1

FY 2009 REPORT TO CONGRESS 

ON 

THE ENVIRONMENT AND MULTILATERAL DEVELOPMENT BANKS

UNITED STATES DEPARTMENT OF THE TREASURY
2

FY 2009 REPORT TO CONGRESS

ON 

THE ENVIRONMENT AND MULTILATERAL DEVELOPMENT BANKS

EXECUTIVE SUMMARY

This Report to Congress on the Environment and the Multilateral Development Banks 

(MDBs)1, covering the FY2009 reporting periods of these institutions, is submitted in 

compliance with Section 539(e) of Title V of Public Law 99-591 (1986) and Section 

533(b) of Public Law 101-167 (1989). These provisions instruct the Secretary of the 

Treasury to report on how MDBs are promoting environmentally sound development and 

Treasury’s efforts to encourage them to do so.

For many years, Treasury has encouraged the MDBs to reduce the negative footprints 

associated with their projects and seek out opportunities to make positive environmental 

impacts. In this context, Treasury’s objectives have included: 1) the adoption of 

strengthened environmental safeguard policies; 2) incorporation of independent 

accountability and recourse mechanisms; and 3) the improvement of day-to-day 

sensitivity to environmental issues through a stronger commitment to project- and policylevel consultation with affected communities and international civil society. We believe 

our efforts have contributed to improved policies and practices across the MDBs. 

The MDBs also have the capacity to play a significant role in the international climate 

architecture to finance efforts to reduce climate change, but to take up this role will 

require them to effectively take on a new challenge—helping developing countries 

reduce the carbon intensity of their economic output. 

In the report that follows, we address four main topics related to the MDBs and the 

environment: 1) the MDBs and climate change; 2) developments in MDB environmental 

safeguards; 3) changes in MDB inspection mechanisms and the outcomes of key 

inspections; and 4) MDB environmental projects and U.S. votes on environmental 

grounds in the MDBs. 

 1

For purposes of this report, MDBs include the World Bank Group, Inter-American Development 

Bank, Asian Development Bank, African Development Bank, and European Bank for Reconstruction and 

Development. 
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TABLE OF CONTENTS

EXECUTIVE SUMMARY ...................................................... . .2

I. Introduction ...................................................................4

II. The Multilateral Development Banks and Climate Change .......4 

III. Safeguards .....................................................................6

IV. Looking Ahead ...............................................................8

V. Accountability Mechanisms ...............................................9

VI. Environmental Projects .....................................................13

VII. Reporting Period Performance .........................................17

VIII. Summary and Conclusion ................................................19

Appendix 1 - Text of Law (P.L. 99-591)........................... ............... 20

Appendix 2 - Text of Law (P.L. 101-167) ......................................... 23
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I. Introduction

The reporting requirements for this report cover the following institutions:

African Development Bank (AfDB)

Asian Development Bank (AsDB)

European Bank for Reconstruction and Development (EBRD) 

Inter-American Development Bank (IDB)

World Bank Group (WBG)

- International Bank for Reconstruction and Development (IBRD)

- International Development Association (IDA)

- International Finance Corporation (IFC)

- Multilateral Investment Guarantee Agency (MIGA)

The reporting periods covered vary by institution, reflecting their respective fiscal years, 

as indicated in Table 1:

Table 1

Institution Reporting Period

WBG July 1, 2008 – June 30, 2009

AfDB, AsDB, EBRD, IDB January 1, 2009 – December 30, 2009

This report supplements information posted on Treasury’s public website that provides 

U.S. voting positions on environmentally sensitive MDB projects and policies. The URL 

for the site is:

http://www.treas.gov/offices/internationalaffairs/multilateral_banks/environmental_impa

cts.shtml 

II. The Multilateral Development Banks and Climate Change

The Treasury Department believes that the multilateral development banks (MDBs) play 

a critical role in addressing climate change and other critical global environmental issues. 

In the context of the negotiations of a post-2012 international climate change financial 

framework, the United States has called for the MDBs to play a central role given their 

unique strengths. These include scale, leverage and financial expertise, and geographic 

scope. 

Scale: Developing countries will need substantial additional finance – on the order of 

billions of dollars – to successfully shift their economies to lower-carbon development 

paths through the adoption of cleaner energy and transportation technologies, reduction 

of deforestation, and greater resilience to the negative impacts of climate change. In 

comparison to other development organizations, the MDBs have the demonstrated 

capacity to efficiently and effectively manage the level of financing necessary. 
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Leverage and Financial Expertise: The MDBs have the greatest degree of expertise in 

deploying the types of innovative financial instruments necessary for addressing climate 

change. They will be able to use new concessional financing to leverage their substantial 

capital bases to maximize the flow of climate finance. 

Geographic Scope: The MDBs represent a network of like-minded institutions, able to 

operate at the global and regional levels, to address problems of global concern. 

Safeguards and Fiduciary Standards: The MDB’s strong safeguard and fiduciary 

policies will help ensure that MDB-financed projects do not lead to adverse climate 

impacts, unwise environmental trade-offs or misuse of funds. 

Development Planning: Efforts to assist developing countries to address climate change 

and its impact will only succeed if countries fully integrate climate change considerations 

into their development strategies and strengthen domestic policies accordingly. Given 

their expertise, experience and extensive engagement in development planning and 

domestic policy reform, the MDBs are uniquely positioned to help ensure that countries’ 

development plans and policies are consistent with the climate objectives. 

The MDBs have demonstrated these positive attributes in their implementation of the 

Climate Investment Funds (CIFs), which were established by the United States and other 

governments to stimulate low-carbon, climate-resilient economic growth in developing

countries. The CIFs are comprised of two multilateral trust funds, the Clean Technology 

Fund (CTF) and the Strategic Climate Fund, which provide grants and other co-financing 

to public and private sector programs developed through the MDBs. To date, 13 

countries2

, including the United States, have pledged nearly $7 billon to the CIFs.3

 

The CTF is facilitating the development of country-led clean energy investment plans 

that can attract private financing and create new models for energy investments in 

developing countries. For example, CTF projects will help produce nearly a gigawatt of 

clean energy through a network of solar power stations across five countries in the deserts 

of Northern Africa. They have also helped foster private sector led, large-scale 

development of wind energy in the Oaxaca region of central Mexico. The CTF has 

already mobilized nearly $44 billion dollars in planned investments for clean energy, 

energy efficiency and sustainable transport in just over one year of operations on a

funding base of $4.3 billion.

