ADB Needs to Modernize Environment and Social Safeguard Policy

The Asian Development Bank’s (ADB) 2009 Safeguard Policy Statement (SPS) has played a positive role in avoiding or mitigating the unintended negative environment and involuntary resettlement impacts of its projects, says a review conducted by ADB’s Independent Evaluation Department (IED). The report, however, states that to ensure continued protection of people and the environment in an increasingly crowded and polluted Asia and the Pacific, ADB needs to modernize and adapt to changing development circumstances.

The report, Effectiveness of the 2009 Safeguard Policy Statement, released today seeks to assess the effectiveness of the policy, especially in achieving its environmental and social objectives. The report also evaluates its adequacy to the current circumstances. The evaluation covered ADB’s portfolio of financing operations from 2010 to 2018, focusing on completed and mature projects that have triggered the application of the policy.

The review found that the objectives of the SPS to avoid, minimize, and compensate for adverse project impacts and to strengthen capacity in borrowing countries remain relevant, with the SPS’ value addition being most evident in reducing the impact of involuntary resettlement arising out of land acquisition. When dams or new roads were built, environmental damage was kept to a minimum, and people affected were compensated or moved with the objective that their livelihoods are restored.

“While the 2009 SPS anticipated that the context and lending instruments used by ADB would evolve, changes over the last decade have had significant implications for ADB’s safeguards policy and its application,” said ADB’s Director General for Independent Evaluation Marvin Taylor-Dormond. “The policy framework has been slow in adapting to deal with more complex programmatic operations and modalities now expected under Strategy 2030. The SPS needs to be adapted to effectively support both public and private sector financing. Adequate adaptation for private sector lending is essential for ADB’s competitiveness, cofinancing, and client needs.”

While the SPS was considered forward-looking at the time of its approval, it has not kept pace with more recently updated policies of other multilateral financial institutions in terms of safeguard best practices. Many are already implementing risk-based supervision and adaptive risk management during implementation. Many institutions have also introduced risk ratings that recognize and assess risk determinants, such as client capacity and commitment. In some countries, infrastructure providers have safeguard divisions, and, in such cases, less effort may be needed than in cases where the agency has less capacity.

“ADB has appropriately and significantly expanded its own safeguard staff over the past decade. There are now over 120 designated staff, but it could have done better in providing more detailed guidance on implementing the SPS,” said IED Director Walter Kolkma. “ADB needs to achieve consistency with other lenders in terms of its thematic coverage and focus on safeguard outcomes, particularly given increasing levels of project cofinancing. Greater alignment with the practices of the private sector is also needed, given shorter timeframes and more cofinancing with other players.”

The review recommends that ADB modernize the SPS; adopt a new approach to strengthen borrower safeguard systems; introduce a new safeguard implementation framework for more consistent safeguard outcomes across ADB; underpin that framework with detailed policy guidance and good mechanisms for regular reviews and updates; and assess the staffing requirements to deliver the framework and strengthen skills for better safeguard outcomes.