| A brief and preliminary assessment of the IFC's new Safeguard Policy framework |
|
Introduction On 21 February, 2006 the Board of the World Bank Group approved the replacement of 10 existing safeguard policies for the International Finance Corporation (IFC) with a new IFC Policy on Social and Environmental Sustainability (Sustainability Policy) and 8 new Performance Standards (PS). These standards cover Social and Environmental Assessment and Management System (PS1), Labour and Working Conditions (PS2), Pollution Prevention and Abatement (PS3), Community Health, Safety and Security (PS4), Land Acquisition and Involuntary Resettlement (PS5), Biodiversity Conservation (PS6), Indigenous Peoples (PS7) and Cultural Heritage (PS8). The package also includes a revised set of Environmental and Social Review Procedures (ESRP) to be followed by IFC staff in project preparation, approval and oversight, plus a set of non-binding best practice Guidance Notes (GN) to advise IFC staff and private sector clients on how to effectively implement each performance standard, plus an IFC Exclusion List that stipulates the types of projects that IFC does not finance.[1] This new IFC safeguard package came into force on 1, May 2006.
Problems with the process for developing and adopting the IFC standards The radical overhaul of the IFC’s safeguard policy framework was undertaken in a relatively compressed time scale of only 20 months. Originally, the IFC had sought to push these reforms through in just 12 months, but had to extend the process due to heavy criticism from civil society organisations. Nevertheless, most observers consider that the whole process was unduly rushed and consultations were defective, not least because face-to-face regional consultations with indigenous peoples over PS7 never took place. Repeated calls for the IFC process to raise the bar From the outset of the process (and earlier through the IFC’s safeguard policy review in 2003) NGOs and indigenous and community organisations had pressed the World Bank to ensure that the whole process would result in stronger IFC policies and minimum standards consistent with international standards on human rights, environment, sustainable development and public disclosure of information. Assurances were also sought that existing safeguards would not be weakened and that any new policies would, as a minimum, be compatible with standards operating in the public lending arms of the Bank (IBRD and IDA). A Mixed Bag Scrutiny of the final IFC Sustainability Policy and Performance Standards approved by the Bank’s Board in February shows that the whole review and policy revision process has resulted in a mixed bag of positive and negative outcomes.Additionally, the likely impact of these outcomes on the ground is obscured by ambiguous and unclear language and, therefore, IFC and its client’s practice will have be assessed before the real value of the new standards can be adequately judged. The purpose of this briefing is to note some potential gains achieved and list some of the remaining problems with the IFC’s new policies in relation to PS1, PS5, PS6 and PS7.[2] The final part of the briefing presents a number of recommendations to address the outstanding problems identified. At a later date, the FPP intends to prepare a more comprehensive guide to Performance Standard 7 and related Performance Standards which will aim to assist indigenous peoples to seek protection of their rights in IFC-financed projects and to monitor implementation of the new IFC standards. Some progress made: Some potentially positive elements in the new framework include, but are not limited to: q A clear requirement for comprehensive social assessment for all proposed IFC loans to the private sector (PS1) and for indigenous peoples informed participation in assessments (GN7)[3]. q In projects with potential “significant” adverse impacts, the IFC assures itself through its own investigation that there is broad community support” (BCS) for the project within affected communities before presenting the project for approval to the Bank’s Board.[4]This issue however is potentially compromised by the vagaries of the definition of BCS and the failure to require independent assessments of its existence or lack thereof. q In “high risk” projects located on or using resources within traditional and customary indigenous lands under use that may have “adverse impacts” on indigenous peoples’ livelihoods or cultural, spiritual or ceremonial use that define the identity and community of the indigenous peoples, a mandatory and higher standard is required of “good faith negotiation with affected communities...”. This process must include documentation and assessment regarding whether or not there is a “successful outcome” to such negotiation (PS1, PS7 and ESRP).[5] This safeguard thus indirectly establishes that the IFC will not fund projects where negotiations with affected indigenous peoples are not successfully concluded, presumably also in cases where indigenous peoples choose not to enter into negotiation at all, or if they reject a project at some stage in the negotiations with the client.