Coal and Climate Change:

To meet their growing energy demands, developing countries have been pursuing the 

increased burning of coal. In many ways, coal represents an attractive, relatively costeffective energy solution. This is particularly true for China and India. Yet, the need to 

 2 As of April 1, 2010 - Australia, Canada, Denmark, France, Germany, Japan, Netherlands, Norway, Spain, Sweden, 

Switzerland, United Kingdom and the United States. 3 USD 6.9 billion as of April 1, 2010.
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dramatically reduce greenhouse gas emissions resulting from the burning of coal is one of 

the most significant challenges in the global climate agenda. 

In December 2009, after months of consultations with other USG agencies, NonGovernmental Organizations and MDB staff and management, Treasury released a 

guidance note4

, Treasury’s Guidance to MDBs for Engaging with Developing Countries 

on Coal-Fired Power Generation (Coal Guidance). This guidance note encourages the 

adoption of “no or low-carbon” energy options rather than coal-based energy programs 

and projects. The guidance is intended to be adapted by the individual MDBs and 

incorporated into their respective operational policies, country and sector strategies, and 

other procedures that are related to the public or private project cycle for coal-powered 

generation operations. 

The Coal Guidance is comprehensive yet flexible, delineating procedures and actions 

MDBs should take to reduce coal-based projects and programs such as providing 

assistance to increase countries’ capacities to evaluate coal alternative options, provide 

financial support to countries to level the playing field where policies bias investment 

decisions against no or low-carbon energy sources, and assist borrowers to identify public 

or private sources of external financing to cover the additional costs to consumers that 

alternative energy investments might generate. 

III. Safeguards

Environmental safeguards are the policies against which MDB operations are measured 

to assure accountability. As such, these policies can be considered part of the “does no 

harm” aspect of the MDB’s environmental approach. The United States was integral to 

the development of these policies and has remained a strong champion of their robust 

implementation. Treasury focuses on the periodic reviews and updates of these 

standards, with the objective of modernizing their application and scope in light of 

contemporary concerns, technology and development practices. Since Treasury’s last 

report, two MDBs have revised their safeguard policies: the EBRD and AsDB. 

EBRD – Environmental and Social Policy:

The EBRD’s Board of Directors approved a new Environmental and Social Policy in 

May 2008. The United States encouraged the adoption of a more robust policy that 

broadened the scope of the previous policy and moved it significantly towards 

harmonization with the IFC’s safeguards framework with respect to both scope and 

substantive requirements. 

Like the IFC’s safeguard approach, the EBRD’s policy makes a clear distinction between 

the EBRD’s responsibilities and client responsibilities. The EBRD’s policy organizes 

client responsibilities into a set of subject matter “Performance Requirements” that 

 4 http://www.ustreas.gov/offices/international-affairs/multilateral_banks/guidance.shtml
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closely mirror the IFC’s Performance Standards but have separate performance 

requirements for financial intermediaries and with respect to stakeholder engagement. 

The EBRD is engaging in policy dialogues with governments to enter into joint 

Sustainable Energy Action Plans (SEAPs), which provide the EBRD and governments 

with an enhanced platform to pursue policy improvements, thereby enabling increased 

investments in support of ambitious climate financing objectives. In December 2009, the 

EBRD signed SEAPs with Bulgaria, Kazakhstan, Ukraine and Russia. These plans 

connect high priority areas for reducing energy intensity with EBRD banking operations. 

For example, under the Ukraine Carbon Market Facilitation Programme, the EBRD and 

the National Environmental Investment Agency of Ukraine are developing the legal and 

regulatory basis for Green Investment Scheme contracts. Furthermore, the EBRD signed 

a Memorandum of Understanding (MOU) with the Russian bank, Sberbank, for 

cooperation on energy efficiency and carbon finance in Russia. The MOU will support 

activities under the Russia Sustainable Energy Finance Facility, and paves the way for 

co-financing and carbon finance. 

The EBRD’s Sustainable Energy Initiative (SEI) (begun in 2006) and the creation of a 

new Energy Efficiency and Climate Change Department have demonstrated the EBRD’s 

strong performance in this area. At the 2009 Annual Meeting, the Board of Governors 

approved Phase 2 of the SEI and set ambitious objectives for the 2009-2011 period. The 

Board expanded the scale and reach of SEI activities, set an investment target within a 

range of Euro 3–5 billion ($3.9 - $6.5 billion) and a total project value range of Euro 9–

15 billion ($11.7 - $19.5 billion), and a corresponding carbon reduction target range of 25 

to 35 million tons of CO2 per annum. 

Asian Development Bank – Safeguard Policy Statement:

After an extensive review and consultation process, the AsDB Board of Directors 

approved a new Safeguard Policy Statement in July 2009. The United States supported 

this policy, which creates a more coherent, consistent and comprehensive safeguard 

policy than previously existed and was a driving force for inclusion of a number of 

improvements to the draft policy initially proposed by management. 

The new policy is similar in scope and level of protection to other MDB safeguards 

policies, and includes a number of important improvements over the previous policy. 

These improvements include greater clarity with respect to borrower/client 

responsibilities; clearly identified principles; strengthened safeguards implementation 

oversight; explicit inclusion of economic displacement in the involuntary resettlement 

protections; a commitment to restore livelihoods to pre-project levels or better where they 

are subject to significantly adverse impacts; benefit-sharing with affected people; 

improvements in consultation and participation; greater clarity in the safeguards 

requirements for different lending modalities (such as framework approaches and 

financial intermediaries); and, for the first time, a specific provision on greenhouse gases. 

The Safeguard Policy Statement complements important provisions in the social 

protection strategy and related procedures on social assessment and impact mitigation. 
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The policy also permits use of country environmental systems on a pilot basis. United 

States’ concerns about the use of country safeguards as a general approach resulted in 

adoption of this approach on a pilot basis only. 

IV. Looking Ahead: 

In 2010, we will focus on the following MDB reviews and commitments: 

IDB – Review of Environment and Safeguards Compliance Policy:

The IDB is reviewing its 2006 Environment and Safeguards Compliance Policy. The 

Bank has convened a nine member Independent Advisory Panel on Sustainability to 

undertake this review. The panel, chaired by Dr. Tom Lovejoy of the H. John Heinz III 

Center for Science, Economics and the Environment (Washington, D.C.), is conducting 

the assessment. 

