The wilting of safeguard policies?

Scan the news quickly and chances are you will learn how financial services from a bank have contributed towards environmental degradation and human rights abuses. Maybe their clients employed workers in unsafe factory conditions in Bangladesh or maybe their loans resulted in deforestation alongside a river in Brazil, causing increased runoff and destruction of fish habitat.

Financial institutions have an incredible amount of power, but – thanks in part to rising public awareness and scrutiny following the credit crunch – they are increasingly being held accountable for the adverse environmental and social impacts of their investments.

To manage risks, financial institutions develop detailed standards or principles that borrowers must follow. These standards then apply to all investments and projects that go through the credit review process. They set the benchmark for minimum requirements and are especially important in areas where legislation and governance are lagging behind.

The International Finance Corporation (IFC), a member of the World Bank Group, is an international financial institution offering private sector investment in developing countries. They have well-developed and respected Environmental and Social Performance Standards which define their clients’ responsibilities.

Among these, Performance Standard 6 – which pertains to biodiversity conservation and sustainable natural resource management – has become a crucial tool for conservation in developing countries.

This Standard, which was guided by the Convention on Biological Diversity, is designed to ensure that the IFC funds sustainable projects – those that protect and conserve biodiversity, maintain ecosystem services and sustainably manage living natural resources.

The World Bank as a whole sets out its commitment to sustainable development through a Bank Policy and a set of Safeguard Policies. In 2012 the World Bank launched a worldwide review to harmonise and strengthen its policies. The Environmental and Social Framework has been updated and the Bank sought feedback through an online consultation process that ended on 1 March 2015.

Safeguards falling short?

When I read through the World Bank’s proposed Environmental and Social Framework I was left feeling concerned and disappointed.

The framework suggests that mitigation actions – those steps taken to avoid, minimise and reduce environmental harm – are only needed for impacts to significant biodiversity. But how do we define significant?

Moreover, the World Bank has commissioned various reports on biodiversity offsets – conservation activities designed to compensate for damage to wildlife and ecosystems from development. Its Liberian report is relevant and recommends a sensible path forward to support conservation and protected area planning and implementation. However, its Mozambique report falls so far short of good practice that it is culpably negligent in its duty to offer sustainable development options for the country.

This report confuses terminologies and application of the mitigation hierarchy – a structured and measured process to avoid, minimise and restore impacts from development. And it suggests that critical habitat – areas with high biodiversity value – can only occur in natural habitat. What about those migratory routes, assemblages of species and evolutionary processes that occur in altered habitat?

The World Bank is encouraging offsetting in Mozambique’s protected area network, meaning that harm to biodiversity can be compensated by protecting an area that should already be protected.

To add method to madness, they are opening up protected areas to mining exploration and development; amongst others, this includes Reserva Parcial de Caça do Niassa, Parque National do Limpopo and Parque Nacional de Zinave (as shown on Mozambique’s Mining Portal).

How can impacts in one protected area be offset by protecting another protected area – surely this undermines the whole principle of biodiversity offsetting?

Playing favourites in applying policies?

In addition to the potential weakening of environmental performance standards, there is also growing concern about complacency in the application of such policies. Members of IFC itself suggest that the institution seems happy to adapt the application of their criteria depending on the country or the size of the company applying for funding.

Can this be tolerated? Can you have one standard for one development proponent and another standard for others? Surely the impacts on biodiversity are felt regardless of the depth of your pocket or the state you represent?

Do small mining companies get an easier ride than giants like Rio Tinto or BHP Billiton? Are there failures to force the requirements for compliance with the World Bank’s policies?

Is it possible that, even within the IFC, the powerful finance departments have quashing influence over the Performance Standards teams?

In my opinion, the World Bank and IFC are slipping dangerously towards blanket categorisations of biodiversity. I call on everyone to be vigilant when it comes to updating performance standards and to applying them.

Learn more about the Review and Update of the World Bank Safeguard Policies and the IFC’s Performance Standard 6.

The views expressed in this blog are personal and do not necessarily represent those of FFI. For more information, please contact [email protected].