The Good, the Bad, and the Potentially Ugly: Assessing the World Bank Forest Action Plan’s Project-level Impacts – and why potentially environmentally harmful projects matter

This month, we are releasing a report summarizing our findings in forest-sector related World Bank financing in nine countries that have significant forest resources. We looked at projects in Brazil, Colombia, the DR Congo, Indonesia, Liberia, Mexico, Mozambique, Nepal, and Peru. In particular, we were concerned with development in and around forests. This analysis was aimed at seeing the influence the Forest Action Plan (FAP) potentially had on World Bank project selection and financial commitment. The goal of this plan was to increase investments in sustainable forest management, and to make sure World Bank interventions in other sectors, like agriculture and energy, considered forest impacts. In short, we wanted to know if the Forest Action Plan modified World Bank investment decisions, and if intended project outcomes reflected this policy shift. Although we looked at all the active projects approved since April 2013, and at projects in the Bank’s pipeline for these countries, we focused on 3 groups of projects likely to impact forests[i]: 1) projects we identified as ‘pro-forest’ or likely to produce positive environmental outcomes; 2) projects we are certain would involve some environmental harm; and 3) projects that may potentially produce negative impacts, depending on how they are implemented.


Going Beyond the Numbers: Snapshots of the WBG’s Investments in Forests

Among the first group, we found several aimed at assisting indigenous populations with sustainable natural resource management, rehabilitating degraded areas, or increasing funding for the conservation of protected areas. A project in Mexico, the Coastal Watersheds Conservation in the Context of Climate Change Project, funded via a $39.5 million grant from the Global Environment Facility,  was identified as highly likely to produce direct, positive impacts on the environment because of its focus on biodiversity conservation, sustainable land use, and climate change mitigation. In a project in the DRC, the World Bank acted as implementing agency for an $18.2 million Central Africa Forest Initiative grant to support forest landscape management in Mai-Ndombe province. Both, however, were funded by trust funds rather than World Bank (IBRD/IDA) resources indicating that while the FAP may support these projects being selected, how much funding they receive depends in part on the availability of dedicated (Trust) funds, as well as the Bank’s capacity to implement them.

Other projects we identified in the second group, as likely to produce direct and measurable negative impacts on the environment with definitive links to deforestation. Historically these projects have included operations promoting extractive industries (oil, gas, mining, timber). Recent reports from our partner organizations indicate that although WB investment in renewable energy projects has increased, projects most associated with environmental harm, including fossil fuel development projects, continue to receive funding at rates inconsistent with the Bank’s stated commitments to climate action and the global environment. Our analysis concurs with this assessment – financing for environmentally harmful projects far outpaces commitments made for ‘pro-forest’ projects, even though the total number of ‘pro-forest’ projects has increased since adoption of the FAP – at best a mixed picture. Many projects implicated in destructive activities, such as deforestation, came not from extractive industries, but rather from indirectly-impactful projects:  invasive road-works and construction, infrastructure development, and, frequently, agricultural expansion.

Projects involving agriculture were often most difficult to evaluate, usually because of project variables including corporate actors, site-specific environmental conditions, regional characteristics, and mitigation strategies. Furthermore, many technologies and land management strategies may be employed to reduce natural resource degradation, or improve soil quality, but if those strategies are enacted to expand the cultivation of palm oil monocultures in tropical forest regions, the end result is clearly unsustainable. Thus, for World Bank agricultural sector projects, it is important to understand both the local and broader environmental risks and project impacts. A $25 million IDA-funded project in Liberia approved in January provides a good example.  Although touted by the government as its flagship program in sustainable agriculture, in reality the Smallholder Agriculture Transformation project is mostly a means of getting private investors involved in producing more cash crops for export, including oil palm, a historic driver of deforestation.


Potentially Negative Projects: The Critical Role of Design and Implementation

For projects in the third, ‘potentially-negative’ category, most related to the agricultural sector for reasons stated above, but some also involved ‘sustainable’ energy development. While not all development projects with infrastructure components will produce significant environmental harm, every infrastructure project will create a measurable ecological footprint, especially if that development is not carried out according to good practice standards. Where and how such development takes place is crucial to avoiding or minimizing environmental harm.  

Consistent with this, we rated the recent World Bank hydroelectric power generation projects as only potentially producing negative environmental effects; design, location, and mitigation are critical.[ii]  A $147 million project in the DRC involving hydropower expansion illustrates the point: although some mitigation measures have been built into the design of the DRC Electricity Access & Services Expansion project, an internal assessment revealed that its development may involve land not acquired in compliance with domestic environmental regulations, and resettlement of local populations. If the World Bank follows its own policies in minimizing environmental harm and protecting forest communities, it has the potential to provide isolated areas with a low-impact energy source without resorting to coercive actions.   If it fails to fully observe those policies, it could end up supporting human rights violations and undermining livelihoods of intended beneficiaries.

This illustrates the importance of implementation and oversight of such World Bank-funded development. Sometimes World Bank policy and projects are in sync, and sometimes they are not. Closely analyzing projects that may produce negative environmental impacts is one way to assess the World Bank’s impact on climate and forests. Our assessment across nine countries indicates some positive change, which could mean that, however gradually, project design and implementation are beginning to reflect the ideals of mainstreaming forest and climate considerations set out in the FAP, but this change remains a challenge. If the FAP is to have its intended effect, more systematic mainstreaming of forests and forest peoples’ needs in broader development sectors, including those that only have potential for harm, will be required. In the end, the real measure of the FAP will be in its sustained ability to transform projects’ potential negatives into positive certainties.


[i] We did not look into projects unlikely to have significant environmental impacts. For fiscal year 2019, for instance, the World Bank has thus far approved 59 projects totaling more than $1.8 billion relating to the education sector. Similarly, the World Bank has invested over $2 billion this year for projects associated with human health. Most, if not all, of these projects will likely produce positive outcomes for beneficiary communities and their governments, and few, if any, will generate significant environmental impacts.

[ii] While the World Bank’s overall energy policy is to increase investment in renewable energy development and scale up renewable energy options in developing countries, over the past 30 years, this has often meant investments in huge hydroelectric plants.  This trend continues today, posing serious harm to forests and riparian ecosystems in Latin America, Southeast Asia, and elsewhere, and to those whose livelihoods depend on them. In solidarity with our global partners, just this past week, BIC signed a joint statement protesting the “false promises of hydropower” ahead of the 2019 World Hydropower Congress in Paris. The long legacy of social and environmental catastrophes brought about by hydroelectric projects should not be ignored, nor should recent studies suggesting that their carbon footprint is bigger than previously understood.