Ethical Performance
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World Bank to adjust lending policy on extractives

September 2004

The World Bank Group is to put more emphasis on the social benefits of projects it supports in the extractives sector and will increase its lending to renewable energy schemes, but has rejected a recommendation that it should no longer fund fossil fuel extraction.

In its response to the independent Extractive Industries Review, commissioned by the World Bank in 2001 and published this year, the bank’s management group says its future investments in extractive industries will be ‘more selective’, with a stronger emphasis on ‘environmentally and socially sustainable development’.

It will now support only projects where affected communities, particularly indigenous peoples, ‘are engaged through free, prior and informed consultation, leading to broad community support’.

And it has made a new commitment to increase the amount of money it lends to energy efficiency and renewable energy projects by a fifth each year during the next five years, which will raise its investment in the sector to more than $400million (£220m) a year.

The review was chaired by Emil Salim, the former Indonesian environment minister. In its response, the bank says that it will begin reporting its performance in renewable energy and energy efficiency programmes and will increase its staff capacity in the field.

It will also work with the Global Reporting Initiative – which advises on sustainability reporting – to develop indicators measuring the social benefits of the extractive industry projects it supports.

However, it rejects a key review recommendation to phase out financial support for oil and mining projects in favour of lending to renewable energy schemes.

James Wolfensohn, the World Bank Group chairman, said such a move would harm the economies of poor nations. ‘While we strongly support a major scaling-up of renewable and clean energy sources, oil and coal will inevitably continue to be major fuel sources for the world’s poorest peoples for the foreseeable future,’ he said. A tenth of the $19.5billion (£10.6bn) the World Bank lent in the fiscal year 2002 was for energy and mining projects.

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