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More of the same secrecy in Latvia and Romania as EU recovery funds planning gets underway

The time for EU countries to prepare the plans that will outline how they intend to trigger the EUR 672.5 billion allocated under the Recovery and Resilience Facility (RRF) is almost up. March and April are the last months for Member States to finalise their recovery plans and comply with all the requirements laid down by the RRF Regulation, including the obligation to assign 37% of the funds to climate-friendly investments and reforms.  At the same time, this is the last opportunity for Civil Society Organisations (CSOs) from all over Europe to provide input and scrutinise the content of the plans through public consultations. With EUR 13.7 billion allocated to Romania and EUR 1.9 billion for Latvia from the RRF¹, the proper use of the funds will be crucial in order for these two countries to fully align with the updated 2030 EU climate and energy targets of 55% greenhouse gas reduction. However, recent developments in Romania and Latvia still show reasons for concern over both issues of public participation and reaching the climate and energy targets. 

Public participation still not a priority

Regarding public consultations, so far both the governments of Romania and Latvia have done little to open the preparation process of the recovery planning to the public. In Romania, civil society organisations submitted written comments and suggestions on the draft in December without receiving any feedback, and when later consultations were organised for February, the lack of structure for these compromised the possibility for NGOs to give satisfactory input on the content. A second draft is expected to be available on 15 April, but taking into account the tight deadline to be sent to the Commission, 30 April, there is little chance to have a new round of consultations.  Meanwhile in Latvia, environmental NGOs were given the possibility to participate in the consultations only in December, contrary to the social partners that had been involved since the very beginning of the process. After the draft of the plan was published at the end of January, a wider public including environmental organisations was invited to a formal public consultation until 9 March. These updates reinforce a recent survey by Bankwatch and CAN Europe, revealing the poor status of public partnership in many Member States, including most Central and Eastern European countries.

A worryingly low level of ambition on climate and energy targets

Similar concerns also apply to the content of the recovery plans. The money that Romania will receive from the RRF will provide financial contributions to three pillars of intervention, from green transition and climate change to urban development and economic competitiveness. Unfortunately, the first draft of the Romanian plan includes a problematic number of investments for environmentally harmful sectors: both the expansion of fossil gas network and the modernisation of harmful hydropower capacities are planned. Such investments would go against the Do No Significant Harm principle that the European Commission made mandatory for all the projects in the recovery plans, not to mention the negative consequences it would have on biodiversity, one of the priorities of the European Green Deal.  Furthermore, other types of investments such as renewable sources or energy efficiency (representing only 8.4% of the total funding) are barely considered by the Romanian government. In addition, CSOs in Romania are not aware of whether a Strategic Environmental Assessment (SEA) will be conducted on the projects of the plan, inevitably harming the overall green objective.  As for Latvia, Riga’s government released the first draft of the recovery plan at the end of January after having already submitted it to the Commission. This draft presented a worryingly low level of ambition on climate and energy targets, as well as potentially harmful investments towards biomethane and the transport sector. In terms of energy efficiency, the Latvian recovery plan shares Romania’s low targets. Even though the updated Latvian National Energy and Climate Plan (NECP) aims to renovate at least 3000 multi-apartment buildings by the end of the decade, the current investment plans for the EU budget and the recovery funds only foresee that respectively 370 buildings and 182 buildings – 18,4% of that target will be renovated through public funding. In addition to a limited funding for energy efficiency, NGOs are also worried about the lack of reformative elements in the plan. The concerns of civil society in Latvia led the Environmental Advisory Council (bringing together 20 environmental NGOs in the country) to send a letter to the European Commission to draw attention to the most problematic elements of the plan. Latvian CSOs expressed their concerns over the possibility that the state of reforms and investments proposed in the current recovery plan would represent a missed opportunity for the country, failing to turn the economic course of the country towards a green transition. On a more positive note, a Strategic Environmental Assessment has been conducted on the plan which is  currently under public consultation: up to now, Latvia is the only country out of most CEE countries to have proceeded with an SEA, as revealed by Bankwatch in its latest study. New updates on the recovery plans are expected in the next few weeks. Yet with a tight deadline of 30 April, this is the most crucial window of opportunity for Member States to align with the 2030 and 2050 climate and energy objectives. Failure to include long lasting and transformative investments in these coming months will have serious negative consequences for the next decade and beyond, jeopardising the unique opportunity to use the recovery to transition to a low carbon economy and successfully tackle the escalating climate crisis. 

