Multilateral Development Banks and Safeguards

This piece is an abstract. Article originally published in the Huffington Post. on September 8. Full article can be viewed on its website.

Independent evaluations at multilateral WB HQdevelopment banks (MDBs) have called for a reform of the system of safeguards that they use to deflect potential damages to communities and the environment associated with the investments they finance. Without such mitigation, roads can harm habitats, dams displace communities and slum rebuilding hurt livelihoods. The purpose of reform, the reviews stressed, should be to improve environmental and social outcomes of safeguards, while reducing inefficiencies in their implementation.

After many months of deliberation, the World Bank recently put out a reform proposal, which will influence other financiers. Balancing financing with environmental and social attention must be a top concern for established lenders such as the World Bank and Asian Development Bank as well as the two new lenders: the Asian Infrastructure Investment Bank and the New Development Bank of BRICS countries. Even as the borrower is responsible for implementing safeguards, the financier must be accountable for robust checks on the projects financed.

The proposal is naturally driven by a growing demand for lending operations to be speedy, and for due diligence such as safeguards to be flexible. It signals both commitment to sustainable development and efficiency gains in project processing. On the important “what,” or the scope of the policy, it contains improvements, for example, resettlement of affected people or consent of indigenous people. However, issues of critical habitats or social discrimination need careful clarification. Also, by attending only to investment projects, the large body of policy-based lending continues to be left out.

Evaluations noted that downstream diligence ought to be strengthened: the World Bank proposal has advisory and supervisory elements that try to do so. But evaluations did not suggest that upstream regulation be weakened, rather that it be maintained while processing speed is achieved through greater efficiency.

The United Nation’s new Sustainable Development Goals accord top priority for environmentally and socially sustainable growth. MDBs’ safeguards accompanying policies and investments must complement these goals by ensuring that environmental and social care is not weakened but strengthened.

Vinod Thomas is Director-General of Independent Evaluation at the Asian Development Bank, a position he previously held at the World Bank Group. David de Ferranti is President of Results for Development Institute.

Full article can be accessed through the Huffington Post website.

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