Incheon, South Korea - Forum members and allies present at the 56th Annual Meeting of the Board of Governors of the Asian Development Bank (ADB) are calling on ADB management to prioritize safeguards and meaningful consultation in low and middle-income countries (LMICs) that are facing severe economic challenges due to the pandemic and the Ukrainian war.
Countries such as Pakistan, Sri Lanka, Maldives, Philippines, Nepal, and Bangladesh are experiencing severe budget shortfalls, rising inflation, soaring fuel and electricity prices, and food price hikes. To ensure the stability of LMICs, the ADB must prioritize responsible project selection, design, and implementation going forward. Forum urges the ADB to take real responsibility in ensuring that the LMICs achieve Paris 1.5 aligned energy security and sovereignty.
Despite the ADB's efforts, safeguards for infrastructure projects have not been effectively delivered, and communities surrounding projects continue to suffer. For instance, the indigenous Magar and Dalit communities in Tanahu, Nepal, still live in limbo with an uncertain future for themselves and their children.
In light of these issues, the Forum network and allies brought attention to the following critical questions during the 56th ADB AGM:
Safeguards: The CSOs expect the release of the Working (W) - paper on the Safeguards review Phase 3 process in June. We urge the W - paper to be open for at least 120 days of public commenting and to be shared in key regional and national languages where ADB is heavily invested.
Information Disclosure and Meaningful Consultation: Forum urged the ADB to retain para. 54 on (meaningful) consultation and participation of the SPS 2009 and reinforce the "Clear, timely, and appropriate disclosure" as provided in para. 15 of the Access to Information Policy to be upheld and elaborated through the new SPS.
Risk Avoidance and Mitigation: The new Safeguards must ensure binding requirements on rigorous risk assessments for all performance standards before project approval. The assessments must be done through extensive consultations with locally affected and grassroots communities to examine all alternatives, including no project option, in light of internationally agreed standards and obligations.
For Financial Intermediaries: The Forum on ADB is concerned about the opaqueness of the private sector operations department and the different financing modalities such as financial intermediaries, multi-tranche facilities, joint ventures, and bonds, which the Bank is aggressively promoting. FI subprojects must ensure that ADB safeguards are explicitly upheld and delivered across all layers of financing.
Accountability Mechanism: Forum urges the ADB to ensure an independent accountability mechanism, shift the Office of the Special Project Facilitator from management control, and bring it under direct ADB Board supervision. This will make recourse for project-affected communities easier, more accessible, expedient, and cognizant of the community's demands.
Cost of Safeguards: Forum demand that the ADB demarcate the cost of Safeguards be written in ink into the new policy.
For Shrinking Civic Space and Reprisals: Forum network and allies call on the Bank to adopt a zero-tolerance policy of intimidation and reprisals built into the proposed policy with explicit and clear protocols for responding when cases arise.
Addressing these critical questions will help the ADB to ensure responsible project selection, design, and implementation in LMICs and protect vulnerable communities from direct and indirect project-related harms. The network calls on the ADB to uphold its commitment to promoting sustainable development in the region by prioritizing responsible project selection, design, and implementation. This includes ensuring that the new Safeguards review process is transparent and inclusive of public input and that binding requirements for rigorous risk assessments are in place to mitigate potential harm to communities and the environment.
By addressing these critical questions, Forum believes that the ADB will demonstrate its commitment to promoting sustainable development in the region, particularly in countries facing severe economic challenges due to the pandemic and ongoing conflicts.
Energy Transition Mechanism (ETM)
The network also raised a range of concerns regarding the Energy Transition Mechanism (ETM) scheme that the ADBĺ is preparing to pilot in practice.
In Indonesia, the process for pilot project selection has been done behind closed doors and veiled by non-disclosure agreements. In the case of selecting the 660MW Cirebon Unit 1, the adjacent 1000MW Cirebon 2 will be coming online at full capacity, built by the same parent company. Meanwhile, the ADB’s refinancing for the existing power plant appears set to bypass the stringent application of its Safeguards and Accountability Mechanism. As significant community grievances already exist, these would first and foremost be addressed and remedied. While hypocritically championing its safeguards on the ETM website, is this the kind of misleading public information we can expect from ADB after 50 years of operation in the region?
