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Striking the Balance

Ownership and Accountability in Social and Environmental Safeguards

The global landscape of development finance is changing. Some formerly poor countries are becoming richer, and new, large-scale investors have entered the field. At the same time, the global community is becoming increasingly aware of the need to enhance social well-being and environmental sustainability. This working paper looks at different ways in which the World Bank has attempted to navigate this landscape with its safeguard policies. It provides lessons for the Bank and other institutions that are looking to encourage national ownership over the safeguard process while holding both themselves and governments accountable to minimum social and environmental standards.

Key Findings

Executive Summary

Many governments around the world have put in place systems to help ensure that investments in changes such as infrastructure projects, government programs or new national laws do not bring undue harm to their citizens or environment. The effectiveness of these systems in successfully preventing negative impacts varies widely. Developing countries tend to have a particularly difficult time ensuring that investments within their borders meet minimum social and environmental standards. As a result, many financial institutions have established their own policies to help ensure that their investments do not result in harm to vulnerable communities or ecosystems. These policies are generally known as “safeguards.” Although safeguard policies provide vital protection against risks to people and the environment, properly designing and implementing these policies means navigating complex relationships between financial institutions, governments, and the citizens of recipient countries.

The World Bank (the Bank) has been at the forefront among multilateral development banks in developing safeguard policies. In recent decades, the Bank has experimented with different approaches to social and environmental protection. These approaches respond in part to variations in the way in which countries receive money from the Bank, such as investments in projects versus policies. They have also emerged in reaction to the changing global landscape. Some developing countries have become richer and created stronger systems to protect people and the environment. The global community has also realized the value of letting developing countries define their own development path. At the same time, the pressing need to protect our global common goods and most vulnerable communities has become more apparent.

This working paper seeks to help the Bank and other financial institutions take stock of experiences to date and distill lessons for the future. We look at four different approaches to protecting against social and environmental harm: the traditional safeguards approach, which applies to most project lending; the Use of Country Systems approach, which the Bank has applied to some project lending on a pilot basis; the approach used for Program for Results investments, which applies to the Bank’s results-based lending pilot; and the approach used for Development Policy Loans, which applies to loans that support changes to policies and institutions.

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