Promoting Environmental Sustainability in...

PromotingEnvironmental

Sustainability inDevelopment

An Evaluation of theWorld Bank’s Performance

Andrés Liebenthal

2002The World Bank

Washington, D.C.

W O R L D B A N K O P E R A T I O N S E V A L U A T I O N D E P A R T M E N T

http://www.worldbank.org/oed

Copyright © 2002

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First edition January 2002

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Cover photo: Man with baskets for fruits and other local produce.

National Integrated Protected Area, Samar Island, the Philippines

By: Dr. Corazon P.B. Claudio

Department of Environment and Natural Resources, the Philippines

(Participant in the World Bank’s 2001 Environment Review regional and global workshops)

ISBN 0-8213-5053-6

Library of Congress Cataloging-in-Publication data has been applied for.

Printed on Recycled Paper

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Contents

v Acknowledgments

vii Foreword, Prólogo, Préface

xi Executive Summary, Resumen, Résumé Analytique

xxiii Abbreviations and Acronyms

1 1. Introduction

3 2. The Historical Context3 Environment in the World Bank4 Environmental Policy and Strategy5 External Situation

7 3. The Bank’s Record7 Bank Objectives8 Stewardship, Policy, and Strategy8 Environmental Lending and Mainstreaming11 Safeguards and Environmental Assessments11 Global Concerns

13 4. Main Findings13 Stewardship, Policy, and Strategy16 Environmental Lending and Mainstreaming19 Safeguards and Environmental Assessments22 Global Concerns23 Internal Structure, Incentives, and Accountability

25 5. Recommendations

29 Annexes29 Annex A. Donor Evaluations31 Annex B. Report of the Advisory Panel

31 Summary31 Background32 Recommendations35 Concluding Words

37 Annex C. Report from the Committee on DevelopmentEffectiveness

41 Annex D. World Bank Management’s Response to OED’sEnvironment Review and Recommendations

45 Endnotes

49 References

Boxes, Figures, and Tables9 Mainstreaming the Environment (Box)10 Evolution of the World Bank’s Environment Portfolio (Figure)15 Indicators of Environmental Degradation for Selected

Countries (Table)

P r o m o t i n g E n v i r o n m e n t a l S u s t a i n a b i l i t y i n D e v e l o p m e n t

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Acknowledgments

This report would not have been possible with-out the contributions of many people and organ-izations. Preparation of the report was supervisedby Andrès Liebenthal. The main author wasJohn D. Shilling (consultant), assisted by SimoneLawaetz, Muthukumara Mani, and Jane Pratt(consultants). William Hurlbut and StevenKennedy provided editorial assistance. Soon-Won Pak provided administrative support.

An Advisory Panel reviewed drafts, providedadvice, and served as a sounding board for therecommendations. Many thanks to Alicia Barcena,Chief, Environment and Human Settlements Divi-sion, United Nations Economic Commission forLatin America and the Caribbean; Ashok Khosla,President, Development Alternatives Inc. (NewDelhi); David McDowell, former Director General,IUCN; Frances Seymour, Program Director, Pro-gram in Institutions and Governance, WorldResources Institute; and Björn Stigson, President,World Business Council for Sustainable Devel-opment. George Greene facilitated the discussions.

Many individuals inside and outside the Bankprovided comments and advice. Victoria Elliot,Nils Fostvedt, Jorge Garcia-Garcia, KristalinaGeorgieva, Robert Goodland, Patrick Grasso,Kirk Hamilton, Jarle Harstad, Ian Johnson, MagdaLovei, John Redwood, John Underwood, RobertWatson, and David Wheeler were particularlyconstructive and helpful.

The report draws heavily from country casestudies prepared by Roger Batstone (Nigeria),

John English (Poland), Pablo Gutman (Mexico),Fernando Manibog (Madagascar), and KlasRingskog (India).

The report is also indebted to backgroundwork and other materials prepared by LaurenceBoisson de Chazournes (on compliance withoperational policies and procedures); MichaelFlint, Fiona Nunan, and Dermot Shields (on envi-ronmental improvement and poverty reduction);Stein Hansen and Dag Aarnes (on environmen-tal impacts of adjustment operations); Charles diLeva and others at the IUCN Environmental LawCentre (on environmental assessment policy andpractice); Ken Green and Aaron Zazueta (onenvironmental assessment safeguards in selectedprojects); Thor S. Larsen, Shivcharn S. Dhillion,Anne Mossige, Odd Terje Sandlund, and JornThomassen (on biodiversity conservation andsustainable use); Simone Lawaetz (on povertyreduction and environmental sustainability; main-streaming the environment in infrastructure proj-ects; and a survey of task team leaders oninstitutional incentives and constraints); RidleyNelson and Simone Lawaetz (on dryland inter-ventions); and John Shilling (on environmentalsustainability issues in IDA 10, 11, and 12).

The team expresses its gratitude to thosewho hosted and organized the country work-shops: Farouk Alioua, Department of RuralDevelopment, Hassan II Institute of Agricultureand Veterinary Sciences (Morocco); BorisGraizbord, Coordinator, Program of Advanced


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Studies in Sustainable Development and Envi-ronment, El Colegio de Mexico (Mexico); andAdeniyi Osuntogun, President, Foundation forEnvironmental Development and Education inNigeria (FEDEN). Sincere thanks are extendedto the many workshop participants from thepublic and private sectors, academia, and non-governmental organizations.

The study team also acknowledges and sin-cerely thanks the hundreds of contributors whoparticipated in the OED Development Forum andsent very useful comments on the design andinterim findings of the study. MuthukumaraMani adeptly managed the forum.

The generous financial support of the SwissAgency for Development and Cooperation, theNorwegian Ministry of Foreign Affairs, and the

U.K. Department for International Developmentis gratefully acknowledged.

The study was published in the Partnershipsand Knowledge Group (OEDPK) by the Out-reach and Dissemination Unit. The task teamincludes Elizabeth Campbell-Pagé (task teamleader), Caroline McEuen (editor), and JuicyQureishi-Huq (administrative assistant).

Director-General, Operations Evaluation:

Robert Picciotto

Director, Operations Evaluation Department:

Gregory K. Ingram

Manager, Sector and Thematic Evaluation Group:

Alain Barbu

Task Manager: Andrés Liebenthal

FOREWORD

The World Bank has madesubstantial improvement in its

environmental performance since1987. It has focused on theenvironment as a new area ofactivity, and it has sought to mitigatethe negative environmental effects ofits development interventions. TheBank’s participation in the 1992United Nations Conference onEnvironment and Development andthe 1992 World Development Reporton the environment demonstrated theBank’s engagement and helpedlaunch many environmentalactivities. These efforts haveproduced commendable results andhave promoted awareness indeveloping country governments ofthe linkages between theenvironment and development. TheBank has helped many governmentscreate environmental ministries andenvironmental assessmentregulations.

To be sure, these achievementshave fallen short of theexpectations of many stakeholders.The momentum of the early 1990sdissipated in the face of constraintsin the operating environment.Environmental sustainability wasnot integrated into the Bank’s coreobjectives and country assistancestrategies, and linkages betweenmacroeconomic policy, povertyalleviation, and environmentalsustainability were not explicitlyforged. There has been a lack ofconsistent managementcommitment to the environment,coupled with a lack of consistentmanagement accountability. The

PRÓLOGO

El Banco Mundial hamejorado apreciablemente

su actuación relativa al medioambiente desde 1987. Ha centrado laatención en el medio ambiente comonueva esfera de actividad y hatratado de mitigar los efectosambientales perjudiciales de susintervenciones de desarrollo. Suparticipación en la Conferencia delas Naciones Unidas sobre MedioAmbiente y Desarrollo de 1992 y elInforme sobre el desarrollo mundial1992: desarrollo y medio ambientedemostraron el compromiso delBanco y contribuyeron a la iniciaciónde múltiples actividadesambientales. Esa labor ha producidoresultados encomiables y ha creadoconciencia en los gobiernos de lospaíses en desarrollo de los vínculosque existen entre el medio ambientey el desarrollo. El Banco ha ayudadoa muchos gobiernos a crearministerios del medio ambiente ya elaborar normas de evaluaciónambiental.

Esos éxitos no han logradocolmar, por cierto, las expectativasde muchos de los interesados. Elimpulso creado a comienzos de losaños noventa se debilitó debido alas limitaciones del entornooperacional. La sostenibilidadambiental no se incorporó en losobjetivos básicos ni en lasestrategias de asistencia a lospaíses del Banco, ni seestablecieron vinculacionesexplícitas entre la políticamacroeconómica, el alivio de lapobreza y la sostenibilidadambiental. No ha habido un

PRÉFACE

La Banque mondiale aconsidérablement amélioré

les résultats qu’elle obtient au planenvironnemental depuis 1987. Ellea fait de l’environnement l’un deses pôles d’activité, et s’efforced’atténuer les effets négatifs quepeuvent avoir en ce domaine sesinterventions en faveur dudéveloppement. Sa participationà la Conférence des Nations Unies sur l’Environnement et leDéveloppement en 1992 et lapublication, la même année, d’unRapport sur le Développement dansle Monde consacré àl’environnement, qui ont contribuéau lancement de nombreusesactivités environnementales,témoignent de l’engagement de laBanque en ce domaine. Ces effortsont produit des résultats louableset ont permis de faire prendreconscience aux pouvoirs publicsdes pays en développement desliens qui existent entrel’environnement et ledéveloppement. La Banque a aidéde nombreux pays à se doter d’unministère de l’environnement et àmettre en place des réglementationsexigeant la réalisation d’évaluationsenvironnementales.

Il est indéniable que cesaccomplissements ne répondentpas totalement aux attentes denombreuses parties prenantes.La dynamique observée au débutdes années 90 a été compromisepar les obstacles opérationnels.La viabilité écologique n’a étéintégrée ni dans les grandsobjectifs de la Banque ni dans

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Bank has not supportedenvironment efforts as acentral theme through staffincentives or resourceallocations. Yet staff havecarried out manyworthwhile activities relatedto the environment.

These shortcomings are rootedin part in fundamental differencesof view among member countriesabout the Bank’s role. Manycountries are reluctant to borrowfor environmental projects and toimplement Bank environmentalpolicies, which they perceive ascostly and rigid. Manynongovernmental organizationsremain critical of Bankperformance, and some advocatepolicies that would downplay theeconomic prerequisites of povertyreduction.

In short, this OED report findsthat the Bank has made progresson environmental matters but notesthat its commitments have notbeen accompanied by precisegoals and performance monitoring.It advances explanations of whythings have turned out this wayand offers recommendations thatfocus on how to restore theenvironment to its proper role inthe Bank’s holistic, long-termdevelopment agenda.

compromiso firme ni unaresponsabilidad sistemáticade la administraciónrespecto del medioambiente. El Banco no haapoyado el carácterprioritario del trabajo sobreel medio ambiente con el

otorgamiento de incentivos alpersonal o con la asignación derecursos. A pesar de ello, elpersonal ha llevado a cabo muchasactividades valiosas relacionadascon el medio ambiente.

Esas deficiencias tienen suorigen en parte en diferencias deopinión fundamentales entre lospaíses miembros acerca del papeldel Banco. Muchos países seresisten a pedir préstamos paraproyectos ambientales y a aplicarlas políticas sobre medio ambientedel Banco, las que considerancostosas y rígidas. Muchasorganizaciones no gubernamentalescontinúan criticando la actuacióndel Banco. Algunas, incluso,preconizan políticas que restaríanimportancia a los requisitoseconómicos esenciales para lareducción de la pobreza.

En resumen, en el presenteinforme del DEO (Departamentode Evaluación de Operaciones) sellega a la conclusión de que elBanco ha progresado en lo querespecta a las cuestionesambientales, pero se observa quesus compromisos no han estadoacompañados de metas precisas nidel seguimiento de los resultados.Se presentan explicaciones sobre elporqué de ello y se formulanrecomendaciones centradas en laforma de devolver al medioambiente el papel central que lecorresponde en el programa dedesarrollo integrado y a largo plazodel Banco.

les stratégies d’aide-pays, etles liens entre la politiquemacroéconomique, laréduction de la pauvretéet la viabilité écologiquen’ont pas été clairementétablis. La direction n’a pastoujours fait preuve de son

engagement dans le domaineenvironnemental et n’a pas étésystématiquement tenuecomptable des choix effectuésen ce domaine. La Banque n’apas accordé aux actionsenvironnementales une placecentrale en les appuyant par lafourniture d’incitations aupersonnel ou de ressourcesfinancières. Les services de laBanque ont néanmoins poursuivide nombreuses activitésimportantes sur le planenvironnemental.

Ces points faibles s’expliquenten partie par les opinionsfondamentalement divergentesdes États membres quant au rôlede la Banque. De nombreuxpays hésitent à emprunter pourfinancer des projetsenvironnementaux et à mettreen oeuvre les politiquesenvironnementales de la Banquequ’ils jugent coûteuses et rigides.De nombreuses organisationsnon gouvernementales continuentde critiquer la performance dela Banque et certaines préconisentl’adoption de politiques quiminimisent l’importance desconditions économiquesnécessaires à la réduction de lapauvreté.

Pour conclure, le rapport del’DEO estime que la Banque aréalisé des progrès sur le planenvironnemental mais note queson engagement en ce domainen’a pas donné lieu à la définition


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d’objectifs précis et à unsuivi des résultats. Ils’efforce d’en déterminerles raisons et offre diversesrecommandations pourredonner àl’environnement la placecentrale qui lui convient

dans le programme dedéveloppement holistique à longterme de la Banque.

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Robert PicciottoDirector-General, Operations Evaluation

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EXECUTIVESUMMARY

In its first review of the Bank’senvironmental policies and

activities since the EnvironmentDepartment was created in 1987, theOperations Evaluation Department(OED) finds that Bank performancehas substantially improved. The Bankhas mitigated the negative effects ofmany of its developmentinterventions, helped governmentsbuild environmental institutions andprograms, and produced solid policyanalysis and economic and sectorwork—but it has not yet integratedenvironmental concerns fully into itscore objectives or its countryassistance and sector strategies. TheBank has played a leading role inaddressing global issues and hasimproved awareness of the linksbetween the environment anddevelopment, but the complex linksbetween environmentally sustainabledevelopment and poverty alleviationshould be made even more explicit.

Until recently, the momentumachieved in the early 1990s hadslowed in the face of operationalconstraints. Dedicated staff andborrowers committed to improvingthe environment have achievedsome notable successes, but manycountries are reluctant to borrowfor environmental projects or toimplement Bank environmentalpolicies; Bank management,concerned with an ever-growingdevelopment agenda, has not beenconsistent in its commitment to theenvironment; and managers havenot been held strictly accountablefor complying with the Bank’senvironmental policies. The Bank

RESUMEN

En su primer examen de laspolíticas y actividades

ambientales del Banco desde quese creó el Departamento del MedioAmbiente en 1987, el Departamentode Evaluación de Operaciones (DEO)llega a la conclusión de que el Bancoha mejorado notablemente suactuación en esta esfera. Ha mitigadolos efectos negativos de muchas desus intervenciones de desarrollo,ha ayudado a los gobiernos a crearinstituciones y programasrelacionados con el medio ambiente,y ha producido análisis de políticay estudios económicos y sectorialessólidos —pero aún no ha integradocompletamente las cuestionesambientales en sus objetivos básicosni en sus estrategias sectoriales yde asistencia a los países. El Bancoha desempeñado un papelpreponderante en lo que respectaa abordar problemas de alcancemundial y ha creado mayorconciencia de los vínculos queexisten entre el medio ambiente yel desarrollo, pero es preciso haceraún más explícitos los complejosvínculos entre un desarrolloambientalmente sostenible y el aliviode la pobreza.

Hasta hace poco tiempo, elimpulso alcanzado a comienzosde los años noventa se habíadebilitado al tropezar conlimitaciones operacionales. Elpersonal y los prestatariosempeñados en mejorar el medioambiente han logrado un éxitonotable en algunos aspectos, peromuchos países se muestran reaciosa pedir préstamos para proyectos

RÉSUMÉANALYTIQUE

Au terme de son premierexamen des politiques et

des activités environnementalesde la Banque depuis la création dudépartement de l’environnement en1987, le département de l’évaluationdes opérations (OED) note que laperformance de la Banque en cedomaine s’est nettement améliorée.La Banque a réduit les effets négatifsd’un grand nombre de sesinterventions à l’appui dudéveloppement, a aidé les pouvoirspublics à mettre en place desinstitutions et des programmesenvironnementaux, et a réaliséde solides études et analyseséconomiques et sectorielles ;toutefois elle n’a pas encorepleinement inclus les questionsenvironnementales dans ses objectifsinstitutionnels ou dans ses stratégiesd’aide qui sont axées sur les paysou sur les secteurs. La Banque mènel’action engagée pour lutter contreles problèmes d’envergure mondialeet contribue à faire mieuxcomprendre les liens entrel’environnement et ledéveloppement ; il conviendraittoutefois d’établir encore plusclairement les rapports qui existententre un développementécologiquement viable et laréduction de la pauvreté.

La dynamique observée audébut des années 90 a étécompromise par des obstaclesopérationnels jusqu’à une daterécente. Si des progrès notablesont été accomplis grâce audévouement de services del’institution et à la détermination

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must provide betterguidance, standards, tools,incentives, and monitoringif staff are to mainstreamenvironmental componentsin all Bank work, asproposed by theenvironmental strategy

recently approved by the Bank’sexecutive directors.

The Bank’s Approach to theEnvironmentIn response to worldwide concernsabout whether economicdevelopment was compatible withprotection of the environment, theinternational donor communitybegan assigning higher priority toenvironmental concerns in the late1980s. Stakeholders urged theBank to accelerate its efforts tosupport more environmentallysustainable development throughincreased lending, more attentionto the environment in countryprograms and policy dialogue, andmore support for global andregional environmental initiatives.

Since 1987, the Bank has vastlyexpanded the level and scope ofits environmental activities,according to this review, whichwas timed to inform preparation ofa new Bank strategy for theenvironment. The Bank created anEnvironment Department, greatlyincreased environmental staff (whonow number about 250), institutedenvironmental safeguard policies,and launched a program ofenvironmental lending. The Bank’sparticipation in the U.N.Conference on Environment andDevelopment in Rio de Janeiro andthe World Development Report onthe environment (both in 1992)demonstrated the Bank’sengagement with environmental

ambientales o a aplicar laspolíticas ambientales delBanco; la administración,empeñada en un programade desarrollo cada vez másamplio, no ha sidocoherente en sucompromiso con el medio

ambiente, y no se ha hecho a losadministradores estrictamenteresponsables del cumplimiento delas políticas ambientales del Banco.Es preciso que éste mejore susdirectrices, normas, instrumentos,incentivos y sistemas desupervisión, a fin de que elpersonal incorpore componentesambientales en todos los estudios,como se propuso en la estrategiaambiental aprobada recientementepor los Directores Ejecutivos.

La estrategia del Banco conrespecto al medio ambientePara atender a la preocupaciónmundial acerca de si el desarrolloeconómico es compatible con laprotección del medio ambiente, lacomunidad internacional dedonantes comenzó a asignar mayorprioridad a las cuestionesambientales a fines del decenio de1980. Los interesados instaron alBanco a que acelerara susesfuerzos en pro de un desarrollomás sostenible desde el punto devista ambiental mediante elaumento de las operaciones depréstamo, una mayor atención almedio ambiente en los programasde países y los diálogos sobrepolíticas, y un mayor apoyo a lasiniciativas ambientales mundiales yregionales.

De conformidad con el presenteexamen, que estaba calculado paraque sirviera de base a lapreparación de una nuevaestrategia del Banco sobre el

d’emprunteurs désireuxd’améliorer la situationenvironnementale, un grandnombre de pays hésitent àemprunter pour financerdes projetsenvironnementaux ou àmettre en œuvre les

politiques environnementales de laBanque ; la direction del’institution, confrontée à unprogramme d’interventionsenvironnementales sans cesse plusimportant, n’a pas toujours faitpreuve de son engagement en cedomaine et n’a pas été vraimenttenue comptable du respect de sespolitiques environnementales. LaBanque doit fournir de meilleuresdirectives, normes et incitations etde meilleurs outils et aussi assurerun suivi plus rigoureux pourpermettre à ses services desystématiquement intégrer descomposantes environnementalesdans les opérations, comme lepréconise la stratégieenvironnementale que viennentd’approuver les administrateurs.

La démarche environnementale de la BanqueFace aux préoccupations suscitéesdans le monde entier par lacompatibilité du développementéconomique et de la protection del’environnement, la communautédes bailleurs de fondsinternationaux a commencé àaccorder une plus haute prioritéaux questions environnementalesvers la fin des années 80. Lesparties prenantes ont enjoint laBanque d’accroître son appui à undéveloppement plus viable sur leplan environnemental enaugmentant le volume de sesfinancements au titre del’environnement, en accordant une

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issues and helped launch arange of environmentalactivities. The Bank hashelped many governmentscreate environmentalministries and introduceregulations requiringenvironmental assessments.

