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A forest of failures

"Negligible" sustainability in World Bank's forest work

12 February 2013

A leaked copy of an evaluation of the Bank’s forest strategy criticises the Bank’s failure to address social and environmental goals. Further criticism has also been raised over the Bank’s Forest Carbon Partnership Facility (FCPF).

The draft December report by the Bank’s arms-length evaluation unit, the Independent Evaluation Group (IEG), which was discussed by the Bank’s Committee on Development Effectiveness (CODE) in early February, assessed the implementation of the Bank’s 2002 forest strategy and concluded that “the Bank Group’s record in managing the trade-offs and tensions between conservation, poverty alleviation, and growth objectives shows that expectations, as envisioned by the 2002 strategy, have not yet been met.” It pointed to several weaknesses in the strategy, including that “poverty reduction, for the most part, has not been satisfactorily addressed”, noting that projects “often assumed, without verification, that benefits would accrue to the poor”. This is in line with the Bank’s 2007 review of the strategy, which noted that “in many [countries] poverty concerns and the impacts of forest interventions on forest-dependent peoples have not received adequate attention”. The report also raised concerns that “the monitoring and reporting systems … are inadequate to verify whether its operations are supporting forest management in an environmentally and socially sustainable way”.

The strategy, which replaced the Bank’s 1992 forest policy, and the associated revised operational policy most controversially lifted a ban on direct financing of industrial logging in moist tropical forests (see Update 29). A key rationale for this was to facilitate certification, however, the IEG found that challenges remain “in achieving certification and ensuring sustainable forest management.” Furthermore, a March cross-departmental study by the Bank, ,Justice for forests, estimated that illegal logging can account for as much as 90 per cent of all logging in some countries, generating approximately $10-15 billion annually in criminal proceeds, leading to “enormous environmental and societal costs”. The study’s recommendations included a call for illegal logging to be integrated into criminal justice strategies. The IEG report concluded that “evidence is lacking” that the Bank-supported industrial timber concession reforms have “led to sustainable and inclusive economic development.” This included a lack of “attention to rural poverty”, noting that the reforms “have usually neglected or underestimated the nontimber values and uses of the forests, with respect to the livelihoods of forest-dependent people, their traditional claims, sociocultural values, and overall sense of security.”

ensure that the Bank commits to halting its support for industrial-scale logging in tropical rainforests

The Bank has previously come into trouble for failing to include indigenous people in projects, such as Congolese pygmy groups (see Update 59). In 2005 the pygmy groups filed a complaint with the Bank’s accountability mechanism, the Inspection Panel (IP), regarding the exclusion of indigenous peoples from Bank-supported forest sector reforms and the absence of participatory land use planning processes. The IP found that the Bank had violated its safeguard policies and thereby encouraged logging of the world’s second largest rainforest.

Another problem identified by the IEG was the “lack of meaningful integration of communities into integrated conservation management schemes”. Furthermore, out of the 75 per cent of closed protected area projects that included an alternative livelihood scheme for communities, the report claimed that “just 2 out of 37 … achieved their intended livelihood aims”. According to the IEG, participatory forestry management projects have yielded both positive livelihood benefits and better environmental outcomes, but found that application has been limited since the Bank had failed to address important barriers. This includes “neglecting the informal sector”, despite that “countries with the largest informal forestry sectors tend to be low-income countries with weak governance” and thereby the Bank “missed an opportunity to reach more forest-dependent rural poor while at the same time helping to achieve more environmentally sustainable forest management.” The report concluded “there have been negligible outcomes in managing natural forests in a socially and environmentally sustainable way” and noted that: “Sustainability of the environmental outcomes in three-quarters of the Bank-supported projects was found to be at risk”. Furthermore, “only one-third of the protected area projects designed since 2008 included climate change considerations in project design.”

