to IBA is underscored by gaps in at least six areas:

Negotiation process (how it is funded, provision for communities to obtain independent, credible advice)
Availability, timeliness and comprehensiveness of information for the negotiating parties.
Existence of a functioning grievance mechanism
Accountability of the negotiator
Scope and duration of an agreement
Language of the agreement

The implementation of the World Bank safeguard provisions for community agreements has had a mixed track record, which may constitute another area of difference with IBAs. Some IBAs include incentives and sanctions as part of the agreement to anticipate and overcome implementation problems.

The ESAM policy recommended that IBAs and CCIAs become safeguard requirements. Stakeholder agreements and concerns are incorporated into a legally enforceable project approval contract. If the potentially impacted stakeholders approve the ESA and sign the IBA that constitutes free prior and informed consent (FPIC).^[4]

^[1] C. O’Fairchaellaigh, “Evaluating Agreements between Indigenous Peoples and Resource Developers,” Langton, M, M Tehan, L. Palmer, and K. Shain, eds., (2004) in Honour Among Nations? Treaties and Agreements with Indigenous People. Melbourne University Press.

^[2]For a summary of this approach, see Ciaran O’Faircheallaigh (1999) “Making Social Impact Assessment Count: A Negotiation-Based Approach for Indigenous Peoples,” Society and Natural Resources. 12: 63-80; C. O’Faircheallaigh, “Community Development Agreements in the Mining Industry: An Emerging Global Phenomenon,” Community Development, Aug. 13, 2012, pp. 1-17

^[3]CDESIA share similar rationale and approach as Community Driven Development projects. See ESAM Appendix A, Annex A for CDESIA definition.

^[4]ESAM model policy, para. 21; and Appendix A, Annex E: ESMP, para. 12-15

Better coverage of social risks and emerging issues, such as climate change

The Bank’s safeguards have fallen behind international standards in terms of adequate coverage of social risk, human rights, and climate, among others. The Bank needs to fill these gaps. Expanded ESAM coverage of social risks including the presence of a requirement for assessment of specific impacts of projects on children and persons with disabilities should be a priority.

Clarifying the criteria for use of borrower systems and frameworks

Increased country ownership of safeguards and support for borrower systems, particularly for environment and social risk management, are key to safeguard effectiveness. In contrast to the views of some at the Bank, increasing country ownership and support for borrower systems are not at odds with maintaining the high safeguard requirements at the Bank. The safeguard review presented an opportunity to clarify expectations, concepts, progress benchmarks and accountability measures for support for the use of country systems. As the Bank faced strong pressures to delegate environmental and social risk management responsibilities to borrower systems, and it moved in this direction with a massive increase in policy and program lending, and the lack of rigorous and broadly agreed criteria for assessing “equivalence” and “acceptability” of alternatives to Bank safeguards constituted the primary challenge to having full public confidence in this approach.

The ESAM policy recommended establishing clear requirements for the use of borrower systems and to provide adequate support to ensure that Borrowers are qualified to manage risks through use of those systems through program or framework lending. A core challenge to the use of borrower systems is agreeing upon a better definition of what an Environmental and Social Management System (ESMS) is, in order to more clearly establish baseline capacity and provide meaningful progress benchmarks. The ESAM proposal lists five broad ESMS capacity assessment criteria in Annex G as a possible template for improving conceptual clarity in this area.

Top level eligibility screening criteria for a SESA of borrower systems and framework lending should include, but not be limited to, dealing well with corruption, transparency, and accountability, and that borrower standards applied for subproject investments are effectively equivalent to OP4.01, including application of an exclusion list. All high risk subprojects identified under borrower systems or framework lending and supported indirectly by a World Bank operation that do not meet proposed screening criteria should be treated as self-standing Category A investment operation. project for results (P4R) operations should continue to exclude Category A activities.