It has undertaken about 140environmental projects and hassubjected roughly 1,200 projects toan environmental assessment orreview. OED assessed the Bank’sperformance record in four broadareas of environmental activity:• Stewardship: helping member

countries develop strategicpriorities, build institutions, andimplement programs to supportenvironmentally sustainabledevelopment.

• Mainstreaming: integratingenvironmental considerationsinto Bank operations andhelping member countries buildon the positive links betweenpoverty reduction, economicefficiency, and environmentalprotection.

• Safeguards: ensuring thatpotential adverse environmentalimpacts from developmentprojects are addressed.

• Global challenges: buildingawareness about andpartnerships to address pressingtransnational and globalenvironmental issues.

Stewardship, Strategy, andPolicy DialogueAfter Rio, at the urging ofInternational DevelopmentAssociation (IDA) deputies, theBank pressed for the completion ofnational environmental actionplans (NEAPs) in borrowercountries. By the end of 2000, 92NEAPs (of mixed quality) had been

medio ambiente, a partir de1987 el Banco ha ampliadoenormemente el nivel y elalcance de sus actividadesambientales. Creó unDepartamento del MedioAmbiente, aumentóconsiderablemente el

número de funcionarios que seocupan del medio ambiente (elque ahora asciende a unos 250),instituyó políticas de salvaguardiaambiental y puso en marcha unprograma de préstamos para finesambientales. Su participación en laConferencia de las NacionesUnidas sobre Medio Ambiente yDesarrollo celebrada en 1992 enRio de Janeiro y el Informe sobre eldesarrollo mundial 1992:desarrollo y medio ambientedemostraron el compromiso delBanco con las cuestionesambientales y contribuyeron a lainiciación de una variedad deactividades ambientales. El Bancoha ayudado a muchos gobiernos acrear ministerios del medioambiente y a introducir normasque exigen una evaluaciónambiental. Ha emprendido unos140 proyectos ambientales y hasometido a evaluación o estudiosambientales unos 1.200 proyectosaproximadamente. El DEO evaluóla actuación del Banco en cuatroamplias esferas de actividadambiental:• Gerencia ambiental: Prestación

de ayuda a los países miembrospara el establecimiento deprioridades estratégicas, lacreación de instituciones y laimplementación de programasdestinados a apoyar undesarrollo ambientalmentesostenible.

• Integración: Inclusión de lasconsideraciones ambientales en

plus grande attentionà cette question dans lecadre des programmesétablis pour les pays etdu dialogue sur l’actionà mener, et en fournissantun plus grand appuiaux initiatives

environnementales d’enverguremondiale et régionale.

Le présent examen, qui a étépréparé aux fins de la préparationd’une nouvelle stratégieenvironnementale de la Banque,a permis d’établir que, depuis 1987,l’institution a considérablementaccru le volume et la portée de sesactivités environnementales. Elle acréé un département del’environnement, gonflé les effectifschargés de ce domaine (ils sontactuellement 250), adopté desmesures de sauvegardeenvironnementale et lancé unprogramme de prêts au titre del’environnement. La participation dela Banque à la conférence desNations Unies sur l’environnementet le développement, à Rio deJaneiro en 1992, et la publication, lamême année d’un rapport surle développement dans le mondeconsacré à l’environnementtémoignent de l’intérêt portépar l’institution à ce domaine etont permis de lancer toute unegamme d’activités en ce domaine.La Banque a aidé un grand nombrede pays à se doter de ministèresde l’environnement et à mettreen place des réglementationsexigeant la réalisation d’évaluationsenvironnementales. Elle aentrepris environ 140 projetsenvironnementaux et a assujettiquelque 1?0 autres projets à uneévaluation ou à un examenenvironnemental. L’OED a évaluéla performance de la Banque en

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completed. Within the Bank,however, only half of theCountry AssistanceStrategies reviewed (from a1992–99 sample) hadadequately addressedenvironmental issues ascutting across all sectors.

Substantial progress has beenmade where committed Bank staffand line managers have beenproactive in making the case forthe environment and whereborrower countries recognize itsimportance. Countries as diverse asChina, Costa Rica, Mozambique,and Poland have demonstratedhow much can be done in gaininggovernment commitment to andimproving the design andapplication of a country’senvironmental policies. Satisfyingresults have been obtained in bothlow- and middle-income countries.The priority the Bank gives theenvironment in its own objectives,strategy, and programs is asimportant a signal to membercountries as the extent of thefinancial assistance it offers.

Environmental Lending andMainstreamingThe amount of directenvironmental lending rose from$564 million in 1993 (7 projects) to$1,072 million in 1996 (15projects), dropping to $514 millionin 2000 (13 projects). Some of theBank’s environmental projects andprograms have served as models ofsuccessful direct lending and ofmainstreaming the environmentinto other operations—forexample, the Loess PlateauWatershed Rehabilitation andSustainable Coastal ResourcesDevelopment projects in China, theUttar Pradesh Sodic Lands

las operaciones del Banco yayuda a los paísesmiembros para consolidarlos vínculos positivos entrela reducción de la pobreza,la eficiencia económica y laprotección del medioambiente.

• Salvaguardias: Adopción demedidas para atender a losposibles efectos ambientalesadversos de los proyectos dedesarrollo.

• Problemas mundiales: Toma deconciencia acerca de losurgentes problemas ambientalestransnacionales y mundiales, yestablecimiento de asociacionespara abordarlos.

Gerencia ambiental, estrategiay diálogo sobre políticasCon posterioridad a la Conferenciade Rio, a instancias de losDelegados de la AsociaciónInternacional de Fomento (AIF), elBanco insistió en que secompletaran los planes nacionalesde protección ambiental en lospaíses prestatarios. Para fines de2000, se habían terminado 92planes (de calidad desigual).Dentro del Banco, sin embargo,sólo la mitad de las estrategias deasistencia a los países examinadas(de una muestra que abarcaba elperíodo 1992-1999) había tratadoadecuadamente las cuestionesambientales como problemas queafectan a todos los sectores.

Se han realizado avancesconsiderables en los casos en quelos funcionarios del Bancoentregados a su trabajo y sussupervisores inmediatos hanabogado activamente en favor delmedio ambiente y en que lospaíses prestatarios reconocen suimportancia. Países tan diversos

s’attachant à quatre grandsaspects des activitésenvironnementales :• Une bonne intendance de

l’environnement, c’est-à-dire l’aide fournie auxpays membres aux fins dela formulation de leurs

priorités stratégiques, durenforcement de leursinstitutions et de l’exécution desprogrammes à l’appui d’undéveloppement écologiquementdurable.

• L’intégration, c’est-à-dire la priseen compte systématique desconsidérationsenvironnementales dans lesopérations de la Banque et lafourniture d’une aide aux paysmembres pour leur permettred’exploiter les liens positifs quiexistent entre la réduction de lapauvreté, l’efficience del’économie et la protection del’environnement.

• Les mesures de sauvegarde, c’est-à-dire les dispositions prisespour que les effets négatifs quepeuvent avoir les projets dedéveloppement surl’environnement soient pris enconsidération.

• Les problèmes d’enverguremondiale, c’est-à-dire lasensibilisation des partiesprenantes à ces problèmes et laformation de partenariats pours’attaquer aux problèmesenvironnementaux pressants quisortent du cadre des frontièresnationales ou se manifestent àl’échelle mondiale.

Une bonne intendance, desstratégies et le dialogue surl’action à menerÀ la suite de la conférence de Rioet à la demande expresse des

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Reclamation project in India,an industrial pollutionproject in Bulgaria, theArid Lands ResourceManagement project inKenya, district heatingprojects in Poland, and airpollution projects in Mexico.

Results are still uncertain forsignificant efforts made in othercountries to implement major andvitally needed reforms in thetreatment of the environment.

One objective of mainstreamingis to integrate environmentalconcerns into the design andimplementation of all projects. Thiswill be more difficult to put intopractice and to monitor than directenvironmental lending, but couldhave much more dramatic effects.In the past, the Bank’s sectoralorientation made it difficult forenvironmental staff to participate inprojects in other sectors and toencourage sensitivity toenvironmental issues. In the 1990sthe proportion of adjustmentlending that dealt withenvironmental issues was only 23percent.

Safeguards and EnvironmentalAssessmentsThe Bank has addressed thepotentially adverse environmentalimpacts of projects it supportsthrough implementation ofenvironmental assessments (EAs)and related safeguard policies.OED reviews have found theBank’s environmental safeguardpolicies to be generally satisfactory,but implementation ofenvironmental assessments hasbeen mixed. Often the assessmentsare not completed (and safeguardissues are not identified) earlyenough in the project cycle to have

como China, Costa Rica,Mozambique y Polonia handemostrado lo mucho quese puede hacer para lograrla adhesión del gobierno alas políticas ambientales delpaís y para mejorar laformulación y la aplicación

de éstas. Se han obtenidoresultados satisfactorios tanto enpaíses de ingreso bajo como enpaíses de ingreso mediano. Laprioridad que asigna el Banco almedio ambiente en sus objetivos,su estrategia y sus programas esuna señal tan importante para lospaíses miembros como la medidade la asistencia financiera queofrece.

Préstamos para finesambientales e integraciónde las cuestiones ambientalesen proyectos de otra índoleEl monto de los préstamos directospara fines ambientales aumentó deUS$564 millones en 1993 (7proyectos) a US$1.072 millones en1996 (15 proyectos), para luegodisminuir a US$514 millones en2000 (13 proyectos).

Algunos de los proyectos yprogramas ambientales del Bancose han tomado como modelo delos buenos resultados de lospréstamos directos y de laintegración del medio ambiente enotras operaciones, por ejemplo, elproyecto de rehabilitación de lacuenca hidrográfica de la mesetade Loess y el proyecto deordenación sostenible de losrecursos biológicos costeros enChina, el proyecto derehabilitación de tierras con altocontenido de sodio en UttarPradesh en la India, un proyectosobre contaminación industrial enBulgaria, el proyecto de

délégués de l’Associationinternationale dedéveloppement (IDA), laBanque a insisté pourque ses pays emprunteursmènent à bien lapréparation de plansnationaux d’action

environnementale (PNAE). À lafin de 2000, 92 PNAE (de plusou moins bonne qualité) étaientachevés. Toutefois, la moitiéseulement des stratégies d’aide-pays de la Banque (tirées d’unéchantillon de stratégies serapportant à la période 1992–99)qui ont été examinées replaçaient,comme il se doit, les questionsenvironnementales dans un cadreintersectoriel.

Des progrès importants ontété accomplis dans les pays oùles agents et les cadresopérationnels de la Banque ontfait preuve d’initiative enencourageant la prise en comptedes questions environnementaleset où le gouvernement reconnaîtl’importance ces questions. Despays aussi différents que la Chine,le Costa Rica, le Mozambique etla Pologne ont montré ce qu’il estpossible d’accomplir lorsqueles pouvoirs publics sontdéterminés à améliorer laconception et l’application despolitiques environnementales.De bons résultats ont été obtenusdans des pays à revenu faibleaussi bien que dans des paysà revenu intermédiaire. À cetégard, la priorité accordée parla Banque à l’environnement auniveau de ses objectifs, de sesstratégies et dans ses programmesest une indication aussi importantepour les pays membres que levolume d’aide financière qu’ellepeut offrir.

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much impact on projectdesign. In a recentassessment of supervisionquality, the QualityAssurance Group foundthat, for projects withsignificant safeguardaspects, the mitigation

actions and arrangements wereinadequate in 20 percent of cases.Some borrowers and taskmanagers see environmentalmitigation measures as an addedcost and burden that retards projectexecution. Environmentalassessments must contain apolicing element, but the Bank’sculture and structure haveproduced an unnecessarilyadversarial relationship betweencompliance with safeguards andthe promotion of environmentalsustainability.

Global Challenges Bank efforts to address globalissues in research and analysishave been satisfactory. It has alsobegun developing effectivepartnerships. More could havebeen done to mitigate the localimpacts of climate change or toaddress regional andtransboundary issues. The Bank’sattention to global issues—such asbiodiversity, desertification, forestprotection, ozone depletion, andclimate change—is appropriate buttends to understate the importanceof environmental concerns to localinterests and welfare. Recent Bankresearch has shown, for example,that an approach to reducingparticulate air pollution thatproduces great local health benefitsis also nearly optimal for reducinggreenhouse gases, while anapproach that focuses initially onreducing greenhouse gases would

ordenación de los recursosde tierras áridas en Kenya,proyectos de calefacción endistritos de Polonia yproyectos sobrecontaminación atmosféricaen México. Los resultadosde los ingentes esfuerzos

realizados en otros países poraplicar reformas necesarias y devital importancia para eltratamiento del medio ambienteaún son inciertos.

Uno de los objetivos que sepersiguen es la integración de lascuestiones ambientales en laformulación y la ejecución detodos los proyectos. Esto será másdifícil de poner en práctica y devigilar que el otorgamiento depréstamos directos para finesambientales, pero sus efectospodrían ser mucho másespectaculares. En el pasado, laorientación sectorial del Bancohacía difícil que el personal que seocupaba de cuestiones ambientalespudiera participar en proyectos deotros sectores y alentar lasensibilidad a las cuestionesambientales. En la década de 1990la proporción de préstamos parafines de ajuste que se ocupaba decuestiones ambientales era sólo del23%.

Salvaguardias y evaluacionesambientalesEl Banco ha atendido a losposibles efectos ambientalesadversos de los proyectos quefinancia mediante la realización deevaluaciones ambientales y laaplicación de las políticas desalvaguardia conexas. Losexámenes del DEO handeterminado que las políticas desalvaguardia ambiental del Bancoson en general satisfactorias, pero

Le financement desinterventionsenvironnementales et laprise en comptesystématique de cesquestionsLe volume des prêtsdirectement consentis au

titre d’activités environnementalesest passé de 564 millions de dollarsen 1993 (7 projets) à 1 072 millionsde dollars en 1996 (15 projets)pour tomber à 514 millions dedollars en 2000 (13 projets).Certains des projets et desprogrammes environnementaux dela Banque sont des modèlesd’opérations de prêts directs etd’inclusion systématique del’environnement dans d’autresopérations ; c’est le cas, parexemple, des projets deréhabilitation du bassin versant duplateau de Loess et de mise envaleur viable des ressourcescôtières en Chine, du projet derégénération des terres sodiques enUttar Pradesh (Inde), d’un projetde lutte contre la pollutionindustrielle en Bulgarie, d’un projetde gestion des ressources de terresarides au Kenya, de projets dechauffage de district en Pologne etde projets de lutte contre lapollution atmosphérique auMexique. Il est encore trop tôtpour évaluer les résultats donnéspar les efforts significatifs déployésdans d’autres pays pour procéder àdes réformes importantes etcruciales dans le domaine del’environnement.

L’un des buts recherchésconsiste à assurer l’intégrationsystématique des questionsenvironnementales dans laconception et l’exécution de tousles projets. Cette démarche seraplus difficile à mettre en œuvre et

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have much less impact onreducing local pollution.Bank country activitiesshould focus more on thelocal impacts of globaldegradation of theenvironment and the localbenefits of implementing a

global environmental agenda.Global environmental issues by

their nature involve public goods,which market forces normally donot provide adequately. Nationally,public intervention to providepublic goods is a governmentresponsibility; internationally,addressing public goods issuesrequires collective action, theleadership of international bodies,and effective partnerships amongpublic institutions, the privatesector, and groups from civilsociety. The Bank has increased itsefforts to form partnerships withkey stakeholders, private sectorinterests, and local NGOs. Thepent-up demand for a Bank role inmulticountry partnerships remainsstrong.

Falling Short of High ExpectationsBy and large, OED’s findings aresimilar to those for other donors’environmental programs. The Bankrecognized the environment’sstrategic importance with creationof the Environment Departmentand reaffirmed it at the Rioconference, in the 1992 WorldDevelopment Report, and in variouspresidential statements andindividual initiatives. NationalEnvironmental Action Plans weresupposed to be integrated intocountry strategies, environmentalassessments were supposed to leadto sectoral and Regionalassessments, and global concerns

que los resultados de lasevaluaciones ambientaleshan sido relativos. Confrecuencia las evaluacionesno se ejecutan (y lascuestiones de salvaguardiano se indican) con rapidezsuficiente dentro del ciclo

de los proyectos para que tenganalguna influencia en la formulaciónde los mismos. En una evaluaciónreciente de la calidad de lasupervisión, el Grupo de Garantíade Calidad determinó que,tratándose de proyectos conimportantes componentes desalvaguardia, las medidas ymecanismos de mitigación eraninsuficientes en el 20% de loscasos. Algunos prestatarios y jefesde proyectos consideran que lasmedidas de mitigación del dañoambiental constituyen un costo yuna carga adicionales que retardanla ejecución de los proyectos. Lasevaluaciones ambientales debencontener un elemento devigilancia, pero la cultura y laestructura del Banco hanproducido una relacióninnecesariamente contradictoriaentre el cumplimiento de lassalvaguardias y el fomento de lasostenibilidad ambiental.

Problemas mundialesLos esfuerzos del Banco porabordar los problemas mundialesen su labor de investigación yanálisis han sido satisfactorios.Además, el Banco ha comenzado aforjar asociaciones eficaces. Detodos modos, se podría haberhecho más para mitigar los efectoslocales del cambio climático o paraabordar los problemas regionales ytransfronterizos. La atención quepresta el Banco a las cuestiones dealcance mundial —como la

à suivre que des opérationsde prêt direct au titre del’environnement, mais ellepourrait avoir des effetsbien plus considérables. Enraison du ciblage sectorieldes opérations de laBanque, il s’est avéré assez

difficile pour les spécialistes del’environnement de participer à desprojets dans d’autres secteurs et desensibiliser les parties prenantes àl’importance des questionsenvironnementales. Dans lesannées 90, seulement 23 % desopérations de prêt à l’ajustementtraitaient de questionsenvironnementales.

Les mesure de sauvegarde et les évaluationsenvironnementalesLa Banque prend en comptel’impact négatif que pourraientavoir sur l’environnement lesprojets qu’elle appuie en procédantà des évaluationsenvironnementales et enappliquant les mesures desauvegarde correspondantes.L’OED a déterminé, dans le cadrede ses examens, que les mesuresde sauvegarde environnementalede la Banque sont, dansl’ensemble, satisfaisantes mais queles résultats obtenus au plan de laréalisation des évaluationsenvironnementales sont mitigés.Dans de nombreux cas, cesévaluations n’ont pas été achevées(et les problèmes nécessitantl’adoption de mesures desauvegarde n’ont pas été identifiés)à un stade suffisamment précocedu cycle du projet pour pouvoiravoir un impact sur la conceptionde ce dernier. À l’occasion d’unerécente évaluation de la qualité desactivités de supervision, le Groupe

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were supposed to beintegrated into countryprograms, not just addedon. Why didn’t this happen?The preponderance ofevidence suggests thefollowing:•Country Assistance

Strategies have tended to treatthe environment as just anothersector competing for attention,rather than as a crosscuttingtheme, and have not madeexplicit (and built upon) the linkbetween environmentallysustainable development andpoverty reduction.

• The Bank’s safeguard policies(to prevent or mitigateenvironmental harm from itsprojects) were sound in conceptbut unaccompanied by clearstan-dards and inconsistentlyimplemented. This has divertedattention to damage control.

• The Bank’s efforts in dealingwith global issues have beenhampered by con-flicts betweentheir earlyformulation as goals external tomember countries and theBank’s strong countryorientation.

• The structure of priorities, in-centives, and accountabilityprocesses—from seniormanagement on down theline—has not supported astrategic emphasis on theenvironment, rigorousmonitoring, or positiverecognition of environmentalstaff and activities.

These shortcomings will beaddressed by the newenvironmental strategy recentlyendorsed by the Board of

diversidad biológica, ladesertificación, la protecciónforestal, el agotamiento dela capa de ozono y elcambio climático— esapropiada, pero tiende aminimizar la importancia delas cuestiones ambientales

para los intereses y el bienestarlocales. Las investigacionesrecientes del Banco handemostrado, por ejemplo, que unsistema de reducción de loscontaminantes atmosféricos sólidosque produce grandes beneficiospara la salud local, es además casióptimo para la reducción de losgases de efecto invernadero, entanto que un sistema centradoinicialmente en la reducción de losgases de efecto invernadero seríamucho menos eficaz para reducirla contaminación local. Lasactividades del Banco en los paísesdeberían prestar más atención a losefectos locales de la degradacióndel medio ambiente mundial y alos beneficios que reporta a nivellocal la ejecución de un programaambiental mundial.