The Advisory Panel is conducting an independent review that will include consultations 

with governments, the private sector, beneficiaries, and civil society organizations. Based 

on the Advisory Panel’s conclusions, it will provide advice and recommendations to the 

IDB on the implementation of its policies, as well as guidance on emerging sustainability 

issues in the region and the Bank’s capacity to address them. The Advisory Panel began 

its work in August 2009.

AfDB – Review of Environmental and Disclosure Policies:

Following the establishment of the Quality Assurance and Results Department in 2008, 

the AfDB began staffing a dedicated Compliance and Safeguards Division within the 

department. Following initial preparatory work in 2009 by the Safeguards Division, the 

Safeguards and Environment and the Climate Change Divisions will begin reviewing and 

updating the AfDB Group Policy on Environment (2004), the Integrated Environmental 

and Social Impact Assessment Guidelines (2003), and the Environmental Review 

Procedures for Private Sector Operations (2001). The AfDB is reviewing its disclosure 

policy and intends to adopt and begin implementing an updated policy in line with MDB 

best practices in 2010. 

IFC – Review of the Sustainability Policy, Performance Standards and Disclosure Policy:

In fulfillment of its commitment to undertake a review of its 2006 safeguards and 

disclosure policies, the IFC initiated a review and update process in 2009 that is expected 

to result in Board approval of updated policies. The review includes extensive 

consultations with stakeholders, and is intended to strengthen the existing policy and also 

to address key new areas such as climate change. 

The IFC’s review and update are important not only for IFC operations but also for other 

financial institutions that model their standards on those of the IFC for determining, 

assessing and managing environmental risk in project financing, such as the Equator 
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Principles Financial Institutions (EPFIs). (The EPFIs is a group of over 60 financial 

institutions worldwide that have adopted a set of 10 principles, which directly refer to the 

IFC Performance Standards, to ensure that the projects they finance are developed in a 

manner that is socially responsible and reflect sound environmental management 

practices.) 

Adoption of Treasury’s Coal Guidance:

Over the next year, Treasury will monitor the MDBs’ adoption of the guidance. The 

guidance will also influence our input on relevant sector strategies and operational 

policies, and inform our own voting positions on coal-related operations at the MDBs.

V. Accountability Mechanisms

Since the last Environment Report submitted to Congress in 2008, and with the strong 

support of the United States, the MDBs have continued to strengthen recourse 

mechanisms to ensure their accountability to those affected by MDB projects.

• IDB: The IDB has undertaken significant reform of its accountability mechanism, 

which provides recourse for parties that have been negatively affected by IDBfinanced projects. The previous recourse mechanism, the Independent Investigation 

Mechanism (IIM), established in 1994, had conducted only five investigations, and 

lacked the confidence of civil society in the region. The Bank’s new mechanism, the 

Independent Consultation and Investigation Mechanism (ICIM), significantly 

improves the IDB’s recourse mechanism by increasing its independence from 

management and expanding requesters’ access to the mechanism. 

 

• EBRD: In 2009, the EBRD adopted a new inspection mechanism, the Project 

Complaint Mechanism (PCM), to replace its Independent Recourse Mechanism 

(IRM). The EBRD’s new mechanism provides two functions: a compliance review 

function that assesses whether the Bank has complied with its policies, specifically its 

environmental policy and the project specific provisions of the public information 

policy, and a problem-solving function that aims to restore dialogue between the 

parties in order to resolve the issues underlying the grievance. The new mechanism is 

more accessible to the public, has a dedicated officer and budget, and gives greater 

consideration to requesters, for example by allowing complainants to comment on the 

Management Action Plan prior to its consideration by the Board. 

• AfDB: The African Development Bank’s Independent Review Mechanism (IRM) is 

also undergoing a review after its first three years of operation. A draft review report 

has been prepared and includes a number of recommendations for improvement of the 

mechanism, including increased outreach and more resources for outreach, greater 

transparency of Bank policies, and setting a deadline for management to take actions 

after a case review. 
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Cases

Below we review three MDB inspection cases in two countries, Albania and Uganda, and 

the lessons learned. These cases provided opportunities for the MDBs to revisit the 

robustness of their compliance with safeguard policies and led to actions to strengthen 

their implementation. 

Albania: In response to environmental threats to a 168-km stretch of Albanian coastline, 

which was being blighted by unregulated construction, poor infrastructure, and 

uncollected/untreated waste, the World Bank began preparation of the Albania Coastal 

Zone Management and Clean-up Project in 2004. The purpose of the project was to 

protect coastal resources and cultural assets, while promoting sustainable land use, 

community participation and improved environmental conditions. 

Responding to an August 2007 request from families (“Requesters”) in the coastal town 

of Jale, the Inspection Panel investigated the World Bank’s compliance with its 

operational policies on the design, appraisal and implementation of the project, and 

assessed whether there had been harm or potential harm to local, affected peoples. The 

Inspection Panel presented its report on December 1, 2008 and concluded that:

• the Bank had not followed its own policies in the management and supervision of 

this project, 

• harm had been done to a number of families during implementation of the 

project, and 

• the Panel encountered unusual difficulties accessing accurate and complete 

information. 

Bank management acknowledged that a series of unacceptable errors had led to the 

violation of a number of Bank operational safeguards policies, including the Involuntary 

Resettlement Policy, and inappropriate demolitions of several homes and businesses in 

Jale. The project’s implementation was suspended by Bank management on January 9, 

2009. Concurrently, the Bank agreed to a Management Action Plan that included:

• Agreement between the Government of Albania and the Bank for an 

independently monitored case-by-case judicial review of Requesters’ cases to 

determine if compensation was due (this is an ongoing process), 

• Bank funding of the Requesters’ legal fees, 

• Hiring of an Independent Observer of the judicial process to report on a 

confidential basis to Bank management, and

• Recommendation for an Accountability and Performance Review into alleged 

Bank staff misrepresentation to the Inspection Panel of events surrounding 

project preparation, board presentation and project supervision.

The findings of the Inspection Panel’s Progress Report on the Implementation of the 

Management Action Plan dated July 2009 indicated that adequate progress had been
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made to justify the restructuring of the project for board discussion for late 2009 or early 

2010. The components related to land use planning were dropped at the request of the 

Government of Albania. 

