IFC/MIGA APPROACH TO REMEDIAL ACTION

October 31, 2022
This IFC/MIGA Approach to Remedial Action (Approach) was prepared for public consultation
purposes only. The Approach is a proposal by IFC/MIGA that has not been endorsed by andremains subject in all respects to further review and comment by the IFC and MIGA Boards of
Directors, including the Committee on Development Effectiveness (CODE). Accordingly, theApproach remains subject to change following these consultations and further review andcomments from CODE and the IFC/MIGA Boards of Directors.

October 31, 2022

Contents

Acronyms and Abbreviations ..................................................................................................................................... i
Executive Summary................................................................................................................................................... ii
I. Introduction .............................................................................................................................................................1
II. The Approach to Remedial Action ........................................................................................................................2
A.

Scope of Approach to remedial action ...........................................................................................................2

B.

IFC/MIGA Sustainability Frameworks ..........................................................................................................4C.

CAO Policy .....................................................................................................................................................5

D. The Remedy Ecosystem: Roles and Responsibilities .......................................................................................5
E.

Enhancements .................................................................................................................................................6

F.

Internal capacity and financing ......................................................................................................................9G.

Processes ..................................................................................................................................................... 10

III. Key Considerations for IFC/MIGA’s Contribution to Remedial Actions ..........................................................11
IV. Potential Impact on Other DFIs .........................................................................................................................12V.

Pilot Period .......................................................................................................................................................12

VI. Stakeholder Engagement Plan ............................................................................................................................13
Appendix A. External Review ..................................................................................................................................14
Appendix B. Stakeholder Engagement Plan.............................................................................................................15
Appendix C. Proposed Approach to remedial action: Pilot Period ..........................................................................18

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Acronyms and Abbreviations
CAO