Los problemas ambientalesmundiales guardan relación por sunaturaleza con los bienes públicos,los que las fuerzas del mercadogeneralmente no proporcionan encantidad suficiente. A nivelnacional, la intervención públicapara el suministro de bienespúblicos es responsabilidad delgobierno; a nivel internacional,para abordar el problema de losbienes públicos se requiere unaacción colectiva, la función rectorade los órganos internacionales y elestablecimiento de asociacioneseficaces entre las institucionespúblicas, el sector privado y lasagrupaciones de la sociedad civil.El Banco se ha esforzado más por

de contrôle de la qualité adéterminé que les actions etles dispositions adoptéespour atténuer les impactsnégatifs ont été inadéquatesdans 20 % des projets pourlesquels il était important deprendre des mesures de

sauvegarde. Certains emprunteurset certains chefs de projetsconsidèrent que les mesuresd’atténuation desenvironnementales représententune charge et un coûtsupplémentaires et ne font queralentir l’exécution du projet. Lesévaluations environnementalesdoivent avoir une certaineconnotation disciplinaire, mais laculture et la structure de la Banqueont produit une relationinutilement conflictuelle entre lerespect des mesures de sauvegardeet la promotion de la viabilitéenvironnementale.

Les problèmes mondiauxLes efforts déployés par la Banquepour s’attaquer à des problèmesd’envergure mondiale dans lecadre de ses travaux de rechercheet d’analyse sont satisfaisants.L’institution a également entreprisde forger des partenariats efficaces.Elle aurait pu faire davantage pouratténuer l’impact au niveau localdes changements climatiques ous’attaquer à des questions deportée régionale et transfrontières.L’attention qu’elle prête auxquestions d’envergure mondiale —comme la diversité biologique, ladésertification, la protection desforêts, l’appauvrissement de lacouche d’ozone et les changementsclimatiques — est adéquate mais atendance à faire oublierl’importance des préoccupationsenvironnementales pour les

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Directors, restoring theenvironment to its role inthe Bank’s long-termdevelopment agenda.

Next StepsThe environment strategypaper provides an

opportunity to achieve a realisticand workable consensus amongBank members about the Bank’sfuture role in environmental efforts.Toward that end, OED offers thesebroad medium-termrecommendations, among others.The Bank should:• Build on its comparative

advantage and analyticalcapacity to demonstrate theenvironment’s critical role insustainable development andpoverty reduction.

• Review its environmentalsafeguard oversight system andprocesses, to strengthenaccountability for compliance.

• Continue to update its policyframework, adapting it tochang-ing practices and new Bankinstruments and to take accountof recent experience.

• Help implement the globalenvironmental agenda byconcentrating on global issuesthat involve local and nationalbenefits.

crear asociaciones con losprincipales interesados, elsector privado y las ONGlocales. Sigue habiendo unafuerte demanda para que elBanco estimule lacooperación multinacional.

Las grandes expectativasno cumplidasEn general, las conclusiones delDEO son similares a las relativas alos programas ambientales de otrosdonantes. El Banco reconoció laimportancia estratégica del medioambiente con la creación delDepartamento del Medio Ambientey la reafirmó en la Conferencia deRio, en el Informe sobre eldesarrollo mundial 1992 y endiversas declaraciones delPresidente e iniciativasindividuales. Se partió del supuestode que los planes de acciónnacionales sobre el medioambiente se integrarían con lasestrategias de asistencia a lospaíses, que las evaluacionesambientales darían origen aevaluaciones sectoriales yevaluaciones por parte de lasoficinas regionales y que losproblemas mundiales no serían unmero agregado a los programas delos países sino que quedaríanincorporados en ellos. ¿Por qué noocurrió así? La mayor parte de losdatos apuntan a lo siguiente:• Las estrategias de asistencia a

los países han tendido a tratar almedio ambiente simplementecomo un sector más entre losque se disputan la atención, enlugar de considerarlo un temaintersectorial, y no hanexpresado en forma categóricael vínculo que existe entre undesarrollo ambientalmentesostenible y la reducción de la

intérêts et le bien-être despopulations locales. Lestravaux récemmentconsacrés par la Banque àce sujet montrent, parexemple, qu’une démarchevisant à réduire la pollutionatmosphérique due aux

particules en suspension qui ad’importants effets positifs sur lasanté de la population localecontribue également de manièrequasiment optimale à réduire lesémissions de gaz à effet de serre,tandis qu’une démarche axéeinitialement sur la réduction desgaz à effet de serre aurait unimpact moindre sur la réduction dela pollution à l’échelon local. Lesactivités menées par la Banquedans les pays devraient ciblerdavantage l’impact local de ladégradation de l’environnement àl’échelle mondiale ainsi que lesavantages procurés auxpopulations locales par la mise enœuvre d’un programmeenvironnemental mondial.

Les questionsenvironnementales de portéemondiale font intervenir, pardéfinition, des biens publics queles forces du marché ne produisentnormalement pas de manièreadéquate. Au plan national, laresponsabilité de la fourniture desbiens publics incombe à l’État ; auplan international, la résolution desproblèmes concernant les bienspublics exige une action collectivemenée sous l’égide d’organismesinternationaux ainsi que laconstitution de partenariatsefficaces entre les institutionspubliques, le secteur privé et desgroupes de la société civile. LaBanque a intensifié ses efforts dansle but de forger des partenariatsavec les principales parties

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pobreza ni lo han tomadocomo fundamento.• Las políticas de

salvaguardia del Banco(establecidas paraprevenir o mitigar eldaño ambiental derivadode sus proyectos) se

basaban en un concepto sólidopero no estaban acompañadasde normas claras y no seaplicaban de forma sistemática.A causa de ello, la atención seha desviado hacia la reparaciónde los daños.

• Los esfuerzos desplegados porel Banco para hacer frente a losproblemas mundiales se hanvisto obstaculizados por lacontradicción entre suformulación preliminar comoobjetivos ajenos a los paísesmiembros y la fuerte orientacióndel Banco hacia los países.

• La estructura de las prioridades,los incentivos y los procesos derendición de cuentas —desdela administración superior paraabajo— no ha sido propiciapara un énfasis estratégico enel medio ambiente, unasupervisión rigurosa o unreconocimiento positivo delpersonal que se ocupa delmedio ambiente y susactividades.La nueva estrategia ambiental

aprobada recientemente por elDirectorio Ejecutivo subsanará esasdeficiencias, con lo que serestablecerá el papel quecorresponde al medio ambiente enel programa a largo plazo delBanco en materia de desarrollo.

Los próximos pasosEl documento de estrategiaambiental ofrece la oportunidad delograr un consenso realista y

prenantes, des intérêts dusecteur privé et des ONGlocales. Sa participation àdes partenariatsplurinationaux continued’être sollicitée.

Des attentes ambitieuses qui ne sont toujours passatisfaitesDans l’ensemble, les conclusionsde l’OED sont similaires à cellesqui ont été formulées à l’égard desprogrammes environnementauxd’autres bailleurs de fonds. LaBanque a montré qu’ellecomprenait l’importancestratégique de l’environnementlorsqu’elle a créé le départementde l’environnement et a réaffirmél’intérêt qu’elle porte à cettequestion à l’occasion de laconférence de Rio, de lapublication du Rapport sur ledéveloppement dans le monde1992, de diverses déclarations duprésident et de nombred’initiatives. Les plans nationauxd’action environnementaledevaient être intégrés dans lesstratégies formulées pour les pays,les évaluations environnementalesétaient censées déboucher sur desévaluations sectorielles etrégionales, et les préoccupationsd’envergure mondiale devaient êtreintégrées dans les programmesnationaux et non pas simplementannexés à ces programmes.Pourquoi cela ne s’est-il pasproduit ? Les nombreux élémentsd’information disponiblessuggèrent que :• Les stratégies d’aide-pays

considèrent l’environ-nementcomme un secteursupplémentaire auquel il fautprêter attention et non pascomme un problème

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factible entre los miembrosdel Banco acerca del papelfuturo de éste en la acciónsobre el medio ambiente. Aese efecto, el DEO presentaestas recomendacionesgenerales a mediano plazo,entre otras. El Banco

debería:• Aprovechar su ventaja

comparativa y su capacidad deanálisis para demostrar el papeldecisivo que cumple el medioambiente en el desarrollosostenible y la reducción de lapobreza.

• Revisar su sistema desupervisión de las salvaguardiasambientales y los procesoscorrespondientes, a fin dereforzar la responsabilidad de sucumplimiento.

• Seguir actualizando su marconormativo y adaptarlo a lasnuevas prácticas y a los nuevosinstrumentos del Banco y teneren cuenta la experienciareciente.

• Ayudar a poner en práctica elprograma mundial sobre elmedio ambiente,concentrándose en problemasde envergadura mundial queconllevan beneficios locales ynacionales.


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intersectoriel ; elles nedéfinissent pas clairementles liens entre undéveloppementécologiquement durable etla réduction de lapauvreté, et ne lesexploitent pas.

• Les mesures de sauvegarde dela Banque (qui visent à prévenirou à atténuer les dommagescausés à l’environnement parses projets) sont bien conçuesmais ne sont pas accompagnéesde normes clairement formulées; elles sont, en outre, appliquéesde manière inégale. Il s’ensuitque l’attention s’est portée surles mesures prises pour limiterles dégâts.

• Les efforts déployés par laBanque pour faire face auxproblèmes d’enverguremondiale ont été compromisparce que, au départ, lesobjectifs en ce domaine ont étéformulés comme despréoccupations qui débordaientdu cadre national alors que lesactivités de la Banque sontdéfinies par référence aux pays.

• La structure des priorités, desincitations et des processus deresponsabilisation — de ladirection au personnelopérationnel — n’est pasfavorable à une stratégie axéesur l’environnement, un suivirigoureux de la question ou lareconnaissance des efforts dupersonnel et des activitésconcernant l’environnement.

Il sera remédié à ces carencesdans le cadre de la nouvellestratégie environnementale queviennent d’entériner lesadministrateurs, et qui fait del’environnement l’un des objectifs

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du développement à longterme de la Banque.

Action futureLe document sur la stratégieenvironnementale fournitaux pays membres de laBanque l’occasion de forger

un consensus réaliste et applicablesur le rôle que l’institution devrajouer dans le domaine del’environnement. À cette fin, l’OEDprésente, entre autres, plusieurscatégories de recommandationspour le moyen terme selonlesquelles la Banque devrait :• Exploiter l’avantage comparatif

dont elle jouit ainsi que sescapacités d’analyse pourexposer la contribution crucialede l’environnement à undéveloppement durable et à laréduction de la pauvreté.

• Examiner le système desupervision et le processusd’application des mesures desauvegarde environnementaleafin de mieux rendre compte deleur application.

• Continuer d’adapter le cadre deses politiques et procédures faceà l’évolution des pratiques et deses propres instruments, etcompte tenu de l’expérienceacquise.

• Contribuer à l’application duprogramme d’actionenvironnementale mondial enportant son attention sur lesquestions de portée mondialequi ont des avantages au planlocal et national.


x x i i

FR

AN

ÇA

IS

x x i i i

ADB Asian Development BankBP Bank ProcedureCAE Country Assistance EvaluationCAS Country Assistance StrategyCDF Comprehensive Development FrameworkCEO Chief Executive OfficerCIDA Canadian International Development AgencyDFID Department for International Development (United Kingdom)EA Environmental AssessmentENVIS Environmental Information SystemESSD Environmentally and Socially Sustainable Development NetworkESW Economic and Sector WorkGDP Gross Domestic ProductGEF Global Environment FacilityHIPC Highly Indebted Poor Country InitiativeIBRD International Bank for Reconstruction and DevelopmentIDA International Development AssociationIUCN International Union for the Conservation of NatureNEAP National Environmental Action PlanNGO Nongovernmental OrganizationOD Operational DirectiveOECD Organisation for Economic Cooperation and DevelopmentOED Operations Evaluation DepartmentOMS Operational Manual StatementOP Operational PolicyOPN Operational Policy NoteOPS Operations Policy and Strategy DepartmentPCD Project Concept DocumentPRSP Poverty Reduction Strategy Paper QAG Quality Assurance GroupUSAID United States Agency for International DevelopmentWDR World Development Report

ABBREVIATIONS AND ACRONYMS

1

Introduction

This is the first OED evaluation of the World Bank’s overall environmentalstrategy since the Environment Department was created in 1987. Itprovides an independent assessment of World Bank performance and

draws lessons from experience.1 It is timed to inform the new environmentalstrategy being formulated by the Environmentally and Socially SustainableDevelopment (ESSD) Vice-Presidency.

Assessments of environmental programsconducted by OED, the Environment Depart-ment, regional units, and others constituted thestarting point for the evaluation. Backgroundreviews of Bank performance were commis-sioned in selected countries and areas criticalto the environmental strategy.2 Two surveys ofstaff were conducted, and numerous staff wereinterviewed.3 Extensive consultations wereheld with stakeholders in the Regions. TwoInternet forums were conducted. The OEDevaluation team worked closely with the envi-ronment strategy team and shared informa-tion and drafts. An Advisory Panel reviewed thedrafts and served as a sounding board for therecommendations.3

This report presents the highlights and recom-mendations of the evaluation. Supporting evi-dence is provided in a background technical report(Shilling 2000). This report deals with the envi-ronmental performance of the International Bankfor Reconstruction and Development (IBRD) andthe International Development Assocation (IDA).Since stakeholders and the Advisory Panel haveurged that the whole World Bank Group share acommon approach and strategy, the ESSD envi-ronment strategy formulation team has consultedwith the International Finance Corporation (IFC)and Multilateral Investment Guarantee Agency(MIGA), and the strategies of those members of theWorld Bank Group will be formulated in light ofthe strategy developed by ESSD.

11

3

The Historical Context

Environment in the World Bank

The Bank created the Office of the Environmental Adviser in 1970 inreaction to externally voiced concerns about the potential unplannedeffects of Bank-supported projects. The office was given a small staff,

reviewed all projects, and recommended changes where necessary. Itsimpact was modest, and Bank project officers widely regarded it as an“adversary.” It remained isolated from the Bank’s “mainstream,” and by themid-1980s the Bank was lagging behind other multilateral agencies andbilateral donors in implementing environmental policies and practices.1

Several Bank projects (including thePolonoroeste project in Brazil and the Narmadaproject in India) subsequently elicited strongnegative public reactions owing to their adverseenvironmental and social impacts. Complaintswere registered by the Bank’s major sharehold-ers and by environmental nongovernmentalorganizations (NGOs). In response, an Environ-ment Department was created, the number ofenvironmental staff was sharply increased, envi-ronmental safeguard policies were instituted,and a program of environmental lending waslaunched during the 1987 reorganization. Thenew department was given wide responsibilitiesfor developing new environmental initiatives(often with Regional staff), performing regularenvironmental reviews of projects (includingauthority over environmental design aspects),

and strengthening the Bank’s environmental poli-cies. The department launched initiatives toassess environmental conditions in borrowercountries, introduced mechanisms to improvethem,2 and set up a computer database to trackproject content and implementation.3

In preparation for the 1992 United NationsConference on Environment and Developmentin Rio de Janeiro, the Bank set up 23 task forcesto provide technical input on a wide range ofissues related to the environment and develop-ment. It also agreed to help member countriesfulfill their obligations under international con-ventions. The 1992 World Development Report(WDR), Development and the Environment, wasa major intellectual contribution and advancedthinking on the environment within the Bank andin the development community at large.4 The

22

Bank also led efforts to address global issues asan implementing agency for the Montreal Pro-tocol on substances that deplete the ozone layerand as one of the three executing agencies ofthe Global Environment Facility (GEF).

Translating the Bank’s wide-ranging agendainto concrete action has proved difficult, how-ever. Unclear objectives in the EnvironmentDepartment in its early years and poor coordi-nation between the Environment Departmentand the Regional environmental divisions led totension and confusion. Each unit vied forresources and control of the environmentalagenda. This led to a series of structural changesthat gradually transferred more resources andauthority to the Regions.

In the early 1990s the Technical Departmentsprovided Regional leadership on environmentalissues, with technical support and a focus onbroad issues being provided by the Environ-ment Department. The 1996 reorganization fur-ther reduced the role of the center, leading to aloss of momentum on crosscutting issues andreinforcing sectoral treatment of the environ-ment. More recently, the Environment SectorBoard and the ESSD Network Council have beenworking to enhance the role of the center in coor-dinating environmental initiatives and in shapinga new environmental strategy.

Environmental Policy and StrategyThe Bank has adopted environmental sustain-ability as a corporate goal. According to theBrundtland Commission, sustainable develop-ment “meets the needs of the present withoutcompromising the ability of future generationsto meet their own needs” (World Commission onEnvironment and Development 1987). So far, noone has translated this broad and appealingstatement into direct operational guidance for theBank. Analyses of what it takes to achieve sus-tainability have been undertaken for a numberof specific biological and physical topics, but ithas not been possible to aggregate these into

variables or indicators that apply on a nationallevel.5

In order to guide its operations, the Bankissued formal environmental policies, matchingbest practice in other international financial insti-tutions (in particular, the Asian DevelopmentBank and the United States Agency for Interna-tional Development). Environmental assessmentswere formalized in Operational Directive (OD)4.01 in 1991.6 Other policies grounded in Oper-ational Manual Statements and Operational Pol-icy Notes were later added.7 Undertakings calledfor by the IDA deputies included preparation ofNational Environmental Action Plans (NEAPs),inclusion of environmental issues in CountryAssistance Strategies (CASs), and public disclo-sure of environmental assessment documents(Shilling 2001).

While not espousing a formal sector strategy,the 1992 WDR was widely accepted as the strate-gic framework for the Bank’s environmentalactivities. It was supplemented by annual Envi-ronment Reports (1990–95) and subsequentlyby an annual publication called EnvironmentMatters. Two complementary policy approacheswere identified in the WDR: those that build onthe positive links between development andthe environment (“win-win”) and those thatbreak the negative links.

The first approach focused on exploiting thesynergies between poverty reduction and envi-ronment, removing subsidies with negative envi-ronmental externalities, and clarifying propertyrights regimes for land, forests, and fisheries. TheWDR recognized that such policies, by them-selves, were not enough. The second approachrecognized that strong institutions and policiestargeted at specific environmental problemswere essential to break the negative links. Fur-thermore, the WDR emphasized that the envi-ronment is a crosscutting issue that needs to beaddressed in operations in most sectors. Thisimplied a strong commitment to integration ofenvironmental concerns in all Bank activities—what is commonly known as “mainstreaming.”

Critics of the Bank have suggested that thefocus on win-win did not take full account of thetradeoffs implicit in many environmental policiesand understated the opposition of those who


4

The Bank has adopted environmentalsustainability as a corporate goal.

stood to lose, as indicated by difficulties in imple-mentation. There was widespread concern aboutthe environmental “Kuznets Curve,” whichassumes that environmental degradation increaseswith economic growth at low income levels butis eventually reversed as incomes rise above adistinct “inflection” point associated with eachform of degradation (World Bank 1992b).8

However, such views were deemed by envi-ronmental experts inside and outside the Bankas too complacent and implicitly supportive ofthe discredited doctrine of “grow now and fixthe environment later.” The Bank does not sub-scribe to this view and has issued guidelines andpublications, such as The Pollution Preventionand Abatement Handbook (World Bank 1999b),demonstrating effective ways to improve theenvironment at all stages of development. Unfor-tunately, some Bank operational staff still arguethat selectivity and the important role of growthin poverty reduction are valid reasons to give alow priority to the environment in low-incomecountries.

External SituationFor the past three decades, the environmenthas been a highly contentious aspect of Bankwork. Much negative publicity materializedbecause of Bank involvement in several high-profile, high-risk projects, including the Nar-mada dam in India, the proposed Arun dam inNepal, the Itaparica Resettlement and Irrigationproject in Brazil, and, most recently, the Chad-Cameroon Pipeline project and China WesternPoverty Reduction project. Concerns about themixed implementation record of Bank safeguardpolicies precipitated the creation of an Inspec-tion Panel in 1993 to review and investigate

claims by eligible local parties regarding allegedlack of compliance with Bank policies.9

Chronic concerns about the application ofsafeguard policies have led the Bank to initiateprocess reforms, to take a more environmentallyconstructive approach to high-profile projects (forexample, at Nam Theun dam in Laos), and towithdraw from controversial projects, often at therequest of the borrower. Developing countrygovernments have criticized the Bank for givingin to the views of advocacy NGOs, while devel-oped country governments have criticized theBank’s efforts to apply the safeguards and haveurged it to do more to promote the environment.

Many developing country governments viewinternational concern over environmental prob-lems in their countries as intrusive and likely toimpede development. They argue that developedcountries have overexploited the environment,have refused to take full responsibility for mit-igation of their own impacts on the global com-mons, and want to shift that responsibility to thedeveloping countries without adequate com-pensation. This perception has substantial valid-ity, and it has complicated the role of the Bank.At the same time, public tolerance for inadequatecompliance by the Bank of its own policies islow. All member country governments expect theBank to deliver on its promises, and thereforeto promise only what it can deliver.

