UK civil society meeting with UK World Bank Executive Director Gwen Hines

24 January 2014

Attendees

World Bank:

Gwen Hines, UK World Bank Executive Director

UK government:

Paul Healey, International Financial Institutions Department, DFID

Rachel Grant, International Financial Institutions Department, DFID

NGOs:

Tim Wainwright, ADD International

Graham Gordon, CAFOD

Kate Geary, Oxfam

Preethi Sundaram, IPPF

Monica Stephen, International Alert

Bert Schouwenburg, GMB

Alison Doig, Christian Aid

Alessandra Masci, Amnesty International

Ashfaq Khalfan, Amnesty International

Helen Tugendhat, Forest Peoples Programme

Richard Harkinson, London Mining Network

Petra Kjell, Bretton Woods Project

Peter Chowla, Bretton Woods Project

Dario Kenner, Bretton Woods Project

Proposed agenda

1. IFC and human rights (WB strategy)
2. Inclusion of disabled people
3. Climate & energy, incl climate safeguard
4. IDA outcomes, incl fragility and reproductive health indicators
5. Updates:

• Nigeria
• Kenya
• Mongolia & Guinea
• Inga dam and Global Infrastructure Facility
• DBR & BBA indicators

Discussion

1) IFC and human rights (WB strategy)

NGO points:

Want to talk about the IFC investment in Dinant in Honduras, and in particular some wider concerns the case raises. This is in terms of the way human rights are dealt with at the IFC, especially in the context of fragile and conflict states; and the fault lines within the IFC’s institutional culture that allowed the mistakes in the Dinant case to occur.

We would like thank you to you and other members of the Board for taking action last Thursday. The IFC’s initial response to the CAO investigation was totally unacceptable – and as you know 70 Honduran and international NGOs signed a statement summarising the problems with it.

This public statement also put forward some very reasonable asks, many of which have not been met by the IFC’s latest announcement on Wednesday.

Though we’re glad to see that the IFC has finally admitted fault, the new announcement was a disappointment in many ways. At the project level in Honduras, the new announcement does little to build trust among the affected communities:

• They continue to be at very real risk of further violence and forced eviction.
• They want to be fully involved and consulted in any action plan – not relegated to being the subject of a ‘baseline survey’ that frankly should have been carried out six years ago.
• The IFC says nothing about bringing the project into compliance with IFC’s performance standards.
•  It’s also no use promising to withhold the loan until the IFC’s conditions are met as those conditions are not sufficient. The communities want to see no further money going to Dinant until those behind the murders have been brought to justice and there is a just resolution to the land conflict in the Aguan Valley.
• The IFC’s reliance on its client to improve the security situation is hardly credible when it is the client itself that is implicated in the abuses.

At the more systemic level, the IFC’s promise to ‘reflect’ on the causes of its failures is not enough:

• We would like to see a full investigation of the institutional culture that led to staff feeling afraid to ‘make waves’, and feeling unsupported by senior management to raise concerns.
• We’d also like to see those responsible for the errors in this case held responsible.
• Whether carried out by the IEG or the CAO, such an investigation would also propose concrete steps to address systemic failures, and would be open and accountable to the public.
• Finally, this case also raises fundamental questions about the way the institution deals with risk.

The CAO makes specific warnings on this issue, saying:

• “At a time when the Bank Group is being challenged to expand its risk appetite, CAO finds it crucial to also invest in structures that provide management with assurance that E&S risk is being rationally identified and managed.”
• “As indicated by the findings of this audit, a failure to do this can lead the institution to take uninformed risks with serious consequences for people, the environment and/or the Bank Group’s reputation.”
• This case isn’t going to go away. As you know, later this year the CAO will publish yet another audit, this time looking into the IFC’s support to Dinant through the financial intermediary, FICOHSA. Dinant is FICOHSA’s biggest client. We fully expect this will confirm many of the concerns civil society have raised with you and the Bank’s President about financial intermediary lending.
• We would be grateful if you could outline the steps you will be taking at the Board to ensure civil society’s concerns are addressed, both at the project level and at the wider institutional level.