Unrest in Armenia casts shadow on developments at controversial gold mine

Vigorously tapping on a touch screen, Paylak Tevanyan is not placating angry birds or crushing candy. Instead he is zapping pick axe-wielding miners as they rush towards a gold mine in a smartphone game he developed to raise awareness about Armenia’s Save Amulsar movement. 

Tevanyan is just one of the many protagonists featured in a new film by local journalist Tehmine Yenoqyan that documents the ongoing struggle to protect Amulsar from plans for a massive gold mine near the spa town of Jermuk. 

The film’s release this month coincides with seismic shifts in the domestic political landscape and at international fora that could affect the outcomes at Amulsar. Yenoqyan’s film is a detailed portrayal of a popular movement that began in 2007 and reached new heights in 2018 with the election of Nikol Pashinyan, the prime minister who rode a wave of popular support to government in part on promises to re-evaluate the claims of mine owner Lydian to exploit the gold at Amulsar.

But Pashinyan’s credibility has taken a massive blow due to an unpopular agreement reached with Azerbaijan and brokered by Russian to end hostilities in Nagorno Karabakh, which borders on the Vayots Dzor region where the infrastructure for the Amulsar project is located.

The resulting political crisis exploding now in Yerevan has had knock on effects that threaten the safety of citizens and the environment in the area of Amulsar. Tensions around the project have increased as locals report Lydian has begun activities to reopen the mine. At the same time, locals who had opposed the project suffered heavy losses during the war, including their lives in some cases. The mine is also the subject of an outstanding criminal case. 

 

 

Developments at international fora

Just as fighting began in Nagorno Karabakh, the Secretariat of the Convention on the Conservation of European Wildlife and Natural Habitats, also known as the ‘Bern Convention,’ wrote in September 2020 to the Armenian government regarding a complaint filed in March 2020 alleging violations of protected natural areas near Amulsar. 

The Secretariat recommended that the authorities ‘halt any developments that can negatively affect the habitats and species protected under the Convention’ and ‘asked for a report specifically responding to the issue of the gold mine.’ 

To support the work of the secretariat, in February 2021 NGOs wrote to the Bern Convention with more context about the previous violations. In its letter the groups said that starting mining activities will mean “deliberate picking, collecting, cutting or uprooting of (protected) plants” and “deliberate damage to or destruction of breeding or resting sites (…); deliberate disturbance of wild fauna” which is forbidden by the Bern Convention.

 

Redress for locals

While the government received the news from the Bern convention, the independent accountability mechanism at the EBRD (IPAM) released its initial assessment of a June 2020 complaint from locals seeking redress from violations to their rights by Lydian. 

The November Compliance Assessment Report found that the complaint satisfied the criteria to initiate a Compliance Review on whether the Amulsar project complied with EBRD policy requirements to protect environmental and social rights. 

In addition, IPAM concluded that it ‘would seek to focus the investigation on identification of systemic issues that might potentially negatively impact communities in this and other Bank-funded projects, but also might affect project performance and the environmental and social sustainability of transactions. As a next step, IPAM plans to conduct interviews with parties to the complaint this month.

At the same time, the bank’s Chief Compliance Officer has been informed by civil society groups about numerous corruption allegations related to the Amulsar project. If the officer confirms any instances of prohibited activity based on this evidence or court decisions on corrupt land deals in Gandevaz, the company can be blacklisted by the EBRD and other multilateral development banks.

Actions speak louder than words: gender equality policies in development banks

MDBs are well aware that gender mainstreaming and positive discrimination contribute to economic growth. A wide range of research evinces that the more empowered both sexes are, the more economic prosperity a country achieves. For example, the OECD has found that much of the growth in the OECD zone over the past several years can be attributed to the increase in women’s labour force participation. A society’s economic potential is only achievable if all its members are provided with access to opportunities for economic participation. 