T h e H i s t o r i c a l C o n t e x t

5

Many developing country governments viewinternational concern over environmentalproblems in their countries as intrusive andlikely to impede development.

7

The Bank’s Record

Bank Objectives

The Bank sharply increased its attention to the environment in itsoperations after 1987. Its efforts were guided by a series of policies,procedures, and management instructions issued over time,

including a series of papers for the Development Committee, the IDAreplenishment recommendations (IDAs 9–12), the WDR of 1992, annualenvironmental reports, and diverse initiatives.1 All together, these documentsdefined a fourfold agenda consisting of:

• Stewardship: To help member countriesdevelop environmental priorities, build insti-tutions, and implement programs to supportenvironmental sustainability. Operationally,this would be implemented by setting standardsfor the Bank’s own strategy, research, andpolicy efforts regarding the environment andby helping countries prepare environmentalaction plans, integrate short- and long-termenvironmental concerns into country strategies,and through capacity building and policy dia-logue with core economic ministries.

• Mainstreaming: To help member countriesbuild on the positive linkages betweenpoverty reduction, economic efficiency, andenvironmental protection. The Bank wouldimplement this by making environmental sus-tainability a core objective in its operationalactivities and economic and sector work(ESW) and by using its lending to address

environmental issues through direct envi-ronmental projects and, more important, byintegrating environmental objectives into Bankactivities in general and into sectoral projectsin particular. Designing and using appropri-ate environmental indicators was to be usedto set targets and monitor results.2

• Safeguards: To ensure that potential adverseenvironmental impacts from developmentprojects were addressed. This would be imple-mented through environmental assessment(EA) and related safeguard policies. Theseassessments would be undertaken as early inthe project cycle as possible, and the assess-ment process would be fully understood byall staff.

• Global Environment: To ensure that globaland transnational environmental challengesare properly addressed in member countries.This would be implemented by raising aware-

33

ness of these issues and supporting actionsin member countries to reduce adverseimpacts on the global environment and byusing the Bank’s convening power to buildunderstanding and partnerships around theseissues. The Bank has a special responsibilityto focus on the local impacts of global envi-ronmental degradation, and the local bene-fits of implementing the global environmentalagenda in member countries.

The first three elements were well within theBank’s mandate to assist developing countries.The fourth extended its responsibility beyondnational development issues to a range of globaltopics, including promoting environmental aware-ness, supporting international conventions,3 andexecuting GEF projects. This agenda implied fullintegration of the environment as a core themein the Bank’s overall program. In practice, how-ever, the environment has all too often beentreated as just another sector competing for atten-tion rather than as a crosscutting theme.

Under the leadership of President BarberConable, the Bank’s allocation of resources toenvironmental activities increased substantiallyafter the 1987 reorganization. Staffing went froma handful before the reorganization to 70 in1990 and 300 in 1995. It leveled off at around250 in 2000.4 Budgets evolved in a similar fash-ion. However, in an effort to strengthen its coun-try focus, the Bank adopted a cumbersomechargeback system whereby country programunits contracted for environmental staff time. Thisfragmented environmental work, damaged themorale of staff required to report their “billablehours,” and reduced efforts on crosscutting andcross-border issues. Currently, only about one-third of the budget resources of Bank environ-mental units are their own funds. The rest arecontracted from other budgets. Increased relianceon external trust funds has made it difficult toget a precise measure of amounts spent.5

Stewardship, Policy, and StrategyFollowing the 1992 U.N. conference in Rio, andat the urging of the IDA deputies, the Bankpressed forward with the completion of NEAPsor their equivalent in member countries. Manyof these documents took longer to complete thanexpected, especially recent NEAPs, which wentto great lengths to promote the participation oflocal stakeholders. By the end of 2000, 92 NEAPshad been completed.6 These documents wereintended to build national commitment to envi-ronmental sustainability and to define concreteprograms to be implemented, with Bank assis-tance where needed. They did lead to a numberof institution-building projects and identifica-tion of important issues. Overall quality wasmixed, however, and there has not been a reg-ular program to keep them up to date.

During the past decade, the Bank has bothundertaken and sponsored a great deal of pol-icy analysis and ESW on environmental issues.The Research Department allocated more than10 percent of its resources during the 1990s toenvironmental issues. Much of this work washighly regarded and has contributed to a betterunderstanding of the role that environmental fac-tors play in development and of how to quan-tify environmental impacts. Seminal work wasdone on natural capital, environmental indica-tors, and “green accounting” by the EnvironmentDepartment. Environmental data are regularlypublished in the World Development Indica-tors and are summarized in a new annual pub-lication, The Little Green Data Book (World Bank2000c). With the adoption of holistic long-termdevelopment as a Bank priority through theComprehensive Development Framework (CDF),there is a need for more research to probe thelinkages between the environment, sustainablelivelihoods, and poverty reduction.

Environmental Lending andMainstreamingAlthough good data are available for direct Banklending for environmental projects and institu-tion building, considerably less attention hasbeen given to providing guidance or monitor-ing funding for environmental mainstreaming(see box). This is unfortunate in light of the


8

Seminal work was done on natural capital,environmental indicators, and “green

accounting”by the Environment Department.

importance that policy statements give to inte-grating environmental concerns broadly intothe Bank’s program.

As shown in the figures below, the portfolioof direct environmental projects rose from $564million in 1993 (7 projects) to $1,072 million in1996 (15 projects), but dropped to $514 millionin 2000 (13 projects).7 The portfolio includes proj-ects that address sustainable natural resourcemanagement (36 percent of the portfolio forfiscal 2000), pollution management and urbanenvironmental improvements (47 percent), insti-tutional development and capacity building (8percent), and global issues, such as protectionof international waters and biodiversity, mitiga-tion of greenhouse gas emissions, and phase-outof ozone-depleting substances (9 percent).8

IBRD lending has concentrated more onpollution-abatement issues (the “brown agenda”),while IDA credits have been weighted moretoward natural resource management (the “greenagenda”), since IDA borrowers tend to dependmore directly on these resources for ensuring sus-tainable livelihoods.9 The trend in new projectsin both categories peaked in 1996 (amount)and in 1998 (numbers).10

In addition, a wide range of Bank projectshave explicitly included environmental compo-nents (for example, forest protection in a high-way project, or wastewater treatment in anenergy project). Various attempts have beenmade to monitor this mainstreaming, but noconsistent criteria for doing so have emerged,and reliable time series do not exist to indicatewhether environmental component lending hasoffset the decline in direct lending.11

Analysis of environmental components alonemisses a major objective of mainstreaming—consideration of environmental factors in thedesign of projects, even where there is no explicitenvironmental component. The lack of guide-lines for monitoring of the extent of main-streaming is itself a cause for concern. Lack ofcommitment by countries and country man-agers, budget constraints, and the ascendancy ofother priorities have been cited as reasons.12

T h e B a n k ’s R e c o r d

9

Both inside and outside the Bank, confusion exists as to whatmainstreaming the environment is. The definition used in thispaper is based on the definition used in the IDA Ninth Replen-ishment: “to integrate environmental concerns into broaderoperational and analytical activities.” At the project level, thisentails moving beyond “safeguarding” the environment throughcompliance with “do-no-harm” policies to “doing good” for theenvironment. Direct environmental projects may contribute, butthe thrust is to incorporate attention to environmental concernsinto Bank activities supporting institutional development and intodecisions about projects, policies, and programs. To help pindown how this would occur, here are two cases, one wheremainstreaming occurred successfully, and one where it did not.

Best practice: China—Sustainable Coastal Resources Devel-opment. This project evolved from a production-oriented projectto one focused on sustainability. Originally consisting of threecomponents: construction and rehabilitation of shrimp ponds,expanding eel production, and new aquaculture facilities, the

project objective shifted to the sustainable development of coastalresources after an analysis of the project’s environmental impact.The project will enhance the environment through the design andimplementation of coastal zone management plans, siting andselection of production components to stay within local carryingcapacity, conservation of endemic species by protected area man-agement, hatchery development to take pressure off natural stocks,and the provision of facilities for environmental monitoring.

Not best practice: Yemen–Fourth Fisheries Development.The main objective of this project was to expand fish catchesand improve processing. Although it included provisions for aFish Stock Assessment, an internal Bank document noted thatthe technical assistance provided did not have any impact.Another document reported the urgent need to assess the stateof fish stocks that were apparently being overfished. Other stud-ies (such as a marine resources status report) were undertaken,but their recommendations were not implemented. For example,fish catches were not limited to recommended levels.

M a i n s t r e a m i n g t h e E n v i r o n m e n t

Analysis of environmental components alonemisses a major objective of mainstreaming.

Beyond its own lending, the Bank is a majorimplementing agency for the Montreal Protocoland the GEF. Efforts under the former are nowlargely completed and have been successful.The Bank has consistently exceeded its annualtargets for phasing out ozone-depleting sub-stances (World Bank 1999a, 2000d). GEF grants

have grown in line with available resources,and GEF projects have been catalytic in bring-ing global environmental issues to the fore andhelpful in mainstreaming the increase in GEF dis-bursements through the Bank. Bank cofinanc-ing of GEF projects has increased since 1997 toabout 20 percent, on average.


1 0

E v o l u t i o n o f t h e W o r l d B a n k ’ sE n v i r o n m e n t P o r t f o l i o

Annual ◆ Cumulative

◆◆

◆

◆◆

◆

◆

◆

◆

◆

◆

◆

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

5

10

15

20

25

0

20

40

60

80

100

120

140Core Environment Projects, 1989–2000 (number of projects)

Source: World Bank Business Warehouse.

◆◆

◆

◆

◆

◆

◆

◆◆

◆

◆

◆

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

200

400

600

800

1000

1200

0

1000

2000

3000

4000

5000

6000

7000

8000Financing for Core Environment Projects, 1989–2000 (in $US millions)

Annual ◆ Cumulative

While acting as an important source of lever-age in expanding the scope of Bank lending,GEF support is provided only for incrementalcosts associated with global environmental issues.It was never intended to be a large portion ofBank environmental support. Bank staff havenoted, however, that using GEF funds is almostthe only way to get an environmental project intothe program in some countries. This limits envi-ronmental interventions to global areas coveredby the GEF and hinders progress toward theGEF’s goal of leveraging its impact by address-ing the incremental costs of global issues throughjoint Bank/GEF operations. The Bank has beenworking with the GEF to simplify procedures13

and to improve the development impact of GEFgrants. In general, the availability of grant fund-ing (from other donors) for many environmen-tal activities in borrower countries has reducedinterest in borrowing from the IBRD and IDA forenvironmental purposes.

Over the past decade, the overall composi-tion of Bank lending has shifted from project-based operations to adjustment lending andnow to new forms of programmatic lending.Adjustment lending amounted to about one-quarter of total lending over the decade. In FY1999 it rose to $15.3 billion (52.9 percent of totallending) and exceeded investment lending, butdeclined to 33.4 percent in fiscal 2000 as the EastAsian crisis receded (World Bank 2001). TheBank has not made a concerted effort to incor-porate environmental concerns into these typesof operations. Central guidance has been limited,and despite the identification of critical policyissues with substantial environmental impact inthe 1992 WDR and subsequent analyses, therehas been a great deal of ambivalence regardingthe incorporation of environmental considera-tions into adjustment lending.14

Safeguards and EnvironmentalAssessmentsThe Bank’s environmental safeguard policieshave been reviewed twice15 and found to be gen-erally satisfactory. All Bank investment projectsare covered. Between FY90 and FY00, 210 proj-ects (about 14 percent of the Bank’s portfolio byloan amount) were classified as Category A

(requiring a full EA). Another 1,004 projects,nearly 35 percent of Bank lending, were classi-fied as Category B (requiring a limited or targetedEA). About 51 percent were classified as Cate-gory C (requiring no environmental analysis)(World Bank 2000a). There has not been a dis-cernable trend over the period.

In most cases, the EA process has identifiedenvironmental impacts and has led to satisfactoryredesign or mitigation. In some instances, envi-ronmental staff have used the reviews to suggestimprovements in projects outside the EA processand to incorporate environmental concerns inother sectors. Along with increased delegation ofauthority to country units, funding for safeguardimplementation has been included in regulartask budgets. However, there was no independ-ent funding or staff assignment for monitoring andimplementing the safeguards until FY01.

The EA process has not been foolproof. Themost visible failures of the Bank on environ-mental issues have stemmed from actual oralleged failures to implement the EA process fullyand creatively.16 Creation of the Inspection Panelwas one reaction to external pressure.17 Therehave been allegations of many more violationsthat have not been submitted to the InspectionPanel, but there has been no systematic analy-sis of these concerns, and no conclusions canbe drawn. The most recent Quality AssuranceGroup (QAG) assessment of supervision qual-ity found that, in a sample of 150 projects, 5 per-cent had significant safeguard issues that had notbeen identified at the time of approval. For proj-ects with safeguard aspects, the mitigation ofadverse impacts and arrangements for monitor-ing compliance were inadequate in 20 percentof the cases.

Global ConcernsThe Bank has used its advisory services and con-vening power to raise awareness of global envi-ronmental issues among member countries. It has

T h e B a n k ’s R e c o r d

1 1

There has been great ambivalence regardingthe incorporation of environmentalconsiderations into adjustment lending.

supported country actions in line with interna-tional conventions and supported the GEF. Theissues of biodiversity and climate change haveimportant local impacts and must be addressedin the context of local support and generationof local benefits, which can be substantial. Forexample, recent Bank research has shown thatone approach to reducing particulate air pollu-tion that has large local health benefits is alsonearly optimal for reducing greenhouse gases,while another approach that focuses initially onreducing greenhouse gases would have muchless impact on reducing local pollution.

Global environmental issues are concernedby their very nature with public goods. Normalmarket forces do not typically result in adequateprovision of these goods, and public interven-tion is therefore needed. Within national bound-aries, such intervention is usually theresponsibility of government, which is sup-posed to protect the common good. On theinternational level, public goods issues requirecollective action. Thus, leadership by interna-tional bodies, and effective partnerships amongcivil society groups, public institutions, and theprivate sector, are critical. The Bank hasincreased its efforts to form partnerships withkey stakeholders, including local environmen-tal coalitions (MesoAmerica), NGOs (WorldResources Institute and World Wildlife Fund),private sector interests (forest company CEOs),and local NGOs (in the GEF and the new Crit-ical Ecosystems Fund). The need for a contin-

uing Bank role in multicountry partnershipsremains strong.

The Bank was instrumental in the creation ofthe World Commission on Dams, based in part onthe Bank’s increasing concern about the envi-ronmental and social impacts of large dams. In aconsensus report, the commission proposed globalguidelines for dam building through a process thatwould involve all interested parties. It remains tobe seen how the commission’s recommendationswill be put into effect by the Bank.

During the period under review, the Bank’sperformance on the environment has improvedin a number of areas, but progress has been halt-ing and fragmented. Bank strategy has beenambivalent, leading to uncertainty about whetherto treat the environment as a sector or as atheme. Guidelines and expectations about per-formance have not been clear. Indicators, mon-itorable targets, and regular evaluation ofprogress on the environment have been theexception rather than the rule. Accountability hasbeen weak. Managers have not been systemat-ically held accountable for meeting Bank objec-tives or complying with Bank policies in this area.These shortcomings should not distract fromthe many successes that have been achieved, butthey highlight why performance has not lived upto Bank rhetoric and help explain the continu-ing dissatisfaction with the Bank’s performanceon the environment among responsible externalcritics, as well as the frustrations felt by manyenvironmental staff.18


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1 3

Main Findings

The crosscutting nature of environmental issues and the variety ofinterventions relevant to protecting the environment make it difficultto apply the usual portfolio approach to this evaluation. Shareholder

expectations and the Bank’s own strategic formulations have conceived ofthe environment as a theme rather than a sector. Operationally, and in itsorganizational structure, however, the reverse has been true. Accepting thethematic approach as dominant, this evaluation looks at how well the Bankhas performed on the objective of incorporating the environment into its activ-ities, as well as its performance on environmental projects and safeguards.

The absence of an explicit strategy statement andthe lack of agreed and verifiable corporate andcountry performance indicators have hindered theconduct of this evaluation. However, the intentof numerous Bank policy statements is clear: tointegrate the environment into the Bank’s devel-opment agenda. Accordingly, over and above therecord on projects, country strategies, and otheractivities, this evaluation looks at how internalorganization, incentives, and accountability struc-tures have affected performance.

Stewardship, Policy, and StrategyThe Bank has structured its approach to theenvironment as an economic sector and hasfocused primarily on individual projects. Theintroduction of a major new area of attentionrequired a concerted effort by dedicated units

and staff. Most of the needed expertise wasspecialized and not part of the background ofmost Bank staff. The concept that environmen-tal sustainability is an integral part of sustainabledevelopment has not been explicitly acceptedat a strategic and policy level, although a greatdeal of importance has been given to specificaspects of the environmental agenda in terms ofprojects and safeguards. The long-term, sys-temic nature of environmental issues is difficultto reconcile with the short time horizons and sec-toral structure of the Bank and its borrowers. Thelong-term, holistic vision of the ComprehensiveDevelopment Framework has yet to take hold(OED 1999).

The absence of integration is reflected in theformulation of Bank strategies. The MissionStatement includes “help[ing] people help them-

44

selves and their environment” as an adjunct tofighting poverty, but that part of the statementis rarely referred to in justifying country assis-tance strategies or budgetary allocations. Perhapsmost surprising, and despite recommendationsfrom the IDA deputies, the Environment Depart-ment, and many external agencies, the Bank didnot pursue either analytically or operationally thelinks between environmental sustainability andpoverty alleviation in the context of a sustain-able development strategy (DFID 2000b).1 Theselinks are important, particularly for naturalresource management in rural areas and forhealth in urban areas.

Neither the 1990 nor the 2000 WDR demon-strated the link between poverty and the envi-ronment, although environmental degradation isa major factor in hindering the creation of sus-tainable livelihoods for the poor. The link wasdemonstrated in the 1992 WDR, but an authori-tative statement of corporate strategy linkingpoverty reduction with the environment has notbeen issued.

The poor often contribute to degradationwhen pushed to the margins in order to survive.More important, environmental degradation fromvarious aspects of industrialization and growthhave had very adverse effects on the poor: airand water pollution affect their health, soil ero-sion weakens their productive capacity, andland encroachment restricts their access to tra-ditional productive assets. The recent “Voices ofthe Poor” exercise and consultations about envi-ronmental strategy have underscored the fact thatthe poor consider achieving sustainable liveli-hoods from environmental resources andimproving the environmental aspects of qualityof life to be very important. The U.K. develop-ment agency recently made this connection

transparent and compelling in relation to achiev-ing the International Development Targets for2015 (DFID 2000a).

Strategy papers that have addressed envi-ronmental issues in different sectors show clearoverlap—for example, Water Resources Man-agement, a World Bank Policy Paper (WorldBank 1994b) and Cities in Transition: WorldBank Urban and Local Government Strategy(World Bank 2000h). Fuel for Thought (WorldBank 1999c) was a unique attempt to draw theimplications of a global environmental priorityin terms of programmatic results. Its preparationwas fraught with contention about how large arole environmental factors should play in othersectors. Other sector strategies have been lesscomprehensive in their treatment of the envi-ronment, and few have provided analyses of thelinkages between environmental objectives andsector strategy goals. The treatment of environ-mental issues in private sector developmentactivities has been particularly weak.

Even when the environment has been incor-porated into a sector strategy, its importance hasnot necessarily been reflected in subsequentprojects. This has to do with incentives and thesectoral orientation of the Bank’s organizationalstructure. There have been few efforts to estab-lish and build upon cross-sectoral links despitethe obvious impacts that actions in most sectorshave on the environment. The environmentalstrategy currently under preparation should bedesigned to remedy this situation.

The Comprehensive Development Frame-work (CDF), introduced in 1999, brought a holis-tic and long-term vision to the Bank’s approachto development. The environment, together withcultural heritage, was included as one columnin the CDF matrix. This, however, falls short ofaddressing the crosscutting nature of environ-mental considerations: the environment columndoes not intersect with other sectors in othercolumns. Similarly, the Poverty Reduction Strat-egy Papers (PRSPs) introduced in the context ofthe Highly Indebted Poor Country (HIPC) ini-tiative treated the environment as a subsidiarysector. The Strategic Compact launched in 1996did not include enhancement of environmentalwork.2 These are signs that the Bank has not yet


1 4

The links between environmentalsustainability and poverty alleviation

in the context of sustainable developmentare important, particularly for natural

resource management in rural areas andfor health in urban areas.

succeeded in making the environment a core the-matic priority that should be emphasized in allrelevant aspects of Bank activities.

