Bank failing on environment: IEG finds lack of coherence

29 September 2008

In July the World Bank’s internal watchdog, the independent evaluation group (IEG), released an assessment of the Bank’s record on environment between1990-2007. Delicate wording aside, the evaluation finds that the Bank has performed poorly when it comes to a coherent integration of environmental goals into its country strategies and investment portfolios. These findings fly in the face of the UK’s calls for the World Bank to be an environment Bank, and the Bank’s new role as administrator of approximately $10 billion worth of climate investment funds (see Update 61, 60).

Assessing Bank support for environmental sustainability over the past 15 years, the evaluation finds that despite Bank investments in the environment of $400 billion since 1997 and improved policy commitments, the reality has been disappointing. Notably the Bank has paid “insufficient attention to longer-term sustainable development”, and needs more adequate systems “to monitor environmental outcomes and to assess impacts” as well as better coordination among the different parts of the Bank Group.

According to the report, the Bank lacks an adequate monitoring and reporting system to assess the environmental aspects and outcomes of the projects it supports, echoing findings of an evaluation carried out in 2002. In addition, the IEG finds that due to a lack of internal coherence and coordination, there is the risk that the Bank’s private and public sector branches work at cross-purposes. For instance, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), both Bank private sector arms, seem to have “few operations specifically intended to avoid damage to the environment.” Bank performance has also been weaker in Sub-Saharan Africa than elsewhere, and environmental compliance and performance gaps have been most notable in IFC projects.

The IEG states that the inadequate availability of information made it difficult to measure Bank impact, because of “the inability to separate its influence on policy and environment improvements from that of other forces.” Consequently it had to rely on country case studies undertaken in 2006. Ironically the Bank management response criticises the evaluation for this, for being out of date.

Though the Bank Group is “now the largest multilateral source of environment-related financing”, it is unclear exactly how much lending has gone directly for environmental improvement “because of the way Bank [IBRD and IDA] commitments are identified.” Moreover “the priority given to lending for environment and natural resource management (ENRM) appears to be modest” and the estimated $59 billion committed for ENRM projects between 1990 and 2007 “appears to overstate the actual volume of resources going directly for environmental improvement.”

In its defence, Bank management expressed concern over the IEG’s methodology in carrying out the evaluation. It accuses the report of “over-synthesising issues” which only apply to certain parts of the World Bank Group. Management also refers to a “lack of adequate coverage of IFC’s sustainability strategic pillar”, and states “the evaluation of IFC’s non-due diligence activities is cursory and incomplete.” Management is also careful to explain that IFC does not design or implement environmental and social mitigation plans for project-related impacts and that ownership and responsibility for these plans “remain with the project sponsor.”

Other areas of disagreement include on cross-sectoral integration, such as the IEG’s failure to review the increased efforts in Africa in promoting regional, river basin approaches and the fact that IEG’s case studies are now two years old and fail to mention the shift in support to urban environmental problems and natural resource management.

Critics have been quick to pick up on the report. “It is troubling that earlier recommendations by the Bank’s own evaluators have been largely ignored,” said Korinna Horta, a senior economist at Environmental Defense Fund. “Even now, the Bank does not have an appropriate accountability structure in place to ensure that its well-meaning environmental and social policies are actually implemented on the ground.”