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The IDB and the environment

A new IDB Environment and Safeguards Compliance Policy will formalize the Bank’s objective of mainstreaming environmental protection principles throughout the institution’s lending and technical cooperation operations.  The policy, which was approved by the Bank’s Board of Executive Directors January 19, 2006, is consistent with the highest standards currently prevailing among public and private international financial institutions, including the Equator Principles that have been adopted by private and national banks.

The new policy brings up to date and systematizes a set of environmental practices that the Bank has developed over the past 20 years, such as environmental assessments, consultations with local populations and other stakeholders, safeguards, incorporation of sustainability principles into country strategies and application of best practices and standards of the international community.

“Our contribution to sustainable development in the region and the environmental footprint of the Bank should be greatly enhanced with this new policy,” said IDB President Luis Alberto Moreno.

The policy consists of two parts: The first sets forth the Bank’s policy objectives, priority areas of activity and monitoring goals; the second spells out the measures the IDB will undertake to ensure compliance with the policy. 

The policy was developed with input from governments, nongovernmental organizations, the private sector and multilateral and bilateral development agencies. A summary of such comments on the policy and the Bank’s response to those comments can be found on the Bank’s website in

An important part of the consultation process was the creation of a Blue Ribbon Panel, chaired by former U.S. Interior Secretary Bruce Babbitt, which advised Bank management on how to reposition the Bank to achieve greater leadership on behalf of sustainability in the region. The panel included eminent environmental leaders from governmental and nongovernmental organizations.

Key role of government

Principal among the policy’s precepts was the crucial role of strong, effective governmental institutions as a precondition to making good decisions on environmental and social issues and ensuring their long-term viability. A strong network of civil society organizations complements the actions of the government and further strengthens the foundation for sustainable development.

The policy also emphasized the close link between social development and environmental management. “Investments in environment and natural resources management are sources of jobs, sustainable income, improved health and better living conditions, particularly for the poor,” states the policy.

“This is a modern policy that speaks to the pressures as well as the opportunities of the 21st century,” said Janine Ferretti, chief of the Bank’s Environment Division, which was responsible for developing the policy. “It recognizes that sustainability is not just the responsibility of the central government, but also of local governments, the private sector, civil society, and the population as a whole,” she said.

For example, a project to increase agricultural production can simultaneously protect natural areas and the environmental services they provide, she said. Similarly, a private enterprise can be provided incentives to use sustainable production techniques, and in this way boost its international image and ability to compete in the global market.

The policy also addresses the need both to accept and to minimize risks. “We know that there are risks associated with many large projects,” said Ferretti, “but that doesn’t mean that we shouldn’t do them. It does mean that we must understand what those risks are and manage them.”

Among the policy’s directives are the following:

  • Identify project risks and opportunities early in the course of establishing country strategies and priorities for Bank support
  • Shift emphasis from identifying environmental impacts to managing risks in partnership with borrowing nations.
  • Establish effective procedures for managing environmental, social and cultural risks.
  • Engage early on with communities affected by a project, and seek community support before financing large projects.
  • Support biodiversity by focusing on transboundary areas, conservation and protection from all significant threats to natural ecosystems.
  • Quantify and monitor projects’ greenhouse gas emissions.
  • Analyze policy-based loans for risks and opportunities for environmental and social sustainability.
  • Seek out opportunities to go beyond impact mitigation to maximize the potential of investments to foster sustainability goals.


The policy is part of the implementation of the Bank’s Environment Strategy, which was approved by the Board in July 2003. “There is significant work ahead of us,” said Ferretti. “We are proposing an extensive training and capacity building effort, both with the Bank and among our borrowers and executing agencies,” she said.  Guidelines, toolkits, and other instruments and resources approved by Bank management will be developed to support this effort. 

The new policy will enter into effect six months after it was approved. Ferretti emphasized that it is a work in progress, and will be reviewed in three years, once again with input from outside the Bank. The new document replaces a previous environmental policy that has been in effect since 1979. This latter policy was the first adopted by a multilateral financial institution.

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