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World Bank Group Progress Report
on the Preparation of
an Environment Strategy

to be Submitted to the GEF Council Meeting

December 8, 1999

strategic framework | mainstreaming environment |
climate change | biodiversity | land degradation | international waters |

Background

1. In October 1998, World Bank Group (WBG) management informed the GEF Council that a strategy for addressing global environmental concerns in WBG policies and programs would be developed as part of the preparation of a corporate strategy for the environment as a whole, covering local, regional and global aspects. Six months later, the WBG apprised the GEF Council of the initial steps taken toward the preparation of such a strategy, and provided an update on recent global environmental mainstreaming initiatives. At the time, the GEF Council requested the WBG to come back to the Council at its December 1999 meeting with a draft report on its Environment Strategy and a summary of specific elements that will have a direct bearing on integrating global environmental concerns into WBG policies and programs.

2. Over the last five months, the WBG has engaged its environment family in formulating a strategic framework for the detailed development of an environment strategy. Furthermore, it has held extensive discussions with other sectors, networks and constituencies within the WBG regarding the key principles and direction of the strategy. The results to-date from these efforts are enclosed in the attached presentation (in Power Point): “Improving the Environment to Reduce Poverty: Toward An Environment Strategy for the World Bank Group”.

3. This presentation summarizes work in progress. It proposes a strategic framework to guide the further development of the elements and supporting action plans of the environment strategy. Such further development will take place in conjunction with an extensive process of internal and external consultations, involving a broad range of stakeholders, on the direction and potential implications of the proposed approach.

4. Parallel to the efforts to develop a corporate environment strategy is the evaluation that the World Bank’s Operations Evaluation Department (OED) is undertaking of the Bank’s past performance in the area of environmental assistance. Through a series of planned thematic reviews and case studies this work will add importantly to the foundation of lessons learnt upon which the WBG’s new environment strategy can be crafted. Given the obvious need for close coordination between the two initiatives and the timeline for the completion of the OED study (Executive Board review scheduled for July 2000), the presentation of the Environment Strategy to Senior Bank Management for review is targeted for October 2000.

5. The current presentation to the GEF Council Meeting of the proposed framework for the WBG Environment Strategy represents the first early step toward consultations with external partners. WBG management welcomes the early opportunity to obtain the GEF Council’s views and suggestions regarding the proposed overall direction and underlying principles of the strategy.

The Proposed Strategic Framework – A Summary

6. As part of its efforts to mobilize and refocus its resources for effective development assistance, WBG management earlier this year adopted a mission statement which emphasizes “fighting poverty with passion and professionalism for lasting results”. To support this mission, WBG sectoral, thematic, and regional strategies as well as country assistance programs are being reviewed to sharpen their focus on poverty reduction.

7. The WBG’s past and implicit environmental strategy has emphasized strict compliance with safeguard policies, mainstreaming the environment in operational work, maximizing environmental benefits through environmental assistance, and helping countries to implement their obligations under the international environmental conventions. While progress has been good on the development and application of safeguard policies, results have been mixed for targeted environmental assistance and mainstreaming the environment, including the integration of the global environmental agenda.

8. These shortcomings and the need for anchoring the WBG’s environmental assistance (lending and non-lending services) to the overall mission of the Bank Group drive the development and implementation of a corporate environmental strategy. Hence, the proposed goal of the strategy is to “contribute to the Bank’s mission of fighting poverty by improving poor people’s livelihoods, health, and security today and in the future” and to do this by “helping to enhance environmental quality and natural resource management and to maintain the global ecosystems”.

9. This goal in turn translates into three specific objectives:

  •   improve health conditions affected by environmental factors, because the poor are key victims of environmental health impacts and risks;
  •   improve livelihoods through sustainable natural resource management, because secure access to natural resources and associated ecosystem services is essential for the quality and sustainability of the livelihoods of the poor; and
  •   reduce vulnerability to environmental risks and natural disasters, because short term climate variability and long term consequences of global climate change will disproportionately affect both poor people and poor countries.

10. In developing a strategy and associated actions that meet these three objectives, the WBG would be guided by a set of key principles:

  •   listen to the people in client countries;
  •   focus on environmental interventions benefiting the poor;
  •   identify and work toward tangible outcomes;
  •   take a cross-sectoral and long-term perspective on development;
  •   facilitate regional cooperation and global policy dialogue on environmental issues;
  •   harness the role of markets and the private sector to promote sustainable environmental management and investment;
  • promote cost-effective solutions to environmental problems; and
  •   be selective and work with partners for better results.

11. The above directions for the environment strategy, if formally adopted, would call for the development of a number of broad strategy elements. Firstly, environment would have to be better integrated into the country assistance policy dialogue, requiring greater investments in analytical work on understanding the linkages with poverty reduction, a stronger contribution by the WBG’s Environment Family to the upstream policy dialogue, and the creation of incentives for working to a greater extent in cross-sectoral teams. Secondly, and through internal capacity building, the compliance with safeguard policies would need to be strengthened and improved, and the WBG’s targeted environmental assistance lending would have to be refocused on tangible outcomes. Thirdly, synergies and complementarities between local, regional and global environmental benefits would need to be reflected in the country assistance dialogue and strategy. Fourthly, provide policy advice and design projects which make better use of the power of the market place. Finally, for all of the above, the Environment Family would need to mobilize and transfer knowledge more effectively, adjust its programs and skill mix to fit the new strategic priorities, and rely more on partnerships toward common goals.

