The Mitigation Hierarchy in the World Bank Environmental & Social Framework

1. The Mitigation Hierarchy in the World Bank Environmental & Social Framework • Mark King & Agi Kiss • November 2017

2. Overview • Management of risks and impacts within the current Operational Policies and Bank Procedures (Safeguards) • Key elements and drivers of the ESF • How the Mitigation Hierarchy is incorporated in the ESF (cf other IFIs and Development Partners) • Implications for investment lending and players in development

3. Management of risks and impacts within the current Safeguards • 8 environmental and social OPs and 2 legal ones were developed over a 20 year period and vary in style, level of detail etc. • The safeguards do not explicitly address the ‘full range’ of E/S risks and impacts expected today • Mitigation Hierarchy not explicitly a core element of the procedural fabric of E/S risk management • Current safeguards have less direction/detail on the procedural approach leaving much to judgment and inference. • Roles and responsibilities not always clear

4. Key elements and drivers of the ESF (1) • Our 189 shareholders • Need to improve our game across the board (consistency, approach during appraisal, monitoring/supervision) • “Emerging Issues” needed to be addressed • More clarity required on roles and responsibilities (accountability, transparency • A shift from “front-loading” to an outcomes based approach

5. Key elements and drivers of the ESF(2) • Harmonization agenda • Moving from ‘one-size-fits all’ to a more client focused and tailored approach (South Sudan to Poland) • Our portfolio is becoming more challenging (Fragile, Conflict, Violence, emergency response etc)

6. Key Thematic Elements of the ESF • Delineating and limiting project risks and liabilities • Outcomes materially consistent with the objectives of the ESSs • Inclusive, non-discriminatory approach (WB’s Twin Goals) • High standards set by ESSs, EHSGs and GIIP • Risk based approach • More emphasis on judgment rather than a rule based approach • Control or influence • Manner and timeframe acceptable to the Bank • Technically and financially feasible • Adaptive management (ongoing stakeholder engagement)

7. The Mitigation Hierarchy within the ESF Explicitly referenced and/or described throughout ESF and related material: • Vision Statement • Environmental and Social Policy (Bank) • Directive re marginalized/vulnerable (Bank) • Environmental and Social Procedure (Bank) • Best Practice Notes and other tools (Bank) • Ten Environmental and Social Standards (Borrower) • Guidance Notes (Borrower)

8. Elements of the WB Mitigation Hierarchy • Anticipate and avoid risks and impacts • Where avoidance is not possible, minimize or reduce to acceptable levels • Once risks and impacts have been minimized or reduced, mitigate (inc improve or at least restore livelihoods) • Where significant residual impacts remain, compensate or offset them, where technically and financially feasible

9. Leads to more realistic and reasonable outcomes? • Mitigation Hierarchy focuses on risk (downside) not upside except in ESS 2, 5,6,7 IPs, resettlement, Staff Directive (differentiated measures) • Conditioned by proportionality, control and influence, manner and timeframe acceptable to the Bank, technically and financially feasible • Minimize or reduce to acceptable levels (what is ‘acceptable’ and who determines?) • Higher bar for compensation and offsetting (where significant impacts remain (threshold?)

10. Implications for investment lending and players in development • ESF requires rigorous application of the MH for all risks and impacts • ‘Knock-on effect’ is more rigorous E/S assessment process (scoping, stakeholder engagement, baseline etc) • Higher expectations regarding documenting rationale for decision-making • Strong feedback loop (monitoring and stakeholder engagement) supporting adaptive management • Burden of ‘proof’ lies with Borrower and Bank staff (esp Staff Directive)

11. Implications for Borrowers • More rigorous collection of baseline data • Improvements in stakeholder engagement • Improvement in ESA practice • Enhanced skills and knowledge base (hiring, more use of consultants?) • Timely better sequenced actions and processes • Budgetary implications? • Internalizing the cost of the MH may make projects unfeasible (always a possibility but often ignored!) • Much scope for efficiency gains!

12. Implications for Borrowers • Doing things better: more resources • Enhancing skills base especially for ‘new issues’ • Culture change: moving to judgment, risk based approach, making decisions! • More ‘hand-holding’ for Borrowers; at least initially • Accountability and transparency> risk adversity? • Much scope for efficiency gains • Better placed for challenging lending environments

13. Implications for Technical Experts • High expectations to be met in terms of technical expertise and support to clients • More rigorous ESA practice • Better baseline (timing, sequencing, resources) • ESF is holistic: skills and staffing implications • Role of ‘niche’ consultancy v ‘big game’ firms • Need for local partners intensified; esp re stakeholder engagement and on social issues

14. Implications for people and the Environment • Broader range of protections • More rigorous processes leading to better development outcomes • Leaving no-one behind: Non-discrimination, inclusion and differentiated mitigation measures • Higher ‘burden of proof’ linked to ESS6, ecosystem services and the precautionary approach contribute to stronger protection of biodiversity and habitats • Better monitoring and stakeholder engagement allows for effective adaptive management

15. Tbilisi Urban Regeneration • Old residential to mixed apartment/retail • ‘A’ project (OP), High risk project (ESF) • Several IFIs and FIs involved • Scoping • Stakeholder engagement • Staff Directive….

16. Ombla Underground Hydro, Croatia • Karstic cave system • Endangered amphibian present? • Baseline sampling: cave diving, DNA testing • No amphibian but 20 approx. new invertebrate species • Offsetting proposed: species will move to ‘new tunnels’ when hydrological regime changes. Adequate? • Precautionary? Adaptive management?

17. Sakhalin Oil and Gas Developments • Full-field vertically integrated offshore production. • Pipeline to shore through proposed through Western Gray Whale calving/feeding area • Onshore pipeline over 8800km crossing 1000 approx. rivers/streams • Transmission line and Steller’s Sea Eagle