Development banks have supported women as growth contributors and taken steps to support the economic empowerment of women and girls. However, because MDBs are public banks, they have commitments beyond economic empowerment. They should follow their environmental and social due diligence and protect human rights, including gender rights. 

Are MDBs doing enough to protect women and to achieve gender equality for all, including for the most underprivileged? On International Women’s Day, we summarise what development banks are currently doing to advance gender equality and women’s rights, and how they can be more effective in their efforts.

 

MDBs’ existing tools to safeguard gender equality

The European Bank for Reconstruction and Development (EBRD)

The EBRD’s Strategy for the Promotion of Gender Equality 2016-2020 emphasises the economic empowerment of women. However, it lacks a focus on gender safeguards, including those for gender-based violence and harassment (GBVH). 

For the next period, the EBRD plans to have a joint Equality of Opportunity Strategy, which will include support to women and other marginalised groups. The EBRD’s first woman president, Odile Renaud-Basso, in her interviews as a presidential candidate in 2020, responded to criticism of the EBRD for not doing enough on gender. While she said she was cautious about the additional burdens of data collection, Renbaud-Basso proposed assessing each project’s impact on gender balance. Her leadership on the new strategy should hopefully help the Bank widen its strategic fit to include gender safeguards that protect women from GBVH in EBRD-supported activities.

The World Bank

The World Bank Group’s Gender Strategy 2016-2023 promotes economic empowerment, recognises gender safeguards and promises to combat and prevent gender-based violence. The World Bank prioritises combating violence against women, especially in developing countries, and states that gender-based violence is estimated to cost countries up to 3.7% of their GDP – more than double what most governments spend on education.

Green Climate Fund (GCF)

The Green Climate Fund, in addition to its Gender Policy and Gender Action Plan, has a specific Policy on the Protection from Sexual Exploitation, Sexual Abuse, and Sexual Harassment. This should help the GCF to address gender issues holistically within GCF-funded activities, although it is unclear how these policies guide the investments of GCF’s accredited agencies, such as the EBRD.

The European Investment Bank (EIB)

The EIB adopted the EIB Group Gender Strategy ‘Protect, Impact, Invest’ as well as the EIB Gender Action Plan in 2016. Both the Strategy and the Action Plan lack timeframes for when objectives should be achieved and activities should be implemented. Nonetheless, combating gender-based violence, and protecting and supporting victims is a priority area of the strategy, together with promoting gender equality and women’s rights across the world.

What can MDBs do to support gender equality and women’s rights? 

MDBs are doing a lot of work to communicate their commitments to gender equality. They are certainly organising a lot of events on the subject, such as a recent roundtable discussion on gender approaches for an inclusive recovery, or the webinar ‘Women leading on Green’. However, it is important that these words are put into action and that banks recognise women not just as contributors to economic growth but as right-holders, as their environmental and social policies prescribe. Below are some recommendations for banks to help improve their commitments to gender equality. 

 

1.Give voice and agency to project-affected women 

Several development projects have shown that the MDBs fail to provide access to gender-specific project information, and also fail to comply with their own gender standards. For example, the ADB’s and the EBRD’s accountability mechanisms found the banks non-compliant with their safeguard policy provisions related to gender rights in their reviews of the Nenskra hydropower plant project. 

Since January 2020, CEE Bankwatch Network, together with its member groups in Georgia and Macedonia, has been requesting the disclosure of gender assessments at the country, sectoral and project levels from the EBRD and the GCF. No such assessments were disclosed as of March 2021. MDBs need to follow their own policies on gender and public participation, ensure the meaningful participation of women and commit to provide the right to information on both opportunities and adverse impacts on affected communities, including on the differentiated impacts on women. 

 

2. Benchmark and promote best practices in gender equality

As banks have different strategic and structural approaches to their gender policies, there is a need for benchmarking and mutual learning between the banks to make sure that their approaches to gender equality are cutting-edge. For example, there is a need for benchmarking EBRD gender strategy with those of its partners, e.g. the EIB, the Green Climate Fund and the World Bank, so that it includes gender safeguards and protection against gender-based violence. 

