Environment and Safeguards Policy of the Inter-American Development Bank
By Charles Di Leva and Danielle Malek
The Inter-American Board of Executive Directors approved on January 18, 2006 a new Environment and Social Safeguards Compliance Policy. This new policy replaces the Environment Policy that had applied to the institution since 1979 and reflects a move to bring the IDB into line with other international finance institutions and with the Equator Principles. While the IDB undertook close collaboration with the World Bank to help ensure that this new policy should operate in harmony with the World Bank, it also takes several new measures that are of interest for possible future policy reform.
Perhaps foremost among the notable revisions to the former policy is its broad scope: the new policy applies to both the public and private sector operations of the IDB. It also applies to the environmental aspects of IDB procurement practices. In addition, the policy makes clear that mainstreaming of the environment into IDB financing will take place across all sectors, and that the IDB has committed to adopt measures to promote "corporate environmental responsibility". In contrast to World Bank operational policy (OP 4.01), which regularly applies to emergency recovery projects (except where compliance would prevent the effective and timely achievement of the objectives of the project), emergency loans are exempt from the provisions of the IDB policy. Further, the IDB has collapsed into this “umbrella policy” a range of issues that in World Bank practice are covered in an array of different instruments.
The Policy contains Directives that divide into two categories: Mainstreaming Directives, and Safeguard Directives. The Mainstreaming Directives make clear the role of country analytical work in reviewing environmental opportunities and risks, ensuring that such information is included in country programming and strategies. It is also noted that country level environmental analysis will be a principal tool to enable environmental mainstreaming. Bank country strategies "will incorporate, as applicable, relevant indicators" tracking environmental performance. The country strategy should pay particular attention to "the state of environmental governance, institutional and policy development, the conditions of key natural resources and ecosystems, and the status of internationally agreed targets and goals." The Mainstreaming section also makes clear the importance of taking a precautionary approach toward decision-making.
The "Safeguard Policies and Directives" occupy the bulk of the new Policy (11 of its 18 pages). It is stated that the IDB will "only finance operations and activities that comply with the directives of this policy, and are consistent with the relevant provisions of other Bank policies." Projects must be designed to comply with national environmental laws and obligations under "ratified Multilateral Environmental Agreements." All projects are screened and classified according to an A, B, and C system generally similar to that used by the World Bank. While there is no category FI (or financial intermediaries) as such in the IDB policy, financial intermediation operations and loans based on performance criteria are nevertheless subject to the policy. One difference between the two policies is the specific requirement for periodic assessment of the performance of the screening and categorization processes of the IDB. The policy explicitly requires that screening take into account "environmentally related social and cultural impacts."
The tools that IDB will use to implement the safeguards include those familiar to World Bank operations, with some modifications. While both institutions use Strategic Environmental Assessment, this form of assessment is explicitly included in the IDB policy; with SEA being focussed on the impacts of loans, policies and programs. Thus, while IDB has made specific reference to policy based loans in this Environmental policy, the World Bank measures to address the impact of policy based loans are not contained in the “Safeguard Policies” but in OP 8.60, “Development Policy Lending”.
In addition, IDB makes more explicit use of the term “social impact.” Under the IDB policy an Environmental and Social Management Plan is required. While the World Bank carries out this review of social impacts in practice, it does not include as explicit a reference to this requirement. At the same time, the issues of Indigenous Peoples and Involuntary Resettlement are not explicitly referred to here by IDB.
The IDB Safeguard Directives contain specific reference to certain other topics not yet fully referenced in World Bank policies, such as a ban on financing invasive species; reference to compliance with the suite of United Nations Chemicals Conventions; and that it "encourages the reduction and control of greenhouse gas emissions...."
Specific sections on "Multiple Phase and Repeat Loans", "Co-financing Operations" and “In-country Systems" are largely reflective of on-going World Bank practice, but help put the approach to these issues into formal terms. For example, when co-financing, it calls upon the IDB to "collaborate with the borrowers and participating lending institutions to adopt a single EA process and unified documentation; consultation and disclosure requirements...." A section on Procurement advances this issue into explicit terms, and notes that the IDB "procurement practices will include a Bank-approved exclusion list of environmentally harmful products." The final section of the IDB policy includes definitions of key terms.
The policy enters into effect six months from its January 18 approval. Guidelines to help implement the policy are to follow.
Full text version of the IDB policy