The European Bank for Reconstruction and Development finds itself at the center of a fierce debate about whether its environmental and social policy, or ESP, is fit for purpose. Civil society organizations are pushing for policy changes, but the bank says it is a leader in this area.
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The issue has been brought to fore following recent complaints that a project to modernize cotton production in Uzbekistan in which EBRD invested $70 million led to illegal land confiscations, exploitative contracts, mass firings, and union busting — and another complaint that a silver mine project in Bosnia and Herzegovina seriously damaged natural resources, my colleague Rob Merrick reports. EBRD is in the process of a regular consultation ahead of a new ESP, which will be in place about a year from now.
• EBRD tells Devex that its practices are “robust and ambitious” and that it is recognized for its “leadership” in this area of work among other international financial institutions.
• The company at the heart of the complaint about the Uzbekistan project has denied the allegations, saying that it followed due process and had a successful grievance process “validated by independent institutions.”
• A group of six international civil society organizations want the policy to change so that EBRD takes responsibility for projects it co-funds, improves transparency around the impacts of its investments, and consults adequately with local people.
• “We want the bank to take more responsibility for due diligence of a project and for assessing the human rights risks. We believe that is clearly its responsibility,” Nina Lesikhina, a Bankwatch policy officer, tells Devex. “It claims to do due diligence, but its procedures are not transparent, and neither are its findings.”
Read: EBRD under pressure over human rights complaints
Back to the drawing board
EBRD isn’t the only financial institution navigating serious allegations. As we’ve written before, the International Finance Corporation,the World Bank’s private sector arm, is in the process of figuring out its plan for responding to allegations that it failed to address child sex abuse at a chain of Kenyan schools it funded.
IFC presented its plan to the World Bank’s board, which last week rejected the proposal, sending IFC back to the drawing board. The key issue: board members want to see financial compensation for the alleged victims, not just a “collective approach to remedy” that provides services at the community level, sources close to the discussions tell Devex contributor Sophie Edwards.
The uncommon move by the board starts a 30-day clock for IFC to submit a new proposal. If IFC agrees to pay remediation costs to individuals harmed by their investments, it could set a precedent not only for the institution but for others as well.
Read: IFC under pressure to offer compensation to alleged Bridge victims
Background: IFC slammed by its own watchdog for ignoring child sex abuse allegations
ICYMI: Honduran farmers, IFC settle suit alleging violence linked to investment
A milestone birthday
The Millennium Challenge Corporation — the U.S. aid agency that awards large grants to well-governed countries to address key barriers to economic development — has just marked its 20th birthday.
I sat down with MCC CEO Alice Albright to talk about this pivotal moment for the agency, which is trying to chart its path even as it faces a shrinking number of countries it can work in.
She tells me the agency is ready to expand and is pushing the U.S. Congress to pass legislation that would allow it to invest in some upper-middle-income countries. Some experts support that proposal, but others have suggested that it should make some other changes to its model so it can stay relevant and retain its focus on the lowest-income countries.
“Our toolkit is durable,” she tells me. “How the founders have set up the place and how it’s evolved, we’ll have a great ability to keep what’s critical but continue to adapt.”
This is just the first in a series I’m doing about the agency as it marks two decades, so stay tuned for more analysis about what it’s achieved and where it should go from here.
Read: Alice Albright navigates MCC growth and identity on its 20th birthday (Pro)
+ Devex Pro members can also dive into our analysis of MCC’s $434 million pipeline of contracts for 2024. Not a Pro member yet? Start your 15-day free trial today to access all our exclusive news content, analyses, events, and career resources.
Not so prepared
It turns out that the world is not particularly well prepared for the next pandemic, especially when it comes to having diagnostics, treatments, and vaccines ready within 100 days of a public health emergency declaration.
Part of the problem is that there are limited investments in the research and development of these products for a number of different diseases, my colleague Jenny Lei Ravelo writes.
And the demand for funding that does exist — such as the Pandemic Fund, which was created to support pandemic preparedness efforts in low- and middle-income countries — has typically been oversubscribed. While the Pandemic Fund recently opened a new $500 million window, its first call for proposals, which ended up with a final allocation of $338 million, was eight times oversubscribed.
Jenny also took a look at the fund’s successes and challenges and what this new round of funding might mean.
Read: The pipeline for pandemic products is bare. Here’s why it matters
The Pro read: Where does the Pandemic Fund stand in its second year?
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Investments of interest
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The World Bank has announced a new plastic waste reduction-linked bond. The innovative seven-year, $100 million outcomes bond will support projects in Ghana and Indonesia that aim to reduce and recycle plastic waste in vulnerable communities to prevent it from leaking into oceans and other parts of nature.
Rand Merchant Bank is partnering with the World Bank’s Multilateral Investment Guarantee Agency, or MIGA, to provide short-term funding support for a trade-backed facility in Côte d'Ivoire. It’s the first time this type of facility has been created on the continent, and could pave the way for future MIGA-guaranteed short-term facilities in Africa that can help achieve development objectives by allowing for the import of goods such as food, fertilizer, and medicines.
What we’re reading
Bill & Melinda Gates Foundation CEO Mark Suzman urges wealthy donors to give away more money. [Devex]
How USAID can scale an evidence-based approach in its grants. [Devex Opinion]
It’s time to mobilize the economic power of half of humanity. [Devex Opinion]
About the author
Adva Saldinger@AdvaSal
Adva Saldinger is a Senior Reporter at Devex where she covers development finance, as well as U.S. foreign aid policy. Adva explores the role the private sector and private capital play in development and authors the weekly Devex Invested newsletter bringing the latest news on the role of business and finance in addressing global challenges. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.