 

3. Provide a specific and targeted response to gender needs and grievances

A noteworthy example comes from the small Ugandan community of Bigodi, which together with local, national, and international allies, mobilized to demand redress for harm done by a World Bank-funded infrastructure project, and in doing so, catalyzed changes at the World Bank aimed at preventing similar abuses in the future.

MDBs have to make sure that their gender standards are concrete and targeted at specific sectors and groups. For example, the IFC and the EBRD are developing toolkits for gender mainstreaming in different areas, such as district heating and gender-responsive climate reform, and tools for combating gender-based violence in the private sector. Other banks could use these toolkits as models. 

 

4.Provide a gender-specific response to COVID-19 recovery 

Many MDBs have already raised the alarm that the COVID-19 pandemic is not gender-neutral. According to the International Labour Organisation’s research, women would have lost 8.1 per cent of their wages in the second quarter of 2020, compared to 5.4 per cent for men. Women are more exposed to the pandemic as care-workers and care-givers. The President of the EBRD stressed that the inclusion of women is among the Bank’s key efforts in the post-COVID recovery and is the EBRD’s priority with regards to gender mainstreaming. 

MDBs have to ensure meaningful public participation and consultation for women and women’s organisations in the design of projects they will be affected by, even if this is made harder by COVID-19 restrictions.

 

5.Focus on marginalised women, especially in developing and conflict-affected countries 

MDBs should pay special attention to the most disadvantaged women, such as women with disabilities and those living in conflict-affected countries and non-democratic regimes. Unfortunately, MDBs often tend to disregard vulnerable women and girls instead of prioritising their interests. The case of Nairobi-Mombasa road in Kenya, supported by EIB, shows how vulnerable women and children could have become homeless because of the big infrastructure project that took their homes. Vulnerable women are the most affected by poverty and the risks of gender-based violence and typically have less rights than men. Protecting and empowering these women will help counter the greatest gender inequalities in the world. 

 

On International Women’s Day as well as every day, it is important to remind MDBs about their gender commitments. While banks publicly communicate their commitment to gender equality, they should also comply with their own gender standards in every project that they fund. Approaching the issue not only through the economic lens but also through the human rights lens would help bring us closer to gender equality, and MDBs need the proper strategies and tools to do so. 

EU Recovery funds: where is the support for District Heating?

The text was originally published at https://energypost.eu/

With an average heating season lasting 200 days, Latvians need to keep warm. More than half (58%) of Latvia’s primary energy consumption is used for heating. Not only are the type of system and boiler efficiency important for effective heat supplies, but the energy source or fuel is also crucial.

Although most of Europe has turned its focus to meeting its heating needs through individual heating units powered by electricity, Latvia has a well-established, efficient and well-monitored central heating system that has the potential to boost the local economy by using locally-produced, renewable resources.

Modernising Latvia’s district heating system

A new briefing from Bankwatch and Green Liberty analyses district heating projects implemented in Latvia with the support of EU funds over the past 20 years. Thanks to this support, many changes have been made to Latvia’s district heating system in the last two decades, including renewed and expanded networks, new efficient boilers and a switch across most of the system from gas and other, dirtier energy resources to biomass.

Such investments not only make district heating more efficient and less polluting, they also make it more attractive financially. As a result of these upgrades, district heating can be the most affordable form of heating and provide full service for customers with stability, safety and comfort at the best value for money.

Gas versus ‘renewable’ woodchips

Using fossil gas for district heating has for too long continued to receive direct and indirect financial support in Latvia. In addition to its negative consequences for the climate emergency, fossil gas also threatens Latvia’s energy independence, because it is still mainly imported from Russia. There has been a lot of greenwashing around fossil gas in Latvia for the last decade, including state support mechanism for green electricity that leads to support for fossil gas as a mandatory procurement component.

Switching to renewables is absolutely an improvement, but the only problem here is that the ‘renewable’ source most commonly found in Latvia is solid biomass or woodchips. Including more renewable sources in the energy balance will help Latvia to achieve its climate and energy policy goals, and Latvia already has substantial wood resources available locally and a thriving forest industry.