Compliance Advisor Ombudsman

CAPs

Corrective Action Plans

CODE

Committee on Development Effectiveness

CSOs

Civil Society Organizations

DFI

Development Finance Institution

E&S

Environmental and Social

ESAPs

E&S Action Plans

FIs

Financial Intermediaries

IFC

International Finance Corporation

MAP

Management Action Plan

MDBs

Multilateral Development BanksMIGA

Multilateral Investment Guarantee Agency

NGO

Non-Governmental Organization

NHFO-SOE

Non-Honoring of Financial Obligations by a State-Owned EnterpriseNHSFO

Non-Honoring of Sovereign Financial Obligation

OECD

Organization for Economic Co-operation and Development

PRI

Political Risk Insurance

SFs

IFC/MIGA Sustainability Frameworks

SGR

Stakeholder Grievance ResponseiOctober 31, 2022
Executive Summary
Introduction
The International Financial Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) arearticulating a holistic approach to remedial action (the Approach) embedded in the Sustainability Frameworks (SFs)and the IFC/MIGA Independent Accountability Mechanism Compliance Advisor Ombudsman (CAO) Policy (theCAO Policy), which contain the mitigation hierarchy of environmental and social (E&S) risks and provide accessto remedy through the CAO and project-level grievance mechanisms. The Approach also provides more clarity on
activities to prepare for remedy, including building and exercising influence, improving access to remedy andsystemizing IFC/MIGA’s facilitation and support of remedial actions.
IFC/MIGA recognize that, to build on their leadership in the field of sustainability through robust SFs and continued
efforts to strengthen their implementation, IFC/MIGA can do more to facilitate and support remedial actions toaddress adverse E&S impacts that may occur in the projects they support. IFC/MIGA are committed tostrengthening implementation of their SFs and, in line with the “do no harm” intent of their SFs and theirdevelopment mandate, endeavoring to avoid or minimize the occurrence of harm in the projects they support. If
harm occurs, they are committed to facilitating and supporting clients’ and stakeholders’ remedial action to address
the harm. These commitments, including accompanying concepts and definitions, are more fully outlined in themain section of this paper.
The process of articulating and enhancing the existing approach reflects IFC/MIGA’s commitment to explore therecommendations of the “External Review of IFC/MIGA’s E&S Accountability, including the CAO’s Role andEffectiveness Report and Recommendations” (External Review), that was presented to the IFC/MIGA Boards inJune 2020. The Boards endorsed the IFC/MIGA and CAO roadmap package for implementing the External Review
recommendations, including IFC/MIGA’s proposal to further analyze and discuss the External Review
recommendation related to remedial action.
Since January 2021, an IFC/MIGA interdepartmental working group chaired by two senior directors and supported
by a joint IFC/MIGA technical team has reviewed relevant theory, guidance, and practice. This included analysis
of various external documents relevant to remedial actions to better understand the existing literature and external
practices. To further examine issues and options, the working group engaged with the CAO, the World Bank, selectcivil society organizations, multilateral organizations, commercial financial institutions, think tanks, and theCommittee on Development Effectiveness (CODE) of the IFC/MIGA Boards.
IFC/MIGA has previously presented to CODE (i) the outcome of the research phase (June 2021) and (ii) the key
considerations for an approach to remedial action (February 2022). This paper presents the culmination of work todate, namely the key elements of the Approach, plans for a 45-day public consultation Q3FY23, and a four-year
pilot period. Following the consultations, IFC/MIGA will submit a final decision document for CODE’s
consideration which will encompass the proposed IFC/MIGA Approach and the proposed pilot period.
The Approach to Remedial Action
A. Scope of the Approach to Remedial Action: IFC/MIGA have articulated a consolidated, structured, andsystematic approach for IFC/MIGA to facilitate and support remedial actions by clients and other stakeholders toaddress adverse E&S impacts in IFC/MIGA projects. The Approach has its foundation in the existing SFs, which
provide the framework for determining compliance by IFC/MIGA and their clients and for assessing whether any
related E&S harm has occurred as a result of non-compliance with IFC/MIGA’s E&S requirements. The Approachis holistic. It encompasses (1) prospective and anticipatory measures taken at the earliest stages of considering,
analyzing and processing a project in order to avoid or mitigate harm, (2) implementing measures taken duringii

