With a lending portfolio of $18 billion in 2010, the International Finance Corporation (IFC) promotes private investment in developing countries. Its lending has been guided since 2006 by a set of Performance Standards on Environmental and Social Sustainability which the IFC applies to all investment projects to minimize their impact on the environment and on affected communities. Large-scale infrastructure projects, extractive industries operations, and other projects often pose serious environmental and social risks, including to human rights.
Over the past decade, WRI has been leveraging its expertise on ecosystems and biodiversity, climate change, and governance to help shape the environmental and social policies of international financial institutions like the IFC, and to promote sustainable private investment in client countries.
WRI actively advised IFC on its 2011 revision of the IFC performance standards which strengthened the environmental and social safeguards it applies to projects worldwide. IFC staff making a case for robust requirements to assess risks on ecosystem services, climate change, and indigenous peoples’ rights, also had access to the following WRI body of work:
Our effort to mainstream ecosystem services in decision-making and the documented use of our ecosystem services review tools within the private sector.
Our work demonstrating that the concept of “Free Prior Informed Consent” makes a good business case for large-scale, high-impact projects to ensure local civil society buy in.
IFC standards are globally influential among international project financiers seeking to manage the environmental and social risks of projects in the developing world. More than 60 leading international institutions have committed to adhere to IFC’s Performance Standards in their project-finance lending under the rubric of the Equator Principles. Banks in emerging economies including China and Brazil often refer to the IFC Performance Standards as they develop national environmental and social guidelines.
Decisions about how to generate, deliver and pay for electricity have a profound effect on people’s lives. WRI’s Electricity Governance Initiative (EGI) promotes transparent, inclusive and accountable decision-making in the electricity sector, with the goal of helping countries can develop more equitable and sustainable electricity policies. The partnership works in India, Indonesia, Thailand, South Africa, and the Philippines, five countries with rapidly growing emissions from power generation. Since 2005, we have worked with civil society organizations to complete national assessments of electricity governance and advocate for improvements. More than thirty organizations around the world are partners in the Initiative.
This breakthrough resulted from the opening up South Africa’s national electricity planning process, in which EGI played a key role.
Civil society organizations were invited to participate in a new open and consultative process to develop the Integrated Resource Plan for 2010-2030. EGI partners in South Africa produced and shared relevant and timely analyses of the draft plan, held public workshops with government officials, parliamentarians, and civil society groups, and drew media attention to key components of the plan. The result was the government’s heightened focus on the clean energy options of renewables and efficiency. In addition, the South African Department of Energy committed to develop a research agenda to address issues that arose during the public process.
The National Green Tribunal (NGT) Act, passed by the Indian Parliament in May 2010, established a court to deal with environmental disputes throughout the country. Though hailed as a progressive mechanism for victims of pollution and environmental degradation to seek redress, the government delayed putting in place the needed infrastructure, staff, and judges for over a year. The deadlock was broken when environmental groups that are part of The Access Initiative in India took the issue to the Supreme Court, which ruled in their favor, forcing the government to implement the tribunal.
This turn of events underlines the influence and effectiveness of The Access Initiative (TAI) which is co-led by WRI. Established in 1999, TAI is the largest network of civil society organizations in the world dedicated to ensuring that citizens have the right and ability to influence decisions about the natural resources that sustain their communities. TAI-India has become a visible and influential player in India’s environmental governance arena.
Following the Supreme Court’s intervention, India’s National Green Tribunal started functioning on July 4, 2011, hearing thirty-five cases in the first two weeks. TAI India members won another victory when they brought to the media’s attention a stipulation in the Act requiring petitioners, when filing for environmental damages, to pay one percent of the compensation claimed. Following media coverage, the Minister for Environment and Forests, immediately withdrew the regulation requiring fees, which would have deterred poor people from seeking the tribunal’s help.
Indian citizens will now have unfettered access to an environmental court – an important step in advancing environmental rights in the world’s largest democracy. Although the court now functions in only New Delhi, the government plans to expand its presence to five other locations.
