The Bank has two lending instruments: investment loans and development policy loans (DPLs). Investment loans finance goods, works, and services in support of economic and social development projects in a broad range of sectors. DPLs provide quick-disbursing external financing to support a country’s policy and institutional reforms. DPLs focus on structural, financial sector, and social policy reform, and on improving public sector resource management.
Broad economic reforms, such as those supported by development policy operations, have the potential to yield unanticipated, indirect impacts on the forests and forest-dependent people. In some cases the outcomes could be positive, whereas in others they could be negative, with irreversible losses. The Bank policy on DPLs (OP8.60) requires due diligence with respect to environment, forests and natural resources. This requires that the Bank determine whether the specific country policies supported by the loan are likely to cause significant effects on the country's environment, forests, and other natural resources. In cases with likely significant effects, the Bank has to use upstream analysis to assess how the country will reduce potential negative effects prior to or during the loan.
To help implement this policy with regards to forests, the Bank has developed an approach for focusing due diligence and identifying opportunities for the forest sector. The result of this analysis, “Development Policy Lending and Forest Outcomes: Influences, Interactions and Due Diligence”, is an approach that uses economic, environmental, governance and poverty measures and information on the proposed policies to identify where forest impact may be significant. The study also presents preliminary recommendations on tools for implementing due diligence.
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