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Asian Development Bank (ADB) should follow International Finance Corporation’s (IFC) lead

Updated: Dec 12, 2018

Halfway through the International Monetary Fund (IMF) and World Bank Annual Meetings in Bali, Indonesia, the International Finance Corporation (IFC), the private sector arm of the World Bank Group (WBG) announced that it would be “rapidly greening its portfolio” and that “it will be taking significant steps to vastly reduce its exposure to coal through new financial intermediary (FI) investments”, this move by the IFC should put considerable pressure on the Asian Development Bank (ADB) to green its portfolio as well and re-think its business as usual pursuit of economic growth driven by dirty energy.

Rayyan Hassan, executive director of NGO Forum on ADB stated that “the Forum is gravely concerned with these seismic shifts in global development financing, specifically in relation to Asia’s developing economies. The intrusion of private capital in mega infrastructure investments has raised the ante on the governance mechanisms, or lack thereof, of multilateral banks especially the ADB. The network believes this lack of accountability of private capital is a telling sign for all future especially energy-intensive projects being championed by the ADB through its Strategy 2030”.

The ADB just recently approved its Strategy 2030 and has set up a clean technology fund or CTF through which in 2013 has financed - without meaningful consultation or attention to environmental or social safeguards - over 150 Million USD in geothermal energy projects in Indonesia alone. Geothermal technology and gas projects are still riddled with underlying environmental impacts including GHG emissions.

In 2016, the ADB through its ADB CTF Private Sector Geothermal Program: Indonesia & Philippines was attempting to seek further funding, again without the mandatory meaningful public consultation required by the ADB. In addition, ADB has provided direct support in the name of "clean energy" for the notorious mega-infrastructure Financial Intermediary, PT Sarana Multi Infrastruktur, (PT SMI) with a well-documented track record of violations of environmental and social safeguards. Given that the majority of geothermal projects in Indonesia are targeted at forest areas inhabited by Indigenous and other forest-dependent peoples, lack of attention to the environmental and social impacts is a tremendous problem.

NGO Forum also notes with extraordinary concern that the ADB is currently attempting to place Indonesia's entire National Energy Company (PLN) under "borrower system" rules instead of requiring mandatory implementation of all ADB Safeguards. Given the dismal environmental and social track record of PLN and the borrower system, this call into question any claims of a focus on clean technology with meaningful environmental and social safeguards.

The ADB has also a track record of financings dirty fossil fuel projects such as the Tata Mundra Coal Power Plant in India, Visayas Coal Project in the Philippines, and many other investments in gas projects in the region. At present, ADB is looking to invest in the CHP5 Coal Power Plant in Mongolia. The bank has also sent a team to see the feasibility of the Upper Karnali Hydropower Dam in Nepal as a possible investment venture. In fact, the majority of its 41 energy pipeline projects published online, are based on the extraction of fossil fuels or other forms of retrogressive energy investments, including large hydro and waste to energy (incineration) projects.

Sreedhar Ramamuthi, co-founder of Environics Trust, a grassroots organization based in New Delhi, India, explained that “ADB should provide a clear plan of action on transitioning from Fossil Fuel energy to fully renewable energy investments and to ensure and publicly commit that these investments - including existing investments -- are carried out under fully implemented ADB safeguards with mandatory meaningful consultation with the affected communities, strict avoidance of forced resettlement, and with careful and documented adherence to environmental safeguard requirements”.

Hassan Mehedi, chief executive director of Coastal Livelihood and Environmental Action Network (CLEAN), a grassroots organization based in Khulna, Bangladesh also put emphasis on the protection of forest and forest peoples, “there should be a mandatory social safeguards for the protection of the lives and livelihoods of affected communities, with a specific focus on women, Indigenous peoples and the vulnerable as required by ADB safeguards”

The transition from Fossil Fuel to renewable energy must have clear indicators and targets with mandatory gauges including gender-disaggregated documentation of environmental and social impacts, how to prevent those impacts, information disclosure, consultation, and avoidance of land evictions.

Lastly, NGO Forum on ADB calls for clean energy transition indicators in line with countries and their respective NDCs (Nationally Determined Contributions) as per Paris Agreement.


Written by Jen Derillo. Jen is NGO Forum on ADB's Program Coordinator for Communications.


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