How can the IDB strengthen its Environmental and Social Policy Framework to enhance sustainable, inclusive development?

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Source: BIC

As the Inter-American Development Bank (IDB) reviews its Environmental and Social Policy Framework (ESPF), civil society reflects on the main improvements in the second ESPF draft and offers recommendations for further strengthening of the ESPF to align with the highest standards. CSOs encourage the IDB to design a strong integrated safeguards system to guarantee better E&S governance, promoting a positive spillover effect within the IDB and its Borrowers.

The Environmental and Social standards are a system of required rules or standards that serve to mitigate, prevent, and reduce the negative impacts associated with multilateral development bank (MDB) projects. Borrowers are required to comply with these E&S standards when they implement projects financed by MDBs. Currently, the Inter-American Development Bank (IDB) is updating its environmental and social Operational Safeguards Policies (2006), and civil society has participated in the process, providing feedback to strengthen policies and create a culture of development that protects people and the environment. On September 16, 2020, the IDB Board of Directors approved the final Environmental and Social Policy Framework, including some of the major asks and recommendations made by civil society during the consultation process to the first and second ESPF draft.

The IDB Board of Directors approved the second ESPF draft on July 6, 2020 and opened a window of 30 days to receive comments from stakeholders. However, we along with others expressed strong concerns around the ESPF consultation process. The process lacked opportunities for constructive consultation and meaningful dialogue with stakeholders and project-affected communities.1 From the beginning, the ESPF consultation process has been weak; what the IDB calls a “second public consultation phase” did not open real opportunities to engage with civil society and project-affected communities in effective and meaningful dialogue — critical elements of genuine consultation. For more information on the concerns raised by civil society during the first ESPF consultation phase, see this article.

In terms of substance, we celebrate many of the changes introduced in the second ESPF draft and that many of the recommendations civil society groups and project-affected communities made to the first draft were taken into consideration, for example:

  • the addition of an exclusion list,
  • strengthened language to protect human rights,
  • the inclusion of the Escazú agreement,
  • improved responsibilities for the IDB and Borrower, etc.

These critical provisions should also be included in the final version of the ESPF. At the same time, additional revisions are needed  to build an integrated and comprehensive safeguards system that benefits people and the environment. A robust safeguard system requires the following:

  • Environmental and social regulations aligned with the highest international standards in development.

These include the norms and standards that borrowers must apply in projects that receive IDB funding. These environmental and social standards should (in theory) guarantee that negative impacts and risks associated with IDB projects are properly identified, avoided, minimized, mitigated, and if not, compensated.

  • Strong mainstreaming tools to integrate the E&S safeguards approach into programming, planning, training, etc.

These tools are critical to addressing E&S issues strategically in the short, medium, and long term. Better planning helps to reduce risks.

  • Setting up the enabling environment to effectively operationalize the ESPF.

This includes developing a robust implementation plan and budget, setting the right institutional incentives, and supporting capacity building activities within the IDB and executing agencies, along with developing clear implementation and monitoring and evaluation (M&E) requirements.

CSOs emphasize that overlooking any of these elements would be a huge mistake, as it risks rendering the safeguards ineffective and exposing IDB and its Borrowers to costly failures.

Civil society has provided comments and recommendations to the second ESPF draft, urging the IDB to adopt higher standards applied by peer institutions and incorporate lessons learned from the IFC, World Bank, IDB project implementation, the Independent Consultation and Investigation Mechanism (MICI) cases, and the Office of Evaluation and Oversight (OVE). To secure the benefits made possible by the critical additions to the second draft, we recommend the following:

1. Mainstreaming and implementation plan: 

The ESPF should include all of the provisions on mainstreaming that are in the current Operational Policies. We urge the IDB to consult civil society on the implementation plan.

2. Do good beyond do no harm principle:

The second ESPF draft incorporates the principle of maximizing sustainable development in accordance with the “do good beyond the do no harm principle.” However, we recommend establishing a clear and transparent procedure that involves stakeholder engagement to support Borrowers in identifying, reporting, and implementing ways to achieve this. Project design and implementation should enhance not only the public social and environmental good, but also equal access to project benefits, especially among marginalized groups.