The Bank’s program to support NEAPs andenvironmental ESW did put the environmenton most policy radar screens, but the docu-ments themselves have been of mixed qualityand follow-up has not been consistent. TheNEAPs have helped member countries gatherinformation on the environment. The Bank hassupported research on environmental indica-tors, such as genuine savings, and has estimatedthe costs of environmental degradation in termsof gross domestic product (GDP) (see table).3

This substantial body of work, despite the strik-ing environmental threats and damages recorded,has not had the expected impact on country pol-icy dialogue and strategy work.

Integration of the environment into CASs hasbeen limited, even when IDA deputies stressed

such inclusion. Reviews of 37 CASs in 1999 andof 51 IDA CASs over the period 1992–99 showthat treatment of environmental issues was onlypartially satisfactory. They were adequatelyaddressed in only half the CASs. Moreover, thequality of the treatment did not improve over theperiod (Shyamsundar and Hamilton 2000; Ekbomand Bojo 1997). Senior management did notmake inclusion of environmental issues into theCAS a review priority. Typically, the environmentis mentioned as a sector rather than integratedinto the development strategy, although there arebest practices that take a broader approach(such as the CASs for Vietnam and Panama).4

Admittedly, CASs carry a large burden and tendto be short-term in focus, perhaps more so thanneeded for a strategic document. However, inclu-sion of a summary diagnosis of the environmentin each CAS is essential to ensure that environ-mental considerations are adequately included in

M a i n F i n d i n g s

1 5

Gross domestic Genuine domestic Environmental Net forest savings savingsa degradation depletion

Country (% of GDP) (% of GDP) (% of GDP) (% of GDP)

Bangladesh 17.1 10 .. 2.1

China 42.6 32.0 8b 0.4

Costa Rica 26.8 20.6 .. 1.0

India 20.9 10.3 4.5 – 8c 1.6

Indonesia 24.1 5.9 .. 1.2

Mali 10.1 5.2 .. 0.0

Mexico 22.4 12.4 10 0.0

Morocco 14.7 9.7 .. 0.0

Nigeria 11.8 -14.2 15d 1.8

Philippines 16.3 7.6 .. 1.6

Poland 21.3 14.6 .. 0.0

Romania 9.2 0.4 .. 0.0

Yemen 2.4 -26.3 .. 0.0

Note: Unless otherwise noted, all statistics are drawn from The Little Green Data Book 2000 (World Bank 2000c) and the Environmental Economics and Indicators Unit (EEI), World Bank,

2000. The data in this book are for the years 1990, 1997, and 1998, or the most recent year for which data are available.

a. Genuine domestic savings is defined as being equal to net domestic savings plus education expenditure, minus energy depletion, mineral depletion, net forest depletion, and carbon

dioxide damage.

b. World Bank 1997a. Air and water pollution damages were estimated to be at least $54 billion a year, or nearly 8 percent of GDP, in 1995.

c. Hommann and Brandon (1995) assessed annual environmental costs at 4.5 percent of GDP. Babu and Khanna (1997) estimated costs from air pollution, groundwater mining, deterio-

rating quality of aquifers, land degradation, and deforestation to be 5 percent of GDP. Annual economic costs of air pollution, contaminated water, soil degradation, and deforestation

were estimated to be 8 percent of total GDP by Tata Energy Research Institute (1998).

d. Estimated from World Bank (1990a).

I n d i c a t o r s o f E n v i r o n m e n t a l D e g r a d a t i o nf o r S e l e c t e d C o u n t r i e s

the overall development vision and strategy. Ifthe environment is a corporate priority, it shouldbe covered in the CAS. It may be that otherobjectives take priority in a particular country ata particular time, but if so, the CAS should notethe rationale for that decision so that senior man-agement and country officials are aware of theirstrategic choices. Lack of such treatment, and lackof insistence on it, is worrisome.

The quality of any country strategy or policydialogue on the environment depends on theunderlying information. Environmental indica-tors are not yet required in CASs, although use-ful ones are available, and a project funded byexternal donors has created a standard formatand data set.5 NEAPs are becoming dated, andthere is no program to keep them current. Man-agement has not requested any regular follow-up on NEAPs and has made no effort toincorporate lessons from their preparation intoother environmental activities.

Environmental ESW is declining comparedwith the early 1990s, with respect to both num-bers of studies and budgetary allocations. Arecent study by the Bank’s Operations Policy andStrategy (OPS) group found that the Bank needsto be diligent in ensuring that environmentalissues are analyzed for all countries, and thatthere is current environmental ESW where it isan important issue. For this purpose, adequatecoverage in integrative ESW (such as the pro-posed Development Policy Review) would bean important first step.

The reluctance within the institution to bemore proactive in making the case for the envi-ronment to clients cannot be wholly explainedby country resistance or the recent emphasis onserving client objectives. Nurturing policy reformis a central Bank objective. The evidence ofmajor negative impacts from environmentaldegradation (where the analysis has been done)argues for the Bank making a stronger case,based on the facts. Substantial progress has

been made where committed staff and line man-agers in the Bank have stressed the issue andborrower countries have recognized the impor-tance of the environment. China, Costa Rica,Mozambique, and Poland demonstrate that sub-stantial progress can be made in gaining gov-ernment commitment and improving the designand application of a country’s own environ-mental policies. Many other countries, however,show significant deficiencies (such as Jordan,Mexico, and, until recently, Indonesia). Satisfy-ing results have been obtained in both low-and middle-income countries. The priority theBank gives to the environment in its own objec-tives, strategy, and programs is as important asignal to member countries as the extent of thefinancial assistance it offers.

Overall, the Bank has been partially suc-cessful in incorporating the environment into sec-tor strategies, country strategies, and policydialogues.6 Even OED evaluations of countryassistance programs have not regularly assessedthe Bank’s activities in relation to the environ-ment. Recent reviews of 29 Country AssistanceEvaluations (CAEs) by OED (16 IBRD countriesand 13 IDA countries) found that only 9 exam-ined the treatment of environmental issues fully.Ten gave some reference to environmentalissues, and nine had no, or only marginal, ref-erences to the environment despite significantenvironmental challenges. Of course, CAEsshould not be expected to cover everything. Atthe same time, since environmental sustainabil-ity is not just another theme or sector but oneof the core objectives of the Bank (along withpoverty reduction and broad-based growth), itwould be appropriate for CAEs to review its rel-evance and coverage in the Bank’s country pro-grams, even if only to note that taking action onthe environment may be a lower priority at a par-ticular point in time.

Environmental Lending andMainstreaming Among the Bank’s environmental projects andprograms are many successful examples both ofdirect environmental project lending and of proj-ects that have mainstreamed the environmentinto other operations, some of which have served


1 6

Environmental ESW is declining comparedwith the early 1990s, with respect to both

numbers of studies and budgetary allocations.

as models for other projects. The Loess PlateauWatershed Rehabilitation and Sustainable CoastalResources Development projects in China, theUttar Pradesh Sodic Lands Reclamation projectin India, the Industrial Pollution project in Bul-garia, the Arid Lands Resource Managementproject in Kenya, district heating projects inPoland, and air pollution projects in Mexico areall good examples. Significant efforts have beenmade in countries such as Madagascar to imple-ment major and vitally needed reforms in thetreatment of the environment. These positiveresults demonstrate the potential of the Bank.They are a function of individual efforts in theborrowing country or the Bank, or, more oftenthan not, both, according to interview data. Incountries where domestic authorities have shownless interest in the environment, staff effortshave been less successful (for example, forestreform in Cameroon and Indonesia, industrialpollution in India, and water projects in Mexico).

The Bank’s treatment of the environment asa sector rather than as a crosscutting priority isreflected in the difficulty of getting environ-mental projects into country programs and envi-ronmental components into sectoral projects.The current structure pits environmental unitsagainst other sector units in a competition forfunds and slots in country lending programs.There are few incentives for mainstreaming intoother sectors, and few independent Bankresources to draw on to mainstream environ-mental components into other projects unless anenlightened task manager is determined to doso. Some environmental staff offer projects on“loss-leader” terms, hoping to make up the dif-ference from trust funds or other sources. Thiscompetitive structure has made it difficult forenvironmental units to form constructive part-nerships for mainstreaming the environment.7

The Asian Regions, in contrast, have stressedmainstreaming, encouraged the inclusion ofenvironmental concerns into projects in othersectors, provided budget allocations, and, insome cases, joint appointments of staff.

A more important and persuasive objective ofmainstreaming is to include environmental con-cerns in the design and implementation of proj-ects across sectors (for example, transport

strategies, energy sources, forestry develop-ment). This is more difficult to do and to mon-itor than specific projects and components, butit can have much more dramatic effects. So far,the Bank has not established guidelines, incen-tives, or monitoring procedures for this degreeof mainstreaming, although many environmen-tal supporters inside and outside the Bank haveurged more efforts in this direction. Developingan effective methodology for mainstreaming inthis manner should be a high priority for sen-ior management.

To shed some light on the extent of main-streaming in nonenvironmental projects, OEDundertook a desk review of a random sampleof 30 infrastructure projects. Six energy projectswithin the sample were found to have producedthe positive environmental externalities ofincreased supply of environmentally superiorenergy sources or improved energy efficiency.In 20 of the remaining 24, modest efforts weremade to mainstream the environment beyond themitigation of the immediate negative impacts ofthe project.

Initiatives in mainstreaming the environmenthave included policy reform measures, strength-ening environmental staff capacity, undertakingresource strategies and plans, and developingenvironmental guidelines and regulations. Theseactivities were also noted in some country casestudies. Partly as a result of the Bank’s involve-ment in Morocco, for example, most ministriesand agencies have an environmental unit incharge of mainstreaming the environment inthe sector’s policies and projects. Within thesample of infrastructure projects, a state highwayproject in Brazil helped establish environmen-tal units within State Roads Departments toimplement environmental guidelines preparedwith technical assistance financed under theproject. In Cyprus, the Southeast Coast Sewer-age and Drainage project led to increases—albeit much lower than planned—in water


1 7

A more important objective is to integrateenvironmental concerns in the design andimplementation of projects across sectors.

charges to help promote the rational use ofwater. It also supported innovative engineeringto permit the re-use of treated wastewater for irri-gation of “green” areas. The country case stud-ies also revealed Bank-supported energy pricereforms in India and Poland, and mainstream-ing of natural resource conservation in infra-structure projects in Madagascar.

Despite these indications of progress, manydifficulties have been faced in introducing main-streaming activities. Sector reviews may be com-pleted but their recommendations not followedup. Environmental capacity can be developed butthen lost when environmental specialists moveelsewhere. There needs to be real commitmentfrom the borrower that is demonstrated by ade-quate budgets and the accountability of opera-tions managers. This commitment is more easilyfound where the value of the environmentalresources is large and obvious. The value of theresource can be tied to its economic potential,its effects on health, or its ecological value.

An issue faced by Bank staff is the reluc-tance of countries to borrow for environmentalprojects, even on IDA terms. Understandably,countries prefer to seek environmental projectgrants from bilateral agencies and to use rela-tively scarce IBRD/IDA funds for other priorities.This has led to environmental concerns droppingout of Bank strategies despite the need to inte-grate the environment into the overall strategy,even if not funded by the Bank (as happened,for example, in Bolivia and Mozambique). It alsohighlights the importance of building strongerpartnerships with other agencies, which isexpected to occur under the CDF initiative.

In one important case, the China Departmentexpressed concern that China’s graduation fromIDA may lead to a drop in Bank environmentallending to a country that has made major effortsin that area. China requires beneficiaries to gen-erate the funds to repay Bank or IDA loans. The

public goods nature of many environmentalinvestments means that full cost recovery maynot be feasible, meaning that beneficiaries inChina will not be able to repay on IBRD terms.The Bank is trying to find other sources of con-cessional finance from other donors to remedythis problem.8 So far, financing has not provedto be a major difficulty, but it does illustrate theimportance of finding ways to fund the publicgoods aspects of environmental projects in a con-sistent way.

Lending for adjustment operations and newforms of programmatic lending has been anincreasing portion of the portfolio in recentyears.9 Adjustment lending is aimed at macro orsector policy reforms, while programmatic lend-ing typically provides budget support for anapproved sector or public expenditure program.In both cases, it has proved difficult to incorpo-rate environmental concerns. The guidelines foradjustment lending recommend that staff iden-tify environmental impacts. OD 8.60 states that:

Analysis of adjustment programs alsoconsiders the implications for the environ-ment, since sound environmental man-agement is a key objective of the Bank’sassistance to countries. To help prepareappropriate assistance programs, Bank staffshould review the environmental policiesand practices in the country. The design ofadjustment programs should take intoaccount the findings and recommenda-tions of such reviews and identify the link-ages between the various reforms in theadjustment program and the environment.

It goes on to suggest that environmental issuesshould normally be addressed by other policyactions. This is circular reasoning, since adjust-ment operations are the Bank’s primary tool forsupporting policy reform.

In practice, most adjustment loans do notaddress environmental issues.10 Policy work bythe Environment Department in 1995 identifiedextensive potential linkages and suggested amatrix with which to analyze the environmen-tal impacts and make adjustment loans moreenvironmentally sensitive (Munasinghe and Cruz


1 8

There needs to be real commitment fromthe borrower that is demonstrated by

adequate budgets and the accountabilityof operations managers.

1995). This matrix was never applied. An ongo-ing review of adjustment lending by operationsstaff found that the proportion of adjustmentlending that deals with environmental issueshas varied widely over time, averaging about 23percent in the 1990s. When the Bank has triedto incorporate environmental issues into adjust-ment lending the results have been mixed,despite significant efforts by staff (see, for exam-ple, Seymour and Dubash 2000). Mainstreamingthe environment into programmatic and adjust-ment lending remains a major challenge.

The Bank’s performance on direct environ-mental project lending compares well with itslending in general. Performance rating of indi-vidual environmental projects by OED and byQAG indicates that the projects have improvedsince the beginning of the decade and now doabout as well as other projects on the indicatorsused. Recent evaluations, however, have raisedconcerns about institutional development proj-ects being too complex and not designed to sup-port institution-building processes long enoughto have lasting effects (Margulis and Vetleseter1999). Both QAG and OED have looked at theimpacts of individual projects on the environ-ment, which has led to positive recommenda-tions in several cases to improve Bankperformance.

Performance on mainstreaming the environ-ment into other sectors and into adjustment lend-ing is harder to measure than the results of directenvironmental projects. The management deci-sion to abandon the Environmental InformationSystem (ENVIS) database in 1992 deprived staffand evaluators of an important tool for analyz-ing the extent and effects of mainstreaming.Interview data suggest that the Bank’s sectoral ori-entation and lack of established environmentalpriorities have made it difficult for environmen-tal staff to participate in projects in other sectorsand incorporate more sensitivity to environ-mental issues. Although it is widely agreed byboth management and staff that an integratedapproach is highly desirable, lack of clear objec-tives, insufficient means of monitoring, and lackof internal incentives have pushed in the oppo-site direction. It is too soon to judge the resultsof recent efforts in some Regions to change this.

The modest extent of mainstreaming the envi-ronment into the Bank’s overall program is dis-turbing. Having identified the pervasive aspectsof environmental issues, recorded their impor-tance to poverty alleviation, and confirmed thatmainstreaming is essential to achieving its envi-ronmental objectives and commitments, in prac-tice the Bank has done little institutionally topromote, monitor, or otherwise make main-streaming happen. Anecdotally, there are excel-lent examples of mainstreaming, but there is nosense of whether those represent a trend or suf-ficient coverage. What is missing is evidence ofa clear, operational, institutional commitment.Performance on project lending and main-streaming has been partially satisfactory.11

Safeguards and EnvironmentalAssessmentsThe Bank’s performance on environmental safe-guard policies remains contentious. Implemen-tation has been mixed. OED and ESSD reviewsof the EA process have found that the policiesand objectives are generally sound, althoughthere is room for improvement, refinement, andupdating (World Bank 1993a, 1997c). Thesereviews have consistently found that EAs areoften not completed soon enough in the proj-ect cycle to have much impact on project design.As a result, the EA process focuses much moreon mitigation than on improving project design.Criteria for application of EA standards havenot been consistently applied across Regions andcountries. Delays in making the EAs available tothe public have contributed to external criti-cism. Heavy reliance on external consultantshas undercut EA effectiveness and has not con-tributed to building local capacity.

Compliance shortfalls highlighted in highlyvisible projects have cast doubt on the integrityof quality assurance processes. The InspectionPanel report on the Western China projecthighlighted many issues (World Bank 2000e).Guidelines for the application of policies havenot been internalized by many task managers


1 9

What is missing is evidence of a clear,operational, institutional commitment.

and staff, partly because the provisions are notalways clear. This is complicated by the diffu-sion of responsibility and accountability associ-ated with matrix management. Line staff are putin the difficult position of trying to apply poli-cies when they have the dual responsibilities ofmonitoring compliance with safeguards whilealso promoting the environment. For example,staff who depend on task managers for workassignments under the current work program sys-tem may also be required to monitor compliancewith EA policies in projects of the same task man-ager, creating a conflict of interest. Key findingsof this report with respect to the Bank’s safeguardpolicies include the following.

Clarifying the Policies. Recent Inspection Panelreports have highlighted a significant problemwith the implementation of EA policy in theBank due to perceived ambiguities in the scope,intent, and requirements of the policies amongstaff responsible for their implementation. Accord-ing to Inspection Panel interviews, lack of clar-ity and sharp differences of interpretation areprevalent even among senior management (WorldBank 2000e). Recent studies sponsored by OED(Boisson de Chazournes 2000; IUCN 2000) con-firm the need to clarify certain aspects of EA poli-cies (for example, the term “significant” is notdefined in OP 4.01, but it is the distinctionbetween A and B projects). Surveys of task man-agers confirm that lack of clarity and authorita-tive guidance play a role in the problemsencountered with the application of EA poli-cies. While the policies themselves may be appro-priate and adequate, the language of both thepolicies and the standards by which they are tobe applied need clarification and reliable inter-pretation to ensure consistent implementation.

Effects on Project Design and Supervision,and Ensuring Sustainability of Results. Most EAwork occurs early in the project cycle andfocuses on completing the EA and on project

design modifications or mitigation activity tosatisfy the recommendations of the EA. Atten-tion to the process falls off thereafter. Supervi-sion of environmental aspects of category Aand particularly category B projects has beenweak, and monitoring of action plan imple-mentation spotty. This aggravates the systematicweakness in compliance monitoring and report-ing. As a result, it is nearly impossible to verifythe effectiveness of mitigation measures. Perhapsmost important, the Bank’s involvement in theEA process formally ends when the project iscompleted (that is, when disbursements arecompleted). There is no regular program formonitoring the implementation and sustain-ability of environmental measures during the sub-sequent life of the project.

Harmonizing Borrower/Bank Standards.Borrowers are now establishing their ownenvironmental assessment regulations and imple-mentation procedures, often with Bank assistanceand encouragement. Many of these are still rel-atively new and they are not strong, but theyhave grown out of domestic processes and con-stitute important first steps in environmentalpolicy development. However, national EArequirements are often different from those ofthe Bank. Concerns have been raised by bor-rowers that lack of effort to harmonize Bank andnational policy standards leads to unnecessaryfriction and harms the overall cause of the envi-ronment.12 There is insufficient guidance onhow staff can implement the Bank’s standardsflexibly enough to harmonize with local rules andto strengthen local processes—and to do sowithout undermining the basic safeguard policyobjectives. This is an important question thatshould be considered in revisions of the Bank’sEA policies.13

Application to Adjustment and ProgrammaticLending. Adjustment lending was excluded fromthe EA process when OD 4.01 was initiallyformulated. Several NGOs and internal stud-ies (Munasinghe and Cruz 1995; Reed 1992,1996) have highlighted important impacts thatadjustment lending can have on the environmentand have recommended methods for incorpo-rating attention to environmental issues in adjust-ment operations. Since March 1999, sector


2 0

There is insufficient guidance on how staffcan implement the Bank’s standards flexiblyenough to harmonize with local rules and to

strengthen local processes.

adjustment loans have been included amongthe projects subject to the EA process. ESSD iscurrently examining to what extent, and how,safeguard policies should be applied to adjust-ment lending and to other programmatic oper-ations. It is important that satisfactory guidelinesbe developed for all Bank lending.

Internal Structure and Incentives. Since thecreation in 1970 of the Office of the Environ-mental Adviser, the application of environmen-tal mitigation measures has been viewed by anumber of borrowers and task managers as anadded cost and burden that has impeded rapidproject execution. While EAs necessarily have apolicing element, the culture and structure of theBank have resulted in an unnecessarily adver-sarial relationship that has contributed to mak-ing the environment an enclave activity. TheBank’s model for managing EAs has changedover time but has yet to find a fully satisfactoryform.

