Latin America and the Caribbean have made great progress in the sustainability agenda in the last twenty years. These advances include the adoption of the Equator Principles among leading financial institutions in the region, the adoption by borrowing countries of modern labor standards in cooperation with the International Labor Organization (ILO), and the Escazú Agreement, the first environmental human rights treaty in Latin America and the Caribbean, which just received enough ratifications to enter into force in 2021.
The IDB’s new Environmental and Social Policy Framework (ESPF) reflects this progress. The framework, which is expected to enter into force at the end of 2021, highlights the IDB’s commitment to helping the countries of the region develop more inclusive and prosperous societies, fostering both economic development and environmental and social sustainability. Sustainable economic development encompasses equal access to services and opportunities for all, including for the poor and most vulnerable. The IDB believes that, in order to achieve this, the health of the environment must not be compromised.
Once the ESPF becomes effective, it will apply to new IDB projects, including investment loans, grants and guarantees, as well as some policy-based loans and technical cooperation. The ESPF establishes the IDB and borrower responsibilities, as well as the requirements that borrowers must meet throughout the project life cycle. As it will represent a substantial shift in the way we operate, we are preparing a series of blogs throughout the year in which we will be diving deep into different standards. But first, here are three things you need to know about the ESPF.
1. It is based on international standards
The ESPF harmonizes IDB policies and guidelines with the standards of other peer institutions and is based on the International Finance Corporation (IFC) performance standards adapted for the public sector and our region. In addition, by incorporating standards on labor and working conditions, we are now aligned with the most recent core international United Nations (UN) and ILO conventions and instruments. And, to obtain open, transparent, and inclusive engagement around our projects, the ESPF includes a stand-alone stakeholders’ engagement and information disclosure standard. Among other updates, the IDB will require grievance mechanisms at the project level, so that borrowers can promptly address concerns and complaints shared by individuals and communities.
2. It includes new, modern standards
Our new ESPF sets ambitious standards in several areas. It elevates respect for human rights to the core of environmental and social risk management. It also establishes more stringent protections for people and groups in situations of vulnerability. It specifies clearly where free prior and informed consent is required from indigenous peoples, mandates protection for African descendants and persons with disabilities, and requires consideration of factors such as race and ethnicity, age, or social condition. It also includes new standards on labor rights and a standard on community health and safety. The Bank has also become the first multilateral development bank to not allow biodiversity offsets in critical habitats.
3. It reinforces standing commitments
The development of the new standards was based on a principle of non-dilution of our previous policies, ensuring that the IDB will maintain its current commitments. The ESPF has a dedicated, stand-alone standard on gender equality with provisions for people of all genders, replacing our previous gender policy. Our new framework explicitly addresses the risks of sexual and gender-based violence, exploitation, discrimination, and abuse in the projects we support, recognizing that women and people of diverse sexual orientations and gender identities need to be empowered to achieve equality. The new ESPF also includes resilience to natural hazards and climate change in these standards, building on our many years of experience and leadership in this area.
Drawing on decades of experience and insight, the ESPF provides our clients with leading-edge pro-visions to tackle environmental and social issues, thus becoming an essential piece of our broader efforts to contribute to the region’s sustainable development. Still, we recognize that our new framework will only be as good as its implementation. Therefore, we are already training our personnel, preparing tools, and assigning the resources necessary to support our clients in its effective implementation.
It is important to acknowledge that the approval of the ESPF is occurring at a time of global upheaval, with the public health and economic crisis caused by COVID-19, and the climate crisis caused by global emissions of greenhouse gases from human activity. While these factors pose devastating consequences for all, they disproportionately affect the poor and most vulnerable. Both crises reaffirm the urgency of transitioning to a more sustainable and inclusive development. We are fully aware of the challenges that lie ahead, but we are also convinced that the partnerships we have forged over the past six decades with our clients will allow us to overcome them and continue to place nature and people at the center of development for many years to come.
This is the first in a series of blogs about the improvements of our new policy framework, as we work towards policy implementation, exploring good practices and practical solutions for addressing challenges and opportunities for increasing the sustainability of our operations.
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