IFI governance


UK civil society meeting with UK World Bank Executive Director Melanie Robinson

22 September 2017

15 December 2017 | Minutes


Melanie Robinson, UK ED to World Bank

Jennifer Stockill, Advisor to UK ED to World Bank

Mark Collins, DFID

Ruth Turner, DFID

Luiz Vieira, Bretton Woods Project (BWP)

Jon Sward, Bretton Woods Project (BWP)

Helena Wright, E3G

Mariana Paoli, Christian Aid

Matti Kohonen, Christian Aid

Graham Gordon, CAFOD

Joanna Khinmaung-Moore, Tearfund

Petra Kjell, BIC Europe

Natasha Kennedy, Sightsavers


1. Introduction:

BWP: Invited UK ED to discuss the focus/priorities of the UK at the upcoming World Bank and IMF Annual Meetings, in Washington DC, 13-15 October.

UKED: We will be engaged with a number of things:

  • Working with the Bank to look at the response to the Caribbean hurricanes, and look at countries’ risk preparedness. This includes ensuring that they have pre-arranged disaster finance in place, including climate insurance. Some countries were able to benefit from insurance under CCRIF from the recent hurricanes. But there is a difference between poor and rich nations in terms of what solutions are appropriate.
  • UK Secretary of State will attend human capital summit, and give a speech on nutrition, thereby launching the UK’s Global Nutrition Position Paper, and also touching on issues such as disability, modern slavery and gender – which are all areas on which the UK has led.
  • [In terms of the Bank, we continue to make a case to them and other donors, regarding the need to focus on the poorest countries, leveraging the private sector, making the Bank more ‘agile’ and financially efficient. The IFC will also be implementing its reforms to work in Fragile and Conflict-affected States (FCS).
  • UK team will be meeting with a range of countries and attending events.


2. Multi-purpose Programmatic Approach (MPA)

BWP: We understand that there are areas where the Bank can improve efficiency. We were concerned about MPA – which would allow the board to approve a whole ‘programme’ of projects rather than approving projects individually – as when we first heard about it in July, there was apparently a lack of opportunity for CSOs to comment before the vote. It seems, particularly in light of the Bank’s shift towards leveraging private investment to support development, that this is a time that requires more Board oversight, not less. We are glad that – after we raised concerns – we were able to provide input, and that two things were decided:

  1. That the timeline for project approvals will be made public well in advance, so that CSOs have an opportunity to comment and raise specific concerns on proposals;
  2. The IPN [the Bank’s Inspection Panel] will retain jurisdiction over programme oversight.

However, given past concerns raised by IEG [the Bank’s Independent Evaluation Group] about mis-categorisation of projects, I wanted to check with you what projects will be go back to the Board for approval: whether this is the case for both Category A & B projects.

UKED: I think that you’re right that the Bank could be more efficient and agile. One of the weaknesses of the Bank is that it has a hard time identifying risk as a project evolves. DFID has been developing ‘agile’ learning; for the Bank this is a real limitation, and we are only at the start of the process. You don’t always know at entry to a project all the things that can go wrong, and this is a problem in terms of implementing safeguards. From our perspective, the agile approach is something that can enable the Bank to better understand and manage risks, so it’s quite positive. It’s not about diluting safeguards. We need a new equilibrium, if you have better agility and understanding of risk, you have better safeguards.

Agreed action: Need to check what has been decided regarding whether both A&B rated projects will come before the board under MPA.

BWP: agility should be rooted in a strong culture of learning and adaptation. It’s hard to see how this is congruent with incentives for Bank staff to bring in private investment.

UKED: I couldn’t agree more; it will take ten years for the Bank to truly become ‘agile’ and embrace adaptive learning, and MPA is only one part of this.


3. Environment, climate and energy

CAFOD: Last time we spoke in April, we mentioned the ‘Trump effect’ on climate and energy policy – not sure we’ve learned much more since then about what the ultimate effect of the change in leadership, but we have seen US join with other countries in a new push for coal. Others including the UK have retained a commitment to the SDGs and phasing out fossil fuels. From the perspective of CAFOD and other faith-based charities, our focus on climate and energy involves meeting the commitments set out in the Paris Agreement and related SDG targets.

Christian Aid: I wanted to call your attention to the Big Shift campaign, a global campaign that is focused on getting public development banks (PDBs) in line with the Paris Agreement. We are calling for PDBs to phase out fossil fuel investments by 2020; commit to funding renewables, and no backsliding on commitments (following Paris Agreement, PDB funding for fossil fuels exploration increased). We are calling for PDBs to disclose the carbon footprint of their investments in terms of emissions. We want them to provide concrete evidence that they are shifting their activities in line with the Paris Agreement.