For Pakistan, the analysis being undertaken unambitiously proposes to focus on piloting the ETM at a site which is producing under 200MW of power, while, by design deprioritising vast areas of the country where coal projects are clustered by focusing on places where non-fossil fuel energy projects are already proposed/under construction.
Meanwhile, in the Philippines, the ADB appears to be conveniently sidestepping the reality that it has financed several coal power projects and has a responsibility to support prompt closure, environmental rehabilitation, and community restitution.
In all instances, Forum urges the ADB to explicitly commit to excluding support for resource-intensive “fuel-switching” options, including those which depend upon biomass, ammonia, or burning waste, as well as to excluding large hydropower when considering what will be financed under the ETM as ‘clean energy’.
Question On Gas
As of 2019, gas is the leading contributor to global fossil emissions – whilst coal emissions are declining. In the latest IPCC report (AR6), it is clear that there is no more room for new gas, oil and coal projects to still have a chance to achieve the 1.5-degree global target, notwithstanding the current LNG supply problems, and volatility of global and Asian LNG prices which has caused spiralling high prices of electricity and inflation in key gas dependent Asian countries.
With ADB still pursuing investment into gas projects and development, it is promoting a new stranded asset, just like coal that the bank has promoted for the last decades. ADB continues to be the second-largest gas financier among peer MDBs. Meanwhile, some of the ADB’s borrowing member countries are declaring their support for an international non-proliferation treaty on fossil fuel development. When will ADB commit to a time-bound phase-out from gas finance and to including gas as part of its exclusion list in line with the ambition needed to avert deepening the climate crisis and the catastrophic consequences experienced by the people of this region? We have noted that just recently, the ADB approved a new coal-to-gas switching project – meaning the institution, as of 2nd Q 2023, is still contributing to locking member countries into dependence on fossil fuels.
On WTE, Hydro, Geothermal
We strongly ask the ADB to suspend its support for the 121 million USD Waste-to-Energy (WtE) incinerator project in Thilafushi, Maldives, as it conflicts with international conventions on waste transport and sustainable development. Instead, ADB should prioritize viable Solar and Wind solutions, and remove large-scale hydropower dams and geothermal projects from being classified as renewable energy solutions.
Forum and allies are concerned about ADB's lack of transparent and publicly accountable policy guidance on climate change action and financing. The ongoing Safeguards Review and the launch of the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP) without clear policy guidance are alarming.
Forum Network is emphasizing that committed climate finance must follow clear rights-based social and environmental frameworks, align with international human rights obligations, and prioritize the most climate-vulnerable countries in the region. False solutions must be excluded, such as carbon credit and markets schemes, waste incineration, large hydropower, and fuel switching options.
It is imperative that the ADB takes real responsibility and ensures that LMICs achieve energy security and sovereignty aligned with the Paris 1.5 agreement. CSOs urge the ADB to prioritize safeguards and meaningful consultation in all projects, particularly those affecting vulnerable communities and the environment.
Forum network is also concerned about the opaqueness of the private sector operations department and different financing modalities, such as financial intermediaries, multi-tranche facilities, joint ventures, and bonds, that the Bank is promoting. The ADB must ensure that safeguards are upheld across all layers of financing, as has been ruled by the CAO in the recent complaint against IFC and RCBC.
It is imperative that the ADB takes bold and decisive action to address critical questions of sustainable development, community protection, and transparency, not only during the 56th Annual Meeting but also beyond. As a leading financial institution in the region, the ADB must take full responsibility for ensuring that all its projects are implemented in a socially, environmentally, and economically responsible manner. Failure to do so would undermine the ADB's credibility and betray the trust of the communities it serves.
The ADB must prioritize the interests and well-being of communities over profit and economic growth. The Bank must take concrete steps to mitigate the adverse impacts of its projects on vulnerable communities, including indigenous peoples, women, and marginalized groups. This includes conducting thorough social and environmental impact assessments, consulting with affected communities, and implementing measures to mitigate and address any negative impacts.
It is time for the ADB to move beyond mere rhetoric and take concrete actions to uphold its commitment to sustainable development, protect vulnerable communities, and ensure responsible and transparent project implementation.