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implementation to further support avoidance and mitigation, and (3) retrospective measures taken after harm has
occurred in order to support and facilitate the clients’ efforts to address that harm. The Approach embodies four key
elements: application of the mitigation hierarchy, preparedness, access to remedy, and the response continuum. Thisholistic Approach reflects the view that addressing adverse E&S impacts in projects supported by IFC/MIGA
requires actions throughout the project cycle to avoid or minimize such impacts and engage early in the resolutionof any complaints, prepare for remedial actions, strengthening various options available to access systems that allow
those negatively impacted as a result of non-compliance with IFC/MIGA’s E&S requirements to seek redress(access to remedy), and facilitate and support remedial actions when needed. Through application of the mitigation
hierarchy and early resolution of complaints and concerns the overall Approach aims to reduce the possibility ofadverse E&S impacts occurring in the first place, and to equip IFC/MIGA clients with the means to provide remedialactions as and when needed. IFC/MIGA recognize that they have a role, within a broader remedy ecosystem, tofacilitate and support remedial actions by their clients or other stakeholders. The nature and manner of any such
facilitation and support is determined by IFC/MIGA depending on the specific circumstances. This response
continuum may range from applying IFC/MIGA influence with clients and third parties to facilitate implementationof E&S requirements to supporting enabling activities, such as technical assistance or capacity building, incooperation with other actors in the remedy ecosystem, e.g., clients, government entities including municipalities,
other financiers/investors, civil society organizations (CSOs), or nongovernmental organizations (NGOs). Most ofelements of the proposed Approach are already being implemented to varying degrees within the SFs, while others
would be enhancements to existing practices, as detailed below.
B. IFC/MIGA Sustainability Frameworks: The application of a mitigation hierarchy aims to anticipate and avoid
adverse impacts on workers, communities, and the environment; where avoidance is not possible, it aims tominimize, and where residual impacts remain, it requires clients to compensate for, or offset the risks and impacts,
as appropriate. In accordance with the SFs, IFC/MIGA work with their clients to determine remediation measureswhen there are significant environmental or social impacts associated with a particular business activity. The SFs
provide that (i) the client set up project-level grievance mechanisms through which affected communities can seek
access to remedy, and (ii) enable individuals and communities affected by IFC/MIGA-supported business activities
to raise their concerns to the CAO. IFC/MIGA have also continued to strengthen their respective systems, processes,
capacity, training, and tools underpinning efficient E&S risk management. Progress in this space was presented to
CODE on July 12, 2022, as part of the update on implementation of the non-Policy actions recommended by theExternal Panel Review.
C. CAO Policy: The recently adopted CAO Policy now includes several elements that further strengthen
IFC/MIGA’s Approach to remedial action. It reflects an emphasis on the early and proactive resolution ofcomplaints by IFC/MIGA and their clients. There are many opportunities embedded in the CAO Policy thatfacilitate access to remedy, such as referral, engagement in the Dispute Resolution process, deferral during
compliance appraisal, and the development of Management Action Plans (MAPs) in response to complianceinvestigations. These mechanisms are now explicitly embedded in the Approach and are aimed at facilitating andsupporting remedy earlier, more quickly, more efficiently, and more effectively.
D. Remedy ecosystem: According to the SFs, various actors, including IFC/MIGA and their clients, havedifferentiated but complementary roles to play that are relevant for remedial actions. IFC/MIGA clients/sub-clients
have the primary responsibility for managing E&S risks and impacts in a manner consistent with the PerformanceStandards. IFC/MIGA conduct due diligence and monitoring and supervision efforts to determine whether thebusiness activities they support are implemented in accordance with their E&S requirements. IFC/MIGA cooperatewith various actors in the remedy ecosystem, such as government entities, including municipalities; otherfinanciers/investors; and CSOs and NGOs.

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E. Enhancements: In addition to already existing elements being implemented within the SFs, the Approach would
include the following enhancements:•

Preparing for remedial actions: IFC/MIGA would continue to explore additional actions early in the
project cycle to better position the institutions to facilitate and support their clients’ preparedness for
remedial actions, and to build and enhance IFC/MIGA’s ability to exit responsibly, when relevant and as
appropriate for each institution’s business model. These efforts, which go beyond the explicit requirementsof the SFs, would be focused on assessing, building, and deploying IFC/MIGA influence with clients andthird parties to facilitate implementation of E&S requirements by IFC/MIGA clients. Actions would
include: (i) strengthening assessment of influence and of client preparedness for remedial actions; (ii)
expanding possibilities for financing by clients, including through costing E&S Action Plans (ESAPs)
where appropriate; (iii) exploring additional contractual provisions; and (iv) considering other actions to
support low-capacity clients. Some of the foregoing enhancements would be innovations that are notconsistent with current market practice, and IFC/MIGA may face resistance from clients to theirintroduction.

•

Access to remedy: IFC/MIGA are working towards enhancing access to remedy through strengthening
various options available to affected communities, namely project-level grievance mechanisms,1 the IFC
Stakeholder Grievance Response (SGR) function, MIGA’s SGR function (which is currently being
established), and CAO (with the recently approved CAO Policy constituting a cornerstone of theApproach).

•

Facilitation and support: IFC/MIGA would pursue a range of possible ways to facilitate and support
remedial actions depending on the circumstances of each individual case, in response to adverse E&S
impacts that result from non-compliance with IFC/MIGA E&S requirements. IFC/MIGA would utilize
influence to prompt clients and/or other actors in the remedy ecosystem – i.e., government entities including
municipalities, other financiers/investors, and civil society organizations – to provide remedial actions; and,if needed, facilitate and support remedial actions by the client or other stakeholders. This could entail
support for activities such as technical assistance, capacity building, fact-finding, or dialogue facilitation,
which could be provided in the context of CAO cases or otherwise.

