What needs to happen at the IDB to fully implement its new Environmental and Social Policy Framework?

The IDB approved its Environmental and Social Policy Framework (ESPF) in December 2020, which became effective in October 2021 after the borrower guidelines were developed. While the ESPF is robust on paper, the main challenge ahead for the IDB is full and robust implementation. This update makes recommendations on what needs to happen at the IDB to fully implement the ESPF.

In 2020, the IDB approved a robust new Environment and Social Policy Framework (ESPF) that includes a list of excluded activities along with many protections for project-affected communities and the environment. One way in which the new ESPF represents a significant step forward is that it includes the “do good principle,” going beyond do no harm, where IDB commits to maximizing sustainable development benefits. This requires the Borrower to consider and report on how project design will enhance social and environmental good in the environmental and social assessment.

Beyond the do good principle, the framework also enhances the IDB’s monitoring and supervision role and the environmental and social due diligence process. For example, the IDB is now required to consider the Borrower’s commitment, track record, and capacity to implement the provisions of the ESPF. In addition, the IDB and clients are required to inform project-affected communities about the existence of project level grievance mechanisms as well as the MICI, where communities can file complaints when something goes wrong with the project. The framework includes a provision guaranteeing zero tolerance for retaliation against those who voice their opinion or oppose a project. The new ESPF also emphasizes the need to effectively protect the rights of marginalized groups such as afro-descendants, migrant workers, children, persons with disabilities, women, and LGBTQI population throughout the project cycle.

Although the ESPF is robust on paper, the IDB's main challenge remains implementation. A recent engagement with IDB’s junior management regarding a project in El Salvador evidenced a lack of capacity, knowledge, and foresight that needs to be addressed across the institution to be able to implement the commitments under the ESPF effectively. After many requests to meet with the team leading the project, our local El Salvador-based partners finally got a meeting just to learn that the IDB had shared information about their identities and concerns with the Borrower without their knowledge or permission. This happened in a sensitive context where risks of reprisals and retaliation are high and thus the IDB staff’s actions put the safety of local civil society groups at risk.

This case illustrates some of the main concerns raised by civil society around ESPF implementation during the safeguards review process: the need for adequate resources, capacity building, and training. We provide the following recommendations that the IDB and the incoming administration should prioritize to strengthen its ability to implement the ESPF effectively:

1. Align the Environmental and Social Solutions Unit's (ESG) roles and responsibilities with its institutional hierarchy within the IDB. ESG’s role at the IDB is crucial to support borrowers and staff at the IDB in implementing the ESPF. As of today, as a Unit, ESG has little influence but an enormous commitment which is not reflected in a robust institutional structure that gives ESG the leverage they need to be on top of the role and responsibilities they currently have. More leverage will allow ESG access to more resources and grow its position within the institution.

2. Increase ESG’s staff and resources. 

  • ESG needs more financial resources for monitoring and supervision. With a broader number of commitments and thematic areas covered by the ESPF, increased financing is needed to enable more robust monitoring and supervision. Parallel to the process of implementing a new ESPF, the IDB is also developing an operational effectiveness proposal to reduce timing of project preparation. Without strong funding for monitoring and supervision, the IDB could put at risk effective project appraisal and future ESPF implementation. 
  • The IDB needs more social and environmental specialists on the ground. For the IDB to effectively respond to project level issues it needs more environmental and social specialists on the ground in borrowing countries. This requires both increased funding and increased personnel numbers. When we reached out to ESG about the project in El Salvador, they noted it was difficult for them to monitor the situation in the country because there are no E&S specialists in El Salvador. 
  • The IDB needs more people with expertise in emerging ESPF areas. As mentioned above, the ESPF is much broader than the previous Operational Policies. Now projects need to address new requirements on a more comprehensive set of issues and themes. This is why bringing in E&S specialists with expertise on the issues that are new to the institution is critical. The IDB needs to be prepared to support its staff to internalize these commitments, include them effectively in project design and implementation, and to understand their importance in strengthening development outcomes beyond a “check the box process.”  
  • The IDB needs to secure funding for the new management-led grievance mechanism to be prepared to effectively deal with and resolve conflicts. Management-led grievance mechanisms are a critical tool to enable the Bank to learn of potential problems at an early stage, and course correct before these issues cause widespread harm and become more difficult to solve. For them to be effective they need to be accessible and equipped to provide remedy, which requires a significant financial investment.

3. Increase and improve capacity building and training across the institution.

  • The IDB should be prepared to provide long-term genuine support to implementing agencies. The IDB has been doing internal training around ESFP, but that is not enough. Training and capacity building is not about a one-time event or course. On the contrary, it entails long-term support and being there for the client. The IDB Hubs should be prepared to support clients at the beginning of each project operation. Also, real training and capacity building involves years of support from the Bank to the executing agencies, including field visits, missions, and long-term, continuous supervision. For this, the IDB needs to allocate sufficient funding. 
  • The IDB needs to prioritize culture change across the institution. In addition to training and capacity building, there is a need for a real culture shift, for the institution to incentivize compliance with the ESPF rather than simply prioritizing getting funds out the door. Based on our experience, the standard response we usually get from IDB country offices is to reach out to the relevant government agency involved in this project because the IDB is not implementing the project. IDB junior and senior management need to be more responsive and should be prepared to operate in environments with high risks of reprisals without putting stakeholders at risk. It is critical that all IDB staff own their supervision role and work with civil society and project-affected communities to implement the ESPF in a robust manner to prevent harm and maximize benefits.

If the IDB strengthens its presence in countries, the Bank will be better equipped to provide operational support and offer solutions to implementing agencies. More E&S specialists on the ground will support project teams in different countries to be prepared to address a range of environmental and social issues.

With a new robust ESPF, the IDB has a significant challenge, but also a unique opportunity to promote a culture shift at the institution; one that recognizes the critical role the ESPF plays in guaranteeing that IDB-sponsored development benefits people and the planet. Having a strong ESPF on paper is not enough, and this is why culture change, sufficient funding, capacity building, and training need to be addressed and prioritized by the next IDB administration.