Implications for Mainstreaming the Global Environment

12. The detailed elaboration and development of the above strategy elements is scheduled over the next 12 months, with the global environment dimension to be woven into the strategy together with the local and regional dimensions. It is, however, possible at this stage to identify some broad implications that the proposed framework for environment strategy development would have for mainstreaming the global environmental agenda in WBG work.

13. First, the proposed framework is consistent with the responsibilities that the WBG has assumed vis-a-vis the global conventions and recent global public policy initiatives. The proposed framework for developing a corporate environment strategy explicitly embraces global environmental concerns, be they related to the degradation of the global commons or to the loss of natural resources, including biodiversity, on a global scale. Maintaining “the global ecosystem” is viewed as a means to provide for the basic needs of the poor in the longer run. The proposed objectives for the strategy refer to the need to reduce vulnerability of people to adverse local impacts of climatic variability and long term climate change. Finally, the proposed framework supports a role for the WBG in the international policy dialogue that is required to help manage global environmental issues, as well as for promoting regional cooperation on management of trans-boundary water resources and terrestrial ecosystems.

14. Hence, these principles and objectives reinforce the WBG’s commitment to help its client countries build capacity to implement the conventions on climate change and ozone as well as to capture the benefits under their associated protocols and financing mechanisms, i.e. the Global Environment Facility (GEF) and the Multilateral Fund for The Montreal Protocol (MFMP). Under this commitment, the WBG would ensure as an implementing agency for GEF and MFMP that its developing country clients are compensated for the incremental costs of achieving global benefits. It would also use its own and GEF resources to help address negative impacts from global environmental degradation. In addition, the WBG would have a role to play in helping countries access markets for global public goods, e.g. carbon offset trading as per the Prototype Carbon Fund, now being launched by the Bank.

15. Second, the proposed framework calls for better integration of the WBG’s global environmental agenda with local sustainable development agendas. The envisaged focus of the environment and other “real” sector strategies on poverty outcomes, the recognition of longer term impacts, and the emphasis on cross-sectoral perspectives should help accomplish this objective. Specifically, it provides opportunities for building more strategic linkages between on the one hand the mitigation of and adaptation to climate change, sustainable use and conservation of biodiversity, management of regionally shared water resources, reversal of land degradation, and on the other hand poverty alleviation interventions. In so doing, it would help to identify in a more systematic way entry points for GEF interventions in the above areas that are better aligned with the WBG mission. As the country assistance strategy dialogue becomes better informed by these strategic linkages, WBG-GEF support in the form of “freestanding” projects can be expected to gradually phase out.

(a) Climate Change

16. The obligations of WBG clients under the Climate Change Convention framework are limited and, with the possible exception of the Economies in Transition (that will have binding greenhouse emissions constraints under the Kyoto Protocol), are not viewed as the driver of Bank investment in climate-friendly technologies and infrastructure. A sharper focus on poverty in the WBG’s development assistance, however, has important implications for WBG’s efforts to address climate change. The character and volume of WBG activities on greenhouse gas (GHG) emissions abatement will be largely determined by the WBG’s strategies in the "real" sectors: especially energy, but also transport, infrastructure and urban services. The following are key implications and opportunities:

        Access to energy. The WBG’s recently adopted Energy-Environment Strategy assigns high priority to environmental health impacts on the rural and urban poor. Hence, it stresses the provision of basic modern energy services to the rural poor and peri-urban populations. This would involve substitution of low quality biomass fuels by more efficient modern fuels or substituting centralized fossil fuel electricity generation by off-grid renewable systems. The ensuing greenhouse benefits would not likely be large relative to promoting large scale, centralized renewable energy systems. Substitution from traditional biomass fuels, however, has a potential of scaling up to 2 billion people.

        Carbon sinks. Efforts to protect and sustainably use natural systems for the maintenance of local environmental and biodiversity services could have strong benefits for the enhancement of forests and soils as carbon sinks. Local and global synergies can be utilized if climate change-motivated finance increases the benefit of sustainable land management.

        Adaptation. Resilience to climate change is inversely related to economic prosperity: the poor will suffer most. Hence, assessments of the vulnerability of our clients' agriculture, water resources, coastal zones, urban infrastructure, etc., --and improving their long-term capability to adapt to global climate change – need to be at the core of a poverty focused environment-based climate change strategy.

17. A number of GEF operational programs for climate change recognize the above synergies between efforts to address poverty and climate change. Such synergies also exist with respect to addressing certain local and regional environmental externalities. The future level of WBG-GEF climate change assistance may therefore depend in part on the extent to which GEF operational programs remain flexible and relevant to a poverty-focused assistance agenda. Such flexibility would also be needed in the further development of the World Bank-GEF Renewable Energy Strategic Partnership which aims to shift the programming of GEF resources for renewable energy from “one-off” project components to large-scale, long-term renewable energy programs. Countries as diverse as China and Uganda are now formulating specific renewables investment programs for presentation to the GEF Council beginning in May of 2000.

