Internal Review says World Bank Must Reform its Approach to the Environment

FOR IMMEDIATE RELEASE
 
Contact:
Korinna Horta, + 351 96 392 0759, khorta@edf.org
Stuart Ross, 202-572-3235, sross@edf.org
 
 (Washington, DC – July 21, 2008) The Independent Evaluation Group (IEG), the World Bank’s internal watchdog, is about to release its newest assessment of the Bank’s record on the environment, and according to Environmental Defense Fund, the news is not good. The evaluation analyzes the effectiveness of the World Bank Group in addressing the environmental sustainability of its programs in developing countries over the period of 1990-2007.[1]
 
The carefully worded evaluation makes clear that the World Bank continues to perform poorly when it comes to a coherent integration of environmental goals into its country strategies and investment portfolios. Specifically, the evaluations find that:
 
  • Given the lack of a common framework that would allow the World Bank Group to understand the full range of environmental impacts of its interventions, there is the risk that its private and public sector branches work at cross-purposes;
  • The Bank must address the lack of internal coherence by reformulating its environmental strategy, taking into account the private sector and the protection of global public goods;
  • The Bank continues to do a poor job of monitoring and evaluating the environmental impacts of the programs it supports.
 
The latter point repeats findings of a 2002 evaluation report which identified the Bank’s systematic weakness in monitoring and assessing its own operations.[2] “It is troubling that earlier recommendations by the Bank’s own evaluators have been largely ignored,” says Korinna Horta, a senior economist at Environmental Defense Fund. “Even now, the Bank does not have an appropriate accountability structure in place to ensure that its well-meaning environmental and social policies are actually implemented on the ground.”
 
The new evaluation is published on the heels of the establishment of new climate investment funds at the World Bank by the Bank’s Executive Board and their endorsement by the G8 summit in Japan earlier this month. These climate investment funds, which are expected to funnel up to $ 10 billion to developing countries to both mitigate and adapt to climate change, are supposed to pave the way for a future agreement under the U.N. Climate Convention on longer-term financing mechanisms. Yet, as the evaluation report shows, the World Bank has a long way to go to put its internal house in order before environmental sustainability, including the interconnected problems of climate change, deforestation, water scarcity and the loss of biodiversity, all of which have the most severe impacts on the poor, receives the operational priority that both poverty reduction and the protection of global public goods urgently demand.
 
While the international community welcomes World Bank’s new focus on climate change, the IEG evaluation makes clear that while the institution has been talking about environmental sustainability, it has paid insufficient attention to the broader environmental effects of its own activities. Disturbingly, the IEG review points to the risk that the Bank’s private and public sector financing branches may often work at cross-purposes, stating that the problem is especially relevant in climate-sensitive sectors such as energy, transport and agribusiness investments in tropical forest regions. For example, the International Finance Corporation, the World Bank’s private sector arm, may promote the expansion of industrial livestock, soy bean and palm oil plantations, all of which are drivers of tropical deforestation, while the public sector arm of the Bank simultaneously warns about the problems of forest loss and has created a fund to support avoided deforestation. The IEG notes that most Bank country strategies have not integrated the activities of its private sector branches in relation to the environment.
 
The IEG calls on the Bank to urgently address this lack of internal coherence and to reformulate its environmental strategy, taking into account the role of the private sector and the protection of global public goods.
 
Horta notes that while putting a better environmental strategy in place should be helpful, this is insufficient because strategies are well-meaning yet non-binding documents. More important is to actually have a full understanding of the environmental impacts of Bank operations and to find ways to avoid negative impacts or to address them. But here again the Bank faces a major problem. According to the IEG, the World Bank is still doing a poor job of monitoring the environmental consequences and assessing the impacts of the programs it supports. This is not the first time that Bank internal evaluators identify the Bank’s systematic weakness in monitoring and assessing its own operations. In 2002, an evaluation report noted the lack of consistent management commitment to the environment coupled with a lack of consistent management accountability.
 
The IEG clearly identifies some of the internal constraints that have impeded the necessary reforms, such as competing priorities, insufficient technical and operational skills of staff and suboptimal use of administrative budgets.
 
“Now that governments have entrusted the World Bank with financing the fight against climate change, the world needs an institution that not only talks about sustainability, but also creates the internal incentives to ensure that its own activities are environmentally sustainable,” says Horta. “The IEG recommendations are a good place to start and, if properly implemented, should lead to the overhaul of the Bank’s lending in areas such as energy which continues to be highly reliant on fossil fuels.”

[1] Independent Evaluation Group (IEG), Supporting Environmental Sustainability – An Evaluation of World Bank Group Experience 1990-2007, Washington, D.C. July 2008.
[2] Operations Evaluations Department (OED precursor to the IEG), Promoting Environmental Sustainability in Development – An Evaluation of the World Bank’s Performance, Washington, D.C., 2002, p.vii.

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