Compliance Advisor Ombudsman (CAO) Independent Recourse & Accountability Mechanism for IFC & MIGA

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1 Compliance Advisor Ombudsman (CAO) Independent Recourse & Accountability Mechanism for IFC & MIGA Governance and Accountability at International Financial Institutions: Environmental and Social Standards, Accountability and Redress in Development Projects May 2014 Meg Taylor, CAO and Vice President, World Bank Group Compliance Advisor Ombudsman (CAO) is the independent recourse and accountability mechanism for the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), World Bank Group

2 Setting the scene World Bank Group goals: ending extreme poverty and boosting shared prosperity Important role of private sector with government and civil society in catalyzing development: o o o Transformative projects Positives: Jobs and growth Negatives: Risks to people and environment Influential role of development finance institutions o o Sustainable development Best practice environmental and social standards Challenges: population growth, climate change impacts, food insecurity, and competition for natural resources o o Potential for conflict What can we do about it? 2

3 What is the Compliance Advisor Ombudsman (CAO)? CAO addresses complaints from people affected by World Bank Group private sector projects (IFC/MIGA) Independent Provides public accountability & grievance redress Reports to World Bank Group President Goal = enhance social & environmental project outcomes 3

4 World Bank Group: Public and Private Sector Agencies World Bank Group Board World Bank Group President Jim Yong Kim International Bank for Reconstruction & Development (IBRD) International Development Association (IDA) Funding to public sector projects International Finance Corporation (IFC) Multilateral Investment Guarantee Agency (MIGA) Funding to private sector projects 4

5 World Bank Group: Governance & Accountability Structure Board of Governors Director-General Independent Evaluation Group Board of Directors Chairperson Inspection Panel Vice President Institutional Integrity Vice President and Auditor General Internal Audit Jim Yong Kim President Vice President Compliance Advisor Ombudsman 5

6 World Bank Group: Where CAO interacts Board PRESIDENT Jim Yong Kim CAO provides a direct channel of accountability for projectaffected people IFC MIGA Board members are accountable to citizens of their nations Private sector client Private sector client Private sector client Project-affected communities 6

7 How CAO works: Three Roles 7

8 What informs good environmental and social practice? 8 CAO team meets with affected community members in Cambodia (Cambodia Airports Development Project)

9 IFC s Sustainability Framework Policy on Environmental and Social Sustainability Performance Standards 1-8: 1. Assessment & Management of Environmental and Social Risks and Impacts 2. Labor and Working Conditions 3. Resource Efficiency and Pollution Prevention 4. Community Health, Safety, and Security 5. Land Acquisition and Involuntary Resettlement 6. Biodiversity Conservation & Sustainable Management of Living Natural Resources 7. Indigenous Peoples 8. Cultural Heritage IFC Access to Information Policy 9

10 IFC standards used by broader private sector Equator Principles: Environmental and social standards adopted by 78 of the biggest banks in the world, covering 90% of global project finance o Only apply to project finance loans where total capital costs exceed US$10 million Used by 30+ OECD Export Credit Agencies Used by European Development Finance Institutions Global benchmark used broadly by industry groups & corporations 10

11 Challenges in implementation of standards and accountability for performance CAO team meets with affected community members in Cameroon (Chad-Cameroon Pipeline Project) 11

12 What are the gaps? Who is responsible for implementation of standards, and how? Who prepared the Environmental and Social Review documents? Who supervises performance and project outcomes? What was the consultation process? Was social mapping done? What is known about the country and sector context? In Fragile and Conflict Affected States what are the conflicts, what are the fragility issues, and what are the tools to address them? Where do the government, private sector, and banks fit in? What about people where do they fit in? Do they fit in? What are different actors motivation to address risks /problems that emerge and how? 12

13 Even with the best standards, can you avoid conflict? Goldman Sachs: Delays associated with a sample of 190 of the world s largest oil and gas projects found that 73% of project delays were due to above-ground risk, including stakeholder resistance. 13

14 Peru: 72% of conflicts related to mining industry Peru: La Defensoria del Pueblo (Public Defender s Office) May 2013: 149 conflicts registered during May 2013 relate to social and environmental concerns; 108 pertain to the mining sector. 14

15 Kyrgyzstan: Mine shutdown after clashes May State of emergency declared during gold mine clashes as 2,000 local community members demand social benefits. 15

16 India: Mass protests in Uttar Pradesh against land acquisition for infrastructure Issue of land acquisition is highly sensitive as about 65% of India's population is dependent on farming. 16

17 Brazil: Protests against large-scale agribusiness February ,000 farmers march in the capital, Brasília, for stronger reforms in a country with one of the most unequal distributions of land in the world. 17

18 Honduras: Violent land conflict around palm oil February Members of the Peasant Unified Movement of Bajo Aguán in Tegucigalpa, carry mock coffins bearing pictures of people murdered in land clashes 18

19 Common drivers for conflict Land & water - a shared resource Local community Industry Limited resources Agriculture Where there is competition, conflict is predictable Government 19

