As the global biodiversity crisis grows ever more urgent, the European Bank for Reconstruction and Development’s (EBRD) environmental policy and practice is proving insufficient to prevent harm to nature, let alone allow its restoration. The Bank’s review of its environmental and social policy in the coming months must provide a proportionate response to the scale of the problem.
Andrey Ralev, Biodiversity campaigner | 4 October 2023
Apollo butterfly in Armenia. Source: CEE Bankwatch Netwrok
In times of accelerating mass extinction of wildlife, recent years have finally seen increasing global attention to the issue. In December 2022, the Kunming-Montreal Global Biodiversity Framework set global targets for 2030 including bringing the loss of areas of high biodiversity importance close to zero; restoring at least 30 per cent by area of degraded ecosystems and ensuring that at least 30 per cent of land and sea areas are effectively protected. Not only do we have to stop destroying nature, we also need to restore it where it is already degraded.
Yet international financial institutions such as the EBRD have found even the first step – halting biodiversity loss — difficult. For this reason, a group of nine international environmental organisations and experts has recently submitted a set of recommendations on stepping up biodiversity protection in the Bank’s safeguard policies, currently under revision.
No loss, full stop
The Bank’s current safeguard policy aims only at ‘no net loss’ of biodiversity, which is to be achieved by means of a ‘mitigation hierarchy’. This aims to first avoid creating environmental or social impacts from development activities, and where this is not deemed possible, additional measures must be applied that would minimise, mitigate, and as a last resort, offset any remaining adverse impacts.
So ‘no net loss’ means that if biodiversity loss happens in one place, it can be offset somewhere else. But the Kunming-Montreal targets show that this is not good enough, even in theory. We need to keep the biodiversity we still have, and restore degraded habitats.
Moreover, reality has shown that offsetting rarely, if ever, works, and the European Investment Bank (EIB) closed the door on biodiversity offsets in its 2022 safeguard standards. The Amulsar gold project in Armenia and Shuakhevi hydropower plant in Georgia are just two examples of EBRD projects with inappropriate and unsuccessful biodiversity offsetting measures.
No loss of biodiversity per se must therefore be the primary objective of the EBRD’s policy on nature conservation. There is no more time for far-fetched experiments like offsetting.
Critical habitat rules must be watertight
One of the chief areas to avoid building in, according to the EBRD’s policy, is critical habitat, which is defined, among others, as consisting of highly threatened or unique ecosystems or habitats of significant importance to endangered, critically endangered, and endemic species.
According to the criteria from the Bank’s environmental and social policy, projects should not be carried out in such areas unless a number of strict conditions are fulfilled. There are positive examples, such as when the EBRD decided not to finance the Neretvica hydropower plants in Bosnia and Herzegovina due to the presence of species such as white-clawed crayfish that signalled the area as a critical habitat.
But there are also too many examples where the Bank allowed damage to areas fulfilling the critical habitat criteria, such as the Vrući stream near the Adriatic Metals mine, also in Bosnia and Herzegovina, and the Zarafshan and Bash wind projects in Uzbekistan, where the nesting habitats of several pairs of the Endangered Egyptian vulture and saker falcon were not considered critical habitat.
Too often, the ‘avoid’ part of the EBRD’s mitigation hierarchy is neglected, or conflated with minimising and mitigating the damage, both in critical habitats and elsewhere. And in countries with poor environmental governance such as most of the ones that the EBRD works in, that’s an important difference, as mitigation measures are too often not applied in reality.
For these reasons, we’re calling for more habitat types to be included under the definition of critical habitat, for vulnerable and near threatened species to be included, and for more clarity on how critical habitat assessments must be carried out.
All proposed protected areas must be adequately safeguarded
The EBRD’s current policy includes rules for areas that are legally protected, internationally recognised, or proposed for protection by national governments, to prevent project impacts from compromising their integrity or importance. So it does take account of the fact that not all valuable areas are legally protected, but it also leaves a loophole for cases where a protection proposal has been made by a body other than the national government.
An example is the Dzhankeldy wind project in Uzbekistan, financed by the EBRD and other multilateral development banks, half of which is currently being built within the borders of the Kuldzhuktau sanctuary proposed by a UNDP project.
The updated policy therefore needs to acknowledge sites proposed for protection by scientific bodies or international non-governmental organisations, such as Emerald sites and Key Biodiversity Areas, even if they are not yet legally protected or proposed by national governments.
Putting the ‘E’ back into EBRD
All around the world, projects must avoid compromising the integrity, conservation objectives and/or biodiversity importance of protected and internationally recognised areas. The EBRD recognises that local legislation does not always ensure this, and this is why it has its own policy. However, in reality, EBRD-financed projects outside the EU are still subject to laxer rules than those within the EU.
One such example is the Corridor Vc motorway Mostar South-Buna section in Bosnia and Herzegovina. A poor-quality biodiversity assessment was undertaken on the basis of highly inadequate fieldwork. An Appropriate Assessment, as stipulated by the EU Habitats Directive and the Bern Convention, should have been carried out but was not – apparently because Bosnia and Herzegovina has not protected the Buna-Bunica river habitat. This makes no sense, as the species present must be protected irrespective of the site’s legal status, and it implies that governments can just save themselves the bother of assessing impacts by failing to fulfil their obligations.
In principle, the Appropriate Assessment is already an obligation under the EBRD’s environmental and social policy, as it states that the Bank — a signatory to the European Principles for the Environment — is ‘committed to ensuring that projects are structured to meet EU environmental principles, practices and substantive standards, where these can be applied at the project level, regardless of their geographic location.’
This clearly includes the Habitats Directive, which can be applied both to Emerald sites under the Bern Convention, and to potential Natura 2000 sites. However, due to poor implementation, this obviously needs to be made more explicit in the updated policy.
Get the basics right
The EBRD has sometimes displayed ambitions to promote ‘nature-positive’ economies, but this feels a bit like trying to run before being able to walk. Some of the environmental damage caused by its projects is due to poor implementation and enforcement of its existing policy, but there is no doubt that the rules need to be tightened as well. The most valuable contribution the Bank can make at this point is therefore to ensure its clients cause no loss to biodiversity, among others by strengthening its environmental and social policy.
Never miss an update
We expose the risks of international public finance and bring critical updates from the ground – straight to your inbox.