3. Exclusion list: 

We welcome the addition of an exclusion list which both reduces risks to the Bank and makes future decision-making clear and transparent. It puts IDB on par with peer institutions and corrects a notable gap from the first draft. We celebrate the addition of coal and upstream oil and gas development and exploration as essential on this exclusion list for IDB to be aligned with its goal of promoting climate-friendly development. We recommend adding the following to the list to ensure that IDB’s lending does not destroy the natural capital on which many citizens rely: those resulting in the destruction of High Conservation Value (HCV) areas, production forestry in intact primary/old-growth forests, fracking, large hydroelectric dams, activities involving harmful or exploitative forms of forced labor or child labor, and large-scale agricultural activities using pesticide products.

4. No dilution:

The ESPF should continue to strengthen the “no dilution” commitment by not diluting the current operational policies, particularly, OP-765 on Indigenous Peoples, OP-703 on Environment, and Safeguard Compliance, OP-704 on Natural Disaster Risk Management, and OP-761 on Gender Equality.

5. Strengthening supervision during implementation:

We welcome the inclusion of a provision on project closure, and the additions on how the IDB will address non-compliance and ex-post third-party monitoring, since these strengthen project oversight. However, to eliminate flexibility, discretionary action, and weak/ambiguous language, we recommend further additions such as:

  • establishing clear requirements and strengthening language in all the provisions related to supervision during implementation;
  • defining minimum requirements for high-risk projects;
  • requiring independent third-party monitoring using participatory methods that engage affected populations for all Category A projects;
  • addressing key E&S impacts and risks from project design;
  • establishing automatic reporting criteria to project-affected people;
  • creating automatic requirements to disclose information on project implementation; and
  • establishing a predictable system to monitor and report on safeguards performance, among others.
6. Grievance Mechanism and Accountability:

We commend the inclusion of language instructing Borrowers to provide project-affected people with information about MICI, in addition to the project grievance mechanism. We also praise the clarification that access to MICI is not contingent upon exhausting use of the project grievance mechanism. However, we recommend providing concrete guidance on how to structure or operate an effective grievance mechanism at the project-level. The ESPF should require the Borrower to design and implement the Borrower Grievance Mechanisms based on Principle 31 of the UN Guiding Principles. Also, project-level grievance mechanisms should use accessible and culturally appropriate formats for the different physical, sensory, cultural, and/or cognitive needs of project-affected people and local communities.

7. Human Rights & Reprisals:

We welcome the explicit commitment to respect human rights and the reference to the Escazú Agreement to actively promote access to information, stakeholder engagement, and environmental justice. Also, we celebrate the commitment not to tolerate retaliation, such as threats, intimidation, harassment, or violence against those who voice their opinion or opposition to an IDB-financed project or to the Borrower, and the requirement to complete a contextual risk assessment as part of the project’s due diligence process. Such practices are essential for equitable and sustainable development.  However, the ESPF should ensure that the commitment to not tolerate reprisals is communicated from the outset of a project with the Borrower, and it must be backed up with guidelines and procedures for concrete actions that should be taken in response to reprisals, if and when they materialize.

Civil society will continue to engage with the IDB in the safeguards review process, as we look forward to reviewing the final policy. Our expectation is that the IDB uses this opportunity to engage with stakeholders in the upcoming process of ESPF implementation. Although the consultation process for the review was weak, the additions made to the second ESPF draft are a sign that IDB understands the need to facilitate inclusion and sustainability. BIC will be providing further analysis and next steps for engagement in our review of the final policy.

For more detailed recommendations and specific comments on each Performance Standard, see below the complete submission from civil society on the second Environmental and Social Policy Framework draft.

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1. CSOs requested the IDB to have a real consultation process for the second phase with the hope that the IDB would not only host virtual regional consultations but would also expand the period to submit comments to at least 60 days.