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Article Excerpt
It is well documented that international organizations diffuse norms, but how and why do they do so? I compare how the World Bank and the International Finance Corporation attempt to spread sustainable development norms through their compliance, mainstreaming, and diffusion efforts. I propose that international organizations spread norms in different ways as a result of their roles within their respective social environments. The International Finance Corporation champions sustainable development by spreading core practices throughout the project finance industry, while the Bank attempts to do so through core and noncore activities. The different approaches raise questions about the capacity of each organization to champion environmental norms: the Bank's multiple activities mixes its environmental message as opposed to the International Finance Corporation's single (recently lessened) environmental voice. KEYWORDS: World Bank, environment, norms, international organizations, International Finance Corporation.
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How do international organizations (IOs) champion new norms? It is well documented that IOs diffuse norms to states. (1) I argue that IOs diffuse norms through everyday practices, but they may also champion ideas through separate endeavors. I examine how the World Bank and its affiliate the International Finance Corporation (IFC), a lender and investor in private sector projects in developing countries, diffuse sustainable development norms in different ways. (2) I propose that IFC champions sustainable development norms by spreading core practices throughout the project finance industry, while the Bank attempts to do so through both core and noncore activities. The different approaches raise questions about the capacity of each organization to champion environmental norms: the Bank's multiple activities lead to a mixed environmental message versus IFC's single (though recently lessened) environmental voice. Arguably, the different approaches are best understood by situating each institution in its social environment, or observing how it interacts with IOs, states, and nonstate actors.
I propose that the Bank continues to have difficulties in consolidating core sustainability norms as witnessed through its compliance, mainstreaming, and diffusion efforts as a result of opposition both inside and outside the organization. Instead, the Bank champions environmental norms through individual initiatives such as carbon financing through its partnership efforts. I suggest that the Bank takes on partnerships outside its core operations because it is the largest and highest profile multilateral development bank (MDB). In contrast to the Bank, IFC is improving its environmental compliance, mainstreaming, and diffusion while championing its core sustainability agenda throughout the project finance industry. IFC's decision to promote itself as a sustainable finance leader emerged from interactions with states, clients, commercial banks, and environmental groups. I argue that IFC's creation of the Equator Principles in 2003 and its shift to new performance standards in 2006 can only be understood through these interactions. (3)
Championing Norms Through Diffusion
It is increasingly recognized that IOs have some degree of autonomy in undertaking their operations. Indeed, IO actions may not conform to state interests and it may be for independent reasons if they do. (4) This highlights a fertile area of research where IOs choose to "redesign" themselves by limiting or expanding their operations. (5) How this decisionmaking process relates to how IOs diffuse norms is of interest here. I propound that IOs diffuse norms throughout their everyday practices but that they may also expand their role to champion noncore activities. As I argue in this article, the Bank continues to have difficulties in implementing sustainable development through its everyday operations even while it chooses to champion global environmental partnerships. In contrast, IFC chose to go beyond state and environmental group demands to champion sustainable development through the Equator Principles, which resulted from IFC's interactions with commercial banks with whom it cooperates and competes. IFC demonstrated industry leadership through its sustainability agenda and began to shape norms of appropriate behavior for private banks. The championing of norms is therefore mediated by the social environment in which the IO exists.
To make this argument, norm diffusion and championing need to be clearly articulated. Norms are "shared expectations about appropriate behavior held by a community of actors." (6) IOs spread norms by forming international agendas, constructing discourse, enforcing rules, and mediating between states. IOs spread ideas through their practices as organizations that facilitate cooperation and coordination between states. For example, those involved in Bank or IFC operations learn how to follow a new norm by watching and/or participating. Nonstate actors such as transnational advocacy networks (TANs) rely on norm diffusion by IOs to spread ideas. (7) TANs have influenced both the Bank and IFC to integrate environmental ideas, because all projects and operations undertaken in conjunction with either would have to meet environmental criteria. Norm diffusion also goes beyond those actively involved; other MDBs emulated the Bank's environmental standards. (8) Arguably, IOs may choose to advocate norms through and beyond normal activities, such that the IO becomes a chief advocate or champion of the norm. I avoid the use of the pervasive "norm entrepreneurs," as this may imply the original generation of norms, which may not be the case. Norm carriers might be more appropriate, although this could infer passivity. Both norm entrepreneurs and champions diffuse ideas through their practices. Yet the active promotion of norms beyond everyday practices and through additional material and ideational commitments makes an IO a norm champion. (9)
Many IOs undertake multiple functions or increasingly recognize multiple aspects to their functions. Various complex issues are now perceived as integral to achieving these aims (such as, in the case of the Bank, combating HIV/AIDS, climate change, and corruption). Multifaceted IOs must therefore prioritize some norms over others. Yet the Bank continues to grapple with how to integrate sustainability, which is evident in its compliance, mainstreaming, and diffusing difficulties. The Bank has branched out into championing specific environmental problems such as climate change, a process that has expanded its environmental activities while contributing to confusion over its environmental direction. IFC, for its part, has adapted the Bank's sustainability approach and has since gone beyond the Bank in championing core sustainability norms through the 2003 Equator Principles. IFC and commercial banks together created ten specific voluntary principles based on IFC's safeguard policies, which have been voluntarily adopted by forty-one private banks. The Equator Principles were initiated by ABN AMRO, which approached IFC on their environmental expertise. Together they convened a meeting with nine other investment banks (collectively called the Equator Banks) to endorse IFC's safeguard policies for the private project finance industry, demonstrating how IFC diffused norms not just to its clients, but to the project finance industry. (10)
How do we explain IFC and Bank decisions? Catherine Weaver, in her essay, examines theoretical explanations for IO behavior. A brief sketch here will reiterate their import for why these IOs champion norms differently. In sum, externally focused rationalist explanations underpredict IO change because they assume IOs merely respond to state dictates. When the Bank decided to move into carbon financing, it was never assured that it would take off in light of regulatory uncertainty of the Kyoto Protocol. In the mid-1990s, the Bank began to initiate partnerships as a means to help alleviate global problems. In 1996, James Wolfensohn "called for new products to increase the diversity of the Bank's products and its relevance in the world." To this end, he created and chaired a new products committee where a Carbon Investment Fund was floated by senior Bank staff member Ken Newcombe. In 1997, Wolfensohn then sought member state interest in the Bank's intention to test carbon financing at the Rio+5 summit. The response was positive and led Newcombe to establish the Prototype Carbon Fund. (11) Much later, the Group of 8 (G8) would mandate that the Bank "take a leadership role in creating a new framework for clean energy and development, including investment and finance." (12) The rationalist model does not explain the Bank's decision to move into carbon financing because it was not the result of state demands.
Second, the rationalist approach cannot explain why IFC chose to expand its mission via the Equator Principles in the absence of state preferences. IFC's decision, like the Bank on partnerships above, may fit within a "weak" principal-agent (PA) model, where IOs act independently until they run counter to the interests of states. Yet, this is of limited use in explaining 10 change. Rationalists that examine IOs could point to internal competition between departments over "power, prestige and resources." (13) This could account for the dominance of some ideas over others and could explain IFC's environment department's proposition to spread norms beyond its clients. But in the case of IFC's environment department, there is no evidence to suggest that doing so would improve the department's position; indeed, the sustain-ability agenda actually dispersed environmental specialists away from the central department to operations.
Alternatively, constructivists...
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