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March 23, 2004
Social Investors Urge World Bank to Adopt Extractive Industries Review Proposals
    by William Baue

If adopted by the World Bank, EIR recommendations could serve as a social and environmental best practice benchmark for oil, gas, and mining companies.


The World Bank Group (WBG), whose mission is to alleviate poverty in the developing world, exerts influence not only through its own investments and actions, but also as an exemplar. A coalition of US- and Canada-based socially responsible investment (SRI) advocates is urging WBG President James Wolfensohn to set just such an example by implementing recommendations of the Extractive Industries Review (EIR).

Mr. Wolfensohn commissioned the EIR in 2000 to determine whether investment in and involvement with oil, gas, and mining sector companies could in fact promote poverty alleviation and environmental sustainability. The EIR Final Report, issued late last year, concludes that extractive industries can contribute to social and environmental sustainability only in very circumscribed ways. Specifically, the report states that extractive industry companies and the countries where they operate must have pro-poor governance, effective social and environmental policies, and respect for human rights.

Although the EIR does not consider itself a "standard setting exercise," neither does it bar groups such as the SRI coalition from using its recommendations as a yardstick.

"We believe the recommendations of the EIR could be a valuable new benchmark for corporate social responsibility (CSR) as we engage in dialogue with our global oil and gas, and mining company holdings," said Lauren Compere, global advocacy coordinator for Boston Common Asset Management.

The coalition, which collectively represents over $28.86 billion in assets under management, sent a letter to Mr. Wolfensohn earlier this month asking him to adopt the EIR recommendations in their entirety, as both a direct and an exemplary action.

"The World Bank's full adoption of the EIR recommendations will bring a new level of credence and attention to best practices in the extractive industries," said Mark Regier, stewardship investing services managers for coalition member MMA Praxis Mutual Funds.

Mr. Regier also chairs the International Working Group of the Social Investment Forum (SIF), which has increased its interaction in recent years with members of the World Bank and one of its subsidiaries, the International Finance Corporation (IFC).

"We believe these groups play an important role in both modeling and shaping (if indirectly) corporate practice in a variety of venues," Mr. Regier told SocialFunds.com.

The EIR was carried out independently of the WBG through a secretariat headed by Dr. Emil Salim, chair of the 2002 World Summit on Sustainable Development in Johannesburg, South Africa.

"Countries should be helped to remove subsidies from carbon-based fuels [and] WBG lending should concentrate on promoting the transition to renewable energy and endorsing natural gas as a bridging fuel--building new pipelines and renovating leaking ones," wrote Dr. Salim in a letter to Mr. Wolfensohn. "On this basis, the WBG should phase out investments in oil production by 2008 and devote its scarce resources to investments in renewable energy resource development, emissions-reducing projects, clean energy technology, energy efficiency and conservation, and other efforts that delink energy use from greenhouse gas emissions."

Specifically, EIR recommendations call on the WBG to devote 20 percent of its energy portfolio to clean, renewable energy.

The SRI coalition also looked at the other side of the coin, projecting the implications of the WBG not implementing the recommendations.

"If the Bank rejects the EIR, it would seriously diminish the potential of the recommendations and undermine the ability of SRIs and others to point to it as a new CSR standard for how oil, gas, and mining companies should operate in the developing world," said Ms. Compere.

 

 
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