Lessons Learned. The inspection case highlighted conflicting assessments as to the 

applicability of the Involuntary Resettlement Policy to land zoning projects. In order to 

clarify the applicability of the Involuntary Resettlement Policy to these types of projects, 

the World Bank’s Operations Policy and Country Services Department issued a Guidance 

Note that outlined: (1) the types of risks intrinsic in land use planning projects, (2) how 

and when the Bank’s related Safeguard Policies should be triggered during project 

preparation, (3) the range of measures available to mitigate risks as part of 

implementation, and (4) recommended actions during project supervision. 

Moreover, the inspection case revealed gaps in mechanisms to assure that project 

documents presented to and approved by the board mirrored the project agreements 

between the Bank and the government of the project country. For example, the board 

was told that the Government of Albania had committed to a moratorium on demolitions, 

when in fact there was no such commitment. Based upon the Albania case, a full review

was undertaken of all active projects Bank-wide to determine whether there were other 

discrepancies between board documents and the terms in actual loan agreements. This led 

to corrections in a number of project documents of other countries, although nothing was 

found that was equivalent to the major error in the Albanian project.

The Accountability and Performance Review was completed and appropriate actions 

were taken including with regard to Bank staff and reported to an Executive Session of 

the board in April 2009.

Uganda: In 2007, the United States supported an $860 million, 250 megawatt Private

Power Generation (Bujagali) project in Uganda, sponsored by the IDA, IFC, MIGA and 

the AfDB (the Bujagali Hydropower Project). In Uganda, a country where only one in 10 

people has access to electricity and blackouts are common, expansion of power 

generation is crucial to help Uganda emerge from its current power crisis and create the 

growth needed to meet Uganda's development objectives. In addition, the United States 

supported the project based on steps to be taken by the project sponsor, the World Bank 

Group, and the Government of Uganda to mitigate adverse social and environmental 

impacts. For example, the Government of Uganda designated Kalagala Falls as a 

biodiversity offset, including the preservation of the Mbira forest reserve. In addition, we 

noted the Ugandan authorities' intentions to adhere to improved management of the water 

levels of Lake Victoria, and their assurances that any deviation from the agreed release of 

water would be done in consultation and agreement with affected countries.

World Bank: Responding to a request from a Ugandan non-governmental organization 

(NGO), the National Association of Professional Environmentalists, the Inspection Panel 

investigated the World Bank’s compliance with its operational policies on potential 

environmental, economic, and social impacts. The Panel found instances of noncompliance with several policy provisions, noting, for example, that the assessments of 
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project alternatives and cumulative impacts excluded Lake Victoria from the project’s 

area of influence. The Panel also found that the project did not meet Bank policy 

requirements to achieve livelihood restoration for people displaced several years ago in 

the first Bujagali project, and that it had failed to adequately address and mitigate the 

flooding of a significant cultural property of high spiritual value to the Basoga people, a 

local community. 

Lessons Learned: In response to these findings, Bank management took several remedial 

actions, including the timely implementation of a sustainable management plan for 

Kalagala Falls, updating and implementing a cultural property management plan, and 

undertaking an enhanced socio-economic study to support and fully achieve livelihood 

restoration. 

Because the Bujagali project highlighted the challenges of implementing IDA and IFC 

safeguard rules concurrently, the WBG has also sought to facilitate joint IBRD/IDA-IFC 

projects by establishing guidelines to facilitate concurrent application. 

African Development Bank: The Bujagali Hydropower Project was the first investigation 

undertaken by the African Development Bank’s Independent Review Mechanism (IRM) 

in response to a request from Ugandan NGOs and individuals. In June 2008, the IRM 

panel report found a number of areas where project implementation failed to comply with 

the AfDB’s own standards, policies and guidelines. The findings included: 1) that there 

was a failure to resolve all legacy issues from an earlier Bujagali project prior to the 

commencement of the new project activities; 2) that the perfunctory references to the 

gender dimension of the project in the AfDB’s documents constituted non-compliance 

with the requirements of the AfDB’s Policy on Gender; and, 3) that there was a shortage 

of systematically collected data about the situation of the project-affected people before 

the commencement of the project. The lack of such data made it difficult to establish 

confidently that the resettlement plan met all the requirements of the applicable AfDB

policies.

The IRM’s first monitoring report on the AfDB’s implementation of the Action Plan was 

published on August 16, 2009. In light of AfDB’s slow response to the 

recommendations, the monitoring report emphasized the importance of implementing the 

Action Plan in a timely manner and reiterated that AfDB management needed to 

immediately address three key issues raised in the original report: 1) resettlement and 

compensation (ensuring resolution for both the process of providing appropriate 

restoration of the livelihoods of involuntary resettled people and outstanding 

compensation issues); 2) cultural and spiritual issues (ensuring that the consultation 

process be continued in order to mitigate effects of the cultural/religious tension that will 

be caused as a result of the inundation of the Bujagali Falls); and 3) the Kalagala Off-set 

and Forest Reserves mitigation measures be reviewed by the AfDB, as indicated in the 

Action Plan, and that it be implemented as intended. 

Lessons Learned: AfDB management agreed to an Action Plan requiring follow-up on 

the IRM’s main findings on resettlement and compensation issues; stakeholder 
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consultations; cultural and spiritual issues; Kalagala Falls offset and Forest Reserves 

mitigation measures; systematic collection of data; overlapping transmission lines; 

gender issues; and, the negative impact of ongoing construction work and rock blasting at 

the Bujagali Dam site. 

In the broader context, the following key lessons can be drawn from the MDBs’ joint 

experience with the Bujagali Project:

- greater coordination of environmental safeguard policies among MDBs for large 

complex projects is critical for successful project implementation;

- the financing of a project by multiple MDBs provides the opportunity to reinforce 

the adoption and implementation of best practices; and

- ongoing project implementation monitoring is essential to assure that mitigating 

measures and safeguard recommendations are fully implemented. 