20 CAO s work reveals a similar picture Affected community members in Nicaragua (CAO case) 20

21 Complaints by Region, Latin America traditionally has accounted for many complaints Complaints from Africa and Asia regions are on the increase -Level of awareness / mobilization of civil society? -Cultural and political barriers to raising concerns? 1% 1% Latin America and Caribbean 9% Europe and Central Asia 13% 16% 31% Sub-Saharan Africa South Asia East Asia and the Pacific World 29% Middle East and North Africa 21

22 Complaints by Sector, Resource intensive industries dominate grievances raised by communities o Historically high in extractives growth in agribusiness (the new extractive industry) o Pattern reflects physical footprint and resource intensity of sectors (land and water use) 12% 5% 3% Oil, Gas, Mining and Chemicals Infrastructure 46% Agribusiness 14% Manufacturing Advisory Services 20% Financial Markets 22

23 Environmental and social issues, Socio-economic grievances predominate eg adverse impacts to livelihoods, access to project benefits Gaps in project due diligence & supervision Consultation & information disclosure seen as inadequate Land conflict in over 50% of complaints Socioeconomic 66% IFC/MIGA due diligence & supervision 63% Consultation & disclosure 57% Land 52% Pollution 43% Community health & safety 40% Water 39% Biodiversity 31% Labor 22% Indigenous Peoples 18% Cultural heritage 13% 0% 10% 20% 30% 40% 50% 60% 70% 80% 23

24 CAO CASE EXAMPLES 24

25 Where CAO is working Currently, 49 cases in 19 countries 25 Map reflects CAO s total caseload since 2000 (134 cases)

26 Case study: Chad-Cameroon Pipeline Project Thousands affected in communities in Chad & Cameroon Summary: 1000 km oil pipeline from Chad to Cameroon supported by WBG Two complaints: one from communities in Cameroon; second from 20,000+ people in Chad about compensation, loss of livelihood, land and water pollution & monitoring mechanisms Mediation Process: Ongoing CAO mediations in both countries between community and company representatives. Government involved. CAO assessment of complaint with community in Chad 26

27 Case study: Nicaragua Sugar Estates, Nicaragua Chronic health issues affecting sugarcane workers Summary: Agro-energy producer in Nicaragua and IFC client Complaint to CAO in 2008 claims Chronic Kidney Disease among sugarcane cutters is caused by exposure to agrichemicals Company strongly denied Parties deadlocked in a cycle of recrimination and denial Outcomes: Independent medical study Livelihood and health care initiatives benefiting 2,000 community members (food aid, renal clinic, new 27 housing, microcredit fund) Community members meet in Chichigalpa, Nicaragua Status: CAO is monitoring implementation of agreements

28 Case study: Oyu Tolgoi Mine, Mongolia Impact of mega-mine on nomadic herders Summary: IFC investment in huge copper and gold mine at Oyu Tolgoi in the Southern Gobi region, Mongolia. Two complaints : Herders claim impacts to land and water that threaten nomadic way of life. Mediation Process: Community and company participating in mediation process Joint fact-finding to look at impacts of river diversion Local herder takes a break to meet CAO team in Mongolia 28

29 Case Study: Wilmar Group, Indonesia Land clearance for palm oil plantations 29 Summary: Complaint filed by NGOs & smallholders Extensive supply chain with many plantations and hundreds of communities Outcomes: Dispute resolution: CAO mediation process led to compensation and return of land for specific communities Compliance: CAO investigation identified IFC failings. Suspension of WBG investment in palm oil until strategy developed. CAO team meets community members in Sumatra, Indonesia

30 Case study: Dinant, Honduras Palm oil plantations and violent land conflict Summary: Concerns raised by NGOs in 2011 about forced evictions, violence and deaths on and around Dinant palm oil plantations. Widely reported in press. CAO initiates compliance investigation of IFC s involvement with Dinant in 2012 Outcomes: CAO findings released 2014: systematic failures in IFC s environmental and social due diligence, project supervision, and consultation with affected communities. Calls now for human right abuses to be investigated 30 in Honduras. Oil palm plantations in the Aguan Valley, Honduras

31 Summary of Challenges 31 Competition for natural resources = leading to conflict Role of governments as they aim to attract private sector development o o Aggressive approach to development is marginalizing communities How can people participate in the process? Multilateral institutions with standards and mechanisms for accountability and oversight o o o Thorough implementation is key Slower process but better projects Checks and balances

32 Job Opportunities Major Multilateral Development Banks: Asian Development Bank (ADB) African Development Bank (AfDB) European Bank for Reconstruction and Development (EBRD) Inter-American Development Bank (IDB) World Bank Group o o Private sector: IFC and MIGA Public sector: IBRD and IDA UN system: UNOPs, UNDP, UNEP, FAO, UNESCO, UNICEF. Skill sets? Field experience Understand how systems work Social development expertize needed by public and private sectors 32

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