Date：25 to 26 October 2017
From 25 to 26 October 2017, representatives from 19 civil organizations in different countries and a number of senior officials of the BRICS New Development Bank (hereinafter referred to as "the NDB") held a one-day and a half exchange meeting. The 24 representatives came from civil organizations in China, India, Brazil, South Africa and Argentina and they closely follow issues on environment, climate change, energy, rights and interests of women and indigenous people , and sustainable development . On the NDB side, KV Kamath, President of the NDB, Vladimir Kazbekov, Vice President and Chief Administrative Officer, Zhu Xian, Vice President and Chief Operating Officer, and Leslie Maasdorp,Deputy Governor and Chief Financial Officer as well as a team of environmental and social experts , treasury department and communication department attended the meeting.
Issues including NDB operational mechanism, information disclosure, gender equality, environmental and social management, NDB strategy are discussed on the meeting. The discussion and sharing was arranged in the form that NDB participants and CSOs elaborate on specific issues in turn , followed by questions and answers . During the meeting, participants from different CSOs shared their opinions and analysis on the "Information Disclosure Policy", "Environment and Social Framework", "NDB's General Strategy: 2017-2021" and other policy documents published by NDB and came up with recommendations for NDB based on years' experience in communication and practice with multilateral development financial institutions. The NDB introduced its operational framework, the newly proposed "country system", general strategy and its sustainability goals. In addition, this meeting enabled adequate exchange among participants.
Greenovation:HUB was invited to participate in the meeting, and provided feedback in the discussion and Q & A session. Through the interaction, G-Hub’s observations are as follows:
1. Information Disclosure
In July 2016, the Board of the NDB approved the "Interim Information Disclosure Policy" at its first annual meeting. After a round of opinions collection and revision, the NDB released final "Information Disclosure Policy"in June 2017 . Although the revised policy improved compared with earlier version, some problems still exist. In the meeting, CSOs suggested that the " Information Disclosure Policy" lack disclosure instructions on environmental and social impact assessment, member country risk assessment and important project-level information. In addition, CSOs expressed doubts that the policy did not specify time frame for information disclosure, or requirement on policy translation to ensure readability . CSOs also questioned whether / when implementation guidelines will be issued.
NDB management expressed its willingness to adopt proposals for diversifying information translations, improving the time frame and publishing the environmental and social assessment. As to how detailed information disclosure should be made and in what manner at the project level, NDB said it needs to take into account the needs of different clients. From the dialogue, we learned that the internal discussion on how to implement the "Information Disclosure Policy" is still going on and it is unclear when the relevant implementation guidelines will be released. In our opinion, information disclosure is basic tool and condition to ensure effective environmental and social risk management. Formulating implementation guidelines on the Information Disclosure Policy as soon as possible is conducive to facilitate communication with stakeholders at local level so as to fulfill NDB’s commitments on "promoting the highest level of transparency of information" in its “General Strategy: 2017-2021”and consolidating NDB’s commitment on project sustainability.
2. Adopting Country System
As a young multi-lateral development financial institution, the NDB emphasizes its innovation which is manifested in NDB’s practice of making reference to different country systems to formulate environment and social security safeguard policy. Different from traditional multilateral development financial institutions when establishing their own environmental and social safeguard standards, NDB adopts country system in procurement and environmental and social evaluation for investment and financing projects. If standards under applicable country system do not meet NDB requirements, NDB will adopt a higher standard according to different projects.
Participating CSOs raised following concerns in this regard: how to bridge the gap between standards under member countries systems and bank standards, how to guarantee transparency when adopting country systems, and how CSOs should participate in the process. Zhu Xian, vice president and chief operating officer of NDB, said that NDB decided to refer to country system on the basis of careful assessment of the laws, regulations and policy environment related to environmental and social risks and procurement in member countries . Zhu Xian promised that environmental and social safeguard standards will not be lowered by adopting different laws and policies in member countries. At the project level, NDB will adopt a "case by case analysis" to ensure that investments will benefit the environment, society and economy.
From our point of view, although this approach will help NDB to focus on project implementation and ensure compliance , at the same time, maintain good cooperation with its clients, yet there is gap between existing laws, regulations and policy environment of developing countries in environmental and social risk management and international good practices , which may push down lending standards. We recommend that the NDB issues detailed guidance on how to bridge the gap so as to avoid lowering standards in environmental and social governance and incorporates environmental and social risk factors into investment and financing decision-making with prudence and supervise such process, especially in countries and regions with fragile ecology and where the policy environment and laws and regulations are not yet fully developed. We also recommend that the participation of relevant stakeholders, including project communities and CSOs should be guaranteed.
