A draft released yesterday of the Environmental and Social Policy of the European Bank for Reconstruction and Development shows that, instead of strengthening the policy to provide for better implementation, the bank opens several loopholes which ensure that approval of financing is achievable for problematic projects.

The Bank often claims that its investments bring added value by ensuring that best standards are applied, however, the draft writes that these standards may not be 'appropriate' or 'applicable' for projects, for example if not required by national law. Considering the state of environmental legislation in the EBRD’s countries of operations, these exceptions constitute giant loopholes through which bad projects can pass.

According to the draft, even greenfield projects can be exempt from compliance with the environmental and social policy from the start, so in effect any project could be granted approval, if the client puts together a plan of how it will deal with the negative consequences of its operations.

“The draft of the new policy demonstrates an ill-founded belief that safeguarding the environment and the project-impacted communities can be done with action plans and management plans. Once the project is approved and money is disbursed, the bank's leverage is extremely weak, and experience should have taught the EBRD that little can prevent these mitigation plans from failing,” said Fidanka Bacheva-McGrath.

She adds, “Considering that national laws and regulatory capacities are weak in many EBRD countries, the application of EU standards should have been clarified with more concrete and binding references to EU directives, but instead many references are deleted completely and additional language on possible exemptions is added.”

“Unfortunately the new draft of ESP suggests that there are no safeguards that can stop the implementation of any project despite, for example, the high ecological value of the site,” comments Dato Chipashvili from Green Alternative in Georgia. “Once the project is approved, construction work is over and technical parameters are already defined, additional studies and monitoring will not help avoid irreversible impacts on biodiversity, as it will be technically impossible to significantly change the design of the facility.”

The failure of the new policy to clarify requirements and standards that projects are expected to meet will inevitably lead to controversies and complaints to investigate and provide guidance on the flexible formulations of safeguards. Together with other European public banks, the EBRD is a signatory of the European Principles for the Environment [1] and one way or another projects that the bank finances will end up being assessed against these and found failing.


[1] http://www.eib.org/attachments/strategies/european_principles_for_the_en...

The European Principles for the Environment (EPE) encompass the EC Treaty guiding environmental principles and the practices and standards of EU environmental legislation. To promote sustainable development and to protect and improve the environment, five European Multilateral Financing Institutions (MFIs) have agreed to a common approach to environmental management associated with the financing of projects. This approach to environmental management is based on the environmental principles, practices and standards of the European Union.