A social entrepreneur invests the little working capital she has to bring solar electricity to a community that –like 1.2 billion people worldwide– lacks access to electricity. The community used to use dirty, expensive and choking kerosene for light to cook by and for children to learn by. The entrepreneur knows she can recoup her costs, because people are willing to pay for reliable, high-quality, clean energy – and it will be even less than what they used to pay for kerosene. Sounds like a good news story, right?
Three months later, the government utility extends the electrical grid to this same community, despite official plans showing it would take at least another four years. While this could be good news for the community, one unintended consequence is that this undermines the entrepreneur’s investment, wiping out their working capital, and deterring investors from supporting decentralized clean energy projects in other communities that lack access to electricity.
Few countries are unaffected by China’s overseas investments. The country’s outward foreign direct investments (OFDI) have grownfrom $29 billion in 2002 to more than $424 billion in 2011. While these investments can bring economic opportunities to recipient countries, they also have the potential to create negative economic, social, and environmental impacts and spur tension with local communities.
To address these risks, China’s Ministry of Commerce (MOFCOM) and Ministry of Environment (MEP)—with support from several think tanks—recently issued Guidelines on Environmental Protection and Cooperation. These Guidelines are the first-ever to establish criteria for Chinese companies’ behaviors when doing business overseas—including their environmental impact. But what exactly do the Guidelines cover, and how effective will they be? Here, we’ll answer these questions and more.
Promoting forest protection and sustainable agriculture in the Amazon region is vital for local livelihoods and biodiversity, as well as for global climate regulation.
In early 2011, the state legislature of Mato Grosso, Brazil passed a controversial new state zoning law (ZSEE) that opened up 50,000 km2 of new forest areas for conversion to agriculture. In February 2012, following a high-profile civil society campaign and a public civil action suit, the law was suspended through an injunction by Mato Grosso’s State Court. The injunction states: “It is true that… there were… vices of form capable of undermining the law… However, more important is that by reason of these vices, there was impairment of natural goods and services and sustainable development, so there is a risk of impairment of human life. This is the strongest argument that… imposes the granting of the injunction.” In March 2012, Brazil’s Federal Zoning Commission ordered the state government to redraft legislation.
The Instituto Centro de Vida (ICV) – a founding partner of the Governance of Forests Initiative (GFI) – led the successful campaign by producing and distributing their analysis of the ZSEE / MT. This analysis was then used by civil society – including indigenous peoples, social movements, and researchers – as well as legislators and prosecutors in Mato Grosso. Civil society used all opportunities—such as seminars, public events, and protest letters—to denounce the new law. Meetings with more 250 people in attendance were convened.
Curbing Forest Loss
Within a month of the Governor sanctioning the new ZSEE, IMAZON, the other GFI partner in Brazil, documented a more than 500 percent spike in deforestation in Mato Grosso. The immediate public outcry, enforcement actions by the state, and the start of the state case in September, however, acted as immediate deterrents, and the rate of deforestation stabilized. However, without the decisions taken by the State Court and the Federal Zoning Commission, this increase in deforestation would likely have lasted longer, as the law effectively sanctioned past clearing and allowed new areas to be cleared.
These decisions marked an important victory for democratic decision-making and government accountability in a region where the rule of law relating to forests and agriculture is sometimes circumvented for political and economic gain.
Making Change Happen: WRI’s Role
GFI is a set of civil society organization partners in the United States, Brazil, Cameroon, and Indonesia dedicated to improving forest governance through evidence-based advocacy.
In 2010, WRI helped ICV to conduct a governance assessment of the Mato Grosso ZSEE process using a diagnostic tool, the GFI Framework of Indicators (v.1), developed by WRI, ICV, and IMAZON. ICV collected information and conducted interviews to compile a record of expert and civil society inputs into the bill’s drafting over 10 years, from 2000-2010. Armed with this evidence, ICV was able to quickly demonstrate the problems with the new law and start the outcry that led to this outcome.
Giving citizens a voice is essential to environmental and development progress - from reducing greenhouse gases to curbing deforestation to achieving the Millennium Development Goals.