F. Internal capacity and financing: The costs of implementation of the SFs by IFC and MIGA and ongoing
improvements are already significant. The resources IFC dedicates to its E&S risk management and accountability
function are significant relative to the size of its operations and compares favorably to all other MDBs operating in
the private sector space. From a total resources’ viewpoint, the budget has more than doubled over the past 10 years
to $73 million in FY22, including a $10.5 million per year allocation to the E&S Risk and Policy Department since2019. IFC currently has 129 E&S staff, or 11 E&S staff per $1 billion of commitment, compared to 2-4 for other
MDBs. MIGA also continues to increase resources available for E&S risk management. In FY22, a second Sector
Manager position was created in the MIGA Economics and Sustainability Department (MIGES) as well as four
new E&S positions bringing the total team to 15 E&S staff. IFC/MIGA actions to facilitate and support remedialactions are financed by, in the case of IFC, the underlying project’s funding structure and, in the case of MIGA,
funds for the current application of its Performance Standards and Sustainability Policy. IFC/MIGA plan to continue
financing facilitation and support activities for clients’ remedial actions from these sources. In light of IFC/MIGA’s
increased exposure to FCS/IDA countries, the appropriate allocation of resources for E&S due diligence andsupervision will need continued attention through the normal budgetary process. Also, the cost of implementationof IFC/MIGA E&S requirements by clients, especially those operating in FCS/IDA countries, should not be
underestimated and will depend on a number of factors such as the gap between existing E&S laws and regulations
1 Performance Standard 1, paragraph 2.

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and IFC/MIGA Performance Standards, the complexity and risk profile of projects, sectors of operations, etc. IFC
is considering other available options including using donor funds for additional financing of technical assistance.
Per its Sustainability Policy, MIGA may also provide limited advisory/technical assistance services to clients either
through budgetary resources or leveraging funds from donor-funded facilities.
Key Considerations for IFC/MIGA Contribution to Remedial Action
The SFs clearly establish the delineation of roles between IFC/MIGA and their clients and defines the facilitating
and supporting roles that IFC/MIGA can play in the remedy ecosystem. Consistent with the purpose and missionof IFC/MIGA and the fundamental purposes and objectives of the SFs, IFC/MIGA are not guarantors of clients’performance or compliance with Performance Standards or other E&S requirements, nor are they insurers of E&S
risks. IFC/MIGA conduct due diligence and monitoring and supervision efforts to determine whether the businessactivities they support are implemented in accordance with their E&S requirements. If harm occurs as a result of
non-compliance with IFC/MIGA’s E&S requirements, IFC/MIGA are committed to facilitating and supportingclients’ and stakeholders’ remedial action to address the harm within the scope of the existing SFs and the holistic
Approach.
Financing direct contribution to remedial actions gives rise to risks, the most significant of which include: thepossibility of shifting how clients and other stakeholders understand their roles and responsibilities and act on them;increased litigation risk (under a range of possible legal theories) and increased costs and decreased
competitiveness. Given opportunities envisioned for facilitation and support of remedial actions and the anticipatedrisks associated with financing direct contribution to remedial actions, the Approach does not contemplate asystemic process for the financing of direct contribution to remedial action (see paragraph 30).
Potential Impact on Other DFIs
The Approach addresses specific issues arising in the context of IFC/MIGA’s respective business models andmandates, which are distinct from those of other development finance institutions (DFIs) focused on financing
sovereign clients. In sovereign operations, where the client is an agency or affiliate of the member country, therelationships that are required to discuss, design, and implement appropriate remedial actions remain in place,separate from the DFI’s loan, and an Approach to remedial action like the one described in this paper is not necessary
or applicable. For the same reason, during the pilot period, the Approach will only apply to projects guaranteed
through MIGA’s Political Risk Insurance (PRI) product. It will not apply to Non-Honoring of Sovereign Financial
Obligation (NHSFO) and Non-Honoring of Financial Obligations by a State-Owned Enterprise (NHFO-SOE)
instruments, which guarantee financing to sovereign, sub-sovereign, or state-owned enterprise clients, as applicable.
Since many DFIs endeavor to follow a largely harmonized approach to E&S risk management in their E&S policies,
it would be appropriate that those DFIs focused on private sector financing also share and coordinate their respective
approaches to remedial actions to the extent possible.
Pilot Period
IFC/MIGA intend to apply the Approach for an initial four-year pilot period during which it would be rolled out,
tested, and refined, in particular taking into account the experience from the implementation of the CAO Policy andenhanced grievance response arrangements. It is anticipated that an IFC Management Directive would govern thepilot period for IFC, and a similar document would govern the MIGA pilot. It is expected that these would be issued
in Q1FY24. IFC/MIGA are currently assessing and developing relevant tools that would be rolled out during the
preparatory phase and would run from July 2023 through December 2023. During this period, IFC/MIGA would
proceed with the implementation arrangements; build necessary capacity; finalize systems, procedures, guidance
and reporting requirements; refine relevant tools and conduct training and outreach in order to prepare for the pilotvOctober 31, 2022
period. During the subsequent pilot period, starting January 2024, IFC/MIGA would implement the Approach,including all proposed enhancements, for all new IFC direct investment projects and all new MIGA PRI projects.
Relevant elements of the Approach, particularly those related to client preparedness, will also be applied to new
IFC Financial Intermediary (FI) transactions and new MIGA FI transactions to be supported by its PRI product. For
the avoidance of doubt, IFC/MIGA will not require FI clients to establish their own equivalents of the Approach.
The review of the pilot period would coincide with the review of the CAO Policy. The proposal for a pilot period
would allow IFC/MIGA to draw lessons learned, including those related to the design and implementation of MAPs
and handling non-CAO complaints, that would inform the formalization of the Approach.
Stakeholder Engagement
IFC/MIGA look forward to conducting an inclusive public consultation on the proposed Approach in Q3FY23,
involving a 45-day consultation period. Feedback from the consultation will inform the refinement of the Approach
before it is finalized for submission to CODE.