3. Environment & Social Framework
During the meeting, CSOs made recommendations on the "Environment and Social Framework" (hereinafter referred to as the "Framework") released by NDB in March 2016. These recommendations mainly address necessity to issue implementation guidelines for the framework and environmental and social assessment indicator system, formulate specific requirements for due diligence, and establish short-, medium- and long-term sustainable road maps, as well as incorporate gender equality into the framework.
The NDB said it would consider recommendations to incorporate gender equality in the Framework; currently, NDB experts on the framework is planning and discussing corresponding operational guidance document for the Framework, including specific standards and other details; and due diligence will be implemented in the host country. In our opinion, as number of investment projects continue to increase, the environmental social safeguard mechanism needs to be improved as soon as possible. In addition, operational guidance of the"Environment and Social Framework" will help NDB effectively identify and respond to risks at early stage of project implementation.
4. On Coal Power
K. V. Kamath, head of the NDB, said that NDB succeeds on staying green, but with an “open mind on all issues”. In his view, a clean coal-fired power plant is also a possibility. For the coal-fired power plant project, Zhu Xian put forward: "We need to be realistic and forward looking " .He said that NDB members have not submitted proposals for coal-fired power plant so far, but demands for coal-fired power plants exist in member countries, therefore, NDB cannot promise to give up on coal-fired projects for the moment.
Participating CSOs said that NDB's attitude toward coal-fired power is more straightforward than that of other multilateral development financial institutions. In our view, getting rid of coal dependence and moving to sustainable clean energy is undisputed top priority for multilateral development financial institutions and energy infrastructure investors in the world. However, considering high costs of renewable energy and difficulties in storage, it is pragmatic to have coal project as a transitional plan as less developed countries and regions still have demands for survival. As coal power is a highly sensitive industry concerning its environmental and social impacts, we strongly recommend that the NDB issues corresponding energy investment policy or strategy to define the threshold for different energy investment projects and to cautiously deal with investment decisions involving coal-fired power.
5. Gender Equality
Investment and financing projects of multilateral development financial institutions in less developed countries and regions often impact human rights, religion, cultural differences and land rights of local residents, labor and indigenous people, especially when it comes to vulnerable groups including women, children, the elderly and people with disabilities, instability and social risks will be exacerbated. Vulnerable groups are the first to be affected when risks arise from lack of communication, local businesses or government corruption and poor supervision of the project.
Gender issue was an independent part in the discussion. CSOs aimed to helping the NDB to recognize the potential gender inequality and infringement on women's rights and interests investment projects through sharing experience and practice of CSOs that protect the rights and interests of women in the host countries. CSOs think that NDB should establish an independent and strong gender equality policy to avoid risks and ensure that the rights and interests of local women in project construction and implementation are not violated. The NDB said that it would consider introducing a policy on gender equality and other human rights protections, but NDB did not respond explicitly to the recommendations from CSOs which suggest NDB incorporate gender equality indicators in the Environmental and Social Framework.
Overall, this exchange meeting has enhanced CSOs’ understanding on current operating mechanism, environmental and social policies and investment strategies of the NDB and laid a sound foundation for future participation of CSOs and more stakeholders. Through answering questions raised by CSOs and taking suggestions as well, NDB demonstrated its openness and sincerity. We appreciate NDB's willingness in enhancing future communication with CSOs and other stakeholders. We hope that the NDP will maintain its openness toward feedback from CSOs and implement specific operational guidelines on Information Disclosure Policy and Environmental and Social Frameworks, as well as gender equality policy, and makes environmental and social risk response capability assessment reports of member countries available as promised.
At present, the NDB has approved 23 infrastructure projects in renewable energy, road upgrading, sewage treatment and rural development with loan volumes reaching more than 6 billion U.S. dollars. The projects are distributed in India, China, Brazil, Russia and South Africa. Moreover, NDB plans to expand its reach in 2018 and finance more infrastructure projects. Against this backdrop, we propose that the NDB improves its operational mechanism as soon as possible by taking the opinions and suggestions from all parties so as to ensure the effective implementation of environmental and social risk management. CSOs are willing to assist NDB to make sound project financing decisions based on their sustainable strategic objectives and form a good project governance model.
ActionAid India, AFRODAD, BRICS Feminist Watch, Center for African, Latin American and Caribbean Studies at O.P. Jindal Global University (India), Chinadialogue, Coalition for Human Rights in Development, Conectas, Fudan University, Gender Action, Global Environmental Institute, Green Watershed, Greenovation Hub, Greenpeace East Asia, INESC, Landesa/Rural Development Institute, Oxfam, South-South Cooperation Research and Policy Centre, Vasudha Foundation.
Observation on China's Overseas Investment (OCOI) wishes to present multiple views and perspectives to enhance understanding concerning China's overseas investment and global footprint, so as to promote China's "going out" in a more responsible and more sustainable way. We welcome experts and scholars sharing related cases and views with us. Please send us your comment to firstname.lastname@example.org. We welcome your feedback and will share some selected insight upon permission in next issue.