Gwen Hines’s response:

• We had a long and difficult Board meeting on this last Thursday. Everybody was clear that the response was not sufficient and the IFC’s revised announcement is more  specific about the additional measures agreed, but doesn’t cover everything.  The case was taken very seriously. Jin Yong Cai (IFC Executive Vice President and CEO) was online in the middle of the night via VC. He and I will meet to follow this up.
• The action plan will be revised in full consultation with CAO and it will come back to the Board – we’ve been promised a date to come back to the Board and we will let you know what that date is. The action plan will be public, I can’t promise the lessons learned will be made public. The progress against this revised action plan will be scrutinised by the Board and no money will be released till we’re satisfied. The Board agreed the earlier action plan was not sufficient. We need to know who’s responsible for doing what and there must be credibility of commitments.
• On the systemic issues there will not just be a ‘reflection’ by the IFC, there will be a more serious ‘lessons learned’ and systemic issues that will come back to the Board. Again we will tell you the date for that.
• We are trying not to treat this as an isolated case, but to make it more about systemic issues. Particularly as we intend to do more – both as the Bank and DFID – in fragile and conflict states. How do we make sure we have the right business model to do this? This kind of case is not a reason to stay away from F&C states. We need to manage those investments better.
• The Board also talked about what’s been done since the loan was approved to tighten up policies. It would be classified high risk under new policies.
• New head of E&S unit – Mr Landy has been asked to look very closely at role of that unit including how it interacts with rest of the institution and also been asked to look at issue of financial intermediaries etc.
• Beyond the Environmental Screening unit, it’s about more staff accountability, revised incentive structures. On this and FIs it’s not just about having good policies it’s about supervision, how staff act. This is something the UK has always pushed on.

NGO points:

• The IFC response suggests that if  the investment had been after 2012 then problems would have been picked up. The CAO audit was clear that the procedures in place should have worked. So changing the policies would have not had an impact. It is all about institutional culture. A human rights assessment was never completed.
• How can you trust the IFC when they doctor information they gave to you? We want an independent body such as the CAO to work on lessons that should be learned. The farming communities who have directly suffered human rights abuses should be involved.
• What criteria were used by the UK to support the IFC decision to give the money to Dinant which is owned by Miguel Facusse? We do not understand how this money was given to this company at this time. There should never be any money given to this company again. The issues around this project were already known and were not new information. There was a coup in Honduras which made it an international pariah.
• How can UNGP be integrated into this approach? Have very strong GPs on state duty to protect. What work is the Bank doing, and particularly IFC in integrating HR and UNGP into its approach? How will UN Ruggie principles be integrated to address risk? What will the bank do on this in due diligence? How will staff use on the ground? Performance standards are only a voluntary obligation for companies.

Gwen Hines’s response:

• We absolutely agree that it is not the case that post-2012 everything would have been fine. This is a management failure. It is management’s responsibility to show they are dealing with this. We will be scrutinising this carefully and if we are not happy with the result we will make this clear.
• I wasn’t there in 2009 and can’t comment on the criteria used. The Board works on consensus. People are asking why wasn’t it picked up as a high risk project? It would be now. Everyone accepts this one went wrong, particularly on the implementation phase. UK policy is that the IFC should be involved in high risk investments. Every project is on a case by case basis, we ask does development benefit justify the risk? Everybody accepts this project went wrong and we must not allow this kind of thing to happen again. There won’t be further disbursement. I cannot envisage IFC bringing another investment to the Board right now for the company.
• We have the option to walk away. The IFC could write off the $15 million but the feeling is at the moment that we need to stay in and engage – can it be brought into compliance? Will come back to the Board very regularly.
• As the Board we have encouraged Bank staff to be honest about risks in documentation. We have given clear instructions to be honest about risk and the mitigation of these risks. And also residual risk if they cannot be mitigated. Essentially this is about implementation.
• UKDel staff go through every project. Six advisers shared between UKDels IMF and the Bank – team delegated responsibility for different regions – who talk to shareholders, staff and areas of concern. Gwen or Alternate then takes view on project. In countries where DFID has programmes we get additional info. But DFID only works in 26 countries. As the Board we need to hold staff to account for compliance with agreed policies, and failures on this. In countries where we don’t have a programme we consult FCO.
• The World Bank Group (WBG) has clear  Articles of Agreement. The only criteria we can take into account are economic. Over time we have managed to broaden this out.
• Currently, IFC staff work with private sector and IBRD/IDA staff work with governments. With “One WBG” it can’t just be an IFC investment. All staff have to be involved to make sure we look at the overall investment. If IFC is doing investment it might just look at wattage, but World Bank objective could be how energy is used. Everyone recognises that stopping at the deal level is a problem. Should focus on more upstream, strategic work. IFC has its performance standards which it must apply in full. In the case of Dinant it did not.

DFID:

• The systems did not flag this project as high risk and sensitive. This is clearly problematic. We look at every project, but not in detail. Our first question is whether the systems are right.I take your point but the risk that we’re talking about – the best place to address that will be in programme design. These are fallible systems. Need to do project on the ground.
• We consult regularly with FCO colleagues where we don’t have enough information. Risks were not discussed enough by the Board. But the Board is not the Bank management.