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I. Introduction
1. The International Finance Corporation and the Multilateral Investment Guarantee Agency (IFC/MIGA)
have been leaders and standard setters in the field of sustainability for over two decades. IFC/MIGA havedeveloped robust Sustainability Frameworks (SFs)2—providing a model that has since been widely adopted byother development finance institutions (DFIs), commercial financial institutions, and corporations—and work
continuously to support their implementation through ongoing supervision, IFC’s dedicated advisory services, andMIGA’s use of trust funds or budgetary resources to support clients with technical assistance. A basic principle isthat clients have the responsibility for environmental and social (E&S) management, including identification ofadverse E&S impacts and addressing them through corrective action plans. The E&S standards contained in the SFs
constitute a critical aspect of IFC/MIGA’s value proposition for clients to avoid or minimize adverse E&S impacts,
including in fragile and conflict-affected countries. The SFs also provide for access to remedy through theCompliance Advisor Ombudsman (CAO) as well as through project-level grievance mechanisms. This holistic
approach allows for avoidance or minimization of adverse E&S impacts and channels to access remedy if necessary.
In essence, the SFs and the CAO Policy provide the foundations of an IFC/MIGA approach to remedial action.
2. Adverse E&S impacts can occur despite best implementation efforts. Notwithstanding the strong
foundation provided by the SFs and IFC/MIGA’s support for implementation, adverse E&S impacts may occur,
including in situations involving significant contextual risks and clients with lower capacity to manage E&S issues.
This may lead to CAO complaints (see Figure 1) about projects with adverse E&S impacts which may require
remedial action. How DFIs should approach these situations is an ongoing topic of discussion among global
development and commercial financial institutions and presents an important opportunity for IFC/MIGA to takesteps to articulate IFC/MIGA’s approach to remedial action. IFC/MIGA are committed to strengthening
implementation of their SFs. In line with the “do no harm” intent of IFC/MIGA’s SFs and their development
mandate, IFC/MIGA are also committed to avoiding or minimizing the occurrence of harm in IFC/MIGA projects
and, if harm occurs, are committed to facilitating and supporting3 remedial action by the client and others to address
the harm.
Figure 1. IFC/MIGA Projects, Complaints, and Cases, 2012–2021

