World Bank to become more selective in oil and gas loans

The World Bank will continue to fund oil, coal and mining projects but will be more selective, it said in response to a review that recommended it phase out support for such projects.
"Our future investments in extractive industries will be more selective, with greater focus on the needs of poor people and a stronger emphasis on good governance and on promoting environmentally and socially sustainable development," the bank said in a summary of its response.

World Bank President James Wolfensohn commissioned the independent review in 2000, following concerns by environmental and human rights groups that its participation in oil, coal and mining contributed to poverty instead of alleviated it. Led by Emil Salim, Indonesia's former environment minister, the review suggested the bank radically change its approach to funding such projects and even stop supporting some.
In the past year, World Bank affiliates helped fund two criticized private sector oil projects -- the Chad-Cameroon and the Baku-Tbilisi-Ceyhan pipelines -- which both carry crude thousands of kilometres overland to the sea.

Bank directors met to discuss its official response to the review following three months of consultations with governments, industry and civil groups. The bank's executive board will meet to authorize the response after 30 days of public comment.
In its response, the bank said it would dramatically increase its support for more environmentally friendly renewable energies and clean energy sources like natural gas. It said its participation in oil, coal and mining projects is expected to remain relatively small at less than 5 % of its total lending per year.

To the bank, the impact of its involvement in such projects would mean greater environmental protection and better social standards.
"By staying engaged on a selective basis, we can have an influential role in ensuring that the best environmental and social practices are followed and that the goal of sustainable poverty reduction is achieved," it said.
The institution said in many developing countries oil, coal and mining were important assets that will have to play a role if their governments are to reach global poverty targets.

Rashad Kaldany, director of the World Bank Group's oil, gas, mining and chemicals department, said the bank listened to all sides but in the end had to decide where it would make the biggest difference for the world's poor. He said under the new policy the bank would assess a country's governance -- the process of decision making -- before it backs a project.
"We will look at governance issues and make sure that we are (more) comfortable with what is being put in place than we were in the past," he said.

In projects where the bank has more leverage, Kaldany said the global lender would ensure revenues are disclosed and profits properly used.
"We will make it a requirement in the future that revenues are disclosed, certainly immediately for the large projects, and over a period of two years we expect to have all projects in which we're involved be much more transparent on revenue flows to government," he said.

Environmental groups said the bank's response was unclear and ignored the recommendation to get out of oil and coal.
"The World Bank's response is fuzzy and lacks clarity," said Jon Sohn, campaign director for Friends of the Earth. "Judging from past bank behaviour, unless implementation is absolute, binding and subject to public input, a historic opportunity to alleviate poverty will be missed," he said.