U.S. public financing for overseas coal-fired power is likely coming to an end.
That’s the clear signal from the U.S. Department of Treasury’s announcement earlier this week. At institutions like the World Bank, where the United States is the largest shareholder, this decision holds real significance.
Under the new leadership of Dr. Jim Yong Kim, the World Bank Group continues to reinvent itself to meet the challenges of global development. That reinvention will continue this Saturday, when the Board of Governors is expected to endorse a new strategy for the institution. If properly implemented across the Group, the strategy could help boost the institution’s contribution to equitable and sustainable development. Two areas of focus will be especially important, including how the Group handles its work on climate change and selects its investments.
On July 16, 2013 the World Bank agreed to support universal access to reliable modern energy and limit the financing of coal-fired power plants to rare circumstances in an effort to address climate change concerns.
Ensuring that development projects benefit both people and the planet is becoming more and more of a priority.
Environmental and social impact assessments (ESIA) have been in use for decades to consider the effects of projects such as dams, highways, and oil and gas development. Over the years, ESIAs have evolved to cover both environmental and social impacts, including health and human rights.
However, the assessments often study social or environmental factors separately from one another, missing the many ways in which they interact.
In 2012, important financial institutions--the International Finance Corporation and the Equator Principles Financial Institutions--took a welcome step towards promoting a more holistic approach to impact assessment, requiring their clients to address ecosystem services as part of their due diligence.
Incorporating the concept of ecosystem services into ESIA can ensure that affected stakeholders, project developers, financial, and governmental institutions understand the full scope of a proposed project’s impacts on people and the environment. But as I recently learned at the annual conference of the International Association for Impact Assessment (IAIA) two weeks ago, there’s a lot of uncertainty about what the concept of “ecosystem services” really means and how it can be applied to conducting impact assessments. It’s a good time to clear up confusion on this critically important yet complex issue.
Within our lifetimes, the world could be free of widespread, extreme poverty, replaced instead with shared prosperity and environmental and fiscal balance. That was the vision World Bank President Jim Yong Kim outlined at his first Spring Meetings in Washington, D.C. last week.
In a period of economic uncertainty, social exclusion, and climate and environmental crises, these goals hold immense promise. At the same time, for an institution already grappling with its redefined role in the coming decades, the Bank’s current capacity to support this vision will be tested.
The Common Vision for the World Bank Group that was approved by the World Bank’s Development Committee on April 20th includes two goals the Bank will work towards:
alleviating extreme poverty by dropping the percentage of people living on less than U.S.$ 1.25 a day to 3 percent by 2030, and
promoting shared prosperity by fostering income growth of the bottom 40 percent of the population in every country
These two core goals are supplemented by the Bank’s understanding that they cannot be achieved without credible action to ensure environmental sustainability, especially on climate change.
The World Bank’s annual spring meetings take place this week in Washington, D.C. One big topic on the agenda is how to update the World Bank’s “safeguard” policies. Created in the early 1990s, these policies ensure that the Bank considers the social and environmental effects of proposed projects. For example, the safeguards require those borrowing money to assess the project’s environmental impacts and to compensate households who are negatively affected.
The full suite of safeguards is now under review for the first time. Among other things, the Bank hopes to make its safeguard policies reflect changes in the global economic and political landscape that have occurred in recent decades.
World Bank Safeguards vs. National Safeguards
One question on the table is how the World Bank safeguards should interact with national systems already in place in recipient countries. Since the creation of the Bank’s safeguards, many countries have strengthened their own rules and institutions to ensure that large-scale projects are implemented in a manner that protects people and the environment. These include, for instance, laws requiring environmental impact assessments, or government agencies to oversee land use changes. Relying on these domestic systems can potentially improve protection of people and the environment. National laws, for example, allow governments and citizens to work within their own familiar structures, and they’re sometimes more appropriate for local circumstances than Bank policies.
Focus on Multilateral Agencies
This working paper is part of WRI’s Climate Finance Series, which tackles a broad range of issues relevant to public donors, intermediaries, and recipients of climate finance. A subset of this series, including this working paper, examines how public funds can leverage private sector investment...
WRI’s preliminary analysis on countries’ immediate “fast start” climate finance pledges announced thus far.
The World Bank has begun an effort to strengthen its environmental and social safeguards. But how relevant will these safeguards be after the Bank’s parallel proposals to “modernize” the way it does business?
As an institution of 10,000+ staff, owned by 187 governments, the World Bank invests in a wide range of development activities to help meet the needs of a wide range of borrowers. The bank’s environmental and social safeguards have emerged as a consistent approach to ensure, across these diverse contexts, that its investments “do no harm,” particularly when investments do not go as planned.