International financing institutions

The World Bank takes a range of new environmental initiatives

A synopsis of the Forum paper by Ken Piddington, Director of Environment, World Bank

In a situation such as that of the World Bank and other international agencies where the collective momentum of governments governs many of the policy-making decisions, the process of integrating environmental concerns into mainstream activities is not always straightforward.

Developing, Western, and perhaps also Eastern European countries display kaleidoscopic variation in their political attitudes. This has often resulted in a formula for minimisation rather than maximisation of opportunity, with many positive and imaginative opportunities not always being politically attainable. This situation illustrates the difficulties with which we are faced, and points to the crucial role of the engineer in leading us towards new modes of development.

The World Bank's administrative philosophy has been that it is essential to internalise environmental concerns across the institution, and to ensure that these concerns intersect with key points in the bank's activities. Progress has been rapid over the past two years and includes: an environmental assessment process built into the project cycle; increased momentum on the formulation of Environmental Action Plans; a series of free-standing environmental loans; a World Development Report in 1992 on Environment and Development; extensive research and policy work on mainline issues; and an operational commitment to integrate economic and environmental factors, country by country, region by region.

Global facility

A central aspect of environmental action is funding availability for environmental investment. The proposal which has been made for a Global Environmental Facility ad dresses a part of this need and rests on the logic that where a borrowing country agrees to an action which is clearly protective of the global environment, the extra costs incurred by that country should be met by concessional funds. To do this, it should draw on contributions provided by rich countries. The industrial countries have had a cumulative impact on global ecosystems over the period of their major development, particularly over the past one hundred years. which has in turn limited the choices open to those who are only now on the development curve. Also, these wealthy countries share equally in the benefits of protecting the global commons, but have a higher capacity to pay. The two ideas combine in the notion that rich countries have more 'arrears' to pay than do poor ones.

It should be stressed that this proposal for a pilot facility will only deal with a small proportion of the options open. Within existing bank programmes, the aim would be to pick up those possibilities which offer a financial rate of return. Environmental analysis has however made it obvious that a number of urgent interventions may be missed where the economic rate of return does not exist or where the pressing needs of development force the borrower to accord the needed action lower priority than it deserves in the mind of the global community.

Two central problems therefore arise at the technical level. One, of particular importance to a financial institution, relates to valuation. In the bank, this challenge is being addressed through attempts to include global externalities as factors to he internalised in future costing. The second question concerns the issue of scientific proof. If scientific uncertainty is used as a basis for delaying action, whether at the na tional or the international level, the cost of taking action will rise and the risk of ecosystem collapse will become greater. The bank's proposal for a global fund can thus be seen as prudent insurance as well as risk minimisation.

Eastern Europe

From the environmental standpoint, the issues in Eastern Europe are clear-cut. The political and ecological imperatives are to mitigate the environmental damage inflicted locally and on the whole European region as these economies are restructured. The uncertainty arises in determining the degree of progress which can be made within purely economic criteria, by using processes which are economically efficient as well as environmentally sound, and in ascertaining the degree to which additional investment will be required. It is clear, however, that over the next few years the development community will have the opportunity to set new standards of environmental performance in serving its Eastern European clients, enhancing in the process the options for other borrowers. The role of the engineer in these efforts will be important, possibly crucial.

The dilemmas

In economic terms, the way to achieve sustainable development in terms which are ecologically acceptable is not yet clearly defined. In part this is a problem of measurement, and much work is being done on how to revise national accounts and establish more accurate indicators of ,environmental trends. In part also, the problem has arisen because there are thresholds in ecosystems - ecological, economic and social - and there is no scientific exactitude about what happens when they are crossed. The costs of collapse are unknown, but potentially very high. Sustainability can therefore be seen as a compound of these three dimensions. In this light, the environmental crisis has led to a questioning of received wisdom and traditional processes. When rigorous environmental assessment is introduced, it brings along a number of new dimensions which help in the progressive shift towards sustainability.

Political and social role of the engineer

A wider role therefore exists, not only for the consulting engineer, but for the profession as a whole. This role must be both a political and a social one. The profession does not exist in a capsule outside society, and must be part of the solution to the problems which society is grappling with. In particular, it must facilitate the process through which society comes to terms with alternative solutions to the dilemma of sustainability. A great deal of encouragement should be taken from the moves which have been made within the profession in recent years towards broader social and environmental responsibility. As the turn of the century approaches, it will become even more apparent that governments and societies need new models ' for striking the balance between environmental responsibility and the satisfaction of human needs. In the financial institutions, it will also become apparent that the relationship with FIDIC and with the engineering profession as a whole can assist in addressing the new agenda of development.

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