Projects failing to satisfy controversial guidelines recommended five years ago by the World Commission on Dams will no longer be eligible for any kind of financial support from the biggest international commercial bank, following last month’s policy announcement by HSBC Group in London.

"This guideline ensures that our activities in the freshwater sector reinforce our efforts to reduce the social and environmental impacts of our operations," said group chairman John Bond, in a statement after the bank’s annual general meeting on May 27.

Projects most clearly no longer in HSBC’s market are those failing to conform to the WCD Framework. Also excluded are projects that degrade or convert critical natural habitats or the 1,430 wetland sites registered under the international Ramsar agreement of 1971. World Heritage Sites listed by the United Nations Educational, Scientific and Cultural Organization will also be barred.

As well as identifying ineligible types of projects, HSBC’s guideline "outlines the standards that customers operating in this area are expected to meet," it adds. The new policy covers water resource management, services and infrastructure but not usage and other human activities affecting water.

HSBC’s announcement is "great news," says Patrick McCully executive director of the environmental group International Rivers Network, Berkeley, Calif. HSBC "is the only private financier that I know of" to adopt the WCD recommendation in clear terms, he adds.

Otherwise, the "dam-building industry are very critical (of WCD) and so are dam-building governments," McCully adds. McCully is disappointed with the World Bank’s failure to adopt recommendations from WCD, which it partly sponsored. The bank "started immediately backing off," he says.

But McCully is encouraged by South Africa’s effort to accommodate the WCD. And he is pleased by the European Union’s directive, passed last year, that refers to WCD guidelines in defining the eligibility of hydro projects to take part in its new carbon-trading system.

HSBC’s Freshwater Infrastructure Guideline, according to the bank, is "based on widely adopted international sustainable development standards...including the (WCD), as well as other industry participants, development agencies and major environmental non-governmental organizations"

"We share the basic values (of WCD) but we do not agree with the guidelines," says Emmanuel Grenier, spokesman for the International Commission on Large Dams, Paris. The World Bank cosponsored WCD, but its "position changed in 2003," he says. He also claims that HSBC does not do much dam financing.

WCD proposes a planning and decision-making approach based on strategic targets, including gaining public acceptance, reviewing alternatives to dams, assessing potential for enhancing benefits from existing dams, sustaining rivers and livelihoods, recognizing entitlements and sharing benefits, ensuring compliance with project commitments, and sharing transboundary rivers.

Click here for full response from Emmanuel Grenier, ICOLD media manager.