E3G: In terms of carbon disclosure, the World Bank is behind other PDBs, and even behind the ‘best practice’ of the private sector. It is not disclosing carbon emissions estimates for its investments. We would appreciate an update on this. I also wanted to ask whether there has been any progress in terms of streamlining climate change targets into the Bank’s country partnership frameworks (CPFs)? For example, the Asian Development Bank recently committed to this, through its “Operational Framework on Climate Change” document.

UKED:  Yes – the US position remains unclear. But we have had very clear messages from WB President Kim and other Bank stakeholders that we are going to maintain our Climate Change Action Plan, which includes 28 per cent of our portfolio being in climate-related investments by 2020 and helping client countries realize affordable alternatives to coal power.

  • Renewables: we have been working with the Bank and the IFC to make progress. We are encouraged by the recent roll-out of solar in Zambia, and I think we are about to see big growth in Sub-Saharan Africa. In terms of non-renewables, there are a number of EDs including the UK who always push hard to understand why we are funding gas or other fossil fuels projects, to see if these investments can be justified as part of a transition away from fossil fuels. In cases where we don’t feel that they are justified, we have voted against these projects, or abstained.
  • Country partnerships: as each CPF is created, a group of chairs, including the UK, reflects on whether these countries are making progress towards climate goals. In terms of the ADB’s operational framework, we’ll have a look at that, and compare it to what’s in the Bank’s Action Plan.
  • Disclosure: I’ll take that point away and have a think about it. I have also noted that the CAFOD petition to me has 21,000 signatures, but I haven’t had a chance to look in detail at the ‘asks’ it contains.

Christian Aid: Can you suggest any levers, in terms of where CSOs might be able to get some traction as part of the Big Shift campaign?

UKED: There are a number of countries that are on board who are supportive of increasing the Bank’s level of ambition on climate change. However, fossil fuel producers and other borrowers want to have the option to develop fossil fuels to support their development. A lot of your sister organisations in Washington DC are doing very valuable work.

BIC Europe: How is the Bank working to close the policy loopholes in terms of indirect lending? Recent research that BIC has contributed to shows that development policy loans (DPLs) have contained ‘prior conditions’ that actually support new fossil fuel investment. We’ve also seen that the IFC’s funding of financial intermediaries (FIs) has resulted in new investments in fossil fuels – what is the Bank doing to try to close these loopholes?

UKED: In terms of IFC and FIs, there is no loophole. You can’t hold the IFC responsible for everything that FIs do – you can only hold it responsible for what its specific funds are used for. So, I’ve been a little disappointed with some of the research on this, because I don’t think this link is credible. In terms of DPLs, what we can do is try to put stronger ‘prior conditions’ in place that incentivise countries to invest in renewables, for example.

CAFOD: In terms of energy access, how is the Bank looking to meet the energy side of SDG7? We’ve been tracking the Bank’s investments in energy, and only 10 per cent of them are related to the development of off-grid solutions to areas without access. What is the Bank doing in terms of off-grid access?

TearFund: Adding to this, we’ve seen that improving energy access is a huge opportunity to improve job creation, livelihoods, and has health and education co-benefits – and that this is a very cost-effective way to achieve these improvements. What are your views on this?

UKED: We are with you, and this is something that we have been pushing in the Bank. We are very interested in research on off-grid solutions; and the IFC has been very focused on solar, although these have typically been large projects. I’ve passed them some research by McKinsey and others that demonstrates the cost-effectiveness of investing in off-grid energy access. If there is further research that you have done, I would be interested in seeing it. I think in general it’s easier for the Bank to do bigger projects than invest in off-grid solutions, so it’s a question of how we put all the different actors together to make it work.

CAFOD: There is a link to DPLs here – our partners in Kenya are currently mapping out options for off-grid solutions, and there is some support for this at the national level. At the same time, they are sitting on oil, which they see as black gold, so it’s difficult to discourage policymakers from wanting to invest in that.

BIC Europe: In terms of DPLs, BIC has been looking at how loopholes in terms of energy and policy provide incentives towards fossil fuels, rather than renewables. We have done this for a handful of countries and are continuing the research. However, it’s very hard to track where the funding goes, and there are no environmental and social safeguards applied. When the new ESF [Environment and Social Framework] safeguards consultation started in 2012, civil society asked for DPLs to be included in the framework, but there was pushback on this from the Bank. Now that the UK is the co-chair of CODE [the Bank’s Committee on Development Effectiveness], it might be a good opportunity to push for safeguards for DPLs. Is this something that you are planning to do?

UKED: I agree with the point about ‘prior conditions’, including incentives for renewables. DPLs are a powerful instrument for the Bank to drive through policy reforms. But it is budget support, and fungible – that’s the nature of the instrument. But what we can do is try to drive forward conditions in areas related to climate.

