The WCD Framework and Investment in Large Dams

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In May 2005, HSBC was the first private bank to adopt the decision–making framework of the World Commission on Dams. In July, International Rivers and BankTrack called on more than 80 banks in 17 countries to follow the example of HSBC and adopt the WCD recommendations. What follows is the NGO letter to the banks.

Dear Madam/Sir:

We are writing to discuss the financing of large dams and to suggest that, following the example of other actors, your bank adopt the decision–making framework of the World Commission on Dams (WCD) to guide your activities in the water sector.

Experience shows that large dams carry high environmental, social, economic and reputational risks. Such projects should only be developed, and financed, if they comply with the strictest social and environmental standards and guidelines.

Created with support from the World Bank and the World Conservation Union (IUCN) in 1997, the World Commission on Dams carried out the first comprehensive, independent evaluation of the development impacts of large dams. Published in November 2000, the WCD report contains a comprehensive set of recommendations, constituting today’s best practice for developing new dam projects. These recommendations have become the benchmark by which civil society, the media and the interested public at large are measuring all new dam projects across the globe.1

The core values and strategic priorities of the WCD report have been embraced by most of the relevant parties, including the hydropower industry, governments, and the World Bank. A small but growing number of institutions, including most recently HSBC, have formally adopted the WCD’s full decision–making framework, which includes 26 specific recommendations.

The Freshwater Infrastructure Sector Guideline that HSBC adopted on May 27, 2005, applies to direct lending and other forms of project finance, corporate lending and other financial support where the use of proceeds is known to be project–related. It rules out assistance for any projects that do not conform to the WCD framework. It also takes guidance from other standards, including the World Bank safeguard policies, the Ramsar Convention on Wetlands, and the European Union Water Framework Directive.2

BankTrack, International Rivers and other institutions such as WWF have welcomed the adoption of HSBC’s new freshwater sector guideline. We believe that it makes HSBC best–in–class among financial institutions lending to the water sector, and provides a model that all financial institutions, including private banks, should follow. We will encourage socially responsible investors to use endorsement of the WCD framework as a criterion when they assess their investments in the financial sector.3

We call on your bank to follow HSBC’s example and formally adopt the WCD’s decision–making framework. We encourage you to apply the WCD recommendations to all direct and indirect support for projects in the water sector, including project finance, commercial and corporate lending and other project–related support.

We would appreciate it if you could let us know your bank’s position on the WCD’s decision–making framework, and whether you plan to formally adopt it.

We would be happy to discuss this topic with you further, including how the WCD recommendations can be implemented in practice. We look forward to your response.

Thank you for your attention.

Yours sincerely,

Peter Bosshard
Policy Director
International Rivers

Johan Frijns


1. For more information about the WCD process and report, see The WCD report is available here.

2. HSBC’s Freshwater Infrastructure Sector Guideline, available for download below.

3. For NGO comments on the new policy, see (BankTrack) and (WWF).

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