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14 February 2004

The World Bank's Extractive Industries Review (EIR) was created as an independent commission to help answer the question of how and under what circumstances extractive industries could positively contribute to poverty alleviation in the developing world. Many SRIs who hold extractive companies have been asking this very same question, particularly as some of the most controversial impacts of oil, gas and mining activities occur in poor countries with weak environmental and human rights protections.

After years of multi-stakeholder consultations, the final EIR report was released last month. Some of the concepts in it represent environmental and social best practice, and can be seen as a new CSR benchmark for extractive industries.

Currently the World Bank management is determining whether to reject, partially accept, or adopt in full the proposals outlined in the report.

THE BANK NEEDS AS MANY LETTERS OF SUPPORT AS POSSIBLE TO ADOPT THE RECOMMENDATIONS. If the Bank rejects the results of its own commission, the potential of this valuable benchmark will be lost for those who advocate for better CSR among global oil, mining, and gas companies.

We invite you to sign on to the letter below, which calls on the World Bank president to adopt the recommendations of the EIR. Please email your name, title, firm and assets under management to Michelle Chan-Fishel of Friends of the Earth at mchan@foe.org. The deadline is March 1, 2004.

More information can be found in the background document following the sign-on.

Regards,

Julie Tanner, Christian Brothers Investment Services
Michelle Chan-Fishel, Friends of the Earth

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NAMES OF FIRMS IN "LETTERHEAD"

March 1, 2004

Mr. James Wolfensohn
President
World Bank Group
1818 H Street NW
Washington, DC 20433

Dear Mr. Wolfensohn:

We write to thank you for initiating the Extractive Industries Review (EIR) more than three years ago at the 2000 World Bank annual meeting in Prague. Since then, the World Bank Group has devoted substantial human and financial resources to this historic process, and has solicited the input of civil society groups from the Global South and around the world.

As investors representing over $XX in assets, we recognize the relevance of the EIR not only to the World Bank, but to the extractive sector, in which many of us invest. Like the World Commission on Dams process, the multi-stakeholder nature of the EIR has contributed to the legitimacy and quality of the EIR, and has in effect resulted in an international benchmark for social and environmental performance in extractive industries, particularly in emerging markets.

As socially responsible investors, we find the report helpful in understanding the conditions under which extractive industries can foster poverty alleviation. Likewise, the report's examination of issues such as how to minimize environmental damage and protect indigenous peoples contributes to our understanding of best practices in the extractive industries.

We are interested in reinforcing many of the concepts outlined in the EIR, as a way of fostering corporate social responsibility among the extractive companies we own. However, our voice as shareholder advocates will be significantly diminished if the World Bank does not adopt the recommendations of a review that it itself has commissioned. We therefore encourage the World Bank Group to fully endorse the Final Report of the Extractive Industries Review, and encourage you to adopt all of its proposals.

We would greatly appreciate your informing us of the process the Bank will be using to make its decision, the timeframe within which the Bank is expected to make its decision, and how this will be communicated to stakeholders. Replies may be sent to Julie Tanner, Coordinator of Corporate Advocacy at Christian Brothers Investment Services at 90 Park Avenue - 29th Floor, New York, New York 10016-1301 (phone: 212-490-0800 ext. 147).

Sincerely,

[your name & firm here]

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BACKGROUNDER

Encourage Adoption of Best Practice in Extractives Sector

The World Bank Group has recently concluded the Extractive Industries Review (EIR), a global, 3-year, multi-stakeholder process to examine what role, if any, the World Bank has in the extractive industries sector in developing countries. The review examines the Bank's role in extractives, how extractive industries can contribute to the Bank's mission of poverty alleviation, and makes particular recommendations to the World Bank as to its own lending portfolio. Nevertheless, many of its proposals can be seen as an emerging best practice for social and environmental performance among global oil, gas and mining companies. The World Bank is now considering whether it should accept the EIR's recommendations.