VI. Environmental Projects

Background

The MDBs fund activities explicitly designed to generate environmental benefits. Some 

activities are freestanding environmental projects, while others are components of major 

infrastructure or other projects. Sometimes freestanding projects are implemented to 

offset another activity, such as supporting low- or no-carbon power generation in tandem 

with a conventionally fueled power project. Increasingly, environmentally beneficial 

programs are being “mainstreamed,” or folded into, projects whose main development 

objective is not considered solely environmental. For example, agricultural or rural 

development projects may include natural resource management and conservation 

components. Many industry and energy projects of varying size encompass 

environmentally beneficial measures, such as new pollution controls or other “clean 

development” initiatives. 

The MDBs are increasingly using financial intermediaries (commercial banks, investment 

funds, etc.) as an efficient means to broaden access to financing for small and medium 

size private businesses. The MDBs tend to use a specialized environmental 

classification, Financial Intermediary (FI), for these transactions instead of the standard 

environmental categories A through C. However, some of these businesses are engaged 

in activities that may have significant environmental impacts. The Treasury Department 

has called on the MDBs to consistently look beyond the investment in the FI itself and to 

the on-the-ground subprojects to determine environmental classification and the 

appropriate environmental standards and safeguard practices the MDBs should apply to 

such subprojects. 

Below is a sampling of Treasury supported, MDB financed environmental projects and 

project components:
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World Bank

- Colombia. In December 2008, the IBRD approved a $450 million Third 

Programmatic Development Loan for Sustainable Development. The loan 

supports the Colombian government’s efforts to mitigate the effects of growing 

urbanization, notably inadequate water and sanitation management and increasing 

air pollution. 

- Peru. In February 2009, an IBRD $330 million Third Programmatic 

Environmental Development Policy Loan Program was established to support the 

government’s efforts to strengthen environmental governance and institutions,

and mainstream environmental sustainability in the development agenda of key 

sectors (mining, fisheries, and urban transport and energy). 

- China. A $200 million loan for the Shanghai Urban Environment Project was 

approved in June 2009 to help counties develop solid waste management, 

wastewater treatment facilities, and reduce water pollution to improve the basic 

quality of life of their populations.

EBRD

- Romania. In March 2009, the EBRD board approved an environmental loan of 

approximately $390 million to a Romanian oil company to finance a series of 

environmental sector sub-projects, including large-scale cleanup of legacy 

contamination, reduction of product losses through pipeline replacement, and 

health and safety measures (including traffic management, energy efficiency and 

other environmental remediation investments).

- Turkey. In May 2009, the EBRD provided $58 million in financing for a 135 

MW wind farm project in Turkey. The project is the largest wind farm 

development in Turkey to date, and is an important part of Turkey’s effort to 

diversify its energy portfolio and improve the country’s energy security.

- Poland. In January 2009, the EBRD board approved a financing package

consisting of a $38.7 million senior long-term debt facility, a $5 million debt 

service reserve facility, and a $1.7 million guarantee facility for the construction 

and operation of a 50MW wind-farm located near Tychowo in northern Poland. 

The project represents the first wind-farm project financing in Poland without 

concessional financing or recourse to the sponsor, and helps Poland meet its 

renewable energy targets which were set in line with EU requirements.

- Ukraine. In April 2009, the EBRD provided a loan of approximately $15.5 

million to the municipal district heating company of Ivano-Frankivsk to partially 

convert its energy supply to biomass. The project is expected to result in 

additional annual reductions of 5.2 million cubic metres in gas consumption and 
15

around 10 kilo tonnes of CO2 per annum – enough energy to provide heating for a 

10,000-strong community in Ukraine for an entire year.

- Mongolia. The Salkhit Wind-farm Development, a $1 million equity investment,

was approved by the EBRD in December 2009. As the first renewable energy 

project in the country, and the first private generator in an otherwise state 

dominated sector, the project is a landmark in the Mongolian power sector. The 

project also achieves a significant step forward in establishing the viability of 

renewable energy in the Mongolian economy.

IDB

- Mexico. In October 2009, the IDB approved a $40 million non–sovereign 

guaranteed loan to BBVA Bancomer, one of Mexico’s leading commercial banks, 

for the construction of a new “green” corporate headquarters. The company is 

building a $900 million corporate campus in Mexico City and is seeking 

Leadership in Energy and Environmental Design (LEED) certification. When 

completed, the Bancomer headquarters will be among the first buildings in Latin 

America to acquire such international recognition. The project also brings BBVA 

Bancomer’s vast network of branches and commercial buildings into line with 

internationally certified standards of energy savings and efficiency.

- Peru. In December 2009, the IDB provided a $25 million non-sovereign 

guaranteed loan to Maple Ethanol S.R.L. to help finance construction of a 

sugarcane ethanol plant with production capacity of 35 million gallons of fuel per 

year in the province of Piura, on the northwest coast of Peru. The project includes 

a 14,000-hectare sugarcane plantation on marginal land that the parent company,

Maple Energy, purchased from the government of Piura and private individuals.

- Guatemala. In June 2009, the IDB board approved $22 million to improve 

Guatemala’s ability to safeguard protected areas by preventing land ownership 

disputes regarding and encroachments on the protected areas. Encroachments 

have become particularly serious in the northern department of Petén, which has 

been under serious pressure from forestry interests and new settlement. The loan 

enables Guatemala to establish a state-of-the-art physical cadastre that provides 

the country’s System of Protected Areas with legal and geographical certainty 

regarding borders.

AfDB

- The Lake Chad Basin Sustainable Development Program. In December 2008, 

the AfDB, in cooperation with the World Bank and other donors, agreed to 

provide $95 million to finance a program to restore the productivity of Lake 

Chad. Lake Chad Basin covers nearly 1 million square kilometers. Nearly 30 

million people in five countries -- Cameroon, Niger, Nigeria, the Central African 

Republic, and Chad --share the Lake and rely upon its waters, fish, and 
16

ecosystem. But, the Lake is drying up. The program will help restore over 8000 

hectares of sand dunes, combat erosion over 27,000 hectares, and stop the 

proliferating vegetation that is choking the Lake. In addition, the program will 

clean out the Vrick canal to augment the volume of water flowing into the Lake; 

undertake feasibility and implementation studies on redirecting waters from the 

Oubangui River in the Central African Republic to the Lake; and, undertake 

studies to reduce the water losses provoked by the many small dams built on the 

waterways feeding the Lake. 

