As World Bank Signals End of Extraction Finance, Csos Call For
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SPRING 2018 obsBRETTONe WOODSrver A quarterly critical review of developments at the World Bank and IMF ENVIRONMENT analysis In this issue As World Bank signals end of extraction finance, 2 AIMM: Will IFC hit rights-based CSOs call for end to its other fossil fuel funding development target? 3 Tunisians take to the streets over IMF- imposed austerity by Clara Capelli 5 The wrongdoings of the Doing Business Rankings and the corporate take-over of agriculture by Frederic Mousseau 7 The impacts of IMF- backed austerity on women’s rights in Brazil by Grazielle David Alex Doukas from US-based NGO Oil Change for the Bank’s direct lending to low-income WBG announced it will end finance for International (OCI) hailed the importance International Development Association (IDA) ‘upstream’ oil and gas projects after 2019 of the upstream pledge in a December countries, which allows the Bank to fund Pledge includes exception for gas projects blog, noting “each dollar of World Bank upstream gas projects if they are judged to in low-income countries finance currently going into oil and gas have an energy access component and be catalyzes many more, and … many projects part of a low-carbon transition strategy. This Commitment does not apply to FI and DPL that get World Bank finance would never raises questions about how stringently this lending go ahead without it. So, the finance that exception will be interpreted when it comes will shift away from oil and gas as a result into force in 2020. Moreover, upstream of this announcement really matters, and lending is only about one-third of the Bank’s The end of 2017 brought a boost for climate will have an even larger effect than the fossil fuels portfolio, according to the OCI advocates, with World Bank Group (WBG) numbers might suggest.” OCI’s Shift the database. Finance for pipeline projects that President Jim Yong Kim announcing at Subsidies database showed that the Bank’s bring upstream oil and gas to markets is December’s One Planet Summit in Paris upstream portfolio is significant, amounting not covered by the pledge, for example (see that the Bank will cease project lending to “an average of over $1 billion per year in Observer Autumn 2017). for ‘upstream’ oil and gas projects after exploration and production activity between 2019. As the Bank clarified, “upstream is an 2014 and 2016.” The upstream pledge Bank’s indirect fossil finance continues industry term that refers to exploration of oil marked an important victory for civil society The upstream pledge also only applies to the and natural gas fields, as well as drilling and organisations (CSOs) who have engaged in Bank’s project lending and does not extend operating wells to produce oil and natural a decades-long push for the Bank to end its to other parts of the Bank’s portfolio, such gas.” The Bank also announced at the support for fossil fuels. as lending to financial intermediaries (FIs) summit that it “will be applying a shadow and development policy loans (DPLs). This is price on carbon in the economic analysis of Despite the upstream pledge being a major significant, as the WBG is de facto funding all … projects in key high-emitting sectors.” step in the right direction, many challenges a new generation of coal power plants and This followed the Bank’s October 2017 remain for the Bank to fully decarbonise its other fossil fuel projects via support for FIs, commitment to begin tracking the carbon lending portfolio. Firstly, the pledge will not as documented by CSOs in Bangladesh, emissions of its project investments for the end the Bank’s fossil fuel project lending. India, and the Philippines (see Observer first time in 2018. The upstream pledge included an exception 1 BRETTON WOODS OBSERVER SPRING 2018 Winter 2017-2018). To close loopholes portfolio in terms of support for fossil fuel This agenda … is largely reliant on fossil that allow funding of fossil fuels via the projects between FY14-FY16 among the fuels, mining and large-scale agribusiness. back door, CSOs have advocated that the four members of the WBG. E3G found that … [It] is fundamentally incoherent with the Bank publicly disclose and track its indirect in FY16, MIGA did not support a single fight against climate change.” Although financing, and include an exclusion list on renewable energy project: “[its] guarantees the World Bank is currently assisting fossil fuel projects in its indirect lending to energy were worth $1.9 billion in 2016, countries with their Nationally Determined portfolio. CSOs have also argued that the of which $0.9 billion went to fossil fuel Contributions (NDCs) to the Paris Agreement, Bank is ‘propping up’ fossil fuels through its projects”, with the rest going to projects these only involve planning through 2030; DPLs, which provide fungible direct budget such as hydro-dams, which often have given the decades-long lifespan of proposed support to national governments. A January significant environmental and social mega-infrastructure projects, governance 2017 report from