For the poorest countries on our planet, the global economic system, including the institutions and rules governing it, has been an underlying cause behind environmental degradation and disruption of local people’s livelihoods. For over 25 years, Friends of the Earth has worked to reform the key international finance institutions to preserve and protect our natural environment, rather than undermine it.
Big development financiers such as the World Bank Group exert enormous influence in the world. The World Bank advises most developing countries on a wide range of economic and regulatory policies, thereby establishing the framework under which business is done. They also directly finance projects that are supposed to catalyze sustainable development and alleviate poverty. But too often these deals, such natural resource projects, threaten local communities and conservation hotspots, all the while feeding U.S. consumption.
In the 1980s, Friends of the Earth helped launch a successful campaign that created the first environmental and social standards at the World Bank and other international financial institutions. These standards have helped enhance poverty alleviation and improve sustainability outcomes for development projects throughout the global South. World Bank standards have been a reference point for establishing similar standards at other financiers who shape the development paths of entire countries.
However, the World Bank Group continues to fund dirty energy, agriculture, and forestry projects that contribute to global warming - at the same time that the institution claims to want an increased role in funding climate change solutions. As a result, we continue to sound the alarm about the World Bank's climate activities.
In the 1990s, Friends of the Earth began advocating for higher environmental and social standards at two U.S. government agencies – the U.S. Export-Import Bank and the Overseas Private Investment Corporation. These standards eventually prompted the US government to convince the Export Credit Agencies of the Organization for Economic Co-operation and Development (OECD) countries to agree to a set of Common Approaches on environmental lending standards. After a groundbreaking lawsuit that Friends of the Earth initiated in 2002 and settled in 2009, these two agencies further committed to increasing financing for renewables, while tracking and reducing their support for fossil fuel projects.
It became clear that Wall Street banks were also becoming more influential financial players in development countries, and were undercutting the hard-won environmental and social protections achieved at other financial institutions. In 1998, Friends of the Earth began to develop strategies and tactics to address these new power players and built an international network of financial advocacy groups which today is known as BankTrack. This collective pressure of this network compelled leading international banks in 2003 to create the Equator Principles, a set of voluntary common project finance standards that has now been adopted by 60 financial institutions.
Today, the new power players in development finance are banks based in developing countries, particularly China. As the world reaches its ecological limits, multinational corporations around the world -- and the banks which back them -- are seeking to develop natural resources in areas that were previously considered too environmentally fragile, technically difficult, or politically unstable. Working with project-affected communities to ensure that the highest social and environmental standards are applied to these deals, and that the most ecologically and socially harmful projects are simply avoided, will be a key development challenge in the years to come.
