Global growth has not come without costs: Pollution, natural resource depletion, climate change, and the disruption of ecosystem services are now felt around the world.

This report aims at helping investors in developing countries develop effective social and environmental safeguard policies that also support country ownership.

Key Findings

This report offers eight recommendations for investors that want to balance ownership and accountability in their social and environmental policies. We recommend that investors:

Use recipient-country laws and institutions to enhance safeguard implementation.

  1. Maintain strong safeguard policies to ensure social and environmental protection and provide positive examples for country systems.

  2. Thoroughly research the strengths and weaknesses of the recipient country’s safeguard system on paper and in practice.

  3. Engage consistently in information gathering, problem solving, and collaboration with the country government and relevant stakeholders.

  4. Invest in adequate human resources for both the investor and recipient government.

  5. Provide the staff of both the investor and the host government with proper incentives to implement thorough safeguards.

  6. Create clear requirements for the staff of both the investor and the host government, with an emphasis on substantive results.

  7. Support citizen engagement throughout the investment process.

Executive Summary

Investors face growing pressure to reduce the negative environmental and social impacts of their investments. In trying to do so they are confronted with the question of how to interact with governments in the countries where they invest.

Both governments and investors—including international financial institutions, public funds, and private banks and companies—grapple with how to foster economic development without creating social or environmental harm. Past economic growth led to improved prosperity for millions, but caused environmental damage and suffering for those not positioned to benefit from the growing wealth. Governments and investors are now under strong pressure globally to ensure that economic growth supports rather than harms people and the ecosystems on which they rely.

Governments have set up rules and institutions to protect their people and natural resources. Unfortunately, many of these systems are still inadequate. Governments in developing countries, in particular, struggle to consistently ensure that investments in roads, power plants, agriculture projects, or other infrastructure do not result in undue social and environmental harm. If governance systems are weak, investors can help provide social and environmental protection.

International financial institutions like development banks now realize that environmental sustainability and social equity are vital to their missions of economic development. Many investors, including the World Bank, the Green Climate Fund, the European Bank for Reconstruction and Development, and several private companies are creating new social and environmental policies or updating old ones. A central question facing these investors is how to manage the relationship between their policies and the laws and institutions of the countries in which they invest.

The World Bank has in recent years experimented with several approaches to deal with the relationship between its own social and environmental risk management (“safeguard”) systems and those of its recipient countries. Its experiences offer valuable lessons for both the World Bank and other investors grappling with how to effectively work with national governments to reduce environmental and social risks. This report analyzes four of these approaches: the traditional safeguards approach, the “use of country systems” approach, the approach used for the World Bank’s “program for results” investments, and the approach used for the Bank’s development policy loans.