- Congo Basin Ecosystems Conservation Support Program. In March 2009, the 

AfDB board approved $56 million to support the sustainable and concerted 

management of forest resources and protected areas through conservation of the 

Congo basin, the second largest tropical forest in the world and the second “green 

lung” of the planet (after the Amazon). Home to unique species of flora and 

fauna, the forest is a rich repository of natural resources that provide many people 

with their primary source of income, but it is being cut down. Poor farmers and 

villagers rely on the forest for subsistence farming and use the wood as fuel. The 

timber industry, a major employer of thousands of workers in these countries, has 

been increasing its activities in the last five years. 

AsDB

- India. In April 2008, the AsDB approved $105 million to support the Gujarat 

Paguthan Wind Energy Financing Facility, which is comprised of the Samana 

wind power facility, located in Guarat state, and the Saundatti wind power facility 

in Kamataka state, totaling 183.4 MW of power generation. The project is one of 

the largest such initiatives in the country and supports the Government of India’s 

“Power for All by 2012” initiative, a strategy for universal electricity supply by 

2012.

- China. In December 2009, the AsDB board approved a $40 million loan for the 

Shaanxi Qinling Biodiversity Conservation and Demonstration Project, which 

represents about 70% of China’s biodiversity, including an estimated 300 giant 

pandas. The Project is intended to protect globally-significant species and sustain 

economic growth. This will be measured by a reduction in degraded land and soil 

erosion, an increase in the area that protects endangered species, and an increase 

in rural incomes and employment. 

- Kyrgyz Republic. The $16.5 million Issyk–Kul Sustainable Development Project, 

approved by the AsDB in September 2009, is the first phase in a longer-term 

initiative by the AsDB to support environmental management and to improve 

urban service delivery in the Issyk–Kul Oblast. Lake Issyk–Kul (“warm lake” in 

Kyrgyz) is the world’s second largest saline lake, a Ramsar site of globally 

significant biodiversity and a United Nations Educational, Scientific and Cultural 

Organization (UNESCO)-designated biosphere reserve. The Lake forms a 

significant part of Issyk–Kul Oblast and contributes to its economic growth 
17

through tourism. However, existing water supply and sanitation infrastructure—

including solid waste management—are decrepit, dysfunctional, and poorly 

maintained and, as a result, are contributing to the Lake's pollution. 

- Sri Lanka. Approved by the AsDB in September 2009, the $100 million Greater 

Colombo Wastewater Management Project will improve the urban environment 

and public health for 1.5 million urban and suburban resident in Greater Colombo 

through higher marine and inland water quality. Significant environmental 

benefits resulting from the Project include improved hygiene and sanitary 

conditions, better sewage disposal, and a healthier ecosystem.

 

GEF

The Global Environment Fund (GEF) is a World Bank trust fund that includes the 

participation of the UN Environment Program, the UN Development Program and the 

MDBs. The GEF often leverages co-financing from other multilateral, bilateral aid 

agencies and beneficiary countries. For example, the GEF funded a project in early 2009 

to improve the management effectiveness of the Maya Biosphere Reserve (MBR). The 

entire operation totals over $33 million, and is being implemented by the IDB. The Maya 

Biosphere Reserve has 17 natural ecosystems, more than 40 species of mammals, 256 

species of birds, 97 species of reptiles, 32 species of amphibians and 55 species of fish, as 

well as cedars, pines, bread-nut trees, gum trees, relict mangroves (the most inland 

occurrences of mangrove in the Yucatan Peninsula), rare mollusk-based reefs, caves and 

cenotes (a sinkhole containing groundwater) within its borders. Equally important is the 

MBR’s role in bridging borders: the 2.1-million-hectare reserve is the core of a regional 

corridor connecting protected areas in Mexico and Belize.

VII. Reporting Period Performance

As Table 2 shows, environmental projects have increased at all of the MDBs in dollar 

terms (with the exception of MIGA whose data was not available). As a share of total 

MDB financing, the picture is less clear, as this share can fluctuate considerably from 

year to year. In addition, there are differences in the way the institutions classify projects 

as having primarily environmental objectives. Finally, total loan volume changes or 

exchange rate fluctuations may exaggerate the magnitude of some yearly percentage 

changes.
18

Table 2. Total Environmental Projects5

Institution FY07

US$ 

millions

FY07

share of 

total 

financin

g

FY08

US$ 

millions

FY08

share of 

total 

financing

FY09

US$ 

millions

FY09 

share of 

total 

financing

AfDB 225 5% 575 11% 787 7%

AsDB 989 10% 2,600 25% 4,300 26%

EBRD 1,578 18% 1,487 19% 1,820 17%

IBRD/IDA 2,017 8% 2,662 11% n/a n/a

IDB 1,100 12% 1,800 15% n/a n/a

IFC 450 5% 1,400 12.3% 1,030 9.8%

MIGA 155 11% n/a n/a n/a n/a

In US FY08, the U.S. abstained or voted no on Pelosi Amendment or other 

environmental disclosure grounds on 14 projects (“Pelosi votes”) representing less than 

0.90% of total projects. (See Table 3). In FY09, there were 38 such votes that 

represented 2.5% of total projects. This increase in the frequency of Pelosi votes reflects

three factors:

1) That, while MDBs’ internal standards and actual project-development 

practices have made significant progress over time, the high standard set by 

the Pelosi Amendment remains challenging in some cases, particularly when 

the MDBs are seeking to respond to emergency situations. FY08 and FY09 

lending contained unusually high volumes of emergency lending. 

2) That the MDBs are investing an increasing share of their resources in 

infrastructure projects. These projects are more likely to raise environment 

disclosure issues than other types of lending, such as governance or social 

sector lending. The Treasury Department has supported this increased 

investment in infrastructure, which can have high development impact, but 

has called for the lending to be supported by high-quality environmental 

practices that are consistent with the Pelosi Amendment. 

3) That an increased share of MDB lending is being directed to private-sector 

borrowers, especially to financial sector borrowers who will leverage and onlend MDB resources. Treasury has pressed consistently for greater 

investment in the developing world’s private sector—the engine of sustainable 

economic growth. While the Treasury Department has found that more than 

90 percent of MDB private sector lending is consistent with the Pelosi 

Amendment, it remains true that a larger proportion of private sector lending 

remains inconsistent with Pelosi Amendment disclosure requirements than the 

corpus of MDB lending as a whole. The Treasury Department continues to 

press to see environmental practices in private sector lending improve.

