Glass Half Full? The State of Accountability in Development Finance

New research report finds development banks do not provide adequate remedy for people affected by their projects

Download the full report and its annexes – including the annex on the European Investment Bank.glass half full cover

Civil society calls on development banks to strengthen their systems to protect those harmed by the activities they finance. Counter Balance is among the 11 civil society organizations that launched “Glass Half Full? The State of Accountability in Development Finance”, a report documenting the hurdles communities and workers must overcome to seek recourse from the financial institutions.

Many development finance institutions have established independent accountability mechanisms that receive complaints from communities and workers adversely affected by the activities they finance. While the structure and procedures of these mechanisms vary, their core activities consist in bringing together the complainants and the borrower to resolve the conflict, conduct an investigation to determine if the DFI’s environmental and social policies have been violated, or both. The complaint mechanisms (CMs) are often the only available option for communities to seek recourse and currently the only avenue to hold development banks accountable to their environmental and social commitments. Since the World Bank’s Inspection Panel—the first independent accountability mechanism —was created in 1994, there have been 758 complaints filed to now 11 different institutions. “Glass Half Full?” assesses the extent to which the development banks and their accountability mechanisms are equipped to handle complaints from impacted people.

The report also contains annexes analysing in details the complaint mechanisms of the different financial institutions and offering recommendations on possible improvement paths.

 

The Complaints Mechanism of the European Investment Bank

The EIB CM was established in 2008. It provides both compliance review and dispute resolution functions. A unique feature of EIB’s CM is that it provides for appeals to the European Ombudsman as a second layer of accountability. This greatly increases the potential of the system to provide remedy. However, this potential has yet to be realised.

The Mechanism itself suffers from a lack of transparency. The authors of the report were impeded in their ability to assess the effectiveness of the system because of the lack of information provided on a large number of CM cases. Additionally, the CM is not provided with sufficient independence from the EIB Management and Board. The European Ombudsman has found the EIB to have interfered in the CM’s complaint process. The EIB Board and Management must demonstrate their commitment to providing remedy to those harmed by EIB-financed activities by taking actions to ensure the CM’s legitimacy, including by involving external stakeholders in the selection of the next CM Director, empowering the CM to trigger their own investigations, consulting with complainants on the development of actions plans, and ensuring the disclosure of all relevant information regarding EIB-financed activities and related investigations.

On the basis of these assumptions, the report looks into specific recommendations to the EIB’s CM, resulting from the assessment based on the standardised framework of the United Nations Guiding Principles Effectiveness Criteria for Non-Judicial Grievance Mechanisms. This report comes in as new input to the upcoming review of the rules and procedures of the EIB complaints mechanisms to take place in 2016. It confirms earlier findings from our report “Towards a new accountability architecture for the European Investment Bank”.

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