CHAPTER FOUR - REFORMING THE IFIS' POLICY FRAMEWORKS:
ACCENTUATING POVERTY REDUCTION AND SUSTAINABLE HUMAN DEVELOPMENT

5. ACHIEVING ENVIRONMENTAL SUSTAINABILITY

Another controversial area of IFI policies and performance has been their record on the environment. Judging by recent publications of the World Bank, it has certainly moved to take seriously issues of environmentally sustainable development, and to include environmental factors within its project assessment, evaluation and audit procedures. 35 Andrew Steer of the Bank's Environment Department told the Committee that for the approximately 20% of loan applications which raise the possibility of substantial environmental impacts, very rigorous assessments are done which could disqualify them on those grounds. (In the highly-publicized case of the Sardar Sarovar dam on the Narmada river in India, the Bank eventually withdrew funding from the project in 1993 after a damning 1992 independent report which it commissioned concluded the project was "fundamentally flawed" and violated Bank guidelines.) 36

Steer claimed that the Bank is now setting a high standard for development agencies, and is helping countries to raise themselves to meet international standards, working at both the policy level and through such mechanisms as the Global Environmental Facility. The Bank is funding the acquisition of cleaner technologies and less harmful forms of power generation (not including nuclear power). China, for example, is receiving $2 billion in dedicated finance for clean air objectives. This underscores what should be a growing recognition that large resource transfers to low-income countries will be required to realize higher levels of environmental protection on a global scale. The message that environmental goals should be a priority within the Bretton Woods reform agenda was also reinforced at the meeting of G-7 environment ministers hosted by Canada in Hamilton on 29 April-1 May 1995.

Notwithstanding such progress in giving attention to environmental factors in development, the World Bank's Steer acknowledged the difficulties and critical challenges to be confronted, observing that some of its renewable resource projects ¾ notably large dams for hydro-electricity and irrigation as in the Sardar Sarovar case cited above - have generated fierce controversies over their impacts on habitats and local populations. These are areas, in other words, in which there are complex and conflicting calculations to be taken into account. And the Committee heard some testimony that continued to indict the Bretton Woods institutions on environmental grounds. Claiming that the policies and practices of the IMF as well as the World Bank, including on structural adjustment, are still focused on short-term economic growth, often at the expense of sustainability principles, Robin Round, MDB campaign coordinator for the Sierra Club declared:

The IMF has no environment department, no environmental policies, and admits to no environmental expertise. ( . . .) World Bank projects and conditional lending have led to massive environmental devastation, land degradation, soil erosion, biodiversity loss, air and water pollution, and the production of greenhouse gases. Some 2.5 million people have been forcibly relocated by the World Bank between 1986 and 1993 against their will and into conditions of absolute poverty. [18:23]

These matters are seldom simply black or white. Environmental consciousness has been penetrating the Bretton Woods institutions as it has international policy-making structures generally. There has been some notable progress at the operational level by the World Bank in recent years. Clearly, however, there is room for much more. John Kirton suggested that Canada, "which has recently introduced at the national level a commissioner for sustainable development, might see if there is a consensus amongst our G-7 colleagues for instituting commissioners for sustainable development within the major international financial institutions and multilateral development banks. That would provide a permanent presence to ensure that the modern values of sustainability are actually reflected to the degree that these institutions themselves proclaim they should be". [16:14] Beyond such innovative mechanisms or procedures internal to the institutions (e.g. the World Bank's inspection panel), John Foster of Oxfam also made the useful suggestion that what is needed is a broader framework, perhaps within a reformed and strengthened United Nations, that would both assist countries to meet their international obligations, and hold accountable agencies such as the IFIs for the environmental consequences of their policies. [22:20]

In light of the above, the Committee recommends that the Halifax action programme urge the IFIs to review as a matter of priority all of their policies and activities to ensure that they meet the tests of environmental sustainability, and that their use of resources assists countries to meet international standards. Consideration should be given to having in place strong environmental accountability mechanisms within the institutions, or external to them, to improve the IFIs' compliance with such standards.