Internalization of environmental costs in projects financed by Multilateral Development Banks in Central America

Abstract

Sustainable development requires making economic growth and equality in income distribution compatible with the conservation of the environment. This delicate and complex balance is harmonized by Multilateral Development Banks (MDBs). The article aims to show whether the current projects financed by MDBs in Central America internalize environmental costs in their financial models. The research methodology corresponded to the qualitative through the documentary review available on their websites. However, despite the decades that have passed since the founding of these entities, the assessment of externalities is incipient. The first finding was the tendency for the entities to consolidate all their environmental and social policies in instruments called Environmental and Social Frameworks. Although, environmental costs are more relevant in these instruments, they are limited to issues associated with resettlement, conservation of natural habitats, and land acquisition. The following are identified as immediate actions to be promoted by MDBs: the strengthening of national environmental regulations, the introduction of environmental costs in the market, the acceptance of environmental costs by those responsible for them and having the citizen participation. Emerging tendencies is presented green finance instruments that seek; and models that will allow, not only economic objectives, but also those related to sustainable development.