Forests Sourcebook - HCV Resource Network

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tional Bank for Reconstruction and Development
(IBRD) and International Development Association
(IDA) loans with grants.
Building a solid analytical foundation to support and
facilitate engagement in the forest sector.
Coordinating across the World Bank Group, with a particular
emphasis on the International Finance Corporation
(IFC), whose operations in the sector are significant
in many forest-important countries.
Operational policies for World Bank–supported
investment projects
The World Bank’s suite of operational policies ensures that
Bank operations with potential impact on forests take forest
outcomes into consideration. In line with the current Forests
Strategy, OP 4.36 is proactive both in identifying and protecting
critical forest conservation areas and in supporting
improved forest management in production forests outside
these areas. OP 4.36 applies to all World Bank investment
operations that potentially affect forests, regardless of
whether they are specific forest sector investments. It also
encourages the incorporation of forest issues in Country
Assistance Strategies (CAS) and addresses cross-sectoral
impacts on forests. OP 4.36 provides for conservation of critical
natural habitats and prohibits World Bank financing of
any commercial harvesting or plantation development in
critical natural habitats. It also allows for proactive investment
support to improve forest management outside critical
forest areas, with explicit safeguards to ensure that such
World Bank–financed operations comply with independent
certification standards acceptable to the World Bank, or
operations with an agreed upon, time-bound action plan to
establish compliance with these standards.
Beyond OP 4.36, relevant operational policies comprise
the provisions for environmental assessment embodied in OP
4.01, which require that impacts of any proposed activity on
the natural environment, human health and safety, and social
aspects be taken into account under OPs 4.10 (Indigenous
Peoples), 4.11 (Physical Cultural Resources), 4.12 (Involuntary
Resettlement), and 4.04 (Natural Habitats). OP 4.04 in
particular requires that the World Bank not support projects
that, in its opinion, involve the significant conversion or
degradation of critical natural habitats, and OP 4.10 requires
that the World Bank only support projects in which affected
Indigenous Peoples provide broad community support to the
project based on prior, free, and informed consultations.
Broadly based development policy lending, by its nature,
is not dealt with under safeguard policies of the type the
World Bank applies to its investment lending. Development
policy loans (DPLs) were originally designed to provide support
for macroeconomic policy reforms, such as in trade policy
and agriculture. Over time, DPLs have evolved to focus
more on structural, financial sector, and social policy
reforms, and on improving public sector resource management.
Development policy operations now generally aim to
promote competitive market structures, correct distortions
in incentive regimes, establish appropriate financial monitoring
and safeguards, create an environment conducive to
private sector investment, encourage private sector activity,
promote good governance, and mitigate short-term adverse
effects of development policy. While the sorts of activities,
institutional changes, and policy developments that result
can certainly have impacts on forests, it is no simple task to
assess what these effects will be in any given situation, as the
connections with outcomes at the field level are diffuse and
indirect—and thus quite inaccessible to the precise and specific
requirements of the safeguard policies that apply to
investment lending. The World Bank recognized this difficulty,
and until recently did not subject its structural adjustment
lending to compliance with the safeguard policies. An
operational directive (OD 8.60) provided some guidance on
environmental issues for this form of lending until it was
replaced by a more detailed operational policy on DPLs (OP
8.60). 3 This policy makes explicit mention of forests and is
highly relevant to the forest sector because it guides the due
diligence needed to ensure that the potential for this form of
lending to cause damage to natural resources, forests, and the
environment is minimized in the design and approach used.
Such operations are of special concern where large numbers
of poor people rely on forests to some extent for their livelihoods.
Where rapid economic change is occurring, perverse
incentives and misallocation of resources leading to forest
removal or changes in the status of use and ownership of
forests will be risk factors to poverty alleviation.
THE WORLD BANK’S LENDING TO THE SECTOR
The portfolio of the World Bank’s investments in forests
indicates an upward trend, after having fallen in the early
2000s to historically low levels. 4 The total commitment in
2001 was US$141 million, reflecting lending from the World
Bank, the Global Environment Facility (GEF), and the IFC
(figure 3). Lending has remained relatively steady in fiscal
2007 (July 1, 2006 to June 30, 2007). 5 Between October 2002
and June 2007, the World Bank approved 12 stand-alone
forestry projects, as well as 39 others that include forestry
components. There are 13 more forestry-related projects in
6 INTRODUCTION: OPPORTUNITIES AND CHALLENGES IN THE FOREST SECTOR