managing environmental and social risks
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Managing Environmental and Social Risks. Anis Dani Lead Evaluator, IEGCC October 10, 2012. E&S frameworks at the World Bank Group. World Bank safeguards framework, largely for public sector. IFC and MIGA performance standards, for the private sector. - PowerPoint PPT PresentationTRANSCRIPT
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Managing Environmental and Social RisksAnis DaniLead Evaluator, IEGCCOctober 10, 2012
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E&S frameworks at the World Bank Group World Bank safeguards framework, largely for public
sector. IFC and MIGA performance standards, for the private sector.
Similar objectives but different strengths and weaknesses: Thematic coverage of World Bank’s social safeguards is much
narrower than in IFC Performance Standards World Bank’s safeguards emphasize up front mandatory
requirements, with mitigation measures designed before project approval. But projects suffer from lack of adequate supervision and monitoring of outcomes, especially in the case of medium-risk (category B) projects.
In IFC, supervision and monitoring was more robust but oversight was by private sector partners without third-party verification or adequate disclosure.
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World Bank Group Portfolio Trends indicate increasing risk profile
• In the Bank’s portfolio, Category A increased from 6 to 11%, Category B increased from a third to over half of investment projects• In IFC, slight decline in Category A, and FI Projects are 1/3 of portfolio; • In MIGA, FI guarantees increased from 1/3 to over half of portfolio
Source: Business Warehouse
0%
20%
40%
60%
80%
100%
0%
20%
40%
60%
80%
100%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Percentage of Investment Com
mitm
ents
Perc
enta
ge o
f Pro
ject
s
A - No. of Projects B- No. of Projects C- No. of Projects
FI- No. of Projects A - Commitments
A. WB Lending by Safeguard Category B. Trends in IFC Portfolio
0%
10%
20%
30%
40%
50%
60%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Committment year (FY)A (by volume) B (by volume) FI (by volume) C (by volume)
A (by number) B (by number) FI (by number) C (by number)
FI
C
A
B
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Coverage of Safeguards vs Performance Standards
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Supervision of safeguards in WB-financed projects by Env. Category
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Supervision in IFC projects improved over time
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ICR reporting in WB projects
Reporting in ICRs is much weaker on environment than social issues
ICRs for projects with significant E&S risks (Cat. A and B projects) should report on E&S performance
54% 56%
78%77% 81% 78%
47% 48%
78%
0%
20%
40%
60%
80%
100%
Overall E&S Environment Social
Perc
ent o
f Pro
ject
s
All Projects Category A Category B
n=98 n=31 n=62 n=97 n=31 n=61 n=55 n=27 n=27
Source: IEG portfolio review: Completed projects, FY99-08 approvals
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Organizational arrangements at the World Bank and IFC
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Recommendation - 1
Revise safeguards policy framework: harmonize categorization criteria to assess E&S risks consolidate World Bank policies into one social and one
environmental policy, harmonizing thematic coverage across the World Bank Group
apply IFC’s Performance Standards to financial intermediaries, listed equities, and trade finance
increase MIGA’s capacity to supervise its projects
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Recommendations 2-4
Enhance client capacity, responsibility, and ownership Invest more in analytical work, TA/ Advisory Services Assign responsibility for safeguards monitoring to WB clients
Revise guidelines, instruments, and incentives to strengthen supervision arrangements, especially at WB
Strengthen safeguards M&E and completion reporting enhance transparency and third-party monitoring for higher
risk WB projects that use E&S policy frameworks and FI projects at IFC.
incorporate E&S effects as essential dimensions of the PDO, as in the XPSRs in IFC
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Recommendation - 5
Seek greater symmetry in the structure of Bank Group accountability For WB create grievance redress mechanism to complement
Inspection Panel investigations For CAO introduce more independent review of audit
reports.
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Backup Slides
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Supervision of Projects with Policy Frameworks vs Mitigation Plan
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Strengths/Weaknesses of Safeguards in WB projects
Strengths Comprehensive coverage of
environmental safeguards Priority to mitigating negative
impacts Preparation (85%) Good identification of high risk
projects (Cat. A): 11% Supervision of Cat. A (>80%)
Compliance ensured through high quality E&S risk assessments
Use of policy frameworks for FI, CDD, etc. allows rapid preparation
Weaknesses Narrow coverage of social
safeguards Less attention to client capacity
building Supervision (61%) Over-categorization of medium
risk projects (Cat. B): about10% of 51%
Weak supervision of Cat. B and FI (50-60%)
Poor M&E and reporting instruments lead to inattention to E&S results
Poor supervision of projects with frameworks increases E&S risks
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Strengths/Weaknesses of E&S Management in IFC projects
Strengths Balanced coverage of E&S risks in
2006 PS framework Mitigation integrated with E&S
sustainability Focus on client’s E&S management
system Preparation (85%)
Clearly specified indicators to track E&S performance
Well developed instruments for annual reporting by clients (AMR)
Systematic use of indicators allows more accurate supervision and evaluation
Better oversight of real sector projects and some improvement in FI projects
Weaknesses Weaker staff capacity to address new
social areas Area of influence limited to scope of
project Undercategorization of high risk projects
compared to WB Post-PS supervision improved from 65%
to 75% But too soon to evaluate results
Uneven quality of client E&S reporting, and no disclosure of E&S results
Independent verification of client reports – TPM or community monitoring – needed for higher risk projects
Inadequate coverage & supervision of FI projects, listed equities and trade finance