World Bank Turns Green, Pleasing Environmentalists

FOR decades, the World Bank and other international lending institutions directed most of their money toward hydroelectric dams, coal-fired power plants, highways, and mowing down forests for lumber.

Pouring lots of concrete and investing in big equipment was what donor countries wanted (as did the businesses hired by developing nations, which often were based in donor countries) - even if it wasn't the best thing for the environment or for local people.

"I'm embarrassed to tell you that 10 years ago, we had one project directed specifically to the environment," World Bank president James Wolfensohn said recently. Under pressure from environmental groups, the bank and other institutions now are stressing development aid that includes environmental protection, smaller-scale projects, and concern for social impacts.

"There are over 100 [environmental] projects today," Mr. Wolfensohn told senior development officials at the World Resources Institute in Washington last week, adding that "in every one of our projects, we are moving towards 'greening' our portfolio."

This "greening" of the World Bank - which held its annual meeting this week - and its related institutions is evidence that the lessons of the 1992 Earth Summit are starting to be learned, observers say.

"Besides better policies on paper, there have been some signs of real change in the bank's lending program," reports Hilary French, a Worldwatch Institute researcher. "In addition, the bank has worked to increase lending for education, population, health, and nutrition - key sectors for sustainable development."

International organizations and individual countries, including the United States, also are beginning to look at new ways of defining economic progress - questioning the reliance on gross domestic product (GDP), the usual measure of a nation's output of goods and services, for example - so that the depletion of natural resources is more accurately taken into account.

Some leaders of nongovernmental organizations remain critical. There has been a recent prickly exchange between an international coalition of environmental groups and World Bank officials over whether the bank has provided adequate oversight of projects in Asia and Africa.

Still, other activists are pleased with the progress, and they have joined with the World Bank in seeking ways to promote "sustainable development" that connects environmental protection and social progress to traditional economic growth.

Today, the World Bank's "environmental portfolio" includes 137 projects in 62 countries. This is nearly twice as many "green" projects as in 1992, and it amounts to about $10 billion in loans, making the bank the world's largest backer of such projects.

These include cleaning up the Komi oil spill in Russia, expanding sewage collection and treatment in Bombay, India, controlling industrial pollution in China's Liaoning province, and conserving wetlands in the Baltic Sea.

"Never has there been a greater need to invest in environmental activities," says World Bank vice president Ismail Serageldin. While the bank's push into cleaning up pollution and protecting natural resources in developing countries has gained recent attention, the institution's willingness to question long-held economic assumptions may become more controversial.

Bank officials last week joined representatives of the World Wildlife Fund, the World Conservation Union, and the National Wildlife Federation to propose a "draft action plan." This declares that the present system of macroeconomic indicators, such as the GDP, "encourages economic activity that depletes natural resources at unsustainable rates, damages nature's productivity, and overlooks the social costs of many economic policies."

Critics say the international "System of National Accounts" (under which GDP and other economic indicators are calculated) fails to reckon the true costs of pollution or the worth of resources left on or under the ground. The cost of cleaning up an oil spill is recorded as a plus for the economy. "Natural capital" such as land, water, timber, and minerals have no "worth" until exploited for economic gain.

The bank last month announced that it is developing a new system of measuring wealth that integrates economic, social, and environmental factors. In addition to "produced assets" (machinery, factories, and infrastructure), this includes: the economic value of natural resources, "human resources" (people's productive capacity measured in such terms as education and nutrition), and "social capital," or the productive value of human organizations and institutions.

"This new system," Serageldin says, "challenges conventional thinking by looking at wealth and not just income in determining growth strategies of countries."