The EU does have sustainability requirements for the use of woodchips as biomass that should limit when it can be considered a renewable resource. These can be found in a 2010 report on the sustainability of biomass for use in heating and cooling, as well as in the draft EU Taxonomy for sustainable finance.

Our briefing demonstrates a predictably significant trend towards biomass use in Latvia. But the question remains for how long and at what cost can biomass be considered the solution.

Solar powered District Heating

Latvia should instead focus on its well-established heating network and efficient production of heat. Instead of locking in fossil gas and unsustainable biomass as the sources for district heating, Latvia needs to consider other innovations that will keep district heating using renewable sources, while also moving it away from reliance on biomass.

Latvia already possesses a good example of a modern and super-efficient, low-emissions technology system, the solar district heating plant Salaspils Siltums, which generates an estimated 12,000 KWh of power per year.

Inspired by the vast deployment of solar collectors in Denmark, Salaspils’ system was built in less than six months. Total project costs were just over EUR 7 million, of which the EU’s Cohesion Fund co-financed EUR 2.73 million. The plant provides all of the district heating capacity, which covers 85% of the municipality of about 18,000 people.

Other district heating innovations, like building the system as an energy-hub, implementing grid stability mechanisms or developing centralised heating and cooling systems, can be implemented in the future, provided there is political will and available financing.

EU Recovery Funds: inadequate long-term solutions

Latvia has an opportunity to really push the country towards a green and just transition, as it is set to receive up to EUR 1.9 billion from the new EU Recovery and Resilience Facility. Yet though a spending plan for the new recovery funds is currently being drafted, environmental groups warn that the current drafts don’t include adequate long-term solutions for curbing emissions or improving energy efficiency.

On 24 February, twenty Latvian environmental groups sent a letter to the European Commission expressing their concerns with the country’s draft recovery plans. The letter points to the limited funding for energy efficiency measures, which are a necessary complement to all well-functioning district heating projects.

No support for District Heating

Moreover, the draft plan does not include any support under the climate goals for district heating projects, which is a massive missed opportunity. Addressing climate and energy issues in Latvia cannot exclude heating, which has the largest impact on energy consumption. Funding is needed not only for developing non-emissions technologies but also for connecting new customers to district heating systems and for installing filters to minimise dust from using biomass.

Opening the recovery planning process to public consultations and including more ambitious climate goals and projects is crucial if Latvia wants to seize this historic opportunity and build back better. Earmarking funds from not just the Recovery and Resilience Facility but the country’s whole allocation from the upcoming EU budget can lead to innovation, improved energy efficiency and ultimately create a Latvian model of an efficient, effective district heating system.

Why is the EU’s house bank still hiding one-third of its lending?

The European Investment Bank (EIB) uses various intermediaries – commercial banks, state development banks and private equity funds – to help reach smaller clients than it could otherwise attract. Such lending has doubled in the last 15 years, in 2019 accounting for about a third of the Bank’s EU operations. 

In 2020, the EIB Group provided more than EUR 30 billion for small and medium enterprises alone, which does not even cover the full range of intermediary lending. 

Despite years of requests from civil society and the European Parliament, the public still has almost no idea what happens to this money.

Small is not always beautiful

The common wisdom is that this is low-volume financing that has little potential to cause harm. But where it has been possible to track the financing, this has proven to be wishful thinking. First, according to the EU’s definition, small and medium enterprises can employ up to 249 employees, and mid-caps up to 3000, which means the projects are not always small.

Second, small projects can still be damaging. Bankwatch’s research has revealed EIB intermediaries’ role in environmental damage by small hydropower projects in southeast Europe. The EIB has financed more than 25 such plants through financial intermediaries since 2010, but the exact number remains unknown. 

Ilovac in Croatia is an example of a plant built in a Natura 2000 protected area without an adequate environmental assessment, but civil society groups became aware of the EIB’s role only after it was built. The situation is similar for the Blagoevgradska Bistrica cascade in Bulgaria, which received a loan from the EIB in 2012; the EIB disclosed this information only in March 2020.

The Vinča waste incinerator project in Belgrade, Serbia, is also an intermediary project. Paradoxically, the EIB had declined to finance it directly, as it would likely interfere with Serbia’s ability to meet EU recycling targets when it becomes a member, but the EIB-financed Marguerite II Fund has remained a shareholder in the project company.

