Upholding Banks' Biodiversity Responsibilities

Wildlife populations are two-thirds less than they were in 1970. Stop, and read that first sentence again. The alarming decline in the health of our planet is prompting many development finance institutions to consider their global biodiversity impacts, with the goal of building a nature-positive society or, at the very least, sustaining a livable planet.

Avoiding what could be Earth’s sixth mass extinction will depend in part on the actions of development finance and other institutions. There has never been a more crucial time to hold development actors accountable to their biodiversity commitments and impacts. But how and to what extent are development actors willing to be held to account? An examination of existing policies alongside data by independent accountability mechanisms (IAMs) demonstrates that more must be done to (a) increase capacity to prevent and mitigate adverse biodiversity impacts in development finance, and (b) ensure positive human rights impacts in the pursuit of restoring harmony with nature.

RESPONSIBILITY TO PROTECT AND RESTORE BIODIVERSITY

Adopted during the fifteenth meeting of the Conference of the Parties for the Convention on Biological Diversity (COP CBD), the Kunming-Montreal Global Biodiversity Framework (GBF) calls for the cooperation of both public and private finance to correct imbalances with nature. Under this framework, development banks have a responsibility to, among other things, build internal capacity and governance to improve their relationship to nature and biodiversity. They also have an obligation to follow a human rights-based approach in the pursuit of halting and reversing biodiversity loss.

According to a recent study published by the Society for Conservation Biology, less than 42% of development banks have biodiversity impact mitigation measures in place, although banks operating internationally are more likely to have them than banks with only national operations. For that reason, a broad coalition of civil society organizations have called on all financial institutions to produce and publish transition plans responsive to their obligations under the GBF. In their transition plans, financial institutions are urged to abide by key principles for halting and reversing biodiversity loss, such as respecting and prioritizing the rights and knowledge of Indigenous People and local communities to manage biodiversity impacts, and ensuring that land, environmental, and human rights defenders have access to safe and effective grievance redress and accountability mechanisms.

Of course, some banks are further along than others. With respect to multilateral development banks, the International Finance Corporation (IFC) of the World Bank Group has been assessed to be a leader of best-practice principles for biodiversity impact management. The IFC’s performance standard on “Biodiversity Conservation and Sustainable Management of Living Natural Resources,” as well as the World Bank’s standard of the same name under its Environmental and Social Framework, require that its clients consult with affected communities, Indigenous Peoples, and other stakeholders whenever considering projects within legally protected or internationally recognized areas for biodiversity, and whenever projects are identified as having a likelihood of adversely impacting ecosystem services relied on by communities. Under other standards, the IFC requires that project affected communities be consulted with to determine the risks to ecosystem services in the first instance.

Despite the IFC’s relatively advanced safeguards policies, our database of complaints from major accountability mechanisms shows that it has been implicated in over a quarter of the eligible complaints that have raised biodiversity issues [See Chart 1]. The discrepancy demonstrates that strong policy commitments alone are not enough; accountability is essential to ensure adherence.  

PURSUING BIODIVERSITY PROTECTION THROUGH DEVELOPMENT FINANCE

Biodiversity co-benefits can be pursued through a range of investment activities across many sectors, and banks can invest directly into nature-based solutions to restore ecosystems as a component of project finance. Most biodiversity-related finance from multilateral banks goes through three sectors in particular: agriculture, general environment protection, and water supply and sanitation. Philanthropies are also engaging more in biodiversity-related funding, mostly by supporting large conservation organizations. Finalized principles from an international effort to clarify norms for protecting human rights in conservation are expected to be released before this October’s COP CBD, aptly themed “Peace With Nature.”

Efforts are also underway to mobilize and scale private finance for the restoration of nature and ecosystem services. Part of this push has included the establishment of biodiversity reporting guidelines issued by voluntary regimes like the Taskforce on Nature-related Financial Disclosures (TNFD), the Global Reporting Initiative (GRI), the Science-Based Targets for Nature (SBTN), and soon the International Sustainability Standards Board (ISSB). Common among all existing monitoring and reporting frameworks is the expectation to respect the rights of local communities and Indigenous Peoples by, among other things, ensuring they have access to safe and effective mechanisms to safeguard against harm.[1]

ACCOUNTABILITY FOR BIODIVERSITY IMPACTS

Communities look to IAMs to ensure that development finance does not exacerbate the biodiversity crisis. Our database shows that over 130 complaints across all sectors have specifically raised biodiversity issues and nearly 390 relate to issues of general environmental harm [See Chart 2]. In total, roughly 22% of all complaints relate to biodiversity or environmental impacts. 

