World Rainforest Movement

The Natural Habitats Policy: institutionalised derogation

A superficial reading of the World Bank’s Forests Policy suggests that it implies a proscription prohibiting World Bank funding of projects that it determines may damage ‘critical forests’. However, a closer reading of the policy suggests otherwise. This is because, in the first place, it is Bank operational staff and not others, who will decide what areas of forests are ‘critical’ and what are not. Secondly, the Forests Policy relies on the procedures of the current Natural Habitats policy (revised in June 2001), which allows derogations from the overall proscription where there are no feasible alternatives. The quotes below compare the language in OP 4.04 on Natural Habitats and OP 4.36 on Forests.

OP 4.04 ‘Natural Habitats’:

“4. The Bank does not support projects that, in the Bank’s opinion, involve the significant conversion or degradation of critical natural habitats.

5. Wherever feasible, Bank-financed projects are sited on lands already converted (excluding any lands that in the Bank’s opinion were converted in anticipation of the project). The Bank does not support projects involving the significant conversion of natural habitats unless there are no feasible alternatives for the project and its siting, and comprehensive analysis demonstrates that overall benefits from the project substantially outweigh the environmental costs. If the environmental assessment indicates that a project would significantly convert or degrade natural habitats, the project includes mitigation measures acceptable to the Bank. Such mitigation measures include, as appropriate, minimizing habitat loss (e.g., strategic habitat retention and post-development restoration) and establishing and maintaining an ecologically similar protected area. The Bank accepts other forms of mitigation measures only when they are technically justified.”

OP 4.36 ‘Forests’:

“5. The Bank does not finance projects that in its opinion would involve significant conversion or degradation of critical forest areas or related critical natural habitats.If a project involves the significant conversion or degradation of natural forests or related natural habitats that the Bank determines are not critical, and the Bank determines that there are no feasible alternatives to the project and its siting, and comprehensive analysis demonstrates that overall benefits from the project substantially outweigh the environmental costs, the Bank may finance the project provided that it incorporates appropriate mitigation measures.” (7) (Footnote 7: “For provisions on designing and implementing mitigation measures for projects that may have an impact on forests and natural habitats see OP 4.01 and OP 4.04”). This means that while Article 5appears to proscribe Bank financing of projects that will convert or degrade ‘critical’ forests, Footnote 7 suggests that this provision is subject to the procedures in OP 4.01 and OP 4.04 The latter sets out a series of derogations from the overall proscription.

Under the Natural Habitats Policy (OP 4.04 and BP 4.04), a series of derogations allows the Bank to support projects that will damage ‘critical’ natural habitats subject to the following conditions:

There are no ‘feasible’ alternatives
Mitigation measures are in place in accordance with OP 4.01 on Environment Assessment to minimize impacts
Compensatory protected areas are established or maintained
The borrower’s capacity to implement such mitigation measures is assessed and strengthened if needed
The Bank ‘expects’ the borrower to ‘take into account’ the views, roles and rights of NGOs and local communities and involve them in project design, planning, implementation, monitoring and evaluation.
The project is classified as Category A (implying greater provision of information to civil society and slightly longer project preparation time)
The costs of mitigation and compensatory conservation are included in the project’s financing.
However, if compensatory conservation is not possible and/or mitigation in line with OP 4.01 is not possible, then a further derogation is allowed. Other forms of mitigation may then be ‘technically justified’ (OP 4.04 Article 5 last sentence). In these cases, the Bank’s own environmental and legal staff are consulted and the Regional Vice President has to approve the project (BP 4.04 Article 3).
What is needed, and has been called for by NGOs for years, is an independent review of the effectiveness of the Natural Habitats policy. Is it being applied effectively? Does it actually protect biodiversity and critical ecosystems? No one really knows.

By Marcus Colchester, Forest Peoples Programme, e-mail:,

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