A new report by an internal World Bank Group watchdog says the multilateral lender has had some success helping developing nations and private companies active in them to improve their environmental practices in recent years. But it concludes that the bank has failed to make environmental protection an essential part of its economic-development and poverty-reduction projects, adding that recipient countries' "lukewarm interest" in such efforts has contributed to the problem.

"The Bank Group has been far less able to integrate these efforts into [its projects], incorporate them as requirements for sustainable growth and poverty reduction, and provide lending to help countries address environmental priorities," says the Independent Evaluation Group (IEG) in its report "Environmental Sustainability: An Evaluation of World Bank Group Support," released late last month.

Study's broad scope

The report examined operations of the World Bank Group's three main units-the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA)-during the period 1990-2007. It studied World Bank activity in at least one country in each of the group's six operational regions, focusing on Brazil in Latin America. Together the sampling used for the evaluation represents approximately half the population, land mass, and GDP of all lower- and middle-income nations, the bank says.

Vinod Thomas, the evaluation group's director-general, argues the World Bank must stop regarding the environment as an obstacle to development and view it instead as key to alleviating poverty. "Not taking it into account is an obstacle to long-term growth," Thomas says. "Shifting the environment to the mainstream is what we hope this report will help to accomplish."

Besides suggesting environmental priorities be better reflected in regional and country assistance programs, the evaluation group made three other broad recommendations. These are that the bank adopt a more holistic lending approach informed by a range of geographically specific environmental considerations and develop appropriate staff skills; improve its measurement and evaluation of the impacts of its interventions; and boost coordination within the Bank Group and with external partners, while ensuring proper implementation.

A positive example cited is a Brazilian forest-conservation effort involving collaboration among multilateral bodies, bilateral organizations and civil society. The Amazon Regional Protected Areas Project, the result of a financial partnership among the Brazilian and German governments, the Global Environmental Facility and the World Wildlife Fund, among others, has been carried out with World Bank oversight and technical support. The IEG says that although intricate arrangements between stakeholders have meant high transaction costs, a long project cycle and complex funding procedures, community and civil society participation has been strengthened. On the negative side, the report says projects that improved land-management and poverty-reduction in southern Brazil should have been-and were not-applied to other regions, particularly the northeast, home to most of the country's poor.

Report welcomed

A joint press release from the Bank Information Center (BIC) and the Environmental Defense Fund in Washington says the IEG recommendations represent a good starting point and, if properly implemented, should lead to the overhaul of the bank's lending in areas such as energy, in which bank projects often involve fossil-fuel-based power generation. But the two nonprofits cautioned that many of the Bank Group's findings are similar to those made in a 2002 report by the IEG's predecessor, the Operations Evaluation Department.

Bruce Jenkins, BIC policy director, says the report clearly shows the contradictory nature of some World Bank practices. "One of the most important findings is that the different arms of the bank [those that lend to the private and public sectors] do not have a coordinated approach to environmental sustainability, and may at times work at cross purposes, such as IFC's financing of soy and cattle operations in the Amazon region," Jenkins says.

Thomas expects the report will be used in drafting a new World Bank environmental strategy slated for release in September. It will replace the bank's first formal environment strategy, approved in 2001. Between the 1992 Earth Summit and 2001, the World Bank had established a "do no harm" or safeguards approach, as opposed to what it bills today as its proactive "do good" green strategy.

The IEG report, submitted to World Bank directors, also includes a response from the bank's management. While management concurred with several findings-for example, that internal coordination must improve and standards must be adopted by recipient countries, it considered some of the information dated, and said countries the IEG focused on were not always representative of the institution's work.