Of the total complaints across IAMs that relate to issues of "biodiversity", 90 (67%) have been found eligible. Roughly 8% of biodiversity-related complaints did not proceed past the eligibility stage for reasons including that the mechanism deemed their involvement unnecessary, that bank management is addressing or has addressed concerns raised, and the complaint was not filed by project affected people [See Chart 3]. In some ways, we can commend the fact that most complaints raising biodiversity issues are registered and found to be eligible, because the opposite is true for total complaints. Nonetheless, it is important to assess barriers that hinder banks from being fully accountable to biodiversity impacts.

BARRIERS TO ACCOUNTABILITY

Barrier 1: Awareness

Adverse biodiversity impacts may go unaddressed if communities do not know which banks are supporting a project. Several complaints raising biodiversity issues have been denied because banks ended their relationship to a project before communities became aware of their initial enabling support. A prime example is an IFC CAO complaint filed by communities in Lamu, Kenya to amplify the risks posed by a multibillion-dollar coal plant project to coastal mangrove forests and the rich biodiversity of the area. The CAO found the complaint ineligible because the IFC was no longer actively or materially exposed to the project, despite it having provided indirect support. After years of ` navigating transparency issues caused by obscured financial intermediary support of the project, the communities ultimately were successful in amplifying their defense of the ecosystem through other channels until key investors left the project.

Barrier 2: Safety

Once communities know how harmful projects are being supported and where to file grievances, the second barrier to access can be safety. Too often, environmental and land defenders are met with harassment, threats, and violence when asserting their rights and protecting nature. In fact, Global Witness reports that of the thousands of murders against environmental and land defenders between 2012 and 2022, more than half were against Indigenous Peoples and other traditional forest dwellers. 

IAM policies that require complainants to first engage with project implementers or management teams essentially are asking aggrieved people to put aside legitimate fears that those with vested interests in a project might seek to neutralize dissenting voices. At least five complaints were denied at registration or eligibility stages for failing to meet “good faith” requirements to first attempt to resolve issues outside of IAM processes. The cost of the projects subject to the complaints total over $2 billion USD. We are left to speculate as to why complainants did not pursue dialogue outside of process first, but safety concerns are a legitimate assumption.

Barrier 3: Standing

Many IAM policies require that complaints come from people located near the alleged harm, and most every policy requires complainants to assert the ways in which they have been harmed. This becomes problematic when considering accountability for commitments to global public goods like biodiversity.

From an ecocentric perspective, we may say that biodiversity and nature face direct harm, and perhaps more direct harm than the communities that are dependent on natural systems, when finance supports landscape-shifting or extractive activities. The question then becomes whether IAMs are equipped to hold banks to account for their biodiversity impacts when no local communities are able or willing to take on the reprisal risks to assert that they too are being harmed.

Some IAMs allow complaints when no people are directly harmed, but most do not. For example, both the IAMs of the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB) permit the acceptance of complaints in circumstances where complainants are not directly harmed. Others, like the IFC CAO require that complaints be filed only by those who “believe[] they are or may be harmed by a Project or Sub-Project.” Under such a policy complainants must find a way to articulate how specific threats to biodiversity affect them personally, which essentially advances an “injury-in-fact” test that is all too legalistic for the purposes of accountability. 

When policies allow IAMs to receive complaints primarily related to biodiversity impacts, successful nature-positive outcomes are benefitted. In 2011, a local non-profit organization supported by an international NGO submitted a complaint to the EBRD’s Project Complaint Mechanism (now known as the Independent Project Accountability Mechanism); the complaint related concerns about risks to the critical habitat of Balkan Lynx populations posed by a hydro-electric facility planned in the Mavrovo National Park of Macedonia. As a result of a compliance investigation that revealed shortcomings in biodiversity assessments and a failure to justify the destruction of important habitat, the organizations were able to successfully advocate to protect the endangered species.

ACCOUNTABILITY FOR WHEN BIODIVERSITY PROJECTS CAUSE HARM TO COMMUNITIES

Accountability is crucial not only to ensure that biodiversity commitments are fulfilled, but also to protect the rights of local communities and Indigenous Peoples in the endeavor.  People living on or near targeted areas of investment are often the first to be aware of a given project’s on-the-ground impact, and they bear the most direct and immediate risks if those impacts are negative. Efforts to protect biodiversity can cause harm to communities if not designed and implemented in a rights-respecting manner, and case data demonstrates this.

The IAMs of major development finance institutions have received more than 60 complaints regarding conservation and environmental protection sector projects, approximately 40% of which were found to be eligible for consideration. 