2) Inclusion of disabled people

NGO points:

• UN and WHO reports found 1 billion disabled in the world of whom the majority are poor. But receives little attention. Majority of countries (and Bank shareholders) have ratified the UN Convention on the Rights of Persons with Disabilities (CRPD). Post 2015 process had acknowledged importance of not “leaving anyone behind”. Not enough on the cost of excluding disabled people. Not right to only look at cost of inclusion.

• The safeguards Board review last July included disabled people. Is this the only part of the Bank review that includes disability?

• What is being done to include disabled people in country diagnostics?

• What can be done to use countries with positive experiences on disability such as Bangladesh or the Philippines to pilot this?

• It would be a mistake to not included disabled people in the guidance note. Important not to think only of the costs of inclusion, but must think of the counterfactual – the costs of exclusion of the disabled.

Gwen Hines’s response:

• Agree on using positive examples, country pilots would be a good idea. It is important to not work in silos when it comes to addressing the needs of disabled persons. We have pushed for gender and inclusion.

• This needs to be taken into account in the upstream of Country Diagnostics by doing a serious poverty assessment. And then in the programmes there should be disaggregated targets and reporting data. For example on education you would track which regions are lagging behind on enrolment and completion rates. Important to watch how PUSS develops DFID policy which will inform UKDel position.

• The issue is often perceived as expensive. Climate adaptation and renewable energy was seen as an extra cost. There is a big shift in how technology makes this more cost effective and easier to do. There are new innovations out there. The issue is how to take them to scale and make them cost effective.

• There are no guidance notes on systemic country diagnostics yet, but coming soon.

• An update on the safeguards is expected in the next couple of months.

3) Climate and energy

NGO points:

• We welcome the World Bank’s July 2013 energy directions paper for its emphasis on climate change and energy access. It’s good to see climate change high on the World Bank agenda but there is contradiction between climate change rhetoric and increasing spend on fossil fuel, for example exploration. There are also issues around large centralised projects.

• Good to see the UK supports US and World Bank on coal announcement. But oil and gas still concerning. Can we get clarification on what “exceptional” circumstances mean? Not enough information on this in last 4 years. For example recently the US voted against funding a Saudi Arabian company because it included coal plants in its project.

• Great UK supports sustainable energy for all (SE4ALL) on mitigation and access. But less focus on access e.g. de-centralised and off grid not high enough on agenda. It is great there are renewable energy access projects but mismatch with broader policy. There is not enough information on energy poverty. All projects should be rigorous on this. It is important to measure results to ensure there are meaningful outcomes.

• What is the UK approach for UN secretary general Ban Ki Moon’s climate change summit in September 2014? What thinking has the UK done in terms of increasing trust and ambition?

• What happening within World Bank in terms of commitments. For example in the area of de-centralised off grid and reducing fossil fuels. If there is no progress on this in 2014 it will weaken potential for 2015 climate deal.

Gwen Hines’s response:

• Access to energy and climate change are top priorities. Rachel Kyte’s new role as Vice President and Special Envoy for Climate Change is a leadership and operational role. She is working on how to shift WB globally on climate. There is still discussion on how her role will work. It will cover both climate and disaster risk reduction.

• It will take time to implement the energy directions paper. We will do everything in that paper apart from coal-fired power – off-grid, renewables and Hydro are part of this. There is a commitment to do off-grid but the challenge is to do all now because of urgency.

NGO points:

• Will big hydro be tested on poverty reduction?

Gwen Hines’s response:

• We want targets to be more outcome driven. We want more monitoring, not just wattage. There will be joint WBG business plans to ensure all areas are covered. This includes tracking access and who gets access. There will be pilot country business plans and sector-based joint WBG business plans, for example in the energy and extractives sectors.

• All global practices will have specific action plans but currently lack of clarity until staff are in post. There will be a new corporate score card by the spring meetings.

• World Bank President Jim Kim and UN secretary general Ban Ki Moon are working closely, for example on sustainable energy for all (SE4ALL).

• The UK coal announcement by Secretary of State Ed Davey is cross Whitehall British government position.

DFID:

• If there are exceptional circumstances it will be taken very seriously, the case will be taken up by Ministers, there are no specific criteria developed. Ministers have no appetite to discuss hypothetical situations.

Gwen Hines’s response:

• A case like Kosovo will go to ministers. We have not seen any papers yet, there is no board date, but if we are not happy with papers we will ask for more info. I will take my instruction on this project from ministers.