Following the 1987 reorganization, the Envi-ronment Department had authority to review theenvironmental aspects of all projects, one ofonly three mandatory reviews external to theRegion (the other two were legal and procure-ment). For a variety of reasons, authority for theEA process migrated to the Regions, while theEnvironment Department retained substantialindependent resources to assist in and reviewdecisions in the EA process.

This model was further modified following thecreation of networks and the shift to country-based task budgeting that began in the 1996 reor-ganization. Both the central and the Regionalenvironmental units saw their budget resourcesreduced and became more dependent on coun-try directors and task managers for most of theirfunding and staff assignments. As a result, fewerresources were available for crosscutting andcross-border issues, and work became morefragmented as staff sought the security of spe-cific assignments to support their “billable hours.”This also placed Regional environmental staff inthe conflict-of-interest situation of both policingthe safeguards and trying to build constructiverelations with colleagues in other sectors.Regional management was held responsible fordelivering the lending program, but shared

accountability for the implementation of safe-guards with the networks. In turn, Regionalmanagement held major sway over networkAnchors through the budget and influence in thesector board. The quality of the EA processdeteriorated.

External criticism by NGOs and some donorsof the Bank, combined with lack of clear mana-gerial accountability, created a risk-averse men-tality among both managers and staff. Someprojects have been rejected because of potentialenvironmental risks, and senior managementattention to environmental issues has beendirected mainly to high-profile, high-risk projects.Partly as a result of the issues raised in the recentInspection Panel investigation of the proposedWestern China Poverty Alleviation project, sub-stantial additional resources (estimated to beabout $6 million) have been allocated to strength-ening the application of environmental safeguardsand restoring more responsibility to the ESSD Vice-Presidency. Finding a functional model for bal-ancing the roles of the center and the Regions inEA processes should be a high priority.

While strengthening safeguard processes is crit-ical to the credibility of the Bank, care must betaken not to reinforce perverse incentives. Safe-guard policies are increasingly seen as having pri-macy among the Bank’s environmental objectives,rather than in their proper role as a backupassurance to high-quality environmental main-streaming in project design. These safeguardactivities, while essential to display the Bank’scommitment to development “with a humanface,” should not distract attention from the pri-ority to be given to mainstreaming the environ-ment in strategy work and in all lending activities.

Overall, performance in the area of safe-guards has been only partially satisfactory. Fun-damental reform of implementation andaccountability processes is critical. Managementis aware of these shortcomings and is strength-ening its approach to safeguards.

OED has expressed some reservations aboutrecently proposed changes. Two issues inparticular remain to be addressed. First, underthe emerging safeguards compliance frameworkof decentralized responsibility with central over-sight, the members of the Regional safeguards


2 1

compliance team will still depend on cross-support from project task managers for a sub-stantial portion of their work program, and thusface a potential conflict of interest.

Second, since Bank management monitorselapsed time between the Project Concept Doc-ument (PCD) and the project approval date asa key performance indicator, there is a built-inincentive to delay the formal issuance of a PCD.At the same time, since the PCD often representsthe first time that a project can be reviewed bythose not involved in the project, including thestaff responsible for quality assurance on safe-guards, safeguard issues may be identified toolate in the project processing cycle to allowadequate consideration of more environmentallysound alternatives.

Global ConcernsThe Bank, on the basis of its own analyses andon the recommendations of others, has pro-moted initiatives related to climate change at thecountry level and as part of the global agenda.Its focus on global concerns has been appro-priate.14 However, the emphasis on the globalaspects of climate change, protecting forestsand biodiversity, desertification, and the likehas seemed to reflect the concerns of the devel-oped countries and to understate the impor-tance of these environmental concerns to localinterests and welfare. The issues have becomedivisive in international forums, such as nego-tiation of conventions and meetings of the U.N.Commission on Sustainable Development.Opportunities for cooperation have been missed.Fuel for Thought (World Bank 1999c), the Bank’sstrategy for improving environmental perform-ance in the energy sector, was caught in a sim-ilar debate between global and local approachesand was a weaker document as a result.

The Bank has prepared GEF projects toaddress biodiversity, ozone depletion, and inter-national water issues. These projects have some-

times been isolated operations responding to theglobal mandate of GEF and not integrated intocoherent national strategies.15 In other casesthey have contributed to larger environmentalobjectives and have helped the Bank’s efforts tomainstream.16 The Bank is beginning to recog-nize that while global issues require global coop-eration, there are also very important localreasons for concern about such issues. It hasmade modest efforts to promote renewableenergy, and much larger efforts to improveenergy conservation in Eastern Europe and thestates of the former Soviet Union, although theenvironmental benefits were primarily a resultof improving economic efficiency rather than aprimary focus of the operations.17 In addition,the Bank has promoted the Prototype CarbonFund, global forest initiatives, and assisted inwork on the desertification convention. It hasalso, as noted earlier, been a major supporter andexecuting agency for the GEF.

The Bank’s emphasis on global issues shouldnot detract from addressing regional environ-mental issues, which are very important formember countries. Many environmental issuesinvolve watersheds or ecosystems that spannational borders. Cooperation among countriesis needed, and the Bank has the potential to facil-itate more cooperation than has been the caseso far. Although the Bank has encouraged mem-bers to take these issues into account, it has notundertaken projects to address multicountryenvironmental issues. The Bank’s strong coun-try and sectoral orientation has impeded suchactivities.18 The GEF has taken some initiativeson regional issues, and the Bank should learnfrom those experiences. Meanwhile, the Bank’sRegions should find ways to do more regionalenvironmental work.

Considering resource constraints, the Bank’sefforts to address global issues in its own researchand analysis have been satisfactory. It has alsobegun working with international agencies andNGOs on global issues. This approach hasproven partially effective in promoting attentionto global issues in its country dialogues but hasnot made much progress in gaining borrowersupport. The Bank’s efforts have not yet beensatisfactory in the areas of mitigating the local


2 2

While global issues require global cooperation,there are also very important local reasons

for concern about such issues.

impacts of climate change nor in addressingregional issues, but the Bank is beginning toexpand its work in the former.

Internal Structure, Incentives, andAccountabilityUnderstanding the Bank’s organization andincentive structure is a prime factor in evalu-ating its performance in the areas discussedabove. The initial push to expand environ-mental activities was given a highly sectoral fla-vor by the Bank’s sector- and country-basedstructure and the weakness of the NetworkCouncils. There were few incentives to buildcrosscutting themes into holistic approachesat either a strategic or operational level. Thejoint emphasis on safeguards and environmentprojects and the continuing priority to advanceprojects have reinforced the compartmental-ization of the environment and have perpetu-ated the adversarial relationship betweenenvironmental interests and those who wantedto speed up project preparation and simplifyprocedures. So long as mainstreaming the envi-ronment was not clearly stated and pursued asa core institutional objective and staff werenot recognized for their accomplishments in thisarea, there were few material incentives tomove in that direction.

The expansion of the environmental units,however, brought into the Bank a number ofhighly motivated and innovative staff commit-ted to the environment, and they receivedencouragement within the Bank’s environmen-tal community and from some managers. Whenthe Environment Department had substantialindependent resources for environmental activ-ities, there was a rapid expansion of research,analysis, and lending. The subsequent efforts todecentralize responsibility and budgets to theRegions and country units eroded the capacityof the Environment Department to integrate the-matic environmental concerns more broadlyinto sector programs or to monitor implemen-tation of policies. Increased necessity to competefor resources further reduced the environmentto a low-priority sector. These changes dimin-ished the Bank’s capacity both to mainstream theenvironment into country programs and to imple-

ment its safeguard policies effectively. The envi-ronment has too often been viewed as a luxurythat can wait rather than as a central part of theBank’s development objectives.19

With increasingly constrained budgets, taskmanagers in other sectors have often viewedenvironmental inputs as an added cost and havechosen not to engage environmental staff unlessabsolutely necessary. This has made main-streaming harder and has led to underfundingof some safeguard activities.20 Environmentalstaff have exercised a great deal of ingenuity toraise funds from other sources to support theiractivities. Although external funding sourceshave been valuable in the short term, they havetheir costs. Considerable staff time is spent rais-ing funds rather than working directly on tasks,and conditions on this funding may shift thedirection of the activities to the priorities of thedonors.21 The reliance on external funding hastended to reinforce the separation of the envi-ronment from mainline Bank activities and accessto regular Bank funds, creating more divisionrather than integration.22

The Bank as an institution and in the state-ments of its past four presidents has made strongcommitments to supporting the environment.This has been reflected in the creation and allo-cation of resources to the Environment Depart-ment, expanded environmental activities, anumber of major external partnerships, and thestrengthening of safeguard processes. Theseactions, however, have not been accompaniedby incentives or direct action by management toensure that mainstreaming takes place. Seniormanagement reviews of CASs have not focusedon environmental issues unless there was a rep-utational risk issue. Responsibility for other envi-ronmental aspects was delegated to theEnvironment Department, which was outside theoperational line responsible for country strate-gies, projects, and other activities, and for whichit had insufficient independent resources. The ini-tial instructions for the PRSPs did not mentionthe environment. No system has been establishedto define objectives for mainstreaming or tomonitor results. Without guidelines and assign-ment of responsibility, no one is held account-able for mainstreaming.


2 3

The goals of the series of Bank reorganiza-tions over the past 13 years have includedimproving cooperation across sectors and mov-ing toward a more holistic approach. Unfortu-nately, the successive reorganizations havetended to reinforce the Bank’s tendencies towardsector fragmentation. With some exceptions,the other networks are not moving to main-stream the environment in their strategies orprograms.

The allocation of responsibility and account-ability for the environment is a major factor inthis. Senior managers have not been heldaccountable for incorporating environmentalconcerns into the activities of their units, eitherin the Regions or in the networks. This problemhas been recognized, and a new task force hasbeen formed to clarify accountability in thematrix. The results have yet to emerge. In thecase of safeguards, Regional responsibility forapproval of EAs has not been accompanied byadequate accountability. The Regional vice pres-idents have not been accountable for the EAprocess, which was located in the Regional envi-ronmental units. These were then faced with con-flicting objectives of enforcing the policies whilecontributing to Regional lending targets. ESSDand senior management are putting in place anew system that is intended to produce cleareraccountability and better results. It should bemonitored closely.

Given the many other pressures on staff andmanagers, and the ambivalence of many gov-ernments regarding the role of the environmentin development, it is understandable that theenvironment has gotten a low priority. The cur-

rent system does not provide the appropriateaccountability structure to meet the Bank’s com-mitments to incorporate environmental sustain-ability into its core objectives and to mainstreamthe environment into its operations. It is not thatthe individuals who operate within the systemdo not work hard to try to meet the objectiveson which they are judged.23 Rather, the time hascome to examine how the Bank should align itsenvironmental goals and priorities with clearincentives, lines of accountability, and author-ity to achieve results. Management has a respon-sibility to define its priorities and objectives ina manner that can be implemented with avail-able resources, even in the face of pressure tooverload its mandate. In the case of the envi-ronment, which is commonly seen as central topoverty alleviation and growth, this means bet-ter integration into a coherent strategy as wellas better monitoring.

The Bank’s organizational and incentive struc-ture has supported the expansion of Bank directlending for the environment to about 6 percentof the overall portfolio. (If mainstreamed envi-ronmental components are included, the sharemay be about 10 percent.) Environmental lend-ing made up nearly 3 percent of new commit-ments in fiscal 1999. The recent budget cutswill test whether this level can be maintained.However, the Bank’s structure and incentivesreinforce the treatment of the environment as asector, and the Bank’s accountability structure hasnot been able to encourage the mainstreamingof the environment in a satisfactory manner orto convince managers and staff to make it a cross-cutting theme. Unless and until that happens andthe environment becomes part of the Bank’s coreobjectives and a normal part of doing qualityanalysis, projects, and strategies, the tensionbetween the Bank and its stakeholders that hascharacterized the past decade will continue, andprobably intensify.


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Without guidelines and assignment ofresponsibility, no one is held accountable

for mainstreaming.

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Recommendations

By and large, the findings of this evaluation are not new and are similarto what other donors have found when they evaluated theirenvironmental programs (see Annex A). Many of the findings are

based on internal and external studies done over the past decade. The needto make the environment a strategic priority was recognized by the Bankwith the creation of the Environment Department and was reaffirmed at theRio conference and in the 1992 WDR. Various presidential statements andindividual initiatives also reflect an awareness of the importance of the

environment. NEAPs were to be integrated intocountry strategies, EAs were supposed to bebroadened to sectoral and Regional bases, andthe GEF was supposed to complement Bank pro-grams, not become a substitute. Why didn’t thishappen? The preponderance of evidence sug-gests the following: (1) The Bank did not mounta concerted effort to integrate doing positiveenvironmental good as a critical priority in itscore objectives. The cross-sectoral and thematicaspects of the environment received little empha-sis, and, most disconcertingly, the fundamentallink between environmental sustainability andpoverty alleviation was not pursued. (2) TheBank’s safeguard policies to prevent or mitigateenvironmental harm from its projects, whilesound in conception, were not accompaniedby clear standards and consistently effectiveimplementation. This has resulted in increasedreputational risks and diversion of attention to

damage control. (3) The Bank’s efforts in deal-ing with global environmental issues have beenhampered by their early formulation as goalsexternal to member countries and by the strongcountry orientation of the Bank.

In all of these areas, the structure of incen-tives, priorities, and direct processes of account-ability from senior management down the linehas not been supportive of strategic inclusion ofthe environment, adequate monitoring and eval-uation, or positive recognition of activities andstaff. While it may be argued that Bank man-agement attitudes reflect the ambivalence of itscollective membership on this issue, that ignoresthe leadership role attributed to and accepted bythe Bank for the promotion of equitable and sus-tainable development. Unless the Bank expressesthe priority it gives to the environment anddemonstrates how to implement this priority inits programs, it is difficult to expect its borrowers

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to do likewise. Simply recommending more orbetter NEAPs, allocating more staff or resourcesto the environment, or doing better EAs will haveno more impact than in the past. The recentemphasis on being responsive to clients makesexercising the Bank’s leadership and role-modeling functions even more critical.

Our findings highlight a number of specificstrengths and weaknesses of the Bank’s per-formance on the environment. Many of theweaknesses can be—and are being—addressed.The critical issues that must be addressed by theBank’s environmental strategy and its seniormanagement stem from the three major short-comings identified above. The agenda presentedbelow is a medium-term set of corporate objec-tives. It calls for judicious sequencing and grad-ual implementation in line with the resourcesactually allocated to enhance the implementa-tion of this corporate priority. The forthcomingEnvironment Strategy Paper provides a uniqueopportunity to secure a realistic and workableconsensus among the membership about thefuture role of the Bank on the environment.

Recommendation 1: In pursuit of holistic,long-term development and the MillenniumDevelopment Goals, the Bank should buildon its comparative advantage and analyticalcapacity to demonstrate the critical role ofthe environment in sustainable develop-ment and poverty reduction. It shouldincorporate environmental objectives intoits core strategy and its operations. In par-ticular, the Bank should: • Reform the structure of its management, staff,

and budget incentives to give added empha-sis to achieving environmental objectives.

• Integrate environmental sustainability intocountry and sector strategies.1

• Make the environment a central feature of pol-icy dialogue with core ministries, giving par-ticular attention to the links between theenvironment, poverty reduction, and sus-tainable livelihoods.

• Ensure that the environment is adequately cov-ered in due diligence ESW (such as the pro-posed Development Policy Reviews). When theCAS indicates a need for more in-depth analy-sis of environmental issues, environmentalESW should be carried out in a participatorymanner, taking full account of the work carriedout by partners (e.g., national strategies forsustainable development proposed by DFID).

• Mainstream environmental concerns into itsresearch and operations. Adequate guidance,standards, and monitoring should be put inplace so that staff have the tools and incen-tives to implement the environmental strategy.

• Strengthen monitoring and evaluation ofprogress on the environment in CASs and Sec-tor Strategy Papers. To this end, it shouldexpand the use of environmental indicatorsin country analysis, particularly indicators ofenvironmental degradation in terms of GDP.

• Enhance its efforts at capacity building inmember countries by strengthening institu-tions, policies, and regulatory enforcement.

Recommendation 2: The Bank should reviewits environmental safeguard oversight sys-tem and processes to strengthen accounta-bility for compliance. In parallel, the policyframework should be modernized andadapted to the changing practices and instru-ments being used by the Bank and takeaccount of recent experience. In particu-lar, the Bank should:• Ensure that safeguard policies and standards

for their implementation are clear and are fullyunderstood by managers and staff.

• Define policies and practices for treating envi-ronmental issues in adjustment and pro-grammatic lending not currently covered byEA policy.

• Provide adequate and independent fundingfor oversight of safeguard processes andshield compliance review processes and stafffrom conflicts of interest.


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The Environment Strategy Paper providesa unique opportunity to secure a realistic

and workable consensus among themembership about the future role of the

Bank on the environment.

• Allocate accountability and responsibility forimplementation of the safeguard policies tothe relevant line managers and empower thecentral environment unit to intervene wherecompliance problems are identified.2

• Establish a transparent adjudication processto resolve internal differences and avoid mud-dying responsibility and accountability.

• Help build the capacities of borrower coun-tries to formulate and implement EA policiesand manage environmental resources andrisks.

Recommendation 3: The Bank should helpimplement the global environmental agendaby concentrating on global issues thatinvolve local and national benefits. In par-ticular, the Bank should:• Identify environmental actions that achieve

national and local benefits while addressingcritical issues of global concern.

• Help countries prepare for the impactsof global environmental degradation, suchas global warming, and support transitionsto renewable energy sources and end-useefficiency.

• Give adequate attention to regional (trans-boundary) environmental issues in itsanalytic and program work, including cross-boundary cooperation.

• Enhance its role as a global leader in theenvironment through public statements, byserving as a role model through its ownactions, and by promoting greater under-standing of the poverty-environment-devel-opment nexus.

• Use its convening power and partnershipprograms to increase attention to envir-onmental issues of common concern, pro-mote coordination among donors, andempower all stakeholders to achieve com-mon objectives.

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Four donors have recently evaluated their envi-ronmental aid programs: Norway, 1995; Den-mark, 1996; Finland, 1999; and the UnitedKingdom, 1999 (Denmark, Ministry of ForeignAffairs 1996; Finland, Ministry for Foreign Affairs1999a–f; FNI and ECON 1995; Flint and others1999). These major studies of one to several vol-umes have come to surprisingly similar con-clusions that are consistent with those of thisreview. Although their programs are generallysmaller than the Bank’s, these evaluations areimportant because many Bank countries haveexpressed a preference for bilateral (grant) sup-port for environmental projects.

While the emphasis and terms of expressiondiffer across reports, the themes expressedhere are common to all of the studies. Theyall note that environment has been made ahigh priority in their aid programs and expressconfidence in the formulation and emphasisof their policy statements. They also expresssome satisfaction that their programs havehad positive impacts and that progress hasbeen made. Beyond that, the picture is notgood.

A significant gap between rhetoric and real-ity is a major theme in all reports, and the morerecent ones indicate a falling-off in performancein the late 1990s. Effective priorities seem to haveshifted away from the environment.

The reports find that translation of environ-mental goals into action is weak for severalreasons:• Country-level strategies are nonexistent or

inadequate (usually from both the donorand the country points of view, though theavailability of NEAPs was welcomed).

• There is a lack of clear targets and guidelinesfor staff to follow.

• Not enough skilled staff are available, andcurrent staff are stretched too thin and do nothave the necessary authority.

• There is not enough integration or main-streaming of environmental issues into otherprojects.

• There is a paucity of monitorable environ-mental indicators.

• Application of EAs is deficient and, whereapplied, they are often too late in the proj-ect cycle to do more than mitigate risk.

The reports also focus on the lack of adequatemonitoring, lack of evaluation of environmen-tal projects, and the absence of environmentalconcerns in other projects. Internal feedback sys-tems were deemed inadequate. Managementreviews rarely addressed environmental issues,so there was no effective accountability forachieving the environmental principles andgoals that had been articulated.

The recommendations suggested improve-ments in the areas noted above. Particularattention was given to getting better strategies,improving implementation across the board,getting better indicators, and improvingmonitoring.

Although the Bank has rightly been underpressure from its donors to improve its per-formance, it is interesting to note that the short-falls identified for the Bank also occur in manyof the donors’ programs. This suggests thatpromoting environmental sustainability is dif-ficult and is not internalized in any of these in-stitutions to the extent that it ought to be. Theremay be good reasons for a cooperative effortto improve performance. Coordinated effortson developing environmental strategies, envi-ronmental indicators, and monitoring and

ANNEX A: DONOR EVALUATIONS

ANNEXES

evaluation procedures would be a good placeto begin. This should be supplemented by effec-tive in-country coordination of environmental

programs and their evaluation, rather than inde-pendent implementation and evaluation of eachdonor’s program.


