IFI governance


World Bank’s risk rating record for policy lending slammed by internal evaluator

9 February 2016

A July report by the World Bank’s Independent Evaluation Group (IEG) criticised the Bank’s track record in its risk rating of development policy loans (DPL, see Update 82), finding indications of “underreporting of potential risks”. The IEG found that the Bank “identified environmental and social risks just over half as often as IEG’s experts”. It also found that the identification of risks was inconsistent, noting that: “Policies that were identified as having risks in some operations were not identified as risky in other cases.”

Moreover, the IEG found that “Bank policy and guidance are vague, and do not clearly define key concepts.” For example, the IEG noted that under the Bank’s operational policy for DPL, staff should assess what “likely significant effects” a policy action will have, but that “there is no formal definition of this concept” and interviews with Bank staff revealed that its meaning “is not well understood.” It also found that guidance and training materials “vary in quality, usability and relevance.”

The IEG also noted that “the pressure to deliver operations quickly, combined with the lack of a formal role for environmental and social specialists, provide incentives for task teams to deprioritise management of environmental and social risks” in DPLs. Furthermore, the IEG noted that there are no requirements to report on environmental and social risks or their mitigation in DPL, giving “little incentive for task teams to monitor or evaluate them.”

The report was not made publicly available until mid September, after the release of the second draft of the Bank’s proposed new social and environmental framework, which is due to replace the current safeguards (see Observer Winter 2016). According to Korinna Horta, of German NGO Urgewald, it is unfortunate that DPL is excluded from the review which only looks at the Bank’s investment lending: “The World Bank’s persistence in exempting DPLs from safeguard coverage ignores the recommendations of its own evaluation department and of its Inspection Panel. It also defies all logic of why the Bank would exclude the growing portfolio of DPL loans which often deal with highly sensitive sectors such as forests and mining.”