Publish What You Fund’s DFI Transparency Initiative has completed its third research work stream on ESG and accountability to communities. The research report covers a broad range of findings. One of these relates to the topic we’ll be discussing today – to what extent do development finance institutions (DFIs) provide assurance that they have undertaken community engagement activities in the areas where they invest, and why does this matter? Rayyan Hassan, Executive Director of the NGO Forum on the Asian Development Bank (ADB) and our CEO, Gary Forster, sat down to discuss the issue.
GF: Rayyan, please can you introduce yourself for our readers and tell us a little about your role at the NGO Forum on the ADB?
RH: I am the current Executive Director of NGO Forum on ADB. I formally took on the role of leading the network in 2012 and have since been looking towards implementing strategy, which primarily looks at Safeguards and Energy issues around International Financial Institution (IFI) infrastructure financing. My background involves grassroots work in international rights based organizations and academe where my focus remained around Multilateral Development Bank (MDB) finance and its impact on development across Asia.
“DFIs run the risk of community resistance challenging the implementation of the project cycle if communication and transparency have not been ensured early in the project.”
GF: Rayyan, we were fortunate to have you as one of the members of our Expert Working Group for this third work stream of our research. As such you know that one of the things we struggled with was identifying a way of measuring the transparency of DFIs as it relates to their investments on the ground and how they interact with affected populations. One solution was to measure whether DFIs publish information about the community engagement they’ve undertaken including when this happened, where and what information was shared. Can you tell us why having this kind of information being made publicly available would be useful to stakeholders?
RH: There is a misconception across the development sector that MDBs such as the World Bank, Asian Development Bank, International Finance Corporation and others are standard bearers of quality and due diligence. This stems from the rigorous internal reporting requirements surrounding development financing. But as we start looking deeper into the realities of actual projects on the ground we realize that MDBs have not deployed their due diligence outside the ambit of their organizations and into their project financing. To this end, measuring project related information, the timings with which it is released, and field assessments made by MDBs for specific projects would reveal the wide gap in what is perceived as quality due diligence and what is actually being delivered. Stakeholders including project affected communities, government agencies and the wider academic and research community would greatly benefit from such studies as it would help illuminate the actual practice of MDBs in the real world and how that shapes the situation on the ground and broader national development ambitions.
GF: Our analysis showed that DFIs rarely make any information available with regards to the community engagement they’ve undertaken. Some DFIs explained that this is because they entrust the investee company to undertake such engagement. What are your thoughts on this?
RH: As NGO Forum on ADB we have observed that Asian Development Bank (ADB) has been heavily relying on consultants to do most of the community engagements on behalf of the banks. Consultant driven Social and Environmental Assessments have often had varied levels of effectiveness. An Independent Evaluation Department (IED), report on the Operational Delivery of ADB Safeguards conducted a survey of 85 of the bank’s safeguard specialists. The survey revealed that instead of contributing to field level assessments, safeguard specialists actually spent the bulk of their working hours correcting and editing consultant reports on safeguards assessments. While the above scenario pertains to sovereign loan projects, in case of private sector driven loans (especially financial intermediary projects) the reporting back by client borrowers pertaining to community engagement has seen dismal performance as articulated in the IED report of 2014.
GF: Speaking more broadly, why do you think it is important that DFIs take the time to be transparent with affected communities, right from the outset of an investment?
RH: DFIs run the risk of community resistance challenging the implementation of the project cycle if communication and transparency have not been ensured early in the project. Local people have to know the dimensions and impact of a project in order to give their feedback to the project design in order to ensure that social and environmental risks both in the short and long-term have been adequately addressed and mitigated. Looking at the financial scale of the projects and the risks involved in terms of project financing, and considering loan repayments and 1st, 2nd, and 3rd party contractual obligations, if projects get stalled this can tend to have deep financial impacts which in most cases outweigh the cost of mitigating safeguards issues early.
GF: Can you share any particularly good examples of where DFIs have engaged properly with affected communities?
RH: In the ADB financed SongBung 4 Hydropower plant project in Vietnam in the mid-2000s the ADB took a much more hands-on approach in its social safeguarding by deploying a full time safeguards specialist to the actual project site to resolve social risks. In this case the safeguards specialist who wished to remain anonymous in an interview with NGO Forum on ADB mentioned that it took a significant amount of time to gain the trust of the local communities, which was a key factor in deploying the livelihood restoration initiative planned into the project. By residing with the communities and walking them through the different activities and programs the safeguards specialist was able to navigate and resolve tensions at the local level, which could threaten the implementation of the project. The infrastructure construction would impact religious institutions, schools and local health facilities therefore a thorough resettlement and restoration plan was integral to the project success.
GF: Is there anything else you’d like to share with our readers?
RH: DFIs tend to argue that large-scale infrastructure projects tend to fulfil national development goals and are often solicited by the borrowing governments themselves. While to a certain extent that remains true, still the selection of the project and locally impacted communities of the project are both critical issues which need local input. As we are approaching the 2030 climate goals and the world has moved from Millennium Development Goals to Sustainable Development Goals the choice of a project and its expected outcome should be as inclusive as possible. Macro indicators of GDP growth being the sole measure of success for DFIs or national development outcomes have been demystified over the last decade, therefore a shift in measuring project success in line with the social and environmental well being of people and ecosystems have to be embraced fully with human rights being ensured at the core of the development project. While incremental moves have been achieved through some slight changes in policy DFIs have yet to make a radical shift towards pro-people and environmentally responsible development.