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A n n e x e s

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SummaryAn external Advisory Panel convened by theWorld Bank’s Operations Evaluation Depart-ment (OED) wishes to convey six recommen-dations to the OED as the Panel’s response tothe Review of the World Bank’s Performance onthe Environment. The Panel requests that theOED transmit these recommendations to theBank’s senior management and Executive Board.

1. The World Bank’s senior leadership mustreassert environmental sustainability as a coreelement of the World Bank’s mandate.

2. The World Bank’s senior leadership mustestablish staff accountability for compliancewith the Bank’s environmental policies, andto this end, should re-centralize clearanceauthority on every project with environmen-tal implications.

3. The World Bank must dramatically improve itsperformance in mainstreaming environmentalconsiderations into nonenvironment lendingand policy advice, which will require a signif-icant realignment of staff incentives and moretransparent accountability for mainstreaming.

4. The World Bank must do a better job of iden-tifying and exploiting synergies among envi-ronmental protection, economic development,and poverty reduction objectives within asustainable-livelihoods framework.

5. The World Bank must harmonize its envi-ronment strategy across the World BankGroup to ensure greater consistency andaccountability, and to facilitate appropriateintegration into private sector–oriented financeand policy advice.

6. The World Bank has an important globalleadership role to play on environmental mat-ters through its convening power, and a

responsibility to assist borrowers to complywith international commitments and norms.

Background on the Panel’s mandate andactivities, and further detail on the six recom-mendations, are provided below.

BackgroundIn March 2000, the World Bank’s OperationsEvaluation Department (OED) recruited fiveindividuals—Alicia Bárcena, Ashok Khosla, DavidMcDowell, Frances Seymour, and Bjorn Stig-son—to serve as an independent Advisory Panelfor its “Review of the World Bank’s Performancein Promoting Environmental Sustainability inDevelopment.” The review had been initiated theprevious year. OED’s stated objectives for con-vening the Panel were to:

• Bring to bear diverse perspectives in the con-duct of OED’s evaluation

• Serve as a sounding board for the findings ofthe evaluation as they emerge

• Add authority and credibility to the findings.

It was understood that each Panel memberwould represent his or her individual views andnot those of the organization with which eachis affiliated. Panel members were expected notto disclose the findings of the evaluation untilafter they had been presented to the WorldBank’s Board of Executive Directors. OED sharedwith the Panel draft background documents thatwere either commissioned for or related to thereview. Two meetings of the Panel were con-vened, one in May and one in October. At theOctober meeting, OED requested that the Panelprepare written comments on the review and,if possible, submit a consensus report.

ANNEX B: REPORT OF THE ADVISORY PANEL

This brief report is designed to accompanythe OED “Review of the World Bank’s Performanceon the Environment,” and to capture the princi-pal consensus views of the Advisory Panel. ThePanel’s comments are in response to the draft ofthe main report dated December 15, 2000, and thedraft of the technical report dated November 27,2000. Individual Panel members have communi-cated comments of an editorial nature to OED sep-arately. The Panel’s mandate did not extend tocommenting on the World Bank environmentstrategy currently under preparation elsewhere inthe Bank in parallel with the OED review, althoughthe two processes are coordinated.

This report conveys six principal recommen-dations to the World Bank’s senior managementand Executive Board as the Panel’s contributionto deliberations on the implications of OED’sreview. These recommendations are based on thedocumentation provided by OED, the discussionswe have had at our meetings and electronically,as well as on Panel members’ own collectiveknowledge and experience of the World Bank’sperformance on the environment. The remain-der of this report provides supporting detail onthe six recommendations. We seek to clarifythose findings and recommendations of the OEDreport that we agree with, those findings and rec-ommendations that we disagree with, and issuesthat we believe should have been addressed, butwere not.

Recommendations1. The World Bank’s senior leadership mustreassert environmental sustainability as acore element of the World Bank’s mandate.

Members of the Panel agree with OED’s find-ing that the World Bank “has not succeeded inmaking the environment a core strategic prior-ity,” and are alarmed by evidence that the Bankhas in recent years begun losing ground in thisregard. The declining prominence of environ-mental sustainability in the very instrumentsused by the Bank to signal its strategic priori-ties—the Country Assistance Strategy, economicand sector work, and the Comprehensive Devel-opment Framework—indicates the need for theBank’s senior leadership to reassert the central-ity of the environment to the Bank’s core busi-

ness. Moreover, the absence of environmentalconcerns in Poverty Reduction Strategy Papersand in the recent World Development Reportindicates a failure to make the conceptual linkbetween environmental sustainability and theBank’s central mission of poverty reduction.The recent decline in new lending for environ-mental projects, and the finding that competitionfor budgetary resources has “further reducedthe environment to a low-priority sector,” do notbode well for improvement in the near futurewithout a swift and dramatic change in course.

The Panel is thus concerned that the con-gratulatory tone of some of the introductoryand summary text of the OED report is incon-sistent with these more disturbing findingsdetailed in the body of the report. The Panel con-curs that the Bank has indeed achieved muchin the period under review, and that there aremany specific project, country-level, and globalinitiatives of which the Bank can be proud.However, we believe that the appropriate bench-marks for measuring performance should bethe Bank’s own stated commitments, and thedegree to which the Bank’s response has beencommensurate with the urgency and impor-tance of the challenge. By both of these meas-ures, and particularly in light of the failure tomainstream and the evidence of recent back-sliding, the Bank’s performance has clearly beenunsatisfactory. Improved performance willrequire significant attention and leadership fromthe highest levels of the institution.

2. The World Bank’s senior leadership mustestablish staff accountability for compli-ance with the Bank’s environmental policiesand, to this end, should centralize clear-ance authority on every project with envi-ronmental implications.

The Panel agrees with OED’s finding that agreat deal of accountability for compliance withenvironmental safeguard policies seems to havebeen lost during the decentralization of Bankstructure following the 1996 reorganization. ThePanel is particularly concerned by the reportedconflict of interest now faced by environmentstaff in the Regions in the wake of decentral-ization. The Panel supports the OED recom-


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mendation that “the central environmental unitshould have adequate resources and authorityto advise and intervene on issues where differ-ences of opinion arise.” The Panel would go fur-ther and recommend that definitive clearanceauthority on every project with environmentalimplications should be centralized to ensureclarity and consistency in the application ofsafeguard policies.

While the Panel believes that the first orderof business is to ensure accountability for safe-guard policies already in place, we also agreewith OED’s recommendation that the safeguardframework be reviewed to promote clarity, con-sistency, and comprehensiveness. In particular,there is a need to make explicit the articulationof social and environmental issues in the envi-ronmental classification and assessment process.In addition, the policy framework should beupdated to incorporate new insights on how to“do good,” such as those related to dams emerg-ing from the World Commission on Damsprocess.

3. The World Bank must dramaticallyimprove its performance in mainstream-ing environmental considerations into non-environment lending and policy advice,which will require a significant realignmentof staff incentives, and more transparentaccountability for mainstreaming.

Members of the Panel agree with OED’s find-ing that the mainstreaming agenda, that is, inte-gration of environmental objectives into theBank’s regular, nonenvironment lending andnon-lending activities (including concessionalactivities supported by trust funds), has been rel-atively neglected compared with the attention theBank has given to environment sector projectsand safeguard policies. (Indeed, OED’s own ini-tial approach to this review reflected a similarmisplaced emphasis. Too much analytical effortwas focused on the performance of environ-mental projects and processes, and not enoughon the Bank’s performance in dealing with theenvironmental implications of non-environmentalprojects—especially large infrastructure proj-ects—and processes such as country and sectorstrategies.)

At the country level, OED finds “little indi-cation . . . that environmental concerns havebeen integrated in the Bank’s economic policydialogue” with borrower governments, and thatonly about half of Country Assistance Strategiesaddress environmental issues. (Ironically, OEDfinds that OED itself has not systematically mon-itored effectiveness of efforts to promote envi-ronmental sustainability in Country AssistanceEvaluations.) And while an increasing propor-tion of the Bank’s portfolio is now in programlending, OED reports that most adjustment loansdo not address environmental issues, and thattreatment of environmental issues in adjustmentlending has declined in recent years. Despitesome examples of best practice, available evi-dence indicates that the Bank’s performanceoverall in mainstreaming at the country level hasbeen unsatisfactory.

It is unfortunate that the OED review isequivocal in its assessment of mainstreaming ofenvironmental concerns into other sectors, cit-ing lack of clear objectives and insufficientmeans of monitoring. In the view of Panelmembers, the Bank’s performance in this regardis critical, as (in OED’s words) the “benefits ofstand-alone environmental projects can be morethan offset by the negative environmentalimpacts of lending in other sectors that ignoresenvironmental benefits.” Nevertheless, the OEDreport provides sufficient evidence to concludethat potential tools that would support integra-tion of environmental concerns into other sec-tors—such as economic and sector work, andRegional and sectoral environmental assess-ments—are not being used, and that budgetaryand staff incentives are pulling in the wrongdirection.

Members of the Panel agree with OED’s find-ing that “the current system does not provide theappropriate accountability structure to meet theBank’s commitments to incorporate environ-mental sustainability into its core objectives andto mainstream the environment in its opera-tions.” Indeed, task team leaders surveyed byOED expressed the view that that there are cur-rently no positive incentives for mainstreaming,and that lack of interest on the part of seniormanagement is a significant constraint to main-

A n n e x e s

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streaming environmental concerns into non-environment activities. The OED finding thatmany of the Bank’s more positive environmen-tal initiatives “have tended to be a function ofthe efforts of individual staff” is consistent withthe observations of Panel members.

The Panel thus strongly agrees with the OEDrecommendation that the Bank’s structure ofincentives, allocation of resources, and man-agement accountability be reformed to givegreater emphasis to achieving environmentalobjectives, and in particular, that line managerstake responsibility for environmental sustain-ability throughout their operations. There cur-rently appears to be a (mis)perception amongmany in the Bank that environment staff andunits are responsible for ensuring the imple-mentation of the mainstreaming agenda,although they are clearly not in a position to doso. Senior Bank officials thus need to hold linemanagers accountable for integrating environ-mental considerations into all of the Bank’slending and policy advice, and to align incen-tives with this objective as a matter of urgency.

4. The World Bank must do a better job ofidentifying and exploiting synergies amongenvironmental protection, economic devel-opment, and poverty reduction objectiveswithin a sustainable livelihoods framework.

A particular area of concern to the Panel isthe Bank’s failure (until recently) to link envi-ronmental sustainability and poverty reductionobjectives. OED reports that there has been“surprisingly little” analytic work on the linksbetween poverty and environmental degradation.While the Bank’s environment staff haveattempted to establish links with other thematicareas, OED finds that this outreach has not beenreciprocated.

While the Panel is supportive of the attemptto link the new environment strategy with povertyreduction objectives, we are concerned that suchlinkages need to be broadly construed in the con-text of long-term economic development objec-tives and a sustainable-livelihoods framework.Otherwise, there is a danger that the Bank’senvironment-related work will be constrained tolocal interventions with a short time horizon at

the expense of attention to more systemic, long-term threats to economic development and sus-tainable livelihoods posed by environmentaldegradation. For example, the Panel believesthat there is room for increased Bank emphasison the synergies among increased efficiency andproductivity in the use of natural resources, eco-nomic growth, and poverty reduction.

5. The World Bank must harmonize its envi-ronment strategy across the World BankGroup to ensure greater consistency andaccountability, and to facilitate appropri-ate integration into private sector–orientedfinance and policy advice.

Over the past decade, the World Bank hasemphasized private sector development as acentral theme of its lending and policy advice,and the private sector arms of the World BankGroup—the International Finance Corporation(IFC) and the Multilateral Investment GuaranteeAgency (MIGA)—have grown significantly. More-over, recent restructuring has merged WorldBank and IFC management units in key sectors.It is thus extremely unfortunate that the reviewof the Bank’s environmental performance, andthe parallel environment strategy process, arelimited to the IBRD and IDA. At its first meet-ing in June 2000, the Advisory Panel stronglyurged the Bank to integrate the Bank’s privatesector entities into the review and strategyprocess, but this was not done.

Even within the more narrow mandate ofthe review of IBRD and IDA activities, the OEDreview fails to provide an adequate treatment ofthe environmental performance of the Bank’s pri-vate sector development activities, includinglending, guarantees, and policy advice. Giventhat Bank support for privatization and guaran-tees of private provision of infrastructure areoften controversial on environmental grounds,this is a significant omission. In addition, the OEDreview does not treat the potential positive roleof the Bank in promoting opportunities to inte-grate environmental concerns into the objectivesof private sector development. For example,the potential of strict national environmentalstandards to promote innovation and eco-efficiency deserves increased attention.


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6. The World Bank has an important globalleadership role to play on environmentalmatters through its convening power, andresponsibility to assist borrowers to com-ply with international commitments andnorms.

The Panel supports OED’s recommendationthat the Bank should revise its approach toglobal issues, concentrating on capturing thelocal and national benefits from addressingissues that are of global concern. In addition,the Panel supports the recommendation thattransboundary environmental issues shouldreceive more attention in the Bank’s analytic andprogram work, as this is an area with significantunexploited potential and need.

However, the Panel believes that there ismore to be said about the selective use of theBank’s global convening power to promoteinternational consensus-building on environ-mental challenges, the role of the Bank indirectly assisting borrowers to implement thecommitments and norms that emerge fromsuch processes, and indirect assistance throughcooperation with other international organiza-tions. It is unfortunate that the OED review didnot include an evaluation of the many inter-national partnerships and global processes that

the Bank has entered into in the environmen-tal realm.

These partnerships have ranged from itsAlliance with the World Wildlife Fund and con-vening of corporate CEOs in the forestry sec-tor, to its creation (with the World ConservationUnion) and subsequent arm’s-length support forthe World Commission on Dams (and as-yet-unknown role in promoting the recommenda-tions of the latter’s recent report). Each of thesepresents a very different model of engagement,and some have been controversial with variousstakeholder groups. Members of the Panelbelieve that Bank resources should be used tosupport global public policy–making and imple-mentation with respect to the environment, butsuspect that there are likely many lessonslearned regarding how this is best done that areleft uncovered by the OED review.

Concluding WordsThe members of the Panel wish to thank theWorld Bank for providing us with the oppor-tunity to participate in the review process, andextend our gratitude to colleagues in OED whofacilitated our meetings and responses to ourrequests. We hope that our input is received inthe constructive spirit in which it is offered.

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1. The Committee met on May 2 and May 23,2001 to discuss the papers OED: Review of theBank’s Performance on the Environment(CODE2001-0029) and ENV: Making Sustain-able Commitments: An Environment Strategyfor the World Bank Discussion Draft(CODE2001-0041), prior to its being submit-ted for Board review on July 12, 2001. Fol-lowing the May 2nd CODE meeting,Management prepared and circulated a Q&A(CODE2001-0051). The Committee com-mended both OED and Management for awell-coordinated process. The Committee wel-comed the Strategy’s poverty-focused agenda,emphasizing environmental health, sustainablelivelihoods, and vulnerability and environ-mental change. The Committee also supportedManagement’s two-pronged approach focus-ing on strengthening the incentive andaccountability structure and on the supervisionof the environmental aspects of projects.

2. The Committee welcomed the OED review,which rated the Bank’s performance on the envi-ronment as “partially satisfactory.” The Com-mittee supported the OED recommendationsand was pleased to hear that Management hadfound the review useful in guiding the devel-opment of the Strategy. Although not all mem-bers supported all the elements of the strategy,the Committee believed there was enough com-mon ground to support its going to the Board.

3. The Committee raised issues on linkagesbetween the environment and poverty reduc-tion, tradeoffs between global and local issues,and balancing advocacy, minimum standards,and country ownership. It also discussedsafeguards and institutional incentives, andhow to mainstream environmental objectivesinto the Bank’s work, including adjustment

lending policy and harmonization across Bankinstruments.

4. Following are a number of issues that theCommittee feels warrant the particular atten-tion of Executive Directors at the Board dis-cussion of the strategy on July 12, 2001.• Policy Advocacy, Country Ownership and

Capacity. The Committee noted that bal-ancing policy, setting minimum standardsand managing reputational risks for theBank at the country level was a key chal-lenge. Several members believed that thestrategy was weighted more toward pol-icy advocacy and imposed environmentalstandards and minimizing the Bank’s rep-utational risk than toward “doing good”and addressing client concerns about costs,delays, and implementation capacity. Oth-ers cautioned that weak country capacityshould not result in lowering Bank stan-dards and underlined that the proposedapproach should strike the right balancebetween the costs of compliance and theBank’s reputational risk. Members stressedthe importance of country ownership andinstitutional capacity building and said thatthe focus, in the long run, should be tointegrate safeguards into country systems.They called on flexibility in applying thepolicy and emphasized that the localizationof global public goods was critical to clientbuy-in. Executive Directors may wish to dis-cuss whether they are satisfied with thebalance and treatment of “country own-ership,” “capacity building,” and “reputa-tional risk” in the revised draft.

• Safeguards and Institutional Incentives.The Committee believed that more effortis required to strengthen the accountabil-

ANNEX C: REPORT FROM THE COMMITTEE ON DEVELOPMENTEFFECTIVENESS

ity and incentive structure to mainstreamenvironment into the Bank’s work, includ-ing the need to clarify the working modal-ities between the central review functionand Regional responsibilities for imple-mentation and monitoring. Managementagreed to provide a matrix on accounta-bility and incentives. Executive Directorsmay wish to discuss the proposed meas-ures to clarify and strengthen incentivesand accountability for safeguard compli-ance in the Bank.

• Resources/Budget. Some members believedthat the strategy would increase the Bank’sadministrative costs and supported theproposed five-year resource envelope.Other members questioned the need forincremental funding and requested to seea program of activities within the currentresource envelope. Executive Directorsmay wish to discuss the case for incre-mental resources and adequacy ofresources for implementation.

Following are the Committee’s discussion ofthese and other issues in greater detail.5. Linkages between Environment and Poverty

Reduction. The Committee noted that whilethe linkages between environment and sus-tainable livelihoods in the long term wereclear, the links between Regional and globalcommons and poverty reduction were lessdirect. Members called for the strategy toexplicitly acknowledge tradeoffs that couldexist in the short term between realizing thegoals of poverty reduction and environmen-tal sustainability. Members also noted thatwhile the Bank’s focus was on poverty reduc-tion, many of the proposed actions wouldrequire moving beyond a poverty focus, to abroader focus on social sustainability. Man-agement agreed that poverty reduction andsustainable development were not mutuallyexclusive, and presented questions of trade-offs that must be examined carefully.

6. Implementation and Mainstreaming of Envi-ronment Objectives. The Committee stressedthat implementation will be the real test of thestrategy. Members noted the need for sharperdefinition of benchmarks for environmental

monitoring and for more ambitious targets formainstreaming environment into CASs andPRSPs. Other specific implementation issuesraised included the need to: rationalize therole of different instruments to take intoaccount clients’ capacity to benefit fully fromthem; more clarification on the roles of theBank and its key partners in implementing thestrategy, including how the GEF protocolwould be mainstreamed into the Bank’s work;and more guidance on interim measures tobe taken in circumstances where the strategycould not be immediately applied. Manage-ment noted that performance indicators wouldbe tested in the first year prior to wider adop-tion and that it would revisit the proposed“tool kit” of instruments. Issues of main-streaming the GEF protocol into the Bank’swork would be taken up by the GEF Coun-cil following Board review of the SSP.

7. Treatment of Environment Issues in Pro-grammatic/Adjustment Lending. The Com-mittee noted the need for more clarity on howenvironmental issues will be incorporatedinto Bank instruments, including adjustmentlending and PRSCs. Management proposedthat this issue be taken up when the Com-mittee discusses OP 8.60 Adjustment LendingPolicy and also informed the Committee thatit was accelerating its clarification of policiesand integrating all safeguards into a single riskmanagement system.

8. A World Bank Strategy. The Committee notedthat the SSP approach should move beyonda focus on governments and projects toinclude the role of the private sector inimplementing the strategy and asked formore information on implications of thestrategy for MIGA and for IFC. Managementfrom IFC and MIGA informed the Commit-tee that they supported the strategy and thattheir activities were in alignment with itsobjectives.

9. Conclusions. Management agreed to revisethe draft report focusing on the executivesummary to take into account comments fromthe Committee, including with regard to: revis-ing the accountability and incentive matrix;clarifying the role of the regions; balancing the


3 8

costs and the benefits of compliance; ration-alization of the use of current and new instru-ments; and the development of monitorableindicators. Management will prepare a Man-agement Action Record (MAR) to be submit-ted at the time the OED report is circulated

to the Board. Following the Board discussionthe Strategy will be made available to thepublic.

