ADB strengthens environmental and social protections

21 May 19

An urgent initiative has been launched to safeguard environmental and social protections in Asian Development Bank lending projects. 

Staff are developing mechanisms to ensure that financial intermediaries handling ADB loans comply with rules to ensure they are accountable to the people affected by the investments.

The proposed ‘accountability mechanism framework’ will require intermediaries to provide an independent forum for people to voice their concerns or grievances about projects and seek solutions.

“As more and more lending from ADB and other multilateral development banks is routed through financial intermediaries, there is an urgent need for the intermediaries to ensure proper environmental and social safeguards and accountability on projects that they are financing, and towards the people who are adversely impacted by these investments,” said Dingding Tang, chair of the ADB’s Compliance Review Panel.

The costs of unresolved conflicts or disputes between companies and communities, workers, or other stakeholders over the consequences of investments can be significant.

Moreover, studies indicate that companies often fail to factor in the costs of environmental and social conflicts, which include stranded assets or investments or higher investment costs due to regulatory, environmental, and market constraints.

Companies embroiled in conflicts can suffer a loss of productivity, reputational risks, and increases in insurance-related costs, and they can see their market capitalisation decline.

A study in 2014 by ADB’s Independent Evaluation Department reviewed more than 60 projects approved and implemented through financial intermediaries from 2007 to 2012.

The research raised the need in these projects for better due diligence and analysis of environmental and social risks, and improved monitoring and reporting.

Alongside a requirement on intermediaries to provide a forum for people affected by investments, the proposed ‘accountability mechanism framework’ would also review alleged non-compliance by the intermediary of its policies to manage environmental and social risks.

To help design its framework, the ADB launched a workshop on Monday for state-owned banks, public sector bodies, international financial institutions and civil society groups such as the Environmental Defence Fund, World Wildlife Fund and Greenpeace.

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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