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Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012
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Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

Mar 29, 2015

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Page 1: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

Managing Environmental and Social RisksAnis Dani

Lead Evaluator, IEGCC

October 10, 2012

Page 2: 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.

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.

Page 3: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

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 Pr

ojec

ts

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

Page 4: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

Coverage of Safeguards vs Performance Standards

Page 5: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

Supervision of safeguards in WB-financed projects by Env. Category

Page 6: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

Supervision in IFC projects improved over time

Page 7: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

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

Per

cent

of P

roje

cts

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

Page 8: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

Organizational arrangements at the World Bank and IFC

Page 9: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

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

Page 10: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

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

Page 11: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

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.

Page 12: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

Backup Slides

Page 13: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

Supervision of Projects with Policy Frameworks vs Mitigation Plan

Page 14: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

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

Page 15: Managing Environmental and Social Risks Anis Dani Lead Evaluator, IEGCC October 10, 2012.

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