Many private equity funds do disclose their investments. But for lending through commercial or state development banks, it is often argued that such loans are commercially confidential. Yet, slowly, the tide is turning. International financial institutions are starting to realise the risks posed by financial intermediary investments, and the EIB is falling behind its peers.

The EIB’s current approach 

The EIB’s current Transparency Policy only commits to disclosing summarised information on intermediated lending, with country and sector breakdowns. Its Environmental and Social Handbook 2013 appears to go further, requiring intermediaries to disclose at least environmental information. However, Bankwatch research on commercial and state intermediaries in southeast Europe has not found a single instance of this happening in reality.

In January 2019, Bankwatch lodged a complaint to the EIB’s Complaint Mechanism on the Bank’s failure to disclose information on financial intermediary investments and to contractually require financial intermediaries to do so. This eventually led to the disclosure of the clients and loan amounts for some, but far from all, of the EIB’s intermediated hydropower investments in southeast Europe.

Interestingly, recognising the ongoing controversy around hydropower, in 2019, the EIB’s Hydropower Guidelines made a step forward, stating that: ‘Where the EIB is providing financing to an FI [financial intermediary], the FI will disclose the list of hydropower projects it is financing on its website.’ 

No improvements in the new draft policy 

But the EIB’s amended Transparency Policy takes a step backwards compared to this, making no reference to any mechanism by which the EIB will either proactively disclose financial intermediary projects itself, nor by which it will ensure that intermediaries do so – even for high-risk sectors.

In reality, it brings no improvements compared to the current practice of assessing information requests on intermediated lending on a case-by-case basis. This in no way addresses the need to proactively disclose information on sub-projects so that any concerns can be brought forward before environmental or social damage is done.

High time for the EIB to open up on intermediated lending

With its ‘case-by-case, on request’ approach, the proposed draft leaves the EIB far behind its peers. The International Finance Corporation (IFC) and European Bank for Reconstruction and Development (EBRD) have both committed to improve disclosure for financial intermediary loans in higher-risk sectors, while the Asian Infrastructure Investment Bank (AIIB) is currently considering doing so. The Green Climate Fund (GCF) is way ahead of any of these, disclosing all medium and high-risk sub-projects before signing. 

The definition of higher-risk sectors varies by bank, but usually includes all projects which are subject to Environmental and Social Impact Assessment, plus other project types which have the potential to cause damage.

Against this background, as well as its aspirations to become the EU development bank, it is imperative that the EIB finally tackles the issue of financial intermediary disclosure. For private equity investments there is no excuse not to require all sub-projects to be disclosed, and for intermediary banks, the EIB needs to at least start with medium- and high-risk projects.

International financial institutions’ disclosure on bank intermediary lending

The EIB needs to commit to proactively disclose basic project information and environmental information on financial intermediary projects, starting with projects appearing in Annex I and II of the EU Directive on environmental impact assessment, as these are the most environmentally risky projects. This should preferably happen before the sub-project is signed, to allow any concerns to be raised by the public at a stage when issues can still be resolved. 

 

This publication was produced in collaboration with EuroNatur in the frame of the joint research and advocacy work on hydropower finance and subsidies.

The right to access information: Transparency is a two-way process

The text was originally published at: https://www.publishwhatyoufund.org

In November 2020 the first Finance in Common Summit took place, and a joint declaration was published by all the public development banks in the world. The preamble of the joint declaration reads as a significant commitment to transparency and inclusive, sustainable development:

“We, PDBs, [also] commit to act as responsible and transparent institutions, and to develop international cooperation, sharing best practices to improve the sustainability, transparency and quality of our financing” and “Particular attention will be paid to community-led development and the respect of the rights of indigenous people”.

Taken at face value it looks like public development banks have turned a corner, but to what extent are these lending institutions really interested in devolving power to project-affected communities, and to respecting their right to access information so they are able to give informed consent for development projects that will affect their lives?

This blog unpacks the reality against the rhetoric of the PDBs and outlines some areas where we think transparency and the right to information need urgent attention.