Background

As a result of public pressure, the World Bank has sought to answer the question of how resource extraction could alleviate poverty and contribute to sustainable development in poor countries. Over the last three years, the EIR has conducted workshops in Latin America, Africa and Asia; commissioned research projects, made site visits, and conducted numerous consultations in an effort to answer that question.

The Review ultimately found that the World Bank has a role to play in the oil, gas, and mining sectors - but only when the right conditions exist that allow extractive industries to contribute to poverty alleviation through sustainable development. The three main enabling conditions are:

a) pro-poor public and corporate governance,
b)effective social and environmental policies and
c) respect for human rights.

Pro-poor public and corporate governance

Pro-poor public governance refers to the ability of the host country government to enforce environmental laws and protect social and human rights. It also refers to conditions such as the absence of armed conflict (or the risk of such conflict), public participation mechanisms in governmental decision-making, and government recognition of and willingness to protect the rights of indigenous peoples. The EIR proposes that extractive projects adopt several measures, such as promoting transparency in revenue flows and public disclosure of project documents. The Review recommends that the World Bank only support projects when all impacted communities receive benefits from the project, and when the host country is prepared and able to withstand the inherent social, environmental, and governance challenges of resource extraction.

Regarding corporate governance, the Review proposes that companies receiving World Bank financing should have environmental and human rights policies, as well as the capacity to implement them. Companies should also be required to engage in consent processes with communities and groups directly affected by projects in order to obtain their free prior and informed consent. The EIR also provides several recommendations regarding fair revenue sharing, the use of poverty indicators, and grievance mechanisms.

Environmental and Social Policies

The EIR concluded that strong World Bank environmental and social policies, coupled with interventions and advocacy, are key to ensuring that oil, gas and mining activities contribute to sustainable development. It recommends that the corporate sponsors conduct integrated environmental and social assessments that account for the cumulative impacts of projects. It also recommends that the following activities be avoided: operations located in protected areas and/or critical natural habitats, those that result in forced resettlement, and those that discharge mining waste in rivers.

Human Rights

The third key EIR recommendation involves respecting human rights. The EIR maintains that corporations' human rights records should be examined, and those receiving World Bank financing should be required to implement International Labor Organization Core Labor Standards. In addition, indigenous and local communities should only be resettled if they have given free prior and informed consent; and only if their rights to own, control and manage lands and resources have been guaranteed.

A Shift to Renewables

The EIR recommends that the World Bank concentrate on promoting the transition to renewable energy and endorses natural gas as a bridging fuel - building new pipelines and renovating leaking ones. The Review encourages the Bank to continue its de facto moratorium on coal development in emerging markets, and to phase out its investments in oil production by 2008. Its scarce public resources should shift to investments in renewable energies and energy efficiency/conservation at a rate of 20 percent per year.

Lessons for the SRI Community

While much of the EIR contains many proposals specific to the World Bank, the Extractive Industries Review also has essentially created a set of international best practices for environmental and social performance in the extractives industry. Its emphasis on developing countries highlights some of the most environmentally and socially troubling aspects of the global oil, gas and mining industries.

For the SRI community, the EIR's findings address a pressing tension:

Given many funds' exposure in the extractive sectors, how can SRIs maximize sustainability in what traditionally have been some of the most unsustainable sectors? With its concrete corporate recommendations (such as no forced resettlement, no riverine tailings disposal, and transparency in corporate payments) Extractive Industries Review can offer SRIs a new corporate social responsibility (CSR) benchmark for the extractives sector, and inform SRI research agendas, screens, and shareholder activism.

Call to Action

The EIR was conducted with a fair amount of independence from the World Bank. It is now up to the World Bank Management to now decide whether to reject the Review, to accept parts of it, or to endorse it in its entirety. 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.

Email Michelle Chan-Fishel (mchan@foe.org) with your name, title, and firm, and amount of assets under management. For more information, see the Extractive Industries Review website: www.eireview.org or contact Michelle Chan-Fishel of Friends of the Earth at mchan@foe.org or 1 510 848 1155.