Environmental and social safeguards of international financial institutions and their relevance for tourism-induced displacement and resettlement

Several international financial institutions (IFIs), such as the World Bank and the Asian Development Bank, have recognised the drastic impact that evictions and displacements induced by infrastructure and other development projects, including tourism, can have on people. The World Bank was the first multilateral development agency that adopted guidelines on involuntary resettlement more than 35 years ago. It has since made some important contributions to the overall understanding of the multiple risks associated with evictions and proposed a set of mitigation measures — so-called environmental and social safeguards - to minimise harm. These safeguards have been formally adopted by a substantial number of other IFIs, private financial institutions and corporations, yet this has not reduced the high number of forced evictions and involuntary displacements that occur each year. A major reason for this is that foreign direct investments (FDIs), including in land and other natural resources for tourism development, are still seen as a major growth strategy and a prerequisite for poverty alleviation in less developed countries. IFIs and commercial banks have repeatedly called for a further liberalisation of land markets to allow foreign ownership, which aggravates the problem of tourism-related land and resource grabs. In addition, IFIs use an increasing number of complex financing modalities, such as multi-purpose financing facilities, financial intermediary projects and finance projects with multiple subcomponents, whose displacement impacts emerge only after the project has already been approved (Price, 2015).

Another problem is that non-traditional donors and development banks from emerging economies, such as China, Brazil, India, and South Africa, have created new modalities of operation and different transparency and safeguards standards which make development-induced displacement and resettlement even more ambiguous (Price, 2015). For instance, the China-led Asian Infrastructure Investment Bank (AIIB), which began operations in January 2016, is poised to have an enormous impact on Southeast Asian countries by funding major infrastructure projects under China’s ambitious Belt and Road Initiative. The AIIB has developed its own social and environmental safeguards that, among other principles, require its borrowers to only conduct ‘free, prior, and informed consultation’ (FPICon; emphasis added) with Indigenous peoples facing loss of customary ownership of land and other natural resources and/or relocation rather than to obtain ‘free, prior, and informed consent' (FPIC;

emphasis added) from them. This appears to be in gross disregard of the UN Declaration on the Rights of Indigenous Peoples and falls short of existing international standards as enshrined, for instance, in the Equator Principles approved by international financial institutions in 2013 (see section 10.7).

To enhance environmental and social safeguards, IFIs should refrain from financing any tourism business or infrastructure project that leads to forced displacement and dispossession of legitimate landowners. They should further assume the responsibility to monitor adherence of their clients to international human rights standards, to offer legal guidance and to withdraw funding when clients fail to respect customary or codified land and resource rights in the implementation of their projects.

Equator Principles: holding the corporate financial sector accountable to tourism-related land rights infringements?

The Equator Principles (EPs) provide a comprehensive set of guidelines for both borrowers (i.e. project developers) and lenders (i.e. financial institutions) on how to assess the environmental and social impacts of projects and incorporate safeguards into project and loan agreements. They were established in 2003, have since been revised three times and have been valid in their current form of EP IV since June 2020. As of September 2020, 110 private and public financial institutions in 38 countries have voluntarily adopted the EPs and committed themselves to incorporate them into their own policies (www.equa tor-principles.com). The EPs are modelled after the International Finance Corporation’s (IFC’s) Performance Standards on Environmental and Social Sustainability, which came into effect in 2012 (cf. Box 11.5). The IFC is the private lending arm of the World Bank and its relatively high environmental and social risk management standards have been globally recognised. The supporters of the EPs maintain that the principles are a rare example of successful financial market self-regulation and represent substantial progress in raising financial institutions’ performance in addressing social and environmental risks of development projects, including tourism. Yet it has been argued that the EPs rely solely on voluntary reporting and therefore are not a sufficiently strong hedge against dispossession and displacement in weak regulatory' environments and authoritarian political settings (Wright, 2012; Price, 2015, 2018).

Box 11.5 The IFC’s performance standards on environmental and social sustainability on which the Equator Principles are based

  • • Assessment and Management of Environmental and Social Risks and Impacts;
  • • Labour and Working Conditions;
  • • Resource Efficiency and Pollution Prevention;
  • • Community Health, Safety and Security;
  • • Land Acquisition and Involuntary Resettlement;
  • • Biodiversity Conservation and Sustainable Management of Living Natural Resources;
  • • Indigenous Peoples;
  • • Cultural Heritage

Source: IFC, 2012

A recent study commissioned by the United Nations Environment Programme (UNEP) on the adoption and implementation of the EPs by selected financial institutions found that the two major motives of project financiers for adopting the principles have been to (1) increase their reputation and (2) serve as guidelines for risk management strategies (Weber and Acheta, 2016). Another important finding from the study was that the EPs did not effectively change the way environmental and social issues in project finance are assessed nor did they lead to a rejection or modification of projects with regard to their environmental and social impacts. Even more concerning is the finding that in some cases financial institutions that signed up to the EPs did not even comply with their own voluntary guidelines and that most of them did not disclose their projects in reporting, thereby making it near-impossible to assess their social and environmental impacts (Weber and Acheta, 2016).

Some critics have advocated for independent external assurance of financial institutions’ EP disclosures rather than just self-reporting (Maeve and Chen, 2010). It has also been proposed that the EPs implement enforcement mechanisms that could include monetary fines or exclusion from the EP association, if members do not comply with some of the principles (Weber and Acheta, 2016). With regard to land acquisition and involuntary resettlement, EP member institutions could be obligated to disclose the alternatives they explored and why these were not selected. In the meantime, stakeholder pressure through media reporting, independent research and NGO advocacy appears to be the most promising way to hold financial institutions accountable for their project impacts, as they face considerable reputational risk if they do not comply with the social and environmental safeguard principles they have committed to.

 
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