3. The External Review. A further impetus for articulating an approach to remedial actions comes from the“External Review of the E&S Accountability of the IFC and MIGA, including the CAO’s Role and Effectiveness
Report and Recommendations” (the External Review), initiated in 2018 by the Committee on Development
Effectiveness (CODE) on behalf of the Boards of the IFC and MIGA (the Boards). The External Review presented
2 IFC/MIGA Sustainability Frameworks are comprised of the Sustainability Policies (IFC 2012, MIGA 2013); Performance Standards on

Environmental and Social Sustainability (IFC 2012, MIGA 2013) and Access to Information Policies (IFC 2012, MIGA 2013).
3
Support for remedial action refers to enabling activities such as advisory services, technical assistance, and capacity building.

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its report to the Boards in June 2020. At the meeting on June 24, 2020, CODE Committee on Governance andExecutive Directors’ Administrative Matters (COGAM) tasked IFC, MIGA, and CAO with preparing a roadmap
for implementing the External Review recommendations and a timeline for continuing deliberations on
recommendations needing further discussion. On October 26, 2020, CODE/COGAM endorsed the Final Roadmap
Package on IFC & MIGA E&S Accountability, which involved several recommendations relating to remedialactions, including that “an IFC/MIGA framework needs to be established for remedial action in cases in which
noncompliance contributes to harm,”4 which IFC/MIGA proposed to further analyze and discuss (see Appendix A
for additional information on the recommendations of the External Review explicitly related to remedial action).
4. Process. In January 2021, IFC/MIGA established an interdepartmental working group chaired by two seniordirectors and supported by a joint IFC/MIGA technical team to explore an approach to remedial action. From
January to June 2021, IFC/MIGA reviewed theory, guidance, and practice related to remedial actions, analyzing
various documents relevant to remedial actions to better understand the existing literature – namely, the 2011 UN
Guiding Principles on Business and Human Rights, the 2011 Organization for Economic Co-operation andDevelopment (OECD) Guidelines for Multinational Enterprises, and several thematic papers developed specificallyfor the financial sector, including those prepared by the Dutch banking sector. They also studied implementation
practices related to these publications, which are currently limited and ad hoc. Relevant aspects of IFC/MIGA’s
own SFs were also considered and shared in a progress report to CODE in June 2021. From June 2021 to date,
IFC/MIGA have been considering relevant issues and options and consolidating them into a workable approach forthe two institutions. As part of this process, IFC/MIGA have engaged with CAO including through dedicatedbrainstorming sessions and technical working group meetings in March, April, and May 2022. This engagement
has generated valuable insights from CAO’s practical experience of handling complaints related to IFC/MIGA
projects, including CAO’s perspectives on various shortcomings in the implementation of IFC/MIGA SFs that may
have been associated with E&S harms. IFC/MIGA have also engaged with and received feedback from the World
Bank. More broadly, IFC/MIGA have benefited from numerous discussions with select civil society organization(CSOs), multilateral organizations (including multilateral financial institutions), private sector financial institutions,and think tanks. Based on these inputs, IFC/MIGA presented key considerations for an approach to remedial action
to CODE in February 2022, receiving general support for the proposed direction and overall approach. As a resultof further analysis and discussions within IFC/MIGA and the World Bank, the approach has evolved with this papera product of the work to date. It outlines key elements of the proposed Approach to Remedial Action (the Approach),
as well as plans for a 45-day public consultation in Q3FY23, and a pilot period, proposed to run until the end of
2027. Following the consultations, IFC/MIGA will submit for CODE’s consideration a final decision document. It
will encompass the proposed IFC/MIGA Approach and its implementation over a proposed pilot period.
II. The Approach to Remedial Action
A. Scope of Approach to Remedial Action
5. IFC/MIGA have articulated a consolidated, structured, and systematic approach to facilitate and support
remedial actions addressing E&S harm resulting from non-compliance with IFC/MIGA E&S requirements inprojects supported by IFC or by MIGA’s Political Risk Insurance (PRI) instrument. The Approach has as its
foundation the existing SFs, which provide the framework for determining compliance by IFC/MIGA and theirclients and for assessing whether any related E&S harm has occurred due to non-compliance with IFC/MIGA E&S
requirements. The Approach is holistic and encompasses (1) prospective and anticipatory measures taken at theearliest stages of considering, analyzing and processing a project in order to avoid or mitigate harm, (2)implementing measures taken during implementation to further support avoidance and mitigation, and (3)4 “External Review of the Environmental and Social (E&S) Accountability of the International Finance Corporation (IFC) and Multilateral