Common complaint issues

The most frequent issue flagged amongst this cohort, a little more than 60% of the eligible complaints, is inadequate or absent consultation and disclosure [See Chart 4]. Violations with respect to failing to attain the Free, Prior, and Informed Consent (FPIC) of Indigenous Peoples are also evident; as consultation and disclosure deficiencies were raised five of the seven times that projects harmed Indigenous Peoples specifically. Other harms associated with biodiversity-centered projects have included displacement and loss of livelihood (accounting for half of the eligible complaints). Of the three times that complainants raised concerns about potential or actual harm to their cultural heritage, either displacement or loss of livelihood was also at issue.

When consultation issues and FPIC issues plague a project at the onset, most communities have pursued compliance investigation to address the failures, and to date non-compliance has been found in every instance [See Chart 5]. 

For example, in Nicaragua, Indigenous and Afro-descendent communities relied on the Independent Redress Mechanism (IRM) of the Green Climate Fund (GCF) to challenge shortcomings in consultation and securing FPIC for a conservation project that manifested in increased risks of environmental degradation and attacks against them by armed non-indigenous settlers. As a result of the IRM’s compliance investigation, which revealed several systemic issues implicating the GCF’s ability to conduct human rights due diligence in conflict sensitive areas and fragile states, the GCF withdrew from the project with a commitment to work collaboratively with the project partner to ensure a responsible exit. 

When there are failures in consultation and disclosure, communities look to IAMs to help ensure that their knowledge, traditional stewardship, and rights are not only respected, but also utilized in the design of projects and management of biodiversity impacts. In the Tanintharyi region of Myanmar, Indigenous Karen communities engaged with the IAMs of the United Nations Development Programme to assert their right to FPIC in an expansive “Ridge to Reef” conservation project and offer an alternative plan that would respect their rights, traditional stewardship, and knowledge. Though the project has not proceeded through Myanmar’s military coup, the communities’ IAM engagement has offered important lessons on consulting with and including marginalized peoples into the design of conservation efforts, especially in places experiencing conflict or fragility.

A troubling fact is banks often take years to respond to harm caused by failures in consultation or community inclusion. Recently, the World Bank suspended final disbursements of a $150 million conservation project in Southern Tanzania amid an IAM compliance investigation into allegations of forced displacement and violence against communities. Advocates for the communities assert that the bank’s delay in proactively responding to the alarm raised by the complaint nearly a year ago only proliferated the harm. What’s clear is that banks must do more to exercise what leverage it may to quell conflict and protect aggrieved communities when IAMs receive complaints. Waiting to the end of IAM processes to begin acting risks delaying and denying justice for many.

CONCLUSION

As banks commit to nature-positive development to restore biodiversity, IAMs will be crucial to underpin the effort. To ensure their effectiveness in responding to biodiversity complaints, IAM policies must be improved to promote greater accessibility. Communities and public interest organizations must have the opportunity to safely raise complaints in the name of promoting international obligations under the Kunming-Montreal Global Biodiversity Framework.

Further, local communities and Indigenous Peoples also should not be expected to endure adversity in the name of biodiversity. It is crucial for development finance institutions to pursue nature-positive impacts with respect for human rights. Strong IAMs are essential to ensure that happens.

ENDNOTES

[1] See e.g., Taskforce on Nature-related Financial Disclosure, Guidance on engagement with Indigenous Peoples, Local Communities, and affected Stakeholders, Version 1.0, § 4.1.3 (“A well-defined and functioning grievance mechanism that provides a recognised and effective channel for such issues to be surfaced and formally addressed is important so that grievances can be identified and resolved before they compound, escalate and undermine the engagement process. It is also important to track grievances, the organisation’s response and the outcome to ensure timely closing and learning of lessons”)(September 2023); Global Reporting Initiative, GRI 101: Biodiversity 2024, Guidance to 101-2-a-iii, p. 11 (“Stakeholder engagement can include co-design, co-management, co-governance, and regular and inclusive reporting and communication of activities. Organizations are expected to obtain free, prior, and informed consent [FPIC] before and throughout restoration and rehabilitation activities that could have impacts on land or resources that Indigenous Peoples use or own. Organizations are also expected to seek FPIC when restoration and rehabilitation activities have impacts on land or resources that local communities use or own”); Science-Based Targets Network, Global Commons Alliance, Stakeholder Engagement Guidance, Vol. 1, p. 26 (“Functional grievance mechanisms are distinct from the process of stakeholder engagement; they are complementary and mutually reinforcing. Stakeholders who experience higher levels of risk resulting from a company's business practices need to be given more space to provide critical feedback”) (May 2023).