The IEG’s recommendations include “building more meaningful community participation into design and management of protected areas”; to “expand support for participatory forest management”; and to “undertake and disclose a comprehensive review of the economic, environmental and social outcomes associated with World Bank support for industrial timber concession reforms … [to] determine whether and how the World Bank Group can realistically support effective sustainable forest management in tropical moist forest countries.” The Bank’s January draft management response to the report, also leaked, stated that: “While we agree with several [of] IEG’s findings, we strongly disagree with others”, and that the report “contains a number of inaccuracies and misleading assertions”. It rejected the recommendation for a review on several grounds, including since the concession reforms had not been designed “as targeted poverty interventions”. It also claimed that a review would have “significant implications for the on-going safeguards review process” (see Update 83, 82).

Before the CODE meeting, NGOs Greenpeace, Bank Information Center and Global Witness wrote to the Bank’s board members, urging them “to ensure that the Bank commits to halting its support for industrial-scale logging in tropical rainforests in favour of alternative approaches that prioritise land rights, rural livelihoods, and the protection of vital ecological functions.”

More troubles in the forests

Prior to the IEG report, a November Bank report on African forests, woodlands and trees, outlined an “action plan” for the next five years, guided by the 2002 strategy, pointing to their important role for African economies in “providing a substantial source of employment and economic growth as well as contributing to risk reduction and resilience strategies”. While recognising the forests’ broader roles, outside of sources of export revenues from industrial timber and as a global public good, it noted the low ranking of Sub-Saharan countries in the Bank’s Doing Business report (see Update 83, 81, 78), arguing that “more sustainable forest and woodland management, and moving the products value chain up are closely linked to broader improvements in the business environment.” The report included a call for a “focus on forests and woodlands as a provider of household energy and as the source of employment from a vibrant, largely domestic but also export oriented wood industry.” It listed seven action areas, including “sustainable protection and development for wood-fuel and charcoal industries to serve domestic (and potentially export) markets”; “plantation management to support a range of timber products in addition to wood-fuel“; and “development of REDD+ (reduced emissions from deforestation and forest degradation) programmes and carbon finance”.

The Bank’s engagement with REDD+ is through the Forest Investment Program, a Climate Investment Fund aimed at assisting countries to reach their goals under REDD+ (see CIFs Monitor), and its trust fund, the FCPF, which funds developing countries’ national REDD+ plans (see Update 81, 78, 76, 75). In January, the FCPF received a boost through a $180 million injection of funds from Finland, Germany and Norway, most of which will go into the carbon fund which facilitates the sale of forest carbon credits from participating countries to investors. However, according to a separate IEG report published in August 2012, the FCPF has been costly and slow to operate. It notes that, since its inception, the FCPF “has spent approximately $22 million to deliver a total of $4.9 million in grants … 70 per cent of which have been utilised by five countries.” According to the report: “Disbursement delays can, in part, be attributed to the World Bank’s initial decision to assume the role of sole implementing agency of the facility.”

The report noted that “REDD+ is a more expensive, complex and protracted undertaking than was anticipated at the time of the FCPF’s launch”. According to Chris Lang of NGO watchdog REDD Monitor this should not have come as a surprise, since the Bank “undertook no feasibility study, prepared no business case and did no market or technical analysis before launching the FCPF”. The report’s recommendations include that the FCPF needs “to update and clarify its mission to the World Bank’s board and to its participating members in relation to the changes that are taking part in the carbon market“ and “a high-level strategic discussion on its overall approach to REDD”. FCPF’s management team at the Bank clarified that discussions on changes in the external environment are already taking place and supported the recommendation on REDD+, confirming that it “certainly entails significant challenges”.

The Bank’s continued support for carbon markets (see Update 81, 79, 78, 77) has been confirmed by president Jim Yong Kim, when he in January told news agency Bloomberg that he “would like to see governments get behind a carbon market”. Meanwhile, the carbon market suffered several blows towards the end of 2012, including continued accusations of fraud (see Update 74) leading the City of London police to warn that “carbon credits are the latest in a growing list of products marketed by fraudsters” after arresting 11 people in December. In the same month the price of UN carbon credits reached record low.