NGO points:

• We strongly propose a climate safeguard to apply across the WBG. What do mean by a stretch target on climate? And does mainstreaming mean an overall emissions reduction across portfolios?

Gwen Hines’s response:

• We have not said there should be a climate safeguard, but cross cutting. Mainstreaming means upstreaming, if it works it’s more effective, not just do no harm. As the UK we want to get away from tick box approach to do no harm. We have to think about how to incentivise people to make a positive impact, difficult to write a safeguard to reflect this

DFID:

• A tick box approach could be used to side-line the climate issue

4) IDA targets

Fragile and conflict states

NGO points:

• Concerns about how to ensure the right projects and that they are done in the right way. In terms of phasing there is a massive increase in funding to fragile and conflict states IDA before a new structure in place.

• Has the Board discussed how to define fragility and when will it report on this?

• The Dinant case: shows the tension between new strategic priorities and client strategic priorities. How will Board decide to not to fund something?

• For the IDA results management system country strategies could include fragility but projects might not when it comes to implementation. And so the commitment to address risk weakens by the time it reaches ground level. How will projects deliver on this?

• Do you know the timing of the fragility review?

Gwen Hines’s response:

• I do not have information on when the fragility review will be finished.

• Phasing: The new structure in place by 1 July 2014. IDA 17 starts just after that. There is a fragile states hub in Nairobi. $400 million in running costs is being cut from the World Bank budget overall as part of an efficiency drive. Based on the IEG evaluation, we want to protect funds for work in FCS, including staff training. There should be staff incentives for FCS. It should be a core competency for all staff. We need the best staff in the toughest places.

• In terms of saying “No” to clients. This is point of strategic country diagnostics. You have a stronger evidence base in the short and long-term. There needs to be sufficient country ownership to make it happen. You can’t force countries to do things. The Bank’s comparative advantage is strategic dialogue, fewer interventions in fewer places. Looking at the business model, the hub in Nairobi has been successful.

• There is lots of discussion on inequality and jobs in middle income countries (MIC).

• There is more thinking at the regional level. World Bank President Jim Kim and UN secretary general Ban Ki Moon’s visit to the Great Lakes supported this. Overall on FCS I think the Bank has the right approach, we just need to keep pushing on it, including in regions

DFID:

• We are pleased with outcome and risks in terms of increased resources. There are issues about measurement and how to get alignment between projects and new goals (for example strategic country diagnostics). There are more disaggregated data on fragility, they will go to project level.

Indicators on reproductive health

NGO points:

• Important to include specific ones on reproductive health in the results management system. We want to see harmonisation across the Bank. What happens after MDGs?

DFID:

• The results management system are signals to change Bank behaviours. The indicators for IDA 17 will be applied to projects that were designed during IDA 15. The important thing is to look at existing projects because IDA 17 designed-projects will not be implemented for a few years’ time. We have a commitment placeholder in the indicators to measure how well projects align with the overall portfolio and the Bank’s goals – we need to work would a system to measure if projects aligned with the goals.

• We have discussed with IEG staff who said that in terms of flexibility the Bank has got better but in terms of project quality and design there is still room for improvement. This is a Bank wide problem, not just IDA; now the corporate scorecard will have some disaggregated data on FCS.

• Reproductive health is in Tier 1 of the corporate scorecard but not disaggregated in Tier 2. We would love to have it, it was debated, but there were differences of opinions, so we didn’t get it. We compromised on this. In terms of reporting year on year there is promise to get this yearly data.

Gwen Hines’s response:

• The IEG evaluation included disaggregated data for performance of projects in FCS compared to others.

• The challenge for the corporate scorecard is which indicators do we pick? How many can you track? There is already a long list of indicators. If you can agree on 10 then send to me. This affects IFC, IBRD etc, then the global practices, and then to countries. This means on health we felt better to have aggregated data rather than pick one over another. You should talk to DFID’s policy division as the technical lead who advises us on specific reproductive health indicators for the corporate scorecard if you think they are wrong.

• Jim Kim is also setting up a presidential delivery unit which will each year track some key indicators to focus the Bank and especially to make sure we are stopping from going in the wrong direction

NGO points:

• Another way is to test the indicators to see if they would highlight problems e.g. Dinant case in Honduras. How to shift behaviour through incentives?

Gwen Hines’s response:

• The performance management system is being assessed and should address this. Not sure when the fragility review will take place.

