Asian Development Bank’s climate commitments require greater accountability (commentary)

This July marks the deadline by when the Asian Development Bank (ADB) – which describes itself as Asia and Pacific’s Climate Bank – committed to achieving full alignment with the goals of the 2016 Paris Agreement that aims to cap the rise in global temperatures. This comes on the heels of ADB’s May 2023 announcement of the Innovative Finance Facility for Climate in Asia and the Pacific, which aims to invest billions of dollars to reduce greenhouse gas emissions and build resilience for communities already suffering the impacts of the climate crisis in Asia – an important goal. Yet these ambitions have no chance of success without an increased commitment to safeguards and accountability.

From our work at Accountability Counsel with communities harmed by international investments, we know that development projects intending to do good can cause harm to people and the planet. In fact, even money intended to address the climate crisis can cause ecological destruction and unintended human rights impacts, and therefore be guilty of climate-washing. ADB should already know of these risks and commit to ending the cycle of ineffectiveness and harm.

Climate finance requires climate justice 

All types of investments, including those that fund climate solutions and those that the ADB – alongside other multilateral development banks, now classify as universally aligned with the Paris Agreement – have the potential to cause environmental and social harms. From a hydropower dam-associated project in Nepal that impacts the livelihoods, health, and safety of vulnerable populations, to a conservation project in Myanmar that threatens to displace Indigenous populations that have sustainably lived in and protected the area for generations, to a biomass project in Liberia that both led to destruction of nearby natural forests and sexual violence against women – a lesson the ADB should already know is that some climate financing causes harm, and hearing from local communities can prevent and mitigate that harm.

Climate financiers like the ADB must learn this lesson and turn away from the narrative that combating the climate crisis solely requires moving more money as quickly as possible to projects that fund climate solutions. Financing solutions to climate change without adequate environmental and social safeguards guaranteeing climate justice will not only fail to limit the impacts of the climate crisis, but also push vulnerable communities further toward the brink. Despite this, ADB is focused on lending more money, more quickly.

Such a reckless approach to climate finance also increases the likelihood of climate washing, in which critical climate funding goes towards projects that either have tenuous connections to climate solutions or those that actively undermine climate mitigation and adaptation goals. For example, ADB will still not consider fossil fuels such as oil and gas projects as universally unaligned with the Paris Agreement. ADB also continues to fund decades-old solutions like large hydropower projects despite their well-documented negative environmental impacts including greenhouse gas emissions and human rights violations.

Community-led accountability is necessary

Our work with communities has led us to an antidote for top-down climate financing: community-led accountability tools. Community-led accountability means that  (i) projects are co-developed with the communities that the finance will impact, and (ii) when a project results in harm, affected communities have the opportunity to raise their grievances before independent accountability mechanisms and obtain remedies.

For example, robust environmental and social safeguards require that affected communities are meaningfully consulted before a project is approved, and in the context of Indigenous populations, that Free, Prior, and Informed Consent (FPIC) is obtained. Requiring participation of affected communities in the design of the project reduces the risk of negative environmental and social impacts and creates opportunities to adequately mitigate and redress known harms. However, if and when harms occur during implementation, communities should be able to raise a complaint to the bank and receive redress.

Community-led accountability tools go beyond protecting vulnerable communities to also helping well-intentioned investors understand the net impact of their proposed investments. Regarding a hydro-electric project in Oaxaca, Mexico, we supported a community who filed a complaint to an investor’s accountability mechanism alleging severe environmental consequences. After the accountability process provided a forum for communities to be heard, the financiers ultimately decided to halt the project.

See related: In the Mekong Basin, an ‘unnecessary’ dam poses an outsized threat 

The ADB can start to make good on its climate commitments by improving two key policies: the 2009 Safeguards Policy Statement, which is subject to an ongoing review, and the 2012 Accountability Mechanism Policy, which is slated to be reviewed soon.

The 2009 Safeguards Policy, which has been under review since 2020, determines what environmental, social, and human rights standards must be respected and followed at the stage of project design, approval, and implementation. It includes steps for prevention (example: environmental assessments), mitigation (example: changes in project design), and remedy (example: resettlement and livelihood restoration).

Through the consultation process on the safeguards policy, project-affected communities and civil society organizations have advised the ADB on how to adequately safeguard issues of gender, labor, cultural heritage, biodiversity, Indigenous people’s rights, and protect people against reprisals. The safeguards policy also presents an opportunity to further incentivize “low-cost, low-carbon, pro-poor, and sustainable” sectoral investments alongside improving monitoring of greenhouse gas emissions across ADB projects.

The ball is now in ADB’s court. We eagerly await the release of the new draft policy, which will reveal whether civil society voices were heard, or if consultations were just a mechanical check-box exercise for the ADB.

While adequate environmental and social safeguards are crucial, they are meaningless if they are not followed. An accountability mechanism helps ensure that the ADB actually follows its own rules by creating a channel to hear from impacted communities, address non-compliance, and provide remedy. This is why the strength of the Accountability Mechanism Policy is so important.

As it stands, the current Accountability Mechanism Policy is inadequate to govern the ADB’s ambitions. First, it has prohibitive barriers to access that require affected communities to first raise issues with the operations department that is alleged to be responsible for their harm. The protocol does not allow any exceptions even in cases of fear or risk of reprisals. Second, the case process does not adequately enshrine community agency nor does it take into account their Free, Prior, and Informed Consent during complaint submission, dispute resolution, or compliance review.

For example, the mechanism limits communities’ choice of representatives, independent evaluators in the course of problem-solving can be appointed without community consent, and there is no requirement that the bank consult communities in the formulation of remedial actions. Lastly, the process is not remedy-focused. Management-driven remedial action plans often focus on learning for future projects instead of redressing harms faced by communities in the present.

Part of why the Accountability Mechanism Policy is so inadequate is because it is outdated. It was last reviewed in 2012, and it lags behind mechanisms from sister institutions that have reviewed their policies not only once, but twice in the intervening years.

ADB need not reinvent the wheel, as other climate financiers including the Green Climate Fund have better designed accountability mechanisms. ADB must not only meet good practice accountability standards set by other climate financiers, but also strive to set new standards for its Accountability Mechanism.

ADB’s ambition to be Asia and Pacific’s climate bank is admirable, but their business-as-usual approach is not only insufficient, it actively works against sustainable climate investment. To achieve its goal, ADB needs to enshrine its accountability to communities in policies and take seriously the project of creating an effective accountability mechanism. We will be watching to see if ADB seizes the opportunity to actually succeed in combating the climate crisis.

Radhika Goyal is a Policy Associate with Accountability Counsel, where she advocates for international financial institutions to be more accountable to the communities they impact.

See related commentary here at Mongabay:

Indonesia’s Just Energy Transition Partnership must increase transparency (commentary)