Civil Society Networks and the Development of Environmental Standards at International Financial Institutions

By Hunter, David B. | Chicago Journal of International Law, Winter 2008 | Go to article overview

Civil Society Networks and the Development of Environmental Standards at International Financial Institutions


Hunter, David B., Chicago Journal of International Law


I. INTRODUCTION

The development of environmental standards at financial institutions is arguably among the most important international environmental law developments in the past two decades, yet these standards bear little resemblance to traditional visions of international law and may not even rightly be labeled international law at all. The standards are neither treaties nor custom, although they may reflect emerging principles of international law.1 Moreover, their development and implementation owe less to nation-states, the traditional monopolizers of international lawmaking authority, than to the financial institutions and civil society networks formed to influence those institutions.

Environmental and social standards now exist for virtually all international sources of project finance capital: the World Bank ("Bank") and other multilateral development banks ("MDBs"),2 the International Finance Corporation ("IFC"),3 export credit and insurance agencies ("ECAs"),4 and even many private commercial banks.5 These financial institutions ("FIs") have each established their own sets of environmental and social policies, frequently with cross-references to one another's standards. This mutual incorporation reflects a process of upward harmonization driven largely by three factors: (1) cross-fertilization of ideas and demands made by interconnected civil society organizations ("CSOs") and networks;6 (2) recognition by FIs and their clients, particularly private sector borrowers, that compliance with harmonized standards would be easier than with a multiplicity of different standards; and (3) efforts to reflect the goals and objectives of international law relating to sustainable development.7

This Article describes the recent emergence of standards for sustainable finance across a variety of FIs and the implications of those standards for the progressive development of international environmental law. Section II examines the evolution of sustainable development standards at the various FIs. Section III describes the structure and impact of the CSO networks that have influenced development of the standards and continue to monitor their implementation. Section IV identifies some of the implications of the development of these standards for international environmental lawmaking more generally.

II. THE EVOLUTION OF ENVIRONMENTAL AND SOCIAL STANDARDS IN INTERNATIONAL FINANCE

A. DEVELOPMENT OF SAFEGUARD POLICIES AT THE WORLD BANK GROUP

The public became concerned over the World Bank's role in controversial infrastructure projects during the 1970s and 1980s. Projects such as the Sardar Sarovar dam in India's Narmada Valley and the Polonoroeste highway in the Brazilian Amazon led to worldwide civil society opposition, because they were designed with limited concern for impacts on local communities and the environment.8 In response to these criticisms, the World Bank Group began to strengthen its policies to protect vulnerable communities, to ensure sustainable use of natural resources, and to encourage greater community participation.9

These environmental and social policies, collectively known at the World Bank Group as the "safeguard policies," require, among other things, environmental assessments ("EAs") of projects before financing is approved,10 compensation for people involuntarily resettled for bank-financed projects,11 and protection for certain procedural and substantive rights of indigenous peoples when projects impact their lands.12 Key requirements in each of the ten environmental and social safeguard policies are summarized in the table below.

The cornerstone of the World Bank's safeguard policy system is the environmental assessment policy. All World Bank-financed projects are screened into three categories depending on the extent of environmental impacts associated with the project. "Category A" projects, which have "significant adverse impacts that are sensitive, diverse, or unprecedented," must undergo a full environmental assessment. …

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