(b) Biodiversity

18. Biodiversity is an issue of global concern, yet many of the benefits derived from its conservation and sustainable utilization accrue at local and national levels. The proposed framework for environment strategy development emphasizes support for the maintenance of sustainable livelihoods in rural areas, with full consideration to sustainable natural resources management. It also recognizes that rural poverty can be reduced in the long term by ensuring that human use functions do not degrade natural resources so that ecosystems services are disrupted. Finally, it acknowledges that vulnerability to natural disasters affects the poor disproportionately. These issues call for the maintenance of ecological integrity at the landscape level, including the need to maintain ecological services that minimize disaster risk and support sustainable resource use. These are natural entry points for GEF interventions, on an incremental cost basis, to support holistic management of biological resources in agricultural, forested and coastal ecosystems.

19. It is expected that protected area projects will be better anchored within WBG interventions linking them to sustainable rural development projects. Biodiversity that is unique from a global perspective can be conserved within protected areas whose functions and benefits will accrue more clearly to local stakeholders. Careful zoning within protected areas and their buffer zones will continue to be a critical tool for ensuring that biodiversity conservation objectives are maintained while achieving poverty alleviation outcomes. On the other hand, the proposed approach to the strategy provides disincentives for "stand-alone" protected area projects with limited linkages to local development goals.

20. It is also expected that the WBG may be able to better exploit its inherent comparative advantage in projects supporting sustainable biodiversity use. The framework's emphasis on sustainable livelihoods recognizes the crucial reliance of the rural poor upon biological resources, and promotes a greater emphasis upon sustainable resource use. These are important entry points for GEF interventions based on barrier removal approaches to promote long-term sustainable biodiversity use. Projects that develop or strengthen markets for environment services will also have a greater grounding on WBG projects supporting rural development.

(c) Land degradation

21. Land degradation is receiving increasing attention since the development of the Convention on Desertification. The strongest impacts of land degradation tend to coincide geographically with high areas of poverty. Hence, land degradation and poverty are linked through a negative feedback mechanism, in which increased degradation fuels increased poverty, which in turn results in additional negative impacts upon land resources. Clearly, the Bank has an important role in supporting efforts to help break this cycle of poverty in client countries through financing programs that enhance land and natural resources management and mitigate land degradation. The GEF has an opportunity to supplement these efforts, on an incremental cost basis, through existing Operational Programs and through the opportunities that may emerge from the proposed new programs.

(d ) International waters

22. Poverty-oriented environmental outcomes have regional and global dimensions that call for appropriate Bank involvement. One such area is in the management water resources/bodies that transcend national boundaries. In such cases, regional collaboration and dialogue is required to help harmonize policies, coordinate national institutional capacities and responsibilities, and prioritize investments. With support from the GEF, the WBG has come to play an increasingly visible role in the international waters area in the past decade. It has promoted collaboration of countries around inland seas, river basins and other shared water bodies. The proposed emphasis on poverty outcomes will help strengthen the implementation of key regional initiatives in which regional water management is key to maintaining the sustainability of long-term poverty outcomes.

23. Third, the Comprehensive Development Framework (CDF) presents an important tool to help integrate local, regional and global environmental issues in the process of developing and implementing a country assistance program. The CDF has been adopted by WBG as a holistic approach to outcome oriented development assistance planning, emphasizing multi-sector and donor coordination. This orientation, and the longer term time perspective of CDF, offers an opportunity for more systematic and integral treatment of environmental issues in the development of country assistance strategies.

24. Fourth, the increased emphasis in the proposed framework on utilizing the power of the marketplace supports the WBG's on-going efforts to mobilize private sector capital, technology and management skills in support of global environmental objectives. It is also consistent with GEF's interest in maximizing the leveraging of its own funds and mainstreaming of its objectives into private sector decision-making. There is growing integration among the WBG's private sector activities, and IFC already co-ordinates its GEF efforts closely with the Bank. In particular, IFC has demonstrated a broad range of innovative GEF activities involving the use of non-grant financing modalities, new approaches to risk mitigation and significant leveraging of GEF funds through private equity funds and financial intermediation. The WBG expects these activities to expand and deepen in the future.

Next Steps

25. The process of completing the Environment Strategy report will be coordinated with that of the Operations Evaluation Department’s Environment Review. It involves three main sets of activities. First, are the broad internal and external consultations on the proposed strategy framework, i.e. the overall direction, the key underlying principles, and the implications for strategy elements and action plans. Second, additional analytical and thematic review work is required on linking outputs to outcomes, defining indicators, looking at plausible futures, etc. Finally, cross-regional and cross sectoral working groups will work on the detailed development of the strategy elements and their associated action plans.

26. Once the internal process is completed, the World Bank Group will present the Environment Strategy report to the GEF Council.

11-Mar-00 – 9:46 PM

N:\ENVDR\Strategy Paper\Memo to MDS


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