Investment banks oppose strengthening World Bank environmental, social protections
The investment banks’ letter comes as the World Bank Group weighs adoption of the report, known as the Extractive Industries Review (EIR). NGOs have urged the banks that have endorsed the Equator Principles to end their effort to block the EIR, and to support its recommendations.
The review concluded that the poorest people in developing countries were being harmed rather than helped by extractive industry investments. The review offers a set of recommendations that the World Bank should follow to increase development effectiveness, and proposes that the Bank use its limited funds to invest more in renewable energy and phase out financing of oil and coal projects. On 2 April 2004, over 100 members of parliament worldwide spanning the political spectrum and the European Commission called for the full implementation of the EIR recommendations.
The Equator Principles have been endorsed by 20 investment banks and are a set of environmental and social guidelines for project finance linked to the World Bank’s standards. The principles’ preamble emphasize the role banks can play in "promoting environmentally responsible stewardship and socially responsible development."
"It’s outrageous that Equator Banks would consider opposing recommendations designed to benefit the poor, particularly since that’s the World Bank’s mission," said Michelle Chan-Fishel, Program Manager of the Green Investments project of Friends of the Earth-US. "We call on the Equator Banks, particularly Citigroup and the leaders of this initiative, to honor the spirit of the Equator Principles by publicly supporting the EIR recommendations."
"The Equator Banks are acting like wolves in sheep’s clothing," said Daphne Wysham, a fellow with the Institute for Policy Studies. "Though wearing the outer trappings of higher standards, this letter reveals the Equator Banks actually trying to impede the World Bank’s attempt at implementing higher social and environmental standards."
The letter, which was not yet signed by the banks, was leaked to members of the BankTrack network. In a December 2003 letter to Equator Banks, BankTrack specifically called for the creation of a "joint accountability mechanism" that could promote accountability among endorsers and play a positive role in strengthening World Bank environmental and social standards.
The Equator banks’ letter to Wolfensohn holds up the controversial Baku-Tbilisi-Ceyhan (BTC) pipeline in the Caspian region as a model project in terms of environmental and social standards. But according to a document leaked to the UK-based Sunday Times, BTC Co. may have hidden safety concerns about the pipeline in order to secure financing for the project.
"The BTC pipeline underscores the need to strengthen World Bank standards and policies in the extractive industries, as reflected in the EIR," said Francis Grant-Suttie of WWF in Washington. "Full adoption of the recommendations will mitigate the risks inherent in projects like BTC. It is in the best interests of the Equator banks to support, not oppose the Extractive Industries Review."
The letter opposes the notion that robust country governance should be a precondition of World Bank investment. It also expresses concerns with the concept of free, prior and informed consent and with the proposal that the World Bank phase out funding for fossil fuels by 2008.
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