Development Policy Lending and Forest Outcomes : Influences, Interactions, and Due Diligence

Abstract

The revision of the forests Operational Policy (OP) 4.36 in the Bank, stems from discussions on this new approach about the concern raised that, while Bank sector investments would be guided by the new policy, Bank adjustment lending would not. As a result, the latter could, indirectly and inadvertently, lead to adverse impacts on forests and forest-dependent people. Thus it was clear an operational policy to guide due diligence in adjustment lending was necessary. Since adjustment lending at the time was evolving toward the Development Policy Lending (DPL) framework, a policy to guide the design and implementation of this form of operation was prepared, and has since been approved, issued as OP 8.60. This document asserts that it is clear that relatively large-scale economic changes can have significant impacts upon forests. However, there is great variability in outcomes in forests from such changes across the many different countries, and situations covered in the studies reviewed. Forest outcomes from major economic reform, targeting poverty alleviation and sustainable growth, will be highly dependent on prior conditions of the sector. An appropriate response in terms of DPL program design will therefore need to take these conditions into account. In this document, a three-step approach is illustrated. The first is the development of a set of forest significance criteria to rank Bank client countries in terms of their forest sectors; their contribution to the three criteria of sustainable economic growth, poverty alleviation, and protection of global and local forest goods and services; and a fourth criterion, governance. The second is a categorization of forthcoming DPL operations based on their potential to have impacts on forests. The final step is the application of operations identified, as an overlay on the ranked list of countries produced using forest significance criteria. The final section of the document deals with the instruments that have been identified in the Bank as having some role in the due diligence task for OP 8.60, and what further may need to be considered.