The State of Remedy at the EBRD

The European Bank for Reconstruction and Development (EBRD) has just published for public consultation a new draft Environmental and Social Policy (ESP) to govern its operations. Accountability Counsel has advocated for this policy to include a commitment from the EBRD to remediate any environmental and/or social harm stemming from the projects it finances. While the draft ESP includes some promising new language, it does not go far enough to clarify the EBRD’s role in providing remedy for harm.

EBRD’s Draft ESP and Commitment to Remedy

Too often, harm caused by multilateral development bank projects goes unremedied, which can have devastating impacts on people’s lives. While the EBRD’s previous ESP mentioned that the Bank’s clients have a responsibility to address negative project impacts, it did not always specifically require providing remedy to affected people. In a positive step, the draft ESP now clearly requires EBRD clients to “include provisions for the remediation of significant residual environmental and social impact” in their project management systems. This includes an obligation to “provide remediation” to supply chain workers and victims of forced and child labor impacted by the client’s operations.

However, this clarification of clients’ responsibility is only part of the picture. What is missing is a commitment from the EBRD itself that it will contribute to remedy when its actions or omissions contribute to harm. But why is such a commitment needed? Doesn’t the EBRD already have a mechanism in place to facilitate remedy?

It is a common misconception that the existence of an independent accountability mechanism (IAM) alone is sufficient for ensuring remedy for project-related harm. While IAMs are essential channels for communities to raise grievances, the effective implementation of remedy commitments that result from IAM processes depends on action from the financial institution’s management and clients.

Accountability Console data on the outcomes of complaints to the EBRD’s IAMs reveals that over the past twenty years, a remedy gap has persisted at the EBRD. 

Since the ESP is the primary public instrument that governs the actors responsible for implementing remedy commitments - including through its incorporation into the loan agreements that create contractual obligations for these parties -  it’s critical that the ESP complements the IAM by enshrining both actors’ responsibilities for remediating harm.

EBRD’s Accountability Mechanisms Over the Years

EBRD’s IAM has undergone significant changes over time. Its first iteration, the IRM, was established in 2004 and had significant limitations. In 2010, a new version called the PCM made important changes, including a strengthened ability to monitor the outcomes of complaint processes. The current iteration, the Independent Project Accountability Mechanism (IPAM), was established in 2019 and is a relatively strong accountability mechanism, espousing many best practices for IAMs.

The most common issues raised in complaints across EBRD’s accountability mechanisms have been inadequate due diligence, lack of consultation and disclosure, and impacts to livelihoods. Other frequently raised concerns include impacts to community health and safety, pollution, physical and economic displacement, and access to water.

EBRD’s IAMs have addressed complaints in two ways: (1) compliance review, where the IAM investigates whether a project complied with EBRD’s own environmental and social safeguards, or (2) problem solving, where the IAM facilitates a dispute resolution process that identifies ways to address the environmental and social issues. In the compliance review track, the EBRD responds to findings of non-compliance with a management action plan (MAP) that, if designed well, includes commitments to remediate noncompliance and harm. In problem solving, impacted communities can negotiate an agreement with the EBRD’s client as to what remedy is needed.

The Remedy Gap at the EBRD

We analyzed all publicly disclosed MAPs and problem-solving agreements, as well as reports monitoring their implementation, to identify commitments made by the EBRD and its clients to perform remedial actions. A review of disclosed documents shows that at least 106 commitments have been made.

Not all remedial commitments directly address harm to project-affected communities. In fact, most of the commitments produced from EBRD accountability processes were promises from the EBRD or its client to make internal changes: for example, to update operational policies or to change some aspect of project design. Only about 31% of commitments were community-facing commitments, that related to directly addressing the needs of affected community members.

Overall, only 52 of 106 commitments (49% of commitments) produced from EBRD accountability processes are reported as completed. Of these completed commitments, only 15 (29%) are community-facing commitments. 

In at least 2 instances, a problem-solving process resulted in a commitment to provide compensation to the complainant(s). Neither of these commitments is known to have been completed: one is in progress, and there is no public information about the other. 

An important caveat is that just because the IAM deems a commitment to have been completed does not necessarily mean that the remedy was adequate, or that the affected community was satisfied with the result. Since we don’t yet have comprehensive data on how communities have perceived the remedy they received, we are using the IAMs’ designations as an approximation.

The percentage of cases known to have resulted in some remedial action becomes even smaller when we consider that most complaints filed to the EBRD’s IAMs never resulted in any commitments at all. This is because the majority of complaints never reach the stage of a compliance review or problem-solving process. Therefore, they do not produce any action plans or agreements.

Figure 4: The Path of All Closed Complaints Related to EBRD Projects

EBRD’s current mechanism, IPAM, finds a much greater share of complaints eligible to be addressed than did its predecessors. This improved accessibility may lead to a higher percentage of complaints reaching a stage where remedial commitments are made, but it is still too early to tell, given the time (often years) that it takes for complaints to advance through the process.

Figure 5: The Path of All Closed Complaints at IPAM

Zooming out even further, the total number of complaints filed to the EBRD’s IAMs does not capture the total number of instances where EBRD-supported projects have caused harm to communities. Our work supporting communities to use accountability mechanisms at financial institutions has revealed that many obstacles prevent project-affected people from filing complaints. These obstacles include language and technical barriers, fear of retaliation from companies and local authorities, and lack of awareness that accountability mechanisms even exist. For this reason, EBRD’s new safeguards should enshrine an institution-wide commitment to remediating harm that goes beyond simply having an accountability mechanism.

Strengthening Remedy at the EBRD

Publicly available data reveals that remedy remains rare for communities harmed by EBRD-supported projects. The review of its Environmental and Social Policy provides the EBRD with a golden opportunity to step up and do more to ensure that its investments truly leave communities better off than they were before.

To fulfill the draft ESP’s promise that “the EBRD will respect human rights in projects financed by the Bank,” the EBRD must pledge to contribute to remedy where it has contributed to harm.