The World Banks private sector lending arm has come under fire in an internal bank report which accuses it of attempting to dilute the environmental and social assessments attached to its lending, reports The Financial Times.
The banks International Finance Corporation has proposed its own set of safeguard policies, which include environmental assessments, pollution abatement, land acquisition and involuntary resettlements and indigenous people, more tailored to the needs of its private sector clients, according to the World Bank press review Friday.
The proposed changes include a greater focus on project outcomes and the setting of objectives and monitoring performance, rather than the application of the strict safeguards used across the World Bank with government clients.
A change in IFC rules would also apply to the group of commercial banks, including Citigroup, ABN Amro and Barclays, which last year agreed to follow the IFCs environmental and social rules in international project lending under the Equator Principles.
An internal paper by the World Banks legal department and environmentally and socially sustainable development council, seen by the FT, said the proposed IFC approach of principles and guidelines rather than strictly enforced standards “deviated from the clarity attached to the decade-long effort to distinguish mandatory from discretionary action”.
The paper, which raised legal and policy concerns, was sent to the World Banks top management. It also said the IFCs proposals would result in inconsistent policies being applied to the World Banks public and private sector clients.
It warned that the proposals will be viewed outside the bank as “a generally weaker and more relaxed set of “standards” for the private sector” and said that different safeguards for public and private sector lending could make it difficult for the bank to take part in public-private projects.
Rachel Kyte, director of environment and social development at the IFC, said: – Getting the public and private sectors to work together is one of the biggest conundrums in development. It is not an easy thing to do and we are glad to have a debate going.
Peer review within the bank is the normal approach to proposed policy changes, and it is not unusual for internal papers to use blunt language. The paper praised a number of elements of the IFC initiative, including the proposed integration of social and environmental assessment, and a broader range of social impacts and risks.
But it also said that there had been too little internal consultation on the proposed changes, and that the period for external review of just a few months would be seen as too short by campaign groups. Kyte said that the Equator Principles have made the IFC a global standards setter and that the financial sector required a predictable policy framework.
– It all has to be agreed by the board, and there will be a public comment period, but we want to get it done as quickly as possible to provide a clear framework for IFC projects and for banks and export guarantee agencies, she said.
Kilde: www.worldbank.org
