Introduction: Why safeguards matter

Introduction: Why safeguards matter

So-called “safeguard standards” for international finance institutions emerged as a consequence of destructive forestry, agricultural colonisation and extractive megaprojects financed by the World Bank in the Amazon, Indonesia and India in the 1970s and 1980s.[i] Since then many other multilateral development banks and development agencies have adopted their own safeguard policies and related complaints mechanisms. In addition to the need to protect community rights from destructive development investments, it is increasingly recognised that even well-intentioned conservation and ‘community development’ projects can cause damage and violate rights if they are poorly designed and fail to protect human rights and fragile habitats.[ii] 

Safeguard standards and measures are meant to ensure that finance agencies and their programmes and investments “do no harm” to people and the environment.  At a minimum, effective safeguards should ensure that an agency or investor is able to identify potential harm and enable them to take measures to avoid adverse impacts. They are a much needed and vital part of sustainable and accountable finance for development because they establish clear rules and guidelines for staff on how to deal with social and environmental issues. At the same time, safeguard policies can assist agencies to “do good” by promoting sustainable development and encouraging positive policy and legal reforms to enhance local livelihoods and assist communities to realise their rights.

Properly implemented, safeguard measures increase development effectiveness and are proven to help deliver positive results for poverty reduction. Crucially, binding policies and commitments backed by independent complaints mechanisms can help citizens and affected communities hold finance and development agencies to account by allowing them to claim and exercise their rights when problems and failures occur in project planning and implementation.

Need for expanded and strengthened safeguards

At the beginning of the 21st century, safeguards for the protection of human rights and the environment in international development finance are needed more than ever before.  There is alarming evidence that pressures on community lands, forests and resources are intensifying. Agribusiness, extractive industry, energy and infrastructure developments are expanding as Southern countries rush to achieve rapid economic growth and meet growing global demands for fuel, food, fibres and raw materials.[iii]

Public and private finance bodies channel huge volumes of money into these investments that threaten to displace literally millions of people.[iv] In the case of the World Bank alone, for example, it is estimated that at any point in time over one million people are affected by involuntary resettlement in Bank-financed projects.[v] In addition to threats from agro-industry and other sectors, millions of forest dwellers are facing a ‘green land grab’ as the private sector and governments seek to commodify and trade forest carbon and ‘ecosystem services’.

This special edition FPP E-Newsletter on safeguards is being issued at a time when measures needed to tackle threats of a massive global land grab are key topics of national and international debate. The World Bank is reviewing and updating its safeguard framework, assessing how it must deal with human rights and land tenure (Article 5), while the African Development Bank is soon to adopt a newly revised safeguard framework (Article 9). Meanwhile, developing countries are grappling with how to develop national safeguard systems in order to meet obligations required by the 2010 Cancun Agreements under the UN Climate Convention (Article 10). The private sector is likewise reviewing its own safeguards for social and environmental responsibility in response to new standards adopted by the International Finance Corporation (IFC) in 2012 and guidance from UN human rights bodies on business responsibilities to uphold human rights (Article 11).[vi]

The first part of this bulletin aims to feed into current international and national policy discussions on safeguard standards from the point of view of indigenous peoples and civil society organisations in Africa, Asia and Latin America. Experience from both Asia and Africa (Articles 2 and 4) shows that even where safeguard policies for indigenous peoples’ rights are applied by agencies like the World Bank and Asian Development Bank, measures and agreements to safeguard the rights are often not implemented effectively, if at all. Experience with the Inter-American Development Bank safeguards for isolated indigenous peoples teaches us that without long-term guarantees for human rights and forest territories and ecosystems in international investments, safeguards can become meaningless and empty instruments (Article 3). In Brazil, shortcomings in the safeguards of the Brazilian Development Bank (BNDES) underline the need for effective oversight mechanisms to monitor and ensure compliance with social and environmental policies, including through independent monitoring arrangements (Article 8).

Emerging lessons from the World Bank lending to palm oil developments demonstrate the vital need for much more effective IFI due diligence to pinpoint and address indirect social and environmental risks linked to the supply chain and “associated facilities” outside and beyond the specific area where a project or programme is financed (Article 6). Experience within the palm oil industry more widely reveals that safeguard standards are increasingly common in the private sector, and face similar implementation and due diligence challenges (Article 11).

Early experience with safeguards in forest and climate policies suggests that both governments and international agencies lack capacity and effective arrangements to apply safeguard requirements. A growing number of complaints by indigenous peoples are emerging about a lack of meaningful attention to rights issues in several countries preparing for future REDD programmes, including in Panama where indigenous peoples’ organisations have pulled out of the UN forest programme due to alleged violations of rights, including the UN Declaration on the Rights of Indigenous Peoples (Article 10). Promised investigations by the UN into these complaints must get to the root of safeguard implementations problems and pinpoint measures needed to ensure that UN staff and government partners improve due diligence.

In relation to the World Bank’s safeguard update process, it is highlighted that a revamped safeguard framework for the World Bank Group must cover all finance instruments (not just so-called ‘project finance’), including Development Policy Loans (DPLs).[vii] Without developing new standards to manage risk in programmatic lending and finance through intermediary bodies, the Bank is set on a dangerous course that could lead it to adopting a safeguard framework that’s not fit for purpose (Articles 5 and 7).