[6] q Establishes that good faith negotiation must involve indigenous peoples’ representative bodies, be gender and generationally inclusive, be culturally appropriate and provide adequate time for indigenous peoples’ collective decision-making processes (PS7). q Any physical or economic displacement of indigenous peoples is subject to the same safeguard requiring successfully concluded good faith negotiation (PS5, PS7 and ESRP), which indirectly establishes that forced relocation of indigenous peoples cannot take place in IFC investments. q Where potential adverse impacts are anticipated, requirements for the client to establish a “culturally appropriate” and transparent project-level grievance mechanism accessible to affected communities (PS1). q A requirement for client compliance with core labour standards, including standards set out in the international ILO and UN conventions – which are explicitly referenced within PS3. q A requirement for the annual public release of implementation reports by the client q A policy objective to improve the living standards of displaced persons (PS5) Outstanding concerns: The scope and usefulness of several of these potentially positive elements are limited or undermined by gaps and weaknesses in the final policy and safeguard framework. For example, the IFC’s new social and environmental policies still contain vague language in places and there are several instances where existing standards have been weakened in contravention of public commitments made by the Bank. Though the IFC and governments reject criticisms that the policies and safeguards have been weakened, arguing that it is all a question of how the new package is interpreted, there are indeed several clear cases of dilution of standards on key issues (see below). In addition, critical issues and concerns about loopholes in the policies raised by both civil society (and even by some governments) have not been adequately addressed in the final policies (e.g., objective standards on human rights, no-go zones, independent verification of Broad Community Support etc etc). One serious problem with the new policy framework is that some critical safeguards such as Broad Community Support are not incorporated into the Performance Standards, but are confined to the IFC’s Sustainability Policy, its ESRP or the non-binding Guidance Notes. This means, for example, that there is no requirement on the client to directly address the issue of prior community agreement in the social and environmental assessment process. Another key problem is that the new safeguard policy package at the IFC is cumbersome because any understanding of the requirements under the new policies and Performance Standards requires a reading and cross-referencing of up to six separate documents (and up to seven where pollution abatement is involved): the IFC Sustainability Policy, the IFC Exclusion List, the revised IFC Information Disclosure Policy, the relevant Performance Standard(s), the IFC Environmental and Social Review Procedure (ESRP), and relevant Guidance Notes. Some unresolved gaps and weaknesses in several of the IFC’s policies and performance standards are listed below. IFC Policy on Social and Environmental Sustainability
PS1: Social and Environmental Assessment and Management Systems
PS5: Land Acquisition and Involuntary Resettlement (PS5)[12]
PS6: Biodiversity Conservation and Sustainable Natural Resource Management
PS7: Indigenous Peoples
Recommendations: It is recognised that the IFC’s new policies and Performance Standards (PPS) have now been adopted by the Board of the World Bank and that changes cannot be made to the policies themselves in the short term – at least not before the planned reviews in 18 month’s and three year’s time. It is therefore essential that indigenous peoples, where they so choose, are involved in these implementation reviews to ensure that lessons learned are taken on board by the IFC and its policies are eventually amended accordingly. Nonetheless, in the immediate future, several of the above shortcomings in the IFC’s new policies can still be partly addressed in the forthcoming and subsequent revisions of the IFC’s Guidance Notes (that do not need prior Board approval), which are supposed to provide best practice advice on the way to effectively implement the Performance Standards. To this end, in the short and medium-term it is recommended that: q Remaining ambiguities and gaps in the language of the PPS are addressed and clarified in subsequent updates of relevant Guidance Notes q The Guidance Note to PS1 must be updated as soon as is practicable to express a presumption in favour of disclosure of Draft Action Plans to affected communities and the Public and this disclosure standard must be made mandatory in any future revision of the PPS q The IFC should consider developing special guidelines on Human Rights Impacts Assessments, including assessments of potential impacts on the rights of indigenous peoples q Affected communities and civil society organisations tracking the IFC’s loan operations should, where they request, be actively involved in the 18 month implementation review and the 3 year independent review and the IFC should