Implementing the ESF is hard and important, so I think we need to focus on getting that right before focusing on other areas. However, I don’t think the approach to DPLs needs to change, it’s based on the instrument. Ultimately, what we want the new ESF to achieve is to enhance borrowers’ systems; it’s one thing to make the Bank’s safeguards good, but ultimately what we want are governments to value these safeguards.


4. Safeguards

Sightsavers: I just wanted to ask if there was any update on the expected publication of the Tier 1 Guidance Notes, which will guide implementation of the new ESF?

UKED: we are expecting the drafts in late October. As these are guidance notes on best practice, these are not something that the Board approves, but we’ll certainly be taking a look at them once they become available.


5. Tax

Christian Aid: What progress has the Bank made on tax cooperation in the past year? In terms of funding the SDGs, tax reform is vital. We also need to tackle illicit financial flows. We know that there has been a Board update on IEG report on the Bank’s approach to tax [which shows that it failed to address equity issues, and was mainly focused on creating a good business environment]. We also think that the Bank’s stated goals on tax reform fall a bit short, as it still tends to emphasise VAT reform rather than expanding and improving efficiency of corporate taxation and progressive income taxation. There is a target of raising 15 per cent tax as a share of GDP based on IMF research on the tipping point where economic growth is improved rather than looking at adequately financing public services such as health, education, water and sanitation through public resources. Also, we note that in the Bank’s latest ease of Doing Business Report, a high corporate tax rate is still seen as a hindrance of doing business. We would want this part of indicator to eventually be replaced with a tax transparency indicator. We are also looking forward to details of the IFC’s Offshore Financial Centres policy and wider tax risk assessment and tax transparency efforts, which we are expecting around Annuals when the IFC Board Meeting takes place. We are hoping to see a bit more from that, than just repeating what was announced at the Tax and SDG summit in February hosted by the UN under the joint Platform for Collaboration on Tax.

UKED: This is an area the UK has championed – we have pushed the Bank to work on domestic resource mobilization (DRM). Is 15 per cent the right target? I think it’s a good start. A number of countries we are working with are currently below 10 per cent. Whatever the case, we are keen to make sure that a progressive tax system is involved. I was not aware of this issue with the Doing Business indicator, so I’ll have a look at that. In terms of the IFC, I think that they are on their way to developing an approach that takes into account the impact of their investments on DRM.

Christian Aid: For the IFC, there is a question of what metrics are appropriate, for ongoing risk calculations as part of the ‘agile’ approach. At the moment, we just have the Global Forum indicator – we are looking for the IFC to go beyond this in their new approach.


6. Maximising Finance for Development (formerly the ‘cascade approach’)/PPPs:

BWP: While CSOs understand that private sector can play a role in development, they participate with the goal of generating profit.

  • Link with tax – recent IEG report found Bank’s work on tax focused on creating a better investment climate, rather than equity. UNCTAD estimates developing countries lose $300 billion every year in development finance through evaded tax.
  • De-risking: who takes on risk under the ‘cascade’? Presumably it is states. Bank’s own research shows that private investment in infrastructure typically more costly than public investment – so what are advantages, and for whom?

We have two ‘asks’ with respect to PPPs:

  1. Do you support a balance sheet requirement for PPPs (i.e. that risks associated with these agreements must be included in state debt)?
  2. To encourage transparency, will the Bank require its clients to make PPP contracts public?

UKED: We have to be thoughtful about how we use scarce public finance – it there are opportunities, we should use private finance. However, in many cases it’s not clear cut whether public or private solutions are better. The Bank is not unsophisticated in the way it deals with private finance – from the starting point to the end user. There are a lot of different PPP clauses out there, but we need to know more about which models really work.

  • Balance sheet requirement: I think these are questions to have with individual countries. I don’t think blanket indicators are the best tool.
  • Disclosure of contracts: there is a question of whether the Bank can force countries to disclose other contracts that don’t involve the Bank.


7. AOB:

BWP: When the Bank approved a $400 million loan to Azerbaijan in December for construction of the Trans-Anatolian pipeline, the chair’s summary noted that EDs [executive directors] had expressed concern that Azerbaijan retain its membership in the Extractive Industries Transparency Initiative (EITI). In March, EITI suspended Azerbaijan over failure to address corrective measures related to civil society participation. Azerbaijan subsequently quit EITI. What is the UK’s position on this, given that the Bank is a supporter on EITI.

UKED: We would obviously welcome countries, including Azerbaijan, joining EITI. What we are looking for is that they are implementing steps that are consistent with the EITI guidelines.

On the note of CSO engagement, you should contact UK-based staff for UK policy positions, and Washington-based staff for specific Bank projects or UK positions at the Board. We would potentially welcome the opportunity to have quarterly meetings with civil society that are Chatham House rules, in addition to our current meetings.

End of meeting