At the June 2012 UN Conference on Sustainable Development (Rio +20), nine Latin American and Caribbean (LAC) governments took a giant step in this direction. Together, they pledged to begin negotiations leading to a groundbreaking Regional Convention that will enshrine public rights of access to environmental information, public participation, and justice.
As coordinator of The Access Initiative (TAI), an international network of hundreds of civil society groups, WRI played a pivotal role in the agreement by Chile, Costa Rica, Dominican Republic, Jamaica, Mexico, Panama, Paraguay, Peru, and Uruguay. Since then, Ecuador and Brazil have also joined the pledge.
Building Environmental Democracy
The rights of all citizens to information, participation, and justice on environmental issues that affect their lives were enshrined at the 1992 “Earth Summit” in the form of Principle 10 of the Rio Declaration. But in many countries, these principles have not been converted into practice, including in parts of Latin America and the Caribbean.
Much of the region is plagued by escalating conflicts over natural resources, mining, and new infrastructure such as highways and dams. In such situations, legally binding international agreements play an important role in strengthening citizens’ access rights, driving the development of national legislation and practices.
Making Change Happen: WRI’s Role
With Rio+20 providing an ideal launch pad for such an agreement, WRI created an international task force to promote a LAC Regional Principle 10 Convention.
In our role as TAI Secretariat, we made submissions to the United Nations that were reflected in the draft declaration by heads of state. WRI and our partners also engaged LAC governments and regional bodies such as the U.N. Economic Commission for Latin America and the Caribbean and the U.N. Economic Commission for Europe, both of which declared their support.
Following our high-level advocacy efforts, Jamaica and Chile took the lead in publicly calling for a regional, binding legal instrument to implement access rights.
The nine countries announced their agreement at a TAI event at the Rio+20 summit, underlining our key role. Chile hosted the regional governments in November 2012 to develop a road map to achieve the convention.
A regional convention in Latin America, following on one in Europe, will also promote the spread of access rights worldwide. TAI seeks to scale such regional models into global learning and action.
While reactions to President Obama’s newly announced climate plan have focused on domestic action, the plan actually has potentially significant repercussions for the rest of the world. These repercussions will come in part through his commitment to limit U.S. investments in new coal-fired power plants overseas. If fully implemented, the plan will help ensure that the U.S. government channels its international investments away from fossil fuels and toward clean energy. The move sends a powerful signal—and hopefully, will inspire similar action by other global lenders.
Developing countries will need about $531 billion of additional investments in clean energy technologies every year in order to limit global temperature rise to 2°C above pre-industrial levels, thus preventing climate change’s worst impacts. To attract investments on the scale required, developing country governments, with support from developed countries, must undertake “readiness” activities that will encourage public and private sector investors to put their money into climate-friendly projects.
WRI’s six-part blog series, Mobilizing Clean Energy Finance, highlights individual developing countries’ experiences in scaling up investments in clean energy and explores the role climate finance plays in addressing investment barriers. The cases draw on WRI’s recent report, Mobilizing Climate Investment.
The development of Indonesia’s geothermal energy sector—and the starts and stops along the way—provides an interesting case study on how to create readiness for low-carbon energy. By addressing barriers such as pricing distortions and resource-exploration risks, the country has begun to create a favorable climate for geothermal investment.
The History of Geothermal Power in Indonesia
Indonesia holds the world’s largest source of geothermal power, with an estimated potential of 27 GW. However, less than 5 percent of this potential has been developed to date. Indonesia began to explore its geothermal resource in the 1970s, with support from a number of developed country governments. The country made some progress in advancing geothermal development by the 1990s. However, development stalled during the Asian financial crisis in 1997-98 and was slow to recover.
In the early 2000s, a number of barriers limited investment in the sector, including a policy and regulatory framework that favored conventional, coal-fired energy over geothermal. Plus, the high cost and risk associated with geothermal exploration deterred potential investors and made it difficult to access financing from banks.
The Indonesian government took a number of steps to try to advance geothermal development and received support from a wide range of international partners, including multilateral development banks and developed country governments. In 2003, it passed a law to promote private sector investment in geothermal, establishing a target of 6,000MW installed capacity by 2020.