THE MITIGATION HIERARCHY IN THE WORLD BANK ENVIRONMENTAL

THE MITIGATION HIERARCHY IN THE WORLD BANK ENVIRONMENTAL & SOCIAL FRAMEWORK MARK KING & AGI KISS NOVEMBER 2017 November 22, 2020

OVERVIEW v Management of risks and impacts within the current Operational Policies and Bank Procedures (Safeguards) v Key elements and drivers of the ESF v How the Mitigation Hierarchy is incorporated in the ESF (cf other IFIs and Development Partners) v Implications for investment lending and players in development

Management of risks and impacts within the current Safeguards v 8 environmental and social OPs and 2 legal ones were developed over a 20 year period and vary in style, level of detail etc. v The safeguards do not explicitly address the ‘full range’ of E/S risks and impacts expected today v Mitigation Hierarchy not explicitly a core element of the procedural fabric of E/S risk management v Current safeguards have less direction/detail on the procedural approach leaving much to judgment and inference. v Roles and responsibilities not always clear 2

Key elements and drivers of the ESF (1) v Our 189 shareholders v Need to improve our game across the board (consistency, approach during appraisal, monitoring/supervision) v “Emerging Issues” needed to be addressed v More clarity required on roles and responsibilities (accountability, transparency v A shift from “front-loading” to an outcomes based approach 3

Key elements and drivers of the ESF (2) v Harmonization agenda v Moving from ‘one-size-fits all’ to a more client focused and tailored approach (South Sudan to Poland) v Our portfolio is becoming more challenging (Fragile, Conflict, Violence, emergency response etc) 4

Key Thematic Elements of the ESF v Delineating and limiting project risks and liabilities v Outcomes materially consistent with the objectives of the ESSs v Inclusive, non-discriminatory approach (WB’s Twin Goals) v High standards set by ESSs, EHSGs and GIIP v Risk based approach v More emphasis on judgment rather than a rule based approach v Control or influence v Manner and timeframe acceptable to the Bank v Technically and financially feasible v Adaptive management (ongoing stakeholder engagement) 5

The Mitigation Hierarchy within the ESF Explicitly referenced and/or described throughout ESF and related material: ü Vision Statement ü Environmental and Social Policy (Bank) ü Directive re marginalized/vulnerable (Bank) ü Environmental and Social Procedure (Bank) ü Best Practice Notes and other tools (Bank) ü Ten Environmental and Social Standards (Borrower) ü Guidance Notes (Borrower) 6

Elements of the WB Mitigation Hierarchy v Anticipate and avoid risks and impacts v Where avoidance is not possible, minimize or reduce to acceptable levels v Once risks and impacts have been minimized or reduced, mitigate (inc improve or at least restore livelihoods) v Where significant residual impacts remain, compensate or offset them, where technically and financially feasible 7

Leads to more realistic and reasonable outcomes? v Mitigation Hierarchy focuses on risk (downside) not upside except in ESS 2, 5, 6, 7 IPs, resettlement, Staff Directive (differentiated measures) v Conditioned by proportionality, control and influence, manner and timeframe acceptable to the Bank, technically and financially feasible v Minimize or reduce to acceptable levels (what is ‘acceptable’ and who determines? ) v Higher bar for compensation and offsetting (where significant impacts remain (threshold? ) 8

Implications for investment lending and players in development v ESF requires rigorous application of the MH for all risks and impacts v ‘Knock-on effect’ is more rigorous E/S assessment process (scoping, stakeholder engagement, baseline etc) v Higher expectations regarding documenting rationale for decisionmaking v Strong feedback loop (monitoring and stakeholder engagement) supporting adaptive management v Burden of ‘proof’ lies with Borrower and Bank staff (esp Staff Directive) 9

Implications for Borrowers v More rigorous collection of baseline data v Improvements in stakeholder engagement v Improvement in ESA practice v Enhanced skills and knowledge base (hiring, more use of consultants? ) v Timely better sequenced actions and processes v Budgetary implications? v Internalizing the cost of the MH may make projects unfeasible (always a possibility but often ignored!) v Much scope for efficiency gains! 10

Implications for Borrowers v Doing things better: more resources v Enhancing skills base especially for ‘new issues’ v Culture change: moving to judgment, risk based approach, making decisions! v More ‘hand-holding’ for Borrowers; at least initially v Accountability and transparency> risk adversity? v Much scope for efficiency gains v Better placed for challenging lending environments 11

Implications for Technical Experts v High expectations to be met in terms of technical expertise and support to clients v More rigorous ESA practice v Better baseline (timing, sequencing, resources) v ESF is holistic: skills and staffing implications v Role of ‘niche’ consultancy v ‘big game’ firms v Need for local partners intensified; esp re stakeholder engagement and on social issues 12

Implications for people and the Environment v Broader range of protections v More rigorous processes leading to better development outcomes v Leaving no-one behind: Non-discrimination, inclusion and differentiated mitigation measures v Higher ‘burden of proof’ linked to ESS 6, ecosystem services and the precautionary approach contribute to stronger protection of biodiversity and habitats v Better monitoring and stakeholder engagement allows for effective adaptive management 13

TBILISI URBAN REGENERATION v Old residential to mixed apartment/retail v ‘A’ project (OP), High risk project (ESF) v Several IFIs and FIs involved v Scoping v Stakeholder engagement v Staff Directive….

Ombla Underground Hydro, Croatia v Karstic cave system v Endangered amphibian present? v Baseline sampling: cave diving, DNA testing v No amphibian but 20 approx. new invertebrate species v Offsetting proposed: species will move to ‘new tunnels’ when hydrological regime changes. Adequate? v Precautionary? Adaptive management?

Sakhalin Oil and Gas Developments v Full-field vertically integrated offshore production. v Pipeline to shore through proposed through Western Gray Whale calving/feeding area v Onshore pipeline over 8800 km crossing 1000 approx. rivers/streams v Transmission line and Steller’s Sea Eagle