Investment Guarantee Agency (MIGA), including the Compliance Advisor Ombudsman (CAO)’s Role and Effectiveness Report andRecommendations” (June 24, 2020), p. xvii.

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retrospective measures taken after harm has occurred in order to support and facilitate the clients’ efforts to addressthat harm. The Approach embodies four key elements: application of the mitigation hierarchy, preparedness, accessto remedy, and response.
6. It places the issue of remedial actions5 in a wider context, including measures to avoid or minimize E&S
impacts, prepare for remedial actions and early resolution of complaints, provide access to remedy (through oroutside of CAO processes), and facilitate and support remedial actions (through or outside of the CAO processes)
when needed.
7. Through application of the mitigation hierarchy and early resolution of complaints and concerns, this holistic
Approach aims to reduce the possibility of adverse E&S impacts occurring in the first place, while equipping
IFC/MIGA clients with the means to provide remedial actions as and when needed, and for IFC/MIGA to facilitateand support remedial actions as appropriate. Where adverse E&S impacts still occur, IFC/MIGA’s early
engagement with clients on preparedness for remedial actions paves the way for proactive and effective early
response and resolution of grievances. Even if proactive engagement does not lead to an early resolution of E&S
issues, such engagement still provides a crucial foundation for equipping IFC/MIGA with tools to facilitate andsupport their clients in providing remedial actions as needed.
8. IFC/MIGA recognize that they have a role, within a broader remedy ecosystem, to facilitate and support
remedial actions by the client or others, with the nature and manner of any such facilitation and support being
determined by IFC/MIGA depending on the specific circumstances. IFC/MIGA facilitation and support constitutea continuum. This response continuum may range from applying IFC/MIGA influence with clients and third parties
to facilitate implementation of E&S requirements to supporting enabling activities such as technical assistance or
capacity building, in cooperation with other actors in the remedy ecosystem, such as clients, government entities
including municipalities,6 other financiers/investors, civil society organizations (CSOs), or nongovernmentalorganizations (NGOs).
Figure 2. Key Elements of the Approach to Remedial Action

5 Remedial actions by clients and other stakeholders within the remedy ecosystem aim to address adverse E&S impacts, in line with the

Performance Standards, and related E&S harm due to non-compliance with IFC/MIGA E&S requirements, and such actions can take many
forms. These forms may include restitution, compensation, rehabilitation, satisfaction, and guarantees/promise of non-repetition. The
appropriate action in a particular case depends on the unique circumstances of that case and could include a combination of these forms.
Determining the form(s) of remedial action to be used in a particular case should include meaningful consultation with project-affected
communities/complainants.
6 Efforts to strengthen national systems based on legal, regulatory and country frameworks are pursued by other programs.