Enhanced participation, consultation and disclosure

Consistent with the recent strengthening of the Bank’s access to information policy, the IFC’s commitment to begin disclosing project level results, and proposed areas of expanded scope of ESA policy application, the Bank should update disclosure requirements and procedures most pertinent to environmental and social assessment. The framework for disclosing relevant ESA information to local communities directly in an accessible format that presents both the benefits and risks of the project should be strengthened to harmonize requirements for all Bank instruments (P4R, DPLs, Financial Intermediary subprojects, Country Systems). The Bank must ensure public availability of ESIA and relevant upstream planning tools well in advance of go/no-go decisions, consistent with the highest international standards, for foreign investment sub-projects with significant social or environmental impacts and risks. Specifically, the ESAM policy calls for all ESIA or SESA for Category A activities to be properly disclosed and meaningfully consulted by at least 180 days prior to Board decision.

Also, the opportunity for public input into drafts must be strengthened to ensure that critical issues are not omitted or minimized in the defined scope of the ESA. In addition to the measures regarding enhanced tracking of Safeguard costs and benefits noted above, the disclosure requirements of any new ESA instruments should be clarified.

The ESAM policy recommended that the Bank meet the following standard for meaningful consultation, which was defined as a process involving all project stakeholders, affected peoples, including concerned NGOs that is explained in a stakeholder participation plan and (i) begins early in the project preparation stage and is carried out on an ongoing basis throughout the project cycle; (ii) provides timely disclosure of relevant and adequate information that is understandable and readily accessible to affected people; (iii) is undertaken in an atmosphere free of intimidation or coercion; (iv) is inclusive and responsive to marginalized, discriminated-against, and vulnerable groups, with attention to gender; (v) enables the incorporation of all relevant views of affected people and other stakeholders into decision making, such as project design, mitigation measures, the sharing of development impacts, benefits and opportunities, grievance mechanisms and implementation issues; (vi) is designed to include persons with disabilities in all consultations, and (vii) includes a comprehensive discussion of environment and social issues, not limited to the harm prevention objective, but also the areas where ESAM contributed to social, environmental and economic benefits. Consultation must meet the requirements of being “free, prior and informed” and achieve consent of affected people, especially in high-risk projects or projects affecting Indigenous Peoples. Consultations should be integrated into specific steps in the assessment process, such as developing draft Terms of Reference for an ESIA or SESA, draft reports of SESA and social impact assessments, and draft ESMP for Category A projects.

More accountable safeguard implementation (Part I - the policy reforms)

The IEG 2010 evaluation, Safeguards and Sustainability in a Changing World, pointed to a number of issues with the Bank’s implementation policies and procedures, indicating that many of the problems identified in the 1992 Wapenhans report are yet to be resolved.

Improving implementation involves fixing ESIA quality problems by refocusing the EA process on the environmental and social management plan, rather than the diagnostic. The ESAM policy recommended that all ESAs be annexed to the primary ESA tool – an environmental and social management plan (ESMP), and for some projects and programs, an environmental and social management framework (ESMF) or system (ESMS).^[1] The proposal also recommended that an environmental and social post-audit be required for program and framework lending with significant or moderate risks and impacts. All Bank supported ESA should ensure adequate baseline information, skill mix, budget, and timing. ESMP/ESMF mitigation measures should focus on top ranked impacts, agreed upon, scheduled, with identified responsibilities and specified durations. The ESMP/ESMF/ESMS should clearly outline measures to ensure implementation, including adequate, early capacity strengthening and the full integration of the total social and environmental budget within the overall project cost. The conditions of the ESMP should be embedded in the loan contract and/or impact and benefit agreement.

As safeguards systems evolve, greater focus on results opens opportunities to expand the role of safeguards to ensure verifiable, sustainable outcomes. An emphasis on outcomes places a greater premium on the quality and reliability of operation supervision. There are supervision requirements in most, if not all of the Bank’s safeguard policies that call for social and environmental risks to be monitored and evaluated. Yet supervision after project approval, particularly for social and environmental impacts, remains a major weakness in the World Bank’s safeguard policy framework. IEG found that “monitoring and evaluation of safeguards is the weakest aspect of Bank supervision, followed by lack of candor in supervision reporting.”^[2] Assessing safeguard results is often made more difficult by weak monitoring and evaluation frameworks, which often exclude safeguard related outcome indicators and therefore fail to ensure needed data collection.^[3] In turn, assessment of the true benefits and costs of safeguards proves challenging.^[4] Far from addressing this weakness, adopting IFC’s model of monitoring and evaluation, which relies heavily on self-reporting from the client, may further undermine sustainable outcomes.