5) Updates

Nigeria (background)

• Forced evictions in Nigeria in February 2013 affecting 2,000 households (9,000 people). A year later nothing has happened. Safeguards were not followed. The World Bank has agreed to tell Nigeria to provide retroactive resettlement plan. But Amnesty has tracked this and there are massive flaws. There is no transparency so we can’t judge what is happening. The RAP should be made public as soon as possible. Nigeria has until April to compensate communities. Amnesty’s partner filed a complaint with the Inspection Panel who has said the case fits “early resolution” criteria.

Gwen Hines’s response:

We will talk to the country team and get back to you. Tom Duggan at the UK Delegation is the adviser on this to the team.

Kenya (background)

• The Sengwer indigenous people are currently being evicted from forests in the in Cherangany hills. The Kenyan high court ruled against evictions and human rights bodies say should not happen. The Kenyan Forestry Service are still carrying then out at this very moment. The World Bank is doing capacity building with the Kenyan Forestry Service. We are asking the World Bank Kenya country office what they will do but so far their response has been disappointing. An Inspection Panel report is due in a few weeks. The Bank has been funding this project since 2006 and is looking at a future REDD+ project in the area. The Bank has a lot of influence and the Board should use this to stop the evictions. This case highlights issues around how the Bank should deal with these types of situations.

• This case demonstrates the UN human rights mechanism are capable of monitoring and making declarations on these cases. But no there is no system for a Bank response. How bring human rights concerns on a Bank project are dealt with quickly?

Gwen Hines’s response:

• Will follow up. Your ask is for action on the ground. The Bank will determine how best to act on this. Something could be being negotiated behind the scenes already that we’re not aware of.

DFID:

• These are valid questions for the safeguards review.

Mongolia & Guinea (background)

NGO points:

There are impacts on herders being relocated. Prior to ESIA being released. NGOs said it was incomplete. Nothing on operational plans. The mine will use a lot of water which will impact on herders. Rio Tinto is seen as a strategic partner. We want report released. CAO investigation which is upcoming on Rio Tinto affecting new areas.

Gwen Hines’s response:

• My advisor Simon Bor is meeting with the Bank to get an update what is happening this week. We will get back to you. Speak to Tom Duggan about Simandou.

Inga 3 hydro project (background)

• Concern about environment and social study which will only look at punitive impacts. It will only look at cumulative impact of first stage (phase A) and not at the long term impact.

• Will US will veto these kind of projects with new appropriations bill?

Global Infrastructure Facility (background)

• When will get information on this? When civil society will be part of the discussion?

Gwen Hines’s response:

• The Global Infrastructure Facility is now the Global Infrastructure Finance Facility. It is an intention of the World Bank Group to respond to the clear demand of G8 and G20 and  client countries to find new ways to fund infrastructure and leverage money from private sector, for example sovereign wealth funds and private equity. Richard Manning and Paul Colllier involved in thinking on global picture.

• No project programme design at this stage. Everyone keen on the idea but details still to be worked out. Including if anyone will put money on the table. $1.3 trillion pa funding gap. There was a discussion on creating a new asset class at the annual meetings. Nothing on funding mechanisms etc yet. Board update due in February.

DFID:

• This will be led by MICs and emerging markets. We are interested, but they are pushing. As civil society you need to look at your strategy to influence, for example focus on MIC and emerging economics like India.

Gwen Hines’s response:

• Various ways on how to design it, if a financial intermediary fund or not, and technical design problems – before getting into safeguards etc. DFID is doing its own thinking on infrastructure. There are several scenarios about how it works. If the MICs are the ones who put the money on the table then it might operate like the Global Fund on AIDS, TB and Malaria (ie the Bank does financial management, but separate implementation and governance structure) Who does the project preparation to make them bankable? We will share contact details with Priya Basu at the World Bank for more information (pbasu@worldbank.org).

Doing Business (background)

NGO points:

• President Kim promised a response on Doing Business. Clear statement needed on this and on the process for the methodological review.

Gwen Hines’s response:

• We have Board update on process and substance 30 January, this is under Kaushik Basu with Augusto Lopez Claros. Speak to Adrian Stone in DFID because he is preparing cross-Whitehall position. There is a post 2015 link, to find a good way to encourage and track increasing  competitiveness.

DFID:

• There is a desire to review this. The question is over timing. How make changes to preserve data? Make immediate or phase?

Benchmarking the Business of Agriculture (background)

NGO points:

• When will we see the poverty impact of this? There are 4 pilot projects to check if the indicators are working. Consultation has been limited to a few international CSOs. But broader outreach needed to farmers group on this.

Gwen Hines’s response:

• We will follow up on the 4 pilot projects.