Transparency and disclosure or the right to information

Transparency and the right to information are distinct concepts, though not mutually exclusive.

Transparency and disclosure are top-down approaches, where power-holders (in this case the PDBs) may bestow transparent open systems on ordinary people and the intended recipients of development projects. The issue is therefore around “power” – who are the power-holders and who are the power-givers?

Access to information, on the other hand, is clearly articulated in Article 19 of the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights. It’s not an optional “nice-to-have” for development bank project lenders and their clients. Rather, it is an essential tool that bestows a duty on the PDB and empowers ordinary people to demand accountability from governments and publicly funded PDBs. The right to information provides essential facts that benefit communities and makes it more difficult to hide abuses of power and other illegal activities, as citizens can access key facts and data from power holders. 

Transparent processes and stakeholder engagement also benefit PDB plans and assessments as impacted communities often possess information and experiences that can inform the better design of PDB projects. For this, timing is crucial – people need to know about the planned developments before the heavy machinery is at their door.

Transparency needs to be a two-way process which allows communities to co-create their development pathways, rather than have projects imposed on them without adequate information.

Fran Witt and Fidanka Bacheva-McGrath

People centred vs client oriented

For project-affected communities, right to access to information is about ensuring that communities have the information, power and resources to determine their own development paths and priorities and can hold PDBs accountable.

In reality, project-affected communities and CSOs often have very limited access to project information, which is in violation of their right of access to information. For example the 2020 IFC/MIGA Compliance Ombudsman Office Review Report asks that the IFC and the CAO clarify circumstances around client confidentiality. It also means that disclosure and safeguard standards are weak, thereby sparing the company from accountability to communities.

PDBs not only have to inform the public of their own activities, but they also should be transparent about the companies, projects, and governments in which they invest. This is where the issue of client confidentiality becomes a sticking point for information disclosure by PDBs, because of concerns that public information could give a competitor an advantage. PDBs need to assess whether to publish information by taking into account the broader benefits of transparency to public trust and markets, and not just commercial harm caused to the contractor.  

A new trend is PDB corporate level lending to energy utilities, extractive and agribusiness companies. In such projects, the investment is not directed at specific physical assets, such as mines or meat production facilities, but at debt restructuring or bond issuance. There is a loophole in PDB safeguards and transparency policies, so it is considered that communities who are affected by the client’s operation have no say and can be denied their right to information. This is highlighted in the Compliance Review Report on the EPS Restructuring project and CEE Bankwatch Network blog post.

PDBs also need to create an “enabling environment”, where staff are adequately trained and resourced to carry out inclusive public consultations, ESG assessments, and monitoring and evaluation (and not outsource this work to consultants, private companies or clients), and ensure there are obligations for client compliance.

The weak governance and low capacity of clients, especially public sector borrowers, is also a barrier to transparency when PDBs delegate the responsibility for disclosure on supposedly “low risk” projects. For example, urban modernisation projects with city authorities or public services companies can significantly impact access to shelter and water, but they are considered “low risk”. (A recent CEE Bankwatch Network study focuses on some of the issues this has caused for  EBRD and EIB investments in the Western Balkans and Eastern Neighbourhood.) Thus assessments of affordability of public services, or of gender based violence and harassment risks, would not be disclosed to affected people and vulnerable groups. Capacity building for clients and shared responsibility for disclosure are the way forward, in addition to redefining the risk categorisation of PDB projects.

Clients and Financial Intermediaries (FI) should be required to commit to the same publicly available ESG standards of PDBs or national governments (whichever is the stronger). Currently scrutiny of what PDB funds achieve in terms of ESG standards largely ends once funds are provided to an FI and PDBs do not ask for an assessment of development outcomes achieved by a given sub-project. If the right to information is to be respected, then all initial contracts with clients need to be reformed so that they include ESG obligations, and legal right to remedies, as well as stipulating greater disclosure of gender impacts.

Conclusion

The emphasis of transparency in PDB terms is towards the banks and investors and much less towards the right to access to information of communities, and this needs to be redressed. PDBs should therefore reflect on transparency for who and to what end. Transparency needs to be a two-way process which allows communities to co-create their development pathways, rather than have projects imposed on them without adequate information.