Delivery on the Bank’s commitment to results will require changes to project supervision at all stages of the programming cycle. New instruments should be explored for improving the quality of supervision such as enhanced supervision plans; annual monitoring reports; post-appraisal update of safeguard risks; objective, binding standards for frequency and skill mix of missions; and more robust feedback mechanisms. The Bank needs a stronger mandate to systematically integrate clearly specified indicators of social and environmental performance, invest in client systems to collect and analyze operation monitoring data that is disaggregated, and clarify use of independent and community participation in project supervision and evaluation.

The Bank has simplified the supervision policy (OP 13.05) within the new Investment Lending OP 10.00 Far from strengthening supervision, this revision seems likely to seriously undermine, if not eliminate, key safeguard supervision requirements in the name of consolidation. Discussion of reforms to OP 13.05 or related Safeguard Policies should be part of the Bank’s safeguard review.

The ESAM policy recommended improving the implementation of safeguards by ensuring binding social and environment management plans that include the option of codifying ESMPs in contracts with affected communities (IBAs, CDAs), greater use of independent and community monitoring, and commitment to better tracking of safeguard outcomes as well safeguard costs and benefits.

^[1]These terms are defined in OP 4.01, Annex A. See ESAM Model Policy Annexes F & G for ESMP, ESMF, and ESMS requirements.

^[2]IEG Safeguards Evaluation, p. 39; “Three key concerns emerge from supervision deficiencies. First, projects with substantial impact (category-B) are not being adequately supervised and monitored. Most of these are delegated to respective sectors in the interest of increasing ownership and efficiency. This is having the perverse effect of leaving the effects of safeguards unsupervised in a large number of projects” IEG Evaluative Directions, p.6

^[3]IEG Safeguards Evaluation, p. 31

^[4]Ibid., P. 73

More accountable safeguard implementation (Part II - enabling environment)

Even the best safeguard policy can fail if the Bank’s institutional culture and incentive system are rigged against it. In its 15-year review, the Inspection Panel found that inadequate budget and staff resources for supervision of safeguards is a major cause of project failures leading to Inspection Panel claims from people harmed by Bank operations. Similarly, the IEG noted in 2011 that “Staff incentives and predictability of resources for supervision need to be improved for greater effectiveness.”
At least since the 1992 Wapenhans report, the Bank has struggled to correct a “culture of approval” and to balance the Bank’s responsiveness to client demands with the investment of institutional knowledge of development effectiveness. A recent IEG evaluation shows that the operation design and trend in declining operational quality are related to favoring the client’s short-term needs over operational quality. Without substantial changes, “the institution risks losing global relevance on both the knowledge and the lending side.”^[1]

Changes to the Bank’s incentive structure are needed. A joint CSO submission on Safeguard implementation to the Safeguard Policies Review outlined the need for the Bank to consult early on a safeguard policy implementation plan, that addresses how to better align Bank staffing requirements and incentives for the environmental and social assessment priorities of the future, considering the state of high staff turnover and declining average levels of in-house safeguard experience. The organization of safeguards advisory staff should explore how to maximize independence and quality of decision-making. Such options would ensure a robust, central unit of environmental and social expertise with adequate budget and appropriate reporting line. Following the lead of the Latin American region, the Bank should transfer budget authority for social and environmental staff across the Bank to sector managers. Performance evaluations should transparently reward quality of operation outcomes or impacts in addition to volume of lending approvals. The requirements governing the use of third party, independent monitoring mechanisms should be clarified.

^[1] See V. McElhinny, “World Bank modernization agenda advances, sets stage for Safeguard review,” Bank Information Center Update, June 2012