Lessons from Environmental Policy Lending

Abstract

The World Bank offers three main categories of financing: investment project financing directly finances specific investments; Program for results financing uses country systems and disburses based on achievement of specific results; and Development Policy Financing (DPF) supports a government program of policy and institutional actions. The DPF instrument is intended to achieve development results primarily through the supported policy reforms and associated policy dialog and support. This learning product focusses on the World Bank’s experience with DPOs in the Environment sector, broadly defined. For the purposes of this review, environmentalDPOs were defined to be any policy lending operation mapped to the Environment and Natural Resources (ENR) Global Practice or, prior to that, the Environment Sector Board, or any other policy lending operation with an environmental or disaster risk management theme as the primary or secondary theme (see Appendix C). This experience covers a wide range of sectors, including climate change mitigation and adaptation, green growth, natural resource management, disaster risk management, forestry, environmental policy, and others. Much of the experience is very new, with 25 of the 64 operations yet to be evaluated. Many of the active programs are among the first environmental DPOs in their country or region. Many operations were designed and implemented by teams that included staff with relatively little policy lending experience, and so the opportunity for learning is substantial.