 5 Environmental projects as defined by the individual institutions.
19

Table 3. Treasury abstention or no votes related to MDB environmental disclosure 

practices 

Institution FY08

Number of 

Pelosi Votes 

FY08

Pelosi Votes 

/ Total 

Votes

FY09

Number of 

Pelosi Votes 

FY09

Pelosi Votes 

/ Total Votes

AfDB 2 2.0% 10 6.4%

AsDB 1 0.0% 0 0.0%

EBRD 3 1.9% 9 5.6%

IBRD/IDA 2 0.5% 9 6 2.1%

IDB 0 0.0% 1 7.7%

IFC 6 2.6% 9 3.9%

MIGA 0 0.0% 0 0.0%

Total 14 0.9% 38 2.5%

VIII. Summary and Conclusion

In an effort to strengthen MDB policies and practices related to the environment, we have 

sought to improve MDB safeguard policies, urge strict compliance with the due diligence 

practices necessary to ensure that those safeguards are followed, and strengthen 

independent inspection mechanisms. We have also urged the MDBs to significantly

scale up efforts to help developing countries address the impact of climate change while 

substantially reducing support for coal projects, especially in middle income countries. 

These efforts have borne fruit. During this reporting period, the EBRD, AsDB and AfDB 

strengthened their environmental and social safeguards and the World Bank, EBRD and 

IDB adopted revisions to their inspection mechanisms to make them more accessible, 

accountable and credible. In addition, Treasury’s new coal guidance has influenced 

decisions at the MDBs to scale back or abandon coal projects. 

Looking ahead, we anticipate that our intensive engagement in current reviews underway 

at the IDB, AfDB and IFC will also result in significant improvements. In addition, we 

will continue to work with the MDBs--especially through the CIFs--to support lowcarbon, climate-resilient economic growth in developing countries. 

 6 Includes a Pelosi abstention on a World Bank managed Trust Fund for Gaza
20

Appendix 1

Environment (Annual Report) -- Pub.L. 99-591, Section 539 

(a) The Secretary of the Treasury shall instruct the United States Executive Directors of 

the Multilateral Development Banks to

(1) vigorously promote a commitment of these institutions to 

(A) add professionally trained staff with experience in ecology and related 

areas to undertake environmental review of projects, and strengthen 

existing staff exercising environmental responsibilities;

(B) develop and implement management plans to ensure systematic and 

thorough environmental review of all projects and activities affecting the 

ecology and natural resources of borrowing countries, including

(i) creation of a line unit to carry out such reviews as part of the normal 

project cycle,

 (ii) appointment of an environmental advisor to the Presidents of the 

Multilateral Development Banks,

(iii) institution of a regular program of monitoring all ongoing projects to 

ensure that contract conditions and general bank policies to protect the 

environment and indigenous peoples are fully complied with;

(C) create career and other institutional incentives for all professionally 

trained bank staff to incorporate environmental and natural resources 

concerns into project planning and country programming activities;

(2) vigorously promote changes in these institutions in their preparation of 

projects and country programs that will prompt staff and encourage borrower 

countries to

(A) actively and regularly involve environmental and health ministers, or 

comparable representatives, at the national, regional and local level, in the 

preparation of environmentally sensitive projects and in bank-supported 

country program planning and strategy sessions;

(B) actively and regularly seek the participation of non-governmental 

indigenous peoples and conservation organizations in the host countries at 

all stages of project planning and strategy sessions;

(C) fully inform local communities and appropriate non-governmental 

organizations with interests in local development projects of all project 

planning sufficiently in advance of project appraisal to allow informed 

participation of local communities and non-governmental organizations 

that may be adversely affected by them;

(3) establish a regular integrated multidisciplinary planning process to conduct 

land use capability analyses in reviewing potential loans. Such plans shall include, 

but not be limited to, a review of ongoing or other potential resource utilization 

efforts in and adjacent to the project area;

(4) vigorously promote a commitment of these institutions to develop and 

implement plans for the rehabilitation and management of the ecological 

resources of borrower nations on a sustained basis. Special attention shall be paid 
21

to soil conservation, wildlife, wetland, estuaries, croplands, grasslands, forests, 

and fisheries, including-

(A) long-term programs of research designed to manage ecosystems 

properly;

(B) provision of adequate extension workers, park rangers, social forestry 

experts, and other appropriate personnel; and

(C) improved programs of training in environmental science and land-use 

planning;

(5) vigorously promote a commitment of these institutions to increase the 

proportion of their programs supporting environmentally beneficial projects and 

project components, such as technical assistance for environmental ministries and 

institutions, resource rehabilitation projects and project components, protection of 

indigenous peoples, and appropriate light capital technology projects. Other 

examples of such projects include small scale mixed farming and multiple 

cropping agroforestry, programs to promote kitchen gardens, watershed 

management and rehabilitation, high yield wood lots, integrated pest management 

systems, dune stabilization programs, programs to improve energy efficiency, 

energy efficient technologies such as small scale hydro projects, rural solar energy 

systems, and rural and mobile telecommunications systems, and improved 

efficiency and management of irrigation systems.

(6) place an increased emphasis on upgrading the efficient use of energy and other 

resources by borrower nations. Such efforts shall include, but not be limited to

(A) significantly increasing the proportion of energy project lending for 

energy efficiency improvements, and decentralized small scale facilities 

such as solar, wind, or biomass generating facilities; and

(B) conducting an analysis of the comparative costs of any new energy 

generating facilities with the cost of increasing the energy efficiency in the 

project service area;

(7) seek a commitment of these institutions to fund projects to protect and 

preserve crucial wetland systems and to avoid expenditures for projects designed 

to convert major wetland systems. Development proposals which may affect these 

areas should be the subject of detailed impact assessments so as to avoid 

detrimental impacts to fisheries, wildlife and other important resources;

(8) vigorously promote the establishment within the Economic Development 

Institute of the World Bank of a component which provides training in 

environmental and natural resource planning and program development;

(9) regularly raise, at meetings of the Boards of Directors of these institutions, the 

issue of their progress in improving their environmental performance, with 

specific focus on the measures set forth above; and

(10) require at least a four week project review period between the time when 

staff recommendations are presented to the board and board action on any 

projects.

