by: Zhongjing Wang, Chief Executive Officer, MCDF

One of the core areas of engagement by the Multilateral Cooperation Center for Development Finance (MCDF) is to boost high-quality connectivity investments through broader application of International Finance Institutions (IFI) standards by developing countries and new partners. A key group of IFI standards for the sustainability of connectivity infrastructure is their Environmental and Social policies and frameworks.

During a recent discussion organized as part of the meeting of the MCDF Coordination Committee – an advisory body of IFI and country representatives that oversees and directs the MCDF’s Collaboration Platform – a group of representatives from various IFIs discussed recent trends in their Environmental and Social policies.

We had the pleasure of hearing presentations from the European Investment Bank and the Asian Infrastructure Investment Bank on their recently approved policy changes. We also had commentators from the African Development Bank and the Asian Development Bank, as they are in the middle of the policy reform process. Finally, the World Bank shared its experience after over three years of implementing its new Environmental and Social Framework.

Three themes emerged in the conversation of direct relevance to developing countries when designing and implementing infrastructure projects.

First, the IFIs are progressively converging in their Environmental and Social Policies, with some differences that respond to their specific institutional mandates and characteristics. This convergence ranges from similar scope of their policies and framework, to the introduction of climate change considerations and additional social issues. These new areas include more structured engagements with project stakeholders during preparation and implementation, and the social inclusion of vulnerable groups to enhance the overall benefits of the projects.

Second, the new Environmental and Social Policies are helping project developers and financiers move away from applying these policies as only an additional dimension towards the end of project design. Instead, these new policies call for earlier use and analysis of environmental and social considerations to improve project design, enhance the project's sustainability, and promote social benefits.

Third, there are many important lessons of experience from implementation of the policies. One clear lesson is the need to enhance the capacity of governments, project developers, agencies in charge of environmental and social issues, and the national consulting sector to support enhanced project outcomes in these areas, and stakeholders and communities for a productive engagement with project developers. Providing support to strengthen new financiers' capacity in these areas is also important. Another lesson is the need to strengthen incentives to ensure implementation of the safeguards in the construction and operation phases – rigorous environmental and social impact assessments are not enough.

MCDF stands ready to help address these needs. Through our Finance Facility and Implementing Partners, we are able to strengthen the capacity of both developing countries and emerging market financiers – both for specific projects and institutions – to apply IFI standards cost-effectively to maximize the development impact of connectivity infrastructure projects.