facilitate this involvement q Indigenous peoples, where they so choose, should participate in updating the Guidance Notes and ESRP in accordance with lessons learned in actual projects. Moreton-in-Marsh, 3rd May 2006 [1] During the revision of the IFC’s policies the FPP identified the IFC Exclusion List as a critical part of the IFC’s safeguard framework. However, the IFC did not share any draft IFC proposals for possible amendments or additions to the list as part of the public consultation process on its Safeguard Policy Update. In Email communications with the IFC, staff involved in the policy revision did indicate that “the current Exclusion List will be updated to reflect changes in the draft Performance Standards, new business lines, and any new issues that have come to light since it was last revised” (Email to FPP, 02/011/05). After the conclusion of the update process, however, it is still not clear if a revised version of the IFC Exclusion List is to be adopted (the current version on the IFC’s web pages appears to be an unaltered version of the list). [2] The potentially useful elements and remaining problems in the IFC’s new social and environmental policies summarised in this briefing do not constitute an exhaustive list. For further analysis of the IFC’s new Performance Standards, see, for example, Halifax Initiative (2006) Final Analysis of the IFC Performance Standards - forthcoming. [3] Guidance Note 6 to PS6 on Biodiversity Conservation and Sustainable Natural Resource Management notes that the baseline review and impact assessment on possible risks to biodiversity “should consider” the value of biodiversity to local communities, indigenous peoples and other resource dependent peoples (GN6: Annex A). The Guidance Note to PS7 cites the Convention on Biological Diversity’s voluntary guidelines as a best practice source of information for carrying out assessments of social and cultural impacts on indigenous peoples – see http://www.biodiv.org/doc/publications/akwe-brochure-en.pdf (GN7: para G11 referencing the Akwé: Kon Voluntary guidelines for the conduct of cultural, environmental and social impact assessments regarding developments proposed to take place on, or which are likely to impact on, sacred sites and on lands and waters traditionally occupied or used by indigenous and local communities). It is noteworthy that PS7 requires clients to “retain qualified and experienced external experts to assist in conducting the assessment” where adverse impacts on indigenous peoples and their “traditional or customary lands and natural resources” are anticipated (PS7: paras 11, 12 and 13, and GN7: para G23). [4] Determination of BCS involves an internal IFC assessment of the level of community support and dissent. Determination of BCS is to be carried out by the IFC’s “Transaction Leader” for the proposed loan operation. The Transaction Leader is assisted in this determination by the “Lead Specialist” assigned to oversee social and environmental issues relating to a proposed IFC project. He is also assisted by the Director of the IFC’s Environment and Social Department (CES) and the Investment Support Group of the CES known as CESIG. At the Investment Review Meeting (IRM) at the end of project appraisal, the “Director of the Industry Department” reviews the recommendation regarding whether or not BCS exists. The IFC assessment and decision on the level of Broad Community Support is set out in its Environmental and Social Review Summary (ESRS) that (after the clients prior agreement) is made publicly available in the World Bank’s Info Shop. [5] These high risk projects include projects that may be on, or commercially develop natural resources within, indigenous peoples’ “traditional or customary lands under use, and adverse impacts can be expected on the livelihoods, or cultural, ceremonial, or spiritual use that define the identity and community of the Indigenous Peoples…” (PS7: 13); physical relocation (PS7: 14; PS5: 19); ‘economic displacement’ due to land acquisition/compulsory takings for project purposes (PS5: 21); [5] and, commercial use of cultural resources, and traditional knowledge, innovations and practices (PS7: 15). [6] Guidance Note 7 states that good faith negotiation includes, inter alia, “mutually acceptable procedures for the negotiation” (G7:G25). It is also clarifies that in cases where good faith negotiation is involved, the IFC will verify whether or not the affected communities of indigenous peoples are broadly in support of the project (G7:G26). [7] The draft IFC Environmental and Social Review Procedure (ESRP) suggest implicitly that past client performance might be considered as part of an internal IFC assessment of “financial and reputational risks” for the IFC. [8] The option to suspend IFC finance is implied in the draft revised ESRP. However, IFC’s commitment to withhold or suspend finance for non-compliance with social and environmental requirements or breach of Conditions for disbursement (COD) is not made explicit in any part of the PPS. [9] This safeguard was stipulated previously in OP4.01, paragraph
3 in the former IFC policy on Environmental Assessment:
http://www.ifc.org/ifcext/enviro.nsf/AttachmentsByTitle/pol_EnvAssessment/$FILE/ [10] PS1 now simply notes that clients “may” be required “to retain external experts to assist in the Assessment Process” (PS1:7). Compare this with the previous IFC EA policy (OP4.01, paragraph 4. etc). However, the Sustainability Policy (paragraph 15) clarifies that the IFC may still require the client to commission additional assessments by “external” experts if it considers that the client’s SEA does not meet the requirements of PS1 – though the policy does not stipulate that these be independent experts (see also note 2 above regarding special requirements for impact assessments relating to indigenous peoples). [11] The non-binding Guidance Notes, however, do list human rights instruments and Conventions in the References to both GN2 and GN7. In addition, there is noteworthy, though weak, language in GN1 that acknowledges that private sector companies are “increasingly expected” to “...conduct their affairs in a way that would uphold those (human) rights and not interfere with states’ obligations under these (human rights) instruments” (GN1: G22). The Guidance Notes also state that conducting business in a way that is “inconsistent” with basic human rights also poses a risk to business (reputational risks etc ) (GN1:G22. See also GN7:G1). [12] This list of remaining problems with PS5 is mainly derived from the forthcoming analysis of Dana Clark in Halifax Initiative (2006) op. cit. [13] PS7 and PS5 do contain protections for indigenous peoples without formal legal title, provided they hold their lands collectively and depend on affected lands for “their livelihoods, or cultural, ceremonial or spiritual purposes that define their identity and community” (PS7, paragraph 12). [14] Potential for no-go zones is limited to legally designated parks (where proposed actions contravene existing park management plans) and possibly some critical natural habitats (PS6) and cultural heritage sites (PS8). However, PS6 does not include more general provisions for no-go zones. The no-go provisions in PS6 and GN6 (Annex B) are undermined by the ambiguous and potentially narrow definition of Critical habitat and by multiple derogations in PS6 allowing conversion of critical habitats. [15] Compare PS6 at paragraph 16 with former OP4.36 at paragraph 9(a). [16]If critical habitats under PS6 are limited to those with biological importance as defined by the IFC, then the PS is significantly below international best practice where critical habitats of importance to indigenous peoples and local communities are protected in their own right (not only because they are biologically significant) e.g., High Conservation Value Forest criteria used by the FSC. [17]It is noteworthy that IFC existing Exclusion List for microfinance does prohibit IFC finance for “production or activities that impinge on lands owned, claimed under adjudication, by Indigenous Peoples, without full documented consent of such peoples”. For several years the FPP and other organisations have urged the IFC to extend this crucial safeguard to all its investments affecting indigenous peoples’ lands – so far to no avail (NOTE: the revised IFC Exclusion List was still not available at the time of compiling this briefing). [18] Though not in the Performance Standards, it is important to note that the non-binding GN7 clarifies that the trigger for the special requirements and safeguards under paragraph 13 of PS7 should be partly based on a study of the customary land and resource tenure system of affected indigenous peoples “within the project’s area of influence” (G7:G23). Guidance Note 7 notes that clients may - “where indigenous peoples so request” - work with governmental authorities to facilitate legal recognition of lands claimed or under use by indigenous peoples. [19] The IFC has included explicit references to international human rights treaties of relevance to indigenous peoples’ rights in the non-binding Guidance Note 7 (GN7: References). Like the Guidance Note for PS1 (paragraph G22), paragraph G1 of Guidance Note 7 states that private sector companies should not interfere with States’ obligations to uphold human rights treaties they have ratified (G7:G1). Given that previous World Bank policies would make no explicit reference to human rights (other than the objective on human rights under its policy on Indigenous Peoples), this brief, but explicit treatment of human rights in the non-binding advisory notes to the Performance standards is a relative step forward for the Bank. Nevertheless, it is disappointing that the IFC did not venture further on the issue of human rights in its Performance Standards, particularly in view of recent legal advice to the Bank that has affirmed that human rights are an “intrinsic part of the Bank’s mission” – Danino, R (2006) Legal Opinion on Human Rights and the Work of the World Bank 27 January, 2006 [20] The Guidance Note to PS7 indirectly indicates that a successful outcome would be partly demonstrated by some form of written agreement such as “a memorandum of understanding, a letter of intent, a joint statement of principles, and written agreements” (GN25). |
