Alliance Between Banks and NGOs for Sustainable Development

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SEATTLE, Washington — Banks are the source of the overwhelming majority of the world’s capital investment needs. National governments require loans from large private and public institutions to pay for infrastructure projects necessary to uplift citizens out of poverty and enhance economic activity. Therefore, how large banks react and respond to the concerns of civil society organizations (CSOs) and non-governmental organizations (NGOs) is of critical importance. The World Bank, the European Bank for Reconstruction and Development and the Asian Development Bank are large multilateral public banks. These banks serve an outsized role in ensuring citizens’ concerns and their potential opposition to infrastructure projects are respected and adequately resolved.

The Relationship Between CSOs and NGOs and Financial Institutions

Though banks remain gatekeepers for critical infrastructure funding in regions worldwide, NGOs and CSOs are gaining competence in utilizing social media and online networking to create pressure campaigns and raise public awareness for projects and their shortcomings or controversies.

NGOs and CSOs can influence funding enthusiasm through these operations, draw in international scrutiny and change or cancel projects entirely.

On the surface, banks and NGOs appear to have an adversarial relationship at best. However, institutions like the Asian Development Bank (ADB) increasingly recognize their positions’ gravity and their potential to elevate standards for public and private projects across the world. Instead of disregarding NGOs or CSOs, banks like the ADB seek consultation and approval from these organizations. This relationship’s result is a renewed focus on socially responsible and planet-friendly development that limits controversies and maximizes social benefits.

What is the ADB?

The ADB, or Asian Development Bank, is one of the largest multilateral banks globally and serves as one of the main lenders for infrastructure funding in the Asia-Pacific region. With 68 member nations, the ADB is crucial for co-development, economic integration and prosperity in the region. The ADB operates by distributing money offered by membership nations, with much of the funding coming from developed powers like Australia, Japan and the United States.

The bank primarily focuses on sustainable development projects that improve gender equality, reduce poverty and safeguard the environment. For example, in its new outline for the next decade, labeled Strategy 2030, the ADB is committing $80 billion in climate change mitigation and adaption financing across the Asia Pacific region. This pool of capital provided by the ADB serves as a lifeline for developing countries across Asia as many are locked out of funding due to poor credit or historical financial troubles.

How Does the ADB handle CSOs and NGOs?

As one of the largest multilateral banks globally, the Asian Development Bank can set a standard for both the public and private sectors. With its close relationships with the World Bank and the IMF, how the ADB treats NGOs can cause ripple effects worldwide. Fortunately, the ADB commits to respecting NGOs’ concerns in all of its infrastructure and development projects.

Anshukant Taneja, an analyst of the ADB, spoke with The Borgen Project about the function of the ADB and how it seeks input from civil society organizations and non-governmental organizations. Taneja mentioned that the ADB regularly consults these groups prior to any project approval. When asked about how the ADB responds to protests and other civil or environmental concerns regarding infrastructure in Asia, he explained that the rigorous analysis of all project elements — financial, social and economic, among others  — prevent controversial projects from receiving funding from the ADB. Every year, the ADB releases highlights of its partnerships with NGOs and CSOs across the region; some of its 2019 highlights are detailed below.

NGO/CSO Input in Project Design

In 2019, the ADB engaged with several CSOs and NGOs to improve project design across various nations in Asia. For example, river rehabilitation and ecological protection efforts in China funded by the ADB included regular consultations with the Nature Conservancy, a reputable NGO based in the United States with regional offices in China.

NGO/CSO Input in Engagement

In addition to consultation, the ADB also encourages NGOs to build local economies and introduce economic resilience. For example, in 2019, the ADB engaged with the nation of Timor-Leste to develop its coffee industry. Home to 1.3 million people and a GDP per capita income of only $6,000, Timor-Leste needed economic growth to address local poverty concerns. By partnering with local NGOs like the Coffee Quality Institute and CSOs like the Timor Coffee Association, the ADB helped Timor-Leste to commercialize its domestic coffee production potential, growing an industry that serves as the primary cash crop for 20% of households.

Admittedly, the ADB is just one bank among dozens that governments may approach when looking for project funding. However, the ADB and other multilateral public banks like the World Bank play a huge role in shaping the architecture of funding deals and encourage the private sector to improve its project standards across the board. Although the ADB’s engagement with the private sector is limited, Taneja states that private sector banks seek input from the ADB (and other similar institutions) due to its expertise in sustainable development and cordial relationships with many NGOs. In this regard, the ADB can elevate the concerns of CSOs and NGOs in institutions beyond its control.

The alliance between banks and NGOs appears unusual at first analysis. With profit motives often adversarial to social or environmental concerns, it seems unlikely that banks would seek advice from their often opposing groups. However, with social media allowing for new and sustained social and environmental pressure campaigns and investors’ desire to avoid controversy in development projects, a seemingly adversarial relationship actually reveals itself to be a mutually beneficial one.

– Saarthak Madan
Photo: Flickr

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