Pieter StekChairman

A n n e x e s

3 9

A n n e x e s

4 1

Major OED recommendations

Recommendation 1:In pursuit of holistic, long-term development and theMillennium DevelopmentGoals, the Bank shouldbuild on its comparativeadvantage and analyticalcapacity to demonstratethe critical role of theenvironment in sustainabledevelopment and povertyreduction. It shouldincorporate environmentalobjectives into its corestrategy and itsoperations.

Response

Bank management concurs. To support the linking of environ-mental issues with the Bank’s core operations, improvements andactions will be taken in the following areas:• Country-level environmental analyses will be part of the stan-

dard package of diagnostic tools that informs policy dia-logue, particularly in connection with the preparation of CASsand PRSPs. Key sustainability and environmental indicators willbecome part of the country indicator set included in CASs. Wewill refine the methodology of country environmental analy-sis during fiscal 2002, and over the next 5 years, carry out 5to 15 country diagnostic studies annually, linked with CASpreparations in priority countries.

• Targeted environmental input to PRSPs—analytical work,training, and facilitation of cross-sectoral dialogue—will helpintegrate environmental sustainability issues into the policy dia-logue in 5–15 priority PRSP countries annually.

• Structured learning on strategic environmental assessments(SEAs) will help introduce environmental considerations ear-lier in sectoral decisionmaking and planning processes. Wewill refine methodologies and procedures during fiscal 2002,

Several “building blocks” contributed to thepreparation of the environment strategy, includ-ing Regional environment strategies, environ-ment strategy background papers, and anextensive strategy consultation process. One ofthe key building blocks was OED’s environmentreview, which assessed the Bank’s performancein supporting environmental sustainability.

The OED review found that the Bank hadmade substantial improvements in its environ-mental performance, but large challengesremained. It rated the Bank’s performance as sat-isfactory in addressing global environmentalchallenges; and partially satisfactory in (a) incor-

porating the environment into sector strategies,country strategies, and policy dialogues, (b)mainstreaming into the Bank’s overall operations,and (c) implementing safeguard policies.

In defining a course of action for the longerterm and setting specific measures to adjustBank actions, tools, and institutional incentivesfor the next five years, the strategy has taken intoaccount the findings and recommendations ofthe OED review. The management actionresponse matrix below summarizes OED’s mainrecommendations, and outlines the elements ofthe strategy and implementation plan that directlyrespond to these recommendations.

ANNEX D: WORLD BANK MANAGEMENT’S RESPONSE TO OED’SENVIRONMENT REVIEW AND RECOMMENDATIONS


4 2

Major OED recommendations Response

Recommendation 2:The Bank should review itsenvironmental safeguardoversight system andprocesses to strengthenaccountability for compli-ance. In parallel, the policyframework should be mod-ernized and adapted tothe changing practices andinstruments being used bythe Bank and take accountof recent experience.

then pilot and disseminate good practice in SEAs based onabout 10–20 SEAs annually.The following measures will be taken to measure progress:

• Monitoring and evaluating the environmental aspects of CASs.Our objective is to achieve satisfactory coverage based onmethodology developed by ENV.

• Regular reviews of the environmental aspects of PRSPs.• Refinement of the methodology for measuring the extent of

environmental mainstreaming in key sectors (rural, urban,water and sanitation, energy) during FY02, and annual report-ing on progress.

Bank management concurs and is committed to continue improve-ments in the safeguard system, following a two-pronged approachdescribed in the strategy (chapter 3). Addressing short-term priorities:• Implementing an integrated safeguard system, and improving

consistency in safeguard application validated by an inde-pendent internal audit in FY02.

• Establishing a corporate safeguard tracking and monitoring sys-tem by the end of FY02.

• Strengthening corporate consistency and oversight and meet-ing safeguard implementation targets that will be establishedin FY02.

• Developing and piloting a client capacity assessment anddevelopment program in FY02.

Reforming the safeguard system:• Developing a medium-term workplan for reforming the safe-

guards system to be reviewed by CODE in FY02.• Implementing a client capacity development program over the

next 5 years.• Implementing systematic staff training. During the next 5

years, 90 percent of all operational staff and managers will betrained in safeguards.

• Work with clients and other development institutions toreview and harmonize safeguards.

• Improved monitoring and regular reporting at the Regionaland corporate levels will provide up-to-date information onsafeguard implementation issues (chapter 4).

A n n e x e s

4 3

Major OED recommendations Response

Recommendation 3: The Bank should helpimplement the globalenvironmental agenda byconcentrating on globalissues that involve localand national benefits.

Bank management concurs. The strategy emphasizes the needto build on synergies by addressing local, regional, and globalenvironmental issues, and spells out the principles to guide theBank in actions to address global concerns (chapter 3). The fol-lowing are key aspects:• Supporting the integration of global concerns into PRSPs. Sev-

eral global environmental concerns—such as land degrada-tion, water resource management and biodiversity loss, andthe impacts of climate change—have strong linkages withpoverty reduction. Such aspects will be included in PRSPreviews and joint staff assessments (JSA). A methodology willbe developed during FY02 to guide annual reviews of PRSPsand inputs to JSAs.

• Integrating GEF resources with Bank operations. The strategyaims to improve the integration of GEF assistance into Bankoperations measured annually by the proportion of the GEFportfolio blended with Bank resources, compared with the cur-rent level (reported in World Bank 2000e).

• Addressing climate change comprehensively. The Bank willalso seek to enhance the proportion of Bank projects thatcarry out an assessment of their climate change impact. Assess-ment methodologies for sectoral operations will be updated anddisseminated to operational staff. Annex G on climate changespells out in detail the proposed actions for reducing the vul-nerability of people to climate change including the develop-ment of methodologies for assessing vulnerability.

Chapter 11. The findings of a parallel study of the environ-

ment conducted by OED as part of the independentreview of IDA 10, 11, and 12 have been incorporatedin this report. See Shilling 2001.

2. These are identified in the References section.3. See the Acknowledgments for the names of

panel members. The Report of the Advisory Panel isattached as Annex B.

Chapter 21. This section is based on information in Wade

1997.2. The program for NEAPs was the most visible of

these initiatives.3. The ENVIS system allowed extensive word and

topic searches of project documents regarding envi-ronmental and other topics and was well in advanceof other systems then available.

4. Despite criticism from many environmentaladvocates, the WDR went about as far as was feasi-ble for the Bank at that time. It stopped short ofaddressing environmental sustainability, althoughconsiderable background material had been preparedon that topic.

5. Bank research and publications on natural cap-ital and genuine savings and joint efforts with otherpartners, such as the Organisation for EconomicCooperation and Development, to develop and refinevarious sector-specific environmental indicators are atthe forefront of attempts to define valid measures ofenvironmental sustainability on a country basis. Theunderlying data, however, are often hard to come by.

6. USAID, the Canadian International Develop-ment Agency (CIDA), the Netherlands, and the Nordiccountries had already mandated environmental assess-ment of their own programs. The Bank’s environ-mental ratings system was adapted from the AsianDevelopment Bank (ADB).

7. The original policies, many of which have beenconverted to Operational Policies (OPs) and Bank Pro-cedures (BPs), and their issuance dates are: OMS2.36 Environmental Aspects of Bank Work, issued May1984; Annex A to OD 4.00 Environmental Assessment,issued October 1989; Annex B-B4 to OD 4.00 Envi-ronmental Policy for Dam and Reservoir Projects,issued April 1989; OD 4.20 Indigenous Peoples, issuedSeptember 1991; OP 4.36 Forestry, issued March 1993;OPN 11.02 Wildlands: Their Protection and Manage-ment in Economic Development, issued June 1986;OPN 11.03 Management of Cultural Property in Bank-Financed Projects, issued September 1986; and OP/BP4.07 Water Resources Management, issued July 1993.

8. These are based on the economic KuznetsCurve, which postulates that income inequalities willincrease initially before decreasing over time (a the-ory that is not well supported by evidence).

9. Two background papers touch on issues raisedby the Inspection Panel about the Western ChinaProject: Boisson de Chazournes 2000 and IUCN 2000.See also, Shihata 1994, 2000.

Chapter 31. See World Bank 1987, 1988, 1990b, 1991, 1992a,

1993b, and 1994a.2. Various interpretations have been adduced

about mainstreaming as applied to the Bank. For thesake of clarity in presentation, this report uses stew-ardship to address policy and strategy issues thatgovern actions affecting the environment. Main-streaming is used for integrating environmental con-siderations in the Bank’s operations—both directlending (on which information is available) and incor-poration into other lending (for which, despite itsimportance, few indicators are available).

3. Including the Convention on Biological Diver-sity, United Nations Convention to Combat Deserti-fication, Montreal Protocol on Substances thatDeplete the Ozone Layer, and Kyoto Protocol to theUnited Nations Framework Convention on ClimateChange.

4. World Bank Business Warehouse database. Thenumber has declined slightly since 1998 as part of theoverall retrenchment of budgets and staffing in theBank, but the change was roughly proportional. Theseparation of the Social Development Department hasalso resulted in some changes in the overall figures.

5. Owing to changes in reporting, conversion tonew management information software, and increaseduse of trust funds, it has not been possible to get accu-rate and comparable figures over time.

6. Under pressure to complete them quickly, somewere largely the product of foreign consultants andallegedly not reflective of local participation. Inde-pendent reviews of NEAPs have found mixed qual-ity regardless of the means of preparation.

7. World Bank Business Warehouse database. Asa share of total Bank lending, direct environmentalprojects accounted for 2.4 percent in 1993, 5.0 per-cent in 1996, and 3.4 percent in 2000.

8. World Bank 2000a.9. India and China are major exceptions, owing to

the size of their industrial and energy sectors. 10. Although the share of environmental lending

rose in 2000 (from 1999), that was primarily due toa sharp drop in other (primarily adjustment) lending.

4 5

ENDNOTES

By itself, that was not a sign of renewed emphasis onthe environment.

11. The most recent effort (IDA 2001) does notinclude information on closed projects, which isessential for an analysis of trends. Analysis carried outby the Environment Anchor indicates that the valueof environmental lending through nonenvironmentalsector projects through the 1990s was at least of thesame order of magnitude as direct environmentallending over the same period.

12. Cited in staff interviews and survey responses.13. Staff involved say there is still a long way to go.14. Munasinghe and Cruz 1995 and World Bank

1997c discuss environmental policy issues that couldhave an impact on the environment.

15. World Bank 1993a, 1997c. A third review byESSD is under way.

16. In some cases, failure led to actions before theInspection Panel; in others, pressure led to a Bankresponse during project preparation, as in the proj-ects involving the Chad-Cameroon pipeline and theNam Theun dam in Laos.

17. IFC adopted another approach, creating aCompliance Adviser/Ombudsman (CAO), who is ableto deal with issues similar to those brought to theInspection Panel but in a more constructive and lessadversarial manner.

18. The Advisory Panel believes “that the appro-priate benchmarks for measuring performance shouldbe the Bank’s own stated commitments, and thedegree to which the Bank’s response has been com-mensurate with the agency and importance of the chal-lenge. By both of these measures, and particularly inlight of the failure to mainstream and evidence ofrecent backsliding, the Bank’s performance has clearlybeen unsatisfactory” (see Annex B).

Chapter 41. The 2002 WDR on sustainable development

may address this issue. 2. There was a small item for environmental assess-

ments in Africa. Although the Strategic Compact didnot provide additional funds for the environment, that“sector” shared in the subsequent cutbacks.

3. Studies have shown, for example, that the costsof environmental damage amount to about 8 percentof GDP in China each year, and about 5 percent inIndia. See Babu and Khanna 1997, Hommann andBrandon 1995, Tata Energy Research Institute 1998,and World Bank 1997b. Estimates for other countriesalso suggest substantial costs.

4. The last CAS Retrospective showed that only 16percent of CASs were unsatisfactory with regard to

their treatment of the environment (World Bank2000i).

5. Only two of the CASs reviewed included envi-ronmental indicators: South Africa and Zambia.

6. Bank performance is comparable to that ofother donors, based on their own evaluations. SeeAnnex A.

7. These relations are complicated by the policingfunction of the same units with respect to safeguardpolicies, which often creates an adversarial relationship.

8. China has been one of the Bank’s strongest coun-terparts on the environment and has made substan-tial progress, with Bank support.

9. Programmatic lending includes Sector-WideAssistance Programs (SWAPs), Public ExpenditureReview Loans (PERLs), Poverty Reduction StrategyLoans (PRSLs), and policy-based budget supportloans.

10. ESSD is currently reviewing how to betterincorporate environmental concerns into adjustmentlending.

11. The Advisory Panel concludes that “the Bank’sperformance overall in mainstreaming at the countrylevel has been unsatisfactory.”

12. From interviews during country visits under-taken in preparation of this report.

13. A background survey on incentives found thattask team leaders considered the mismatch betweenthe Bank’s OP 4.01—Environmental Assessment pol-icy and the borrower’s corresponding policies, regu-lations, and legislation the greatest constraint toimplementing 4.01.

14. See World Bank 2000g for a complete discus-sion of the efforts made and challenges encounteredin this area.

15. The Lake Victoria project in Africa, a success-ful GEF project, did lead to some associated IDAlending after the GEF project demonstrated definitivelythe value of those activities.

16. See World Bank 1998b for more detail on GEF’sperformance, which is not a topic of this evaluation.

17. Reviews of Bank projects since 1997 in thepower, energy, and oil and gas sectors have revealedthat few projects have explicitly analyzed or esti-mated potential greenhouse gas emissions.

18. The strong country-oriented structure and thedifficulty of making loans to more than one countryaccount for part of this reluctance. There have beenexceptions using grant funds, such as the riverblind-ness program in West Africa and several GEF-fundedprojects (Aral Sea, Lake Victoria, Maghreb ShipwasteDisposal, Caribbean Shipwaste Disposal). These sug-gest that innovative means could be found.


4 6

19. Unfortunately, a number of high-level envi-ronmental initiatives and partnerships, while impor-tant in themselves, have reinforced the sectoralseparation of the environment from other activities.Many of these initiatives have created small, separatelyfunded units to carry out specific mandates, such asthe Prototype Carbon Fund, or they carry separategrant funding, such as the Montreal Protocol. Bothapproaches fragment rather than integrate environ-mental issues.

20. There were increments to the budget overallin 1997 for safeguards activities, but after allocationto the Regions they were not earmarked and went intogeneral resources. It has not been possible to deter-mine how they were spent.

21. This is not a criticism of donor priorities, butthe need to respond to differing external prioritiesmakes putting together a coherent program within acountry context more difficult.

22. This is also true of GEF funding. Some Bankstaff interviewed stated that they were really work-ing for GEF and doing GEF projects as the only wayto maintain their positions and get an environmental“foot in the door” of many country programs.

23. Many environmental staff and some managersfollow their own commitment to the environmentdespite the lack of rewards and incentives in the system.

Chapter 51. This is not to propose a one-size-fits-all

approach, but appropriate inclusion among otherkey priorities, with explicit, country-specific prioritiesworked out within the overall framework.

2. The Advisory Panel recommends “that defini-tive clearance authority on every project with envi-ronmental implementations should be centralized toensure clarity and consistency in the application ofsafeguard policies” (see Annex B).

E n d n o t e s

4 7

Background papers for this study are identifiedwith an asterisk (*).

Babu, P., and P. Khanna. 1997. EnvironmentalEvaluation of Economic Growth: An Agendafor Change. Yojana.

*Boisson de Chazournes, L. 2000. “Compliancewith Operational Policies and Procedures: AContextual Analysis.” World Bank OperationsEvaluation Department. Washington, D.C.

Denmark, Ministry of Foreign Affairs. 1996. Envi-ronment and Development: Volume I, Syn-thesis Report. Copenhagen.

DFID (Department for International Develop-ment). 2000a. Achieving Sustainability: PovertyElimination and the Environment. London.

*——. 2000b. “Environmental Improvement andPoverty Reduction. A Preliminary Review ofWorld Bank Experience.” London.

Ekbom, A., and J. Bojo. 1997. MainstreamingEnvironment in Country Assistance Strate-gies. World Bank Africa Environment GroupDiscussion Paper No. 1. Washington, D.C.

Finland, Ministry for Foreign Affairs, Depart-ment for International Development Coop-eration. 1999a. Thematic Evaluation onEnvironment and Development in FinnishDevelopment Co-operation: Concessional Cred-its. Helsinki.

——. 1999b. Thematic Evaluation on Environ-ment and Development in Finnish Develop-ment Co-operation: Multilateral DevelopmentAssistance in the 1990’s. Helsinki.

——. 1999c. Thematic Evaluation on Environ-ment and Development in Finnish Develop-ment Co-operation: Forest Sector DevelopmentCo-operation in the Sub-Saharan African andCentral American Regions. Helsinki.

——. 1999d. Thematic Evaluation on Environ-ment and Development in Finnish Develop-ment Co-operation: Bilateral DevelopmentCo-operation with Nicaragua in the 1990s.Helsinki.

——. 1999e. Thematic Evaluation on Environ-ment and Development in Finnish Develop-ment Co-operation: Bilateral DevelopmentCo-operation with Nepal in the 1990s. Helsinki.

——. 1999f. Thematic Evaluation on Environ-ment and Development in Finnish Develop-

ment Co-operation: Policy Issues and Gen-eral Management. Helsinki.

Flint, M., P. Balogun, A. Gordon, R. Hoare, B.Voysey, and A. Ziegler. 1999. Environment:Mainstreamed or Sidelined? EnvironmentalEvaluation Synthesis Study. London: U.K.Department for International Development.

FNI (Fridtjof Nansen Institute) and ECON (Cen-tre for Economic Analysis). 1995. “Integrationof Environmental Concerns into NorwegianBilateral Development Assistance: Policiesand Performance.” Oslo.

Hommann, K., and C. Brandon. 1995. “The Costof Inaction: Valuing the Economy-Wide Costof Environmental Degradation in India.” Pre-sented at the Modeling Global SustainabilityConference, United Nations University, Tokyo.

IDA (International Development Association).2001. “How Far into the Mainstream? A Reviewof Environmental Issues in IDA Activities.”Washington, D.C.

*IUCN (Environmental Law Centre). 2000. “Envi-ronmental Assessment Policy and Practice atthe World Bank: A Report for the World BankOperations Evaluation Department.” WorldBank, Washington, D.C.

Margulis, S., and T. Vetleseter. 1999. Environ-mental Capacity Building: A Review of theWorld Bank’s Portfolio. World Bank Envi-ronment Department Working Paper No. 68.Washington, D.C.

Munasinghe, M., and W. Cruz. 1995. Economy-wide Policies and the Environment. WorldBank Environment Paper No. 10. Washington,D.C.

OED (Operations Evaluation Department). 1999.1999 Annual Review of Development Effec-tiveness. Washington, D.C.: World Bank.

Reed, D. 1996. Structural Adjustment, the Envi-ronment and Sustainable Development. Lon-don: World Wide Fund for Nature, Earthscan.

——. 1992. Structural Adjustment and the Envi-ronment. Boulder, CO: Westview.

Seymour, F., and N. K. Dubash. 2000. The RightConditions: The World Bank, StructuralAdjustment, and Forest Policy Reform. Wash-ington, D.C.: World Resources Institute.

Shihata, I. 2000. The World Bank Inspection Panel:In Practice. Washington, D.C.: World Bank.

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*Shilling, J. 2001. “OED IDA Review: Environ-mental Sustainability Issues in IDA 10–12.”OED Working Paper, World Bank, Washing-ton, D.C.

——. 2000. “OED Review of the Bank’s Per-formance on the Environment.” TechnicalReport, Operations Evaluation Department,World Bank, Washington, D.C.

Shyamsundar, P., and K. Hamilton. 2000. AnEnvironmental Review of 1999 Country Assis-tance Strategies—Best Practice and LessonsLearned. World Bank Environment Depart-ment Paper No. 24. Washington, D.C.

Tata Energy Research Institute. 1998. LookingBack to Think Ahead. Delhi.

Wade, Robert. 1997. “Greening the Bank: TheStruggle Over the Environment, 1970–1995.”In The World Bank: Its First Half Century, vol.2, Perspectives. Washington, D.C.: BrookingsInstitution Press.

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——. 2000a. Environment Matters, AnnualReview. Washington, D.C.

——. 2000c. The Little Green Data Book. Envir-onment Department and DevelopmentEconomics Data Group, World DevelopmentIndicators. Washington, D.C.

——. 2000d. Montreal Protocol: Annual ProgressReport. Bank Implemented Montreal ProtocolOperations (January–December 1999). Wash-ington, D.C.

——. 2000e. “The Qinghai Project” (China West-ern Poverty Reduction Project). InspectionPanel Investigation Report. Washington, D.C.

——. 2000f. Supporting the Web of Life. TheWorld Bank and Biodiversity. A PortfolioUpdate (1988–99). Environment Department.Washington, D.C.

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