Netherlands-based CSO impacts. Given that such guarantees offer approaches in line with Paris’s 2050 time Bank Information Center Europe highlighted financial ‘de-risking’ and provide political horizon are needed to ensure Bank- that in Peru, Indonesia, Egypt and legitimacy to projects, CSOs have stressed it supported infrastructure projects do not Mozambique, DPLs have created incentives is problematic for MIGA’s portfolio to lean so become ‘stranded assets’ that will need to for coal, oil and gas investments, as part of heavily towards fossil fuels. be retired to meet global climate goals (see the ‘prior actions’ (i.e. regulatory changes) the Bretton Woods Project’s 2014 briefing, required for countries to secure these loans Climate concerns over infrastructure Multilateral Development Banks’ unburnable (see Observer Spring 2017). CSOs argue the A December report published by Belgian- carbon). Bank needs to adopt a safeguard for DPLs based CSO Counter Balance highlighted Despite the substantial challenges that that, inter alia, prohibits prior actions that the contradictions between the WBG’s remain, CSOs are cautiously hopeful that the promote fossil fuels. push for a new generation of ‘mega- upstream pledge can serve as a catalyst for infrastructure’ (see Observer Winter 2017) The World Bank’s ‘dirty’ guarantees transforming the Bank’s wider approach to and effective climate action. The report energy and climate investments. Research by UK-based CSO E3G showed noted, “The building of planned mega that the Bank’s Multilateral Investment corridors would … mean locking-in the Δtinyurl.com/WBGfossils Guarantee Agency (MIGA) had the dirtiest current extractivist development model. RIGHTS news AIMM: Will IFC hit rights-based development target? AIMM an important opportunity for the IFC Given the importance of AIMM in informing CSOs call on IFC to incorporate human to address many issues raised by them and the IFC’s investment decisions, civil society rights-based methodology in AIMM the IFC’s Compliance Advisor Ombudsman offered to assist the IFC to integrate a CSOs wait to see whether AIMM will apply (CAO, the IFC’s independent accountability human rights-based approach into AIMM to FI lending mechanism), including documented cases that goes beyond narrow projections of job where IFC investments have supported land creation and investment inflows. This would grabs, displacement, loss of livelihoods and ensure that IFC investments are used to At the October 2017 World Bank and IMF destruction of the natural environment (see attract hesitant private sector investments Annual Meetings in Washington DC, the Observer Summer 2017, Winter 2017-2018). to activities that bring tangible benefits to International Finance Corporation (IFC, the CSOs are waiting to see whether AIMM communities’ ability to avail themselves of World Bank’s private sector arm), introduced will apply to all aspects of IFC’s portfolio, their economic, social and cultural rights. its new development impact measurement including its investments in financial This would in turn assure IFC investments are framework, Anticipated Impact Measurement intermediaries. As a January report by fully in line with the Sustainable Development and Monitoring (AIMM, see Observer Winter US-based Center for Global Development Goals, which resolve to “protect human 2017-2018). The new system will replace (CGD) on the nature and destination of rights.” its Development Outcomes Tracking System IFC investments noted, “IFC’s portfolio (DOTS) and is to be fully operational by is not focused where it could make the AIMM is given additional importance by the 2019. Contrary to DOTS, where development most difference”, given that most of its Bank and IFC’s new focus on fragile states impact was only assessed three years after investments were in upper-middle income and the new International Development project implementation, AIMM will conduct countries. While the IFC responded that it is Association’s (IDA) – the World Bank’s low- an ex-ante assessment of likely development the largest investor in low-income countries income arm – (see Inside the Institutions outcomes of proposed investments. It will among international financial institutions, Spring 2017) private sector window also try to determine portfolio-wide impacts, CGD noted that its analysis was difficult (see Observer Winter 2017). Given the with a focus on how individual investments due to the lack of publicly available and challenges of operating effectively in fragile and the portfolio generally perform in user-friendly data provided by the IFC. This environments, civil society has suggested creating markets, a key objective of IFC’s new echoes a persistent complaint of affected that the IFC strongly consider developing 3.0 strategy (see Observer Spring 2017). communities and their CSO partners with AIMM tools specific to those settings. respect to IFC investments. Civil society organisations (CSOs) consider Δtinyurl.com/IFC-AIMM-HR 2 BRETTON WOODS OBSERVER SPRING 2018 CONDITIONALITY analysis Tunisians take to the streets over IMF-imposed austerity by Clara Capelli, PhD.