***
22

(c) The Secretary of the Treasury and the Secretary of State shall regularly 

undertake and continue diplomatic and other initiatives, in addition to those mentioned in 

subsection (a)(5), to discuss measures to improve the environmental performance of the 

Multilateral Development Banks with the representatives to these institutions, and with 

ministries from which they receive their instructions, of borrower and donor nations. In 

particular, joint efforts shall be undertaken with borrowers and donors to ensure 

cooperative implementation of the reforms described above.

***

(e) The Secretary of the Treasury shall prepare and submit to the Committees on 

Appropriations by January 15, 1987, and annually thereafter, a report documenting the 

progress the Multilateral Development Banks have made in implementing the 

environmental reform measures described in paragraphs one through eight of subsection 

(a).

(f) In the report of the Secretary of the Treasury required by subsection (e), 

regarding the implementation of staffing measures suggested in subsection (a)(1)(A), the 

Secretary of the Treasury shall specifically discuss the progress of the International Bank 

for Reconstruction and Development in upgrading and adding environmentally trained 

professionals to each of its six regional offices to review projects for their prospective 

ecological impacts.

(g) The Administrator of the Agency for International Development in 

conjunction with the Secretaries of Treasury and State shall

(1) instruct overseas missions of the Agency for International Development and 

embassies of the United States to analyze the impacts of Multilateral 

Development Bank projects proposed to be undertaken in the host country well in 

advance of a project’s approval by the relevant institution. Such reviews shall 

address the economic viability of the project; adverse impacts on the environment, 

natural resources, and indigenous peoples; and recommendations as to measures, 

including alternatives, that could eliminate or mitigate adverse impacts. If not

classified under the national security system of classification, such information 

shall be made available to the public;

(2) in preparation of reviews required by subsection (g)(1), compile a list of 

categories of projects likely to have adverse impacts on the environment, natural 

resources, or indigenous peoples. The list shall be developed in consultation with 

interested members of the public and made available to the Committee on 

Appropriations by December 31, 1986 and semiannually thereafter; and

(3) study the feasibility of creating a cooperative “early warning system” for 

projects of concern with other interested donors.

(h) If a review required by subsection (g)(l) identifies adverse impacts to the 

environment, natural resources, or indigenous peoples, the Secretary of the Treasury shall 

instruct the United States Executive Director of the Multilateral Development Bank to 

seek changes to the project necessary to eliminate or mitigate those impacts.

HISTORY: (Pub.L. 99-591, § 539, Oct. 30, 1986, 100 Stat. 3341.)
23

Appendix 2

PL 101-167:

ENVIRONMENTAL CONCERNS

SEC. 533. (a) It is the policy of the United States that 

sustainable economic growth must be predicated on the 

sustainable management of natural resources. The Secretary of 

the Treasury shall instruct the United States Executive Directors 

of each multilateral development bank (MDB) to promote 

vigorously within each MDB the expansion of programs in areas 

which address the problems of global climate change through 

requirements to--

(1) augment and expand the professional staff of each 

MDB with expertise in end-use energy efficiency and 

conservation and renewable energy;

(2) develop methodologies which allow borrowing countries 

to include investments in end-use energy efficiency and 

renewable energy as explicit alternatives in the `least cost' 

energy sector investments plans they prepare with MDB 

assistance. Such plans shall give priority to projects and 

programs which support energy conservation, end-use 

efficiency and renewable energy sources in major 

economic sectors, and shall compare the economic and 

environmental costs of those actions with the economic 

and environmental costs of investments in conventional 

energy supplies;

(3) provide analysis for each proposed loan to support 

additional power generating capacity, comparing the 

economic and environmental costs of investments in 

demand reduction, including energy conservation and enduse energy efficiency, with the economic and 

environmental costs of the proposal;

(4) assure that systematic, detailed environmental impact 

assessments (EIA) of proposed energy projects, or 

projects with potential significant environmental impacts, 

are conducted early in the project cycle. Assessments 

should include but not be limited to--

(A) consideration of a wide range of alternatives to 

the proposed project including, where feasible,

alternative investments in end-use energy efficiency 

and non-conventional renewable energy; and
24

(B) encouragement and adoption of policies which 

allow for public participation in the EIA process;

(5) include environmental costs in the economic 

assessment of the proposed projects with significant 

potential environmental impacts, or power projects, and if 

possible for all projects which involve expansion of 

generating capacity of more than 10 MW, develop a 

standard increase in project cost as a surrogate for the 

environmental costs;

(6) encourage and promote end-use energy efficiency and 

renewable energy in negotiations of policy-based energy 

sector lending, and MDBs should consider not proceeding 

with policy-based sector loans which do not contain 

commitments from the borrowing country to devote a 

significant portion of its sector investments toward energy 

efficiency and renewable energy;

(7) provide technical assistance as a component of all 

energy sector lending to help borrowing countries identify 

and pursue end-use energy efficiency investments. This 

technical assistance shall include support for detailed 

audits of energy use and the development of institutional 

capacity to promote end-use energy efficiency and 

conservation;

(8) work with borrowing countries, with input from the 

public in both borrowing and donor countries, to develop 

loans for end-use energy efficiency and renewable energy, 

where possible `bundling' small projects into larger, more 

easily financed projects; and

(9) seek the convening of a special seminar for board 

members and senior staff of each MDB concerning 

alternate energy investment opportunities and end-use 

energy efficiency and conservation.

(b) The Secretary of the Treasury as a part of the annual report 

to the Congress shall describe in detail, progress made by each 

of the MDBs in adopting and implementing programs meeting 

the standards set out in subsection (a), including in particular--

(1) efforts by the Department of Treasury to assure 

implementation by each of the MDBs of programs 

substantially equivalent to those set out in this section, 

and results of such efforts;

(2) progress made by each MDB in drafting and 

implementing least cost energy plans for each recipient 

country which meets requirements outlined in subsection 

(a)(2);
25

(3) the absolute dollar amounts, and proportion of total 

lending in the energy sector, of loans and portions of 

loans, approved by each MDB in the previous year for 

projects or programs of end-use energy efficiency and 

conservation and renewable energy.

(c) Not later than April 1, 1990, the Secretary of the Treasury 

shall request each MDB to prepare an analysis of the impact its 

current forestry sector loans will have on borrowing country 

emissions of CO2 and the status of proposals for specific forestry 

sector activities to reduce CO2 emissions.