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Holes in the World Bank’s safety net

In August, the World Bank concluded a major policy review process to adopt a new Environmental and Social Framework to replace its suite of “safeguard” policies – the policies designed to ensure that development activities financed by the Bank do not cause harm to communities or the environment. The outcome of this four-year review can be summed up in ten words: The safety net got bigger, and so did its holes.

First, the good news. The new framework covers a broader scope of social issues than the old one. The policy now places social impact assessment and management more on par with that of environmental issues which historically have received greater attention in development projects. The framework now also has provisions to prevent discrimination in Bank-financed activities and requires assessment and mitigation of impacts on “vulnerable or disadvantaged” groups. It also includes a new labor standard to protect workers and provisions requiring that new construction and services are accessible, where feasible. This expansion of the safety net to cover more people and social issues is a welcome change.

Now for the bad news, the new framework shifts from a compliance-based system with clear requirements and timelines for planning and reporting, to a more flexible “adaptive management” framework. In several areas, key requirements for Bank supervision and due diligence were eliminated, while responsibility for various aspects of assessment, reporting, and supervision was shifted from the Bank to the borrower. This shift presents real risks for affected communities. Now key assessment and planning documents might not be disclosed and reviewed until it is too late for communities to raise concerns or for projects to be adjusted.

The “adaptive management” approach was sold by Bank management as a way to reduce what was seen by some as a “frontloaded” planning and design process, and to improve implementation throughout the lifecycle of a project. Unfortunately, while the up-front requirements were eliminated, they were not replaced with more supervision during implementation. Safeguards compliance has always been a major challenge for the Bank. Unfortunately, rather than bolster supervision, the new framework dials it back.

The new framework also allows significantly greater leeway for the Bank to decide to waive the safeguards in lieu of a country’s national laws and regulatory systems or the standards of co-financiers. The Bank asserts that the new framework will “boost protections for people and the environment and drive sustainable development through capacity- and institution-building and country ownership.” However, it is unclear how country systems will be strengthened and where necessary resources will come from. It is also unclear whether and how the Bank will assess these alternative systems to ensure that a minimum level of protection is met.

Some of the most contentious fights in the safeguards review process were over human rights. The framework, for instance, includes a provision in the vision statement that “the World Bank’s activities support the realization of human rights expressed in the Universal Declaration of Human Rights” and “the World Bank seeks to avoid adverse impacts and will continue to support its member countries as they strive to progressively achieve their human rights commitments.” However, the Bank declined to adopt a binding commitment to actually respect human rights.

While an earlier draft of the policies included references to human rights instruments, these were all eliminated in the final draft, resulting in several provisions that undercut human rights standards. The new labor provisions are a striking example.

“The new policy will, for the first time ask the borrowing countries to abide by some basic workers’ rights and working conditions in Bank-financed projects,” said Ahmad Awad, of the Jordan-based Phenix Center for Economics & Informatics Studies. “Unfortunately, it leaves workers at risk by failing to include core labor standards and suggesting that freedom of association in projects financed by the Bank will not be required in countries that do not have national laws protecting this right.”

Protection for indigenous peoples is another area where the framework took one step forward and two steps backward. New provisions were added to protect pastoralists and peoples in voluntary isolation as well as a requirement for free, prior and informed consent (FPIC). At the same time, key protections, such as provisions on benefit-sharing were weakened.

“The proposed new policy represents a step forward from the existing policy in that it includes a requirement for free, prior and informed consent from indigenous peoples, however, it still fails to meet international human rights standards by defining consent as ‘collective support’ rather than ensuring respect for the results of affected indigenous peoples’ independent and collective decision-making processes,” said Prabindra Shakya, with Asia Indigenous Peoples Pact. “Further, the requirement of FPIC is restricted to very narrow situations rather than all projects that impact indigenous peoples as identified in participatory assessments.”

The Bank argues that the new framework will promote better, more sustainable development outcomes. “These new safeguards will build into our projects updated and improved protections for the most vulnerable people in the world and our environment,” stated World Bank President Jim Yong Kim upon adoption. But civil society groups see it very differently.

“The lack of binding requirements to uphold human rights and provide appropriate remedy for violations, the weakened requirements for use of national regulatory systems or financial intermediaries, as well as a lack of requirements to disclose real information about potential impacts at project level leave communities unprotected in World Bank financed projects,” said Sukhgerel Dugersuren, of OT Watch Mongolia. “I see this as an obvious move away from its mandate to reduce poverty around the world.”

The new policy framework will not take effect for another year and a half. In the meantime, the Bank will be developing the procedures, guidelines, and processes for implementation. Hopefully the Bank will engage with civil society groups in the development of procedures and guidelines so that some of the holes in the framework can be patched. And hopefully the Bank will put in place systems to assess outcomes and adjust the new framework along the way. Either way, the new Social and Environmental Framework will pose major challenges. Communities and civil society groups will have the difficult and critical task of monitoring Bank-financed projects to catch those who fall through the safety net’s holes and to hold the Bank and its shareholders accountable for the results they have promised.

Gretchen Gordon is Coordinator of the Coalition for Human Rights in Development, a global coalition of social movements, civil society organizations and community groups working to ensure that all development finance institutions respect, protect, and fulfill human rights.

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June 2017
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