Need to respect human rights

Safeguards have developed in an ad hoc manner among many different agencies and global bodies and there is a pressing need for upwards harmonisation to ensure all safeguards meet international norms and obligations on human rights, environmental protection and sustainable development (Articles 5 and 11). Indigenous peoples have consistently argued that safeguards applied to their lands and resources, or affecting their lives, must be coherent with the UN Declaration on the Rights of Indigenous Peoples. Civil society and social justice groups likewise stress that the World Bank must bring its standards into line with international human rights norms and the related obligations of Borrower countries. They maintain that the safeguards of public and private finance institutions do not stand outside international law and that as a specialized UN agency the Bank has a duty to uphold and promote human rights.[viii] UN human rights experts have emphasised this in their recent call for the Bank to ensure consistency with international human rights standards in the current review.[ix]

Ensuring effective implementation

Most of the articles in this newsletter emphasise the need for public and private international financial institutions, including the World Bank, to put in place more robust arrangements to ensure the implementation of agreed standards in project design and on the ground. Without the establishment of more effective risk assessment mechanisms to trigger safeguard measures upstream in project design, and without better oversight and monitoring, safeguards will not deliver their intended results.[x] From the earliest point of project conception and preliminary impact assessment through until the measurement of long-term outcomes, social and environmental risks and impacts should be at the forefront of Bank analysis.

Conclusion

While the volume of official development finance flowing from Northern to Southern countries may stagnate due to the on-going credit crisis, financial flows from Southern Banks and the private sector are set to increase. The BRICS have just announced plans to establish a new Southern Development Bank to fund biofuel, hydroelectric and nuclear developments,[xi] while massive private sector investment is being made in oil palm and other agribusiness development schemes (sometimes running to billions of dollars for individual oil palm plantations in Africa and Asia). The massive scale of development finance and the potential for negative impacts on forest peoples and other communities underlines an ever more pressing need for public and private financial institutions to apply effective and robust social and environmental safeguards. Southern development banks will need to put in place effective safeguard systems and accountability mechanisms. The private sector must also up its game to ensure that its investments are sustainable and fully respect human rights.

In 2013-14, the World Bank is now in a pivotal position to set an example for international development finance. It must use its safeguard review and update initiative to upgrade its standards to meet human rights norms and obligations and extend its safeguard coverage to diverse finance instruments. It must also correct systemic shortcomings in safeguard implementation through far-reaching institutional reform and meaningful measures to put principles into practice.

Tom Griffiths and Helen Tugendhat (FPP Responsible Finance Team)

Further reading:

World Bank Safeguard review and update: http://www.forestpeoples.org/tags/update-and-consolidation-world-bank-safeguard-policies-2010-13

Asian Development Bank: http://www.forestpeoples.org/topics/responsible-finance/asian-development-bank-adb 

African Development Bank: http://www.forestpeoples.org/topics/responsible-finance/african-development-bank-afdb

Inter-American Development Bank: http://www.forestpeoples.org/topics/responsible-finance/inter-american-development-bank-idb

Global Environment Facility: http://www.forestpeoples.org/topics/responsible-finance/global-environment-facility-gef

World Bank’s International Finance Corporation: http://www.forestpeoples.org/topics/responsible-finance/international-finance-corporation-ifc

[i] Griffiths, T and Colchester M (2000) Indigenous Peoples, Forests and the World Bank: a synthesis paper FPP, Moreton in Marsh

[ii] Colchester, M (2003) Salvaging Nature World Rainforest Movement, Montevideo

[iii] Boucher, D, Elias, P, Lininger, K, May-Tobin, C, Roquemore, S and Saxon E (2011) The Root of the Problem: what’s driving tropical deforestation today? Union of Concerned Scientists, Cambridge M.A

[iv] RRI (2012) New research predicts rising trend in India's violent land conflicts; 130 districts struggle, Press Release, December 2012

[v] Independent Evaluation Group (2010) Safeguards and Sustainability in a Changing World - An Independent Evaluation of the World Bank Group Experience IEG, Washington DC at page 20

[vi] See, for instance, the work of the UN Working Group on the issue of human rights and transnational corporations and other business enterprises, elaborating the ‘UN Guiding Principles – Respect, Protect, Remedy’, at: http://www.ohchr.org/EN/Issues/Business/Pages/WGHRandtransnationalcorporationsandotherbusiness.aspx

[vii]  Bank Information Center (BIC) and Global Witness (2013) World Bank Safeguards & Development Policy Lending: A Primer on Why DPLs Should be Part of the Safeguard Review http://www.forestpeoples.org/sites/fpp/files/publication/2013/04/dpl-primer-april2013.pdf

[viii] See inter alia C.F. Amerasinghe, Principles of the Institutional Law of International Organizations (Cambridge: Cambridge University Press, 1996); Henry G. Schermers & Niels M. Blokker, International Institutional Law: Unity within Diversity, 3rd rev. ed. (The Hague: Kluwer Law International, 1995); Sigrun Skogly, The Human Rights Obligations of the World Bank and International Monetary Fund (London: Cavendish Publishing, 2001), 84-87; Mac Darrow, Between Light and Shadow. The World Bank, The International Monetary Fund and International Human Rights Law (Oxford: Hart Publishing, 2003), and Philippe Sands & Pierre Klein (eds.), Bowett’s Law of International Institutions, 5th ed. (London: Sweet & Maxwell, 2001), 458-59.

[ix] Press Release, Office of the High Commissioner for Human Rights, April, 2013. http://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=13248&…

[xi] “BRICS Countries Agree to US50 Billion Development Bank” Asian Scientist Magazine, Monday 15 April 2013