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B. IFC/MIGA Sustainability Frameworks
9. The IFC/MIGA SFs provide a sound foundation for the Approach. In line with IFC/MIGA’s intent to do noharm,7 the SFs present a robust framework , including the application of the mitigation hierarchy for the clients toanticipate, prepare for, and avoid adverse impacts on workers, communities, and the environment, or where
avoidance is not possible, to minimize, and where residual impacts remain, compensate for, or offset the risks andimpacts, as appropriate.8 IFC/MIGA conduct due diligence of E&S risks at appraisal and regular monitoring
throughout implementation. As part of these efforts, and as applicable, IFC/MIGA agree with their clients at
appraisal on the implementation of E&S Action Plans (ESAPs), through which clients are contractually obligatedto undertake specific actions to bring the client or the project into compliance with the applicable requirements of
the Performance Standards. Actions to facilitate ongoing compliance with Performance Standards may be captured
in amendments to ESAPs or additional Corrective Action Plans (CAP)s,9 which are instruments solely financed andimplemented by clients that provide additional avenues to address changing project circumstances and emerging
risks not anticipated at the appraisal stage; thus, they constitute a cornerstone of client remedial actions and
IFC/MIGA influence. IFC and MIGA are also required to “work with its client to determine remediation measures
where there are significant environmental or social impacts associated with the business activity,” “including pastor present adverse impacts caused by others.”10 The SFs provide the relevant benchmark for determining whether
E&S harm has occurred in IFC/MIGA-supported projects.
10. The SFs also provide channels for access to remedy to affected communities and those impacted as a result of
non-compliance with IFC/MIGA’s E&S requirements, specifically through project-level grievance mechanisms,
and the CAO for both IFC and MIGA:•In accordance with the IFC and MIGA Sustainability Policies, clients are required to provide “access to aneffective grievance mechanism that can facilitate early indication of, and prompt remediation of various
project-related grievances.”11•

The CAO, as IFC’s and MIGA’s independent accountability mechanism, receives complaints from people
or communities who believe they may have been affected by an IFC or MIGA project, and, in executing its
mandate, “facilitates access to remedy for project-affected people in a manner that is consistent with theinternational principles related to business and human rights included within the Sustainability
Framework.”12

11. At IFC implementation of the SFs has been supported by dedicated E&S specialists in the Sustainability andGender Solutions Department (CEG). In addition, in 2019 the E&S Policy and Risk Department (CES) reportingto the Managing Director and Executive Vice President of IFC was created to serve an E&S policy, regulatory andE&S risk oversight function (including classification of all projects, clearances of E&S Review Summaries as wellas commitments and disbursement of high-risk projects), as well as to house a Stakeholder Grievance Response(SGR) function to facilitate pro-active response to CAO and non-CAO complaints. MIGA supports implementationof the SF through its Economics and Sustainability Department, which reports to the Vice President and Chief Risk,
Legal and Sustainability Officer and Partnerships. Within the Economics and Sustainability Department, the E&S
7 IFC Sustainability Policy, paragraph 9 and MIGA Sustainability Policy, paragraph 9.
8 IFC Sustainability Policy, paragraph 6 and MIGA Sustainability Policy, paragraph 5.
9 CAPs reflect findings from IFC/MIGA supervision processes. They are developed in cases when originally developed ESAPs are notsufficient and additional actions are needed to meet the Performance Standards. Clients are responsible for implementation of CAPs, andIFC/MIGA monitor their implementation.
10 IFC Sustainability Policy, paragraph 26 and MIGA Sustainability Policy, paragraph 24.
11
IFC Sustainability Policy, para. 12.
12 CAO Policy, paragraph 5.

4October 31, 2022
team is responsible for E&S policy, E&S risk oversight (including E&S due diligence and monitoring), and the
SGR function. IFC/MIGA have also continued to strengthen their respective systems, processes, capacity, training,
and tools underpinning efficient E&S risk management. