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Guest Post: Leaked World Bank documents reveal risk of serious weakening of safeguards for forests, natural habitat and biodiversity

Korinna Horta has worked for more than 20 years on international finance, environment and human rights issues. She currently works with Urgewald, a German NGO.

I asked Horta if she would write a Guest Post after listening to a presentation she gave at a recent meeting of the Forest Movement Europe. In her presentation she explained the importance of the World Bank’s safeguard policies and the review of safeguards that is currently underway at the Bank.

Leaked World Bank documents indicate risk of serious weakening of protections for forests, natural habitat and biodiversity

By Korinna Horta, Urgewald, Germany

In October 2012 the World Bank officially launched a review of its Safeguard Policies. Safeguards are mandatory environmental and social standards. They provide political space for affected people and NGOs because of requirements meant to ensure access to information and participation as well as the possibility of submitting complaints to the Bank’s Inspection Panel.

The Safeguard Review process has languished given the Bank’s reorganization and changes in Bank staff leading the Review. But now things appear to be speeding up. A first draft of the revised Safeguards was submitted to the World Bank’s Vice-Presidents in May. This draft has remained strictly confidential, but the comments on the draft provided by several offices of Vice-Presidents have unofficially become public: they throw a scary light on what is being proposed.

Let’s step back for a moment. The Bank’s Safeguards are widely considered to be the gold standard in global environmental rule-making. The revised Safeguards will have repercussions and ripple effects on southern governments, northern development agencies and international financial institutions for decades to come.

“A game-changer”, nothing less than “a paradigm shift” is how one of the leaked documents describes the impact of the future Safeguards. Although the comments on the first draft of the new Safeguards by the offices of Vice Presidents cover a broad spectrum of opinion, they do reveal that a serious weakening of standards is now on the table.

The shifts in patterns of global economic growth and the emergence of powerful new financial players on the world stage has led to growing competition for investment and business opportunities. In this scramble, the World Bank is now competing with some of its own clients. Think, for example, of China’s new pledge of a US$20 billion loan for infrastructure development in Africa.

Some at the World Bank consider that Safeguards are undermining the Bank’s competitiveness because of the perceived burden they imply. The trend – already seen at the International Finance Corporation (IFC), the Bank’s Private Sector arm – has been to weaken policy requirements and to shift responsibilities away from the lender. In response to NGO concerns about this trend, World Bank President Jim Yong Kim has committed to “No Dilution” of the existing Safeguards.

But the leaked memos reveal a very different picture. According to some VP offices, the draft of Environmental and Social Standard 6 (ESS-6) which covers biodiversity, natural habitat and forests, represents a serious dilution of the existing policies:

“…some of the language in ESS 6 would severely weaken the protection that currently exist for biodiversity and natural habitats under both the IFC PS-6 or OP 4.04, which will make implementation difficult.”
“Moreover it will not include many of the important components of the Forest Policy OP 4.36, which will be subsumed under ESS-6.”

There are clear ramifications for REDD+. The Forest Carbon Partnership Facility (FCPF) as well as the Forest Investment Program (FIP), one of the Climate Investment Funds, must adhere to World Bank Safeguards. And the ripple effect is built in. Remember the “Common Approach” with the FCPF’s Delivery Partners? The Common Approach means that the policies of Delivery Partners must have “substantial equivalence” to the “material elements” of the World Bank’s existing social and environmental Safeguards.

The leaked VP comments reveal other problematic Safeguard issues that are relevant to REDD+. Let me just refer to one of them here which sounds innocent enough: Increased flexibility.

One of the leaked documents describes the draft Safeguard Framework succinctly:

“It clearly adds flexibility to the time-frame for assessing/ managing environmental and social risks with less front-loading and more attention to the implementation phase…”

What this means is that the Bank’s Board will be asked to approve financing for activities whose risks or mitigation costs will only be known at a later stage. This is what is meant when the talk is about “deferred appraisal”.

Paying more attention to implementation is absolutely critical, but this should not come at the cost of project preparation or in Bank jargon “front-loading”. All the current requirements for disclosure of information and public participation are part of project preparation. Consultative and participatory processes at the initial stages of project preparation in forest-related investments, but also in other areas, are key to sustainability.

Much is at stake in the World Bank’s Safeguard Review. It is taking place at a time when the new World Bank Strategy has committed the Bank to taking on larger risks, to vastly increase lending and to finance “transformational projects” designed to change entire sectors if not countries.

Following the first draft that was submitted to the Vice-Presidents, a new draft is scheduled to be presented to CODE, the Bank’s Board Committee on Development Effectiveness, in late July. If this goes ahead as planned, Board members will have to consider the new draft just as many of them will try to escape the humid heat of Washington.

Once approved by CODE, the draft will undergo consultations with multiple stakeholders on all continents.

This is one arena where civil society organizations can make their voices heard. For those of us working on forests and REDD+, one important issue, which is not even referred to in the leaked VP memos, is that about 40% of World Bank-related forest lending, such as the financing of tropical timber concession reforms, is provided through quick disbursing Policy Development Loan. These types of loans are not subject to Safeguard coverage. A key demand put forward by NGOs is that Safeguards must apply to all Bank lending instruments and not just to the shrinking portfolio of project finance as is currently the case.

The Safeguard Review process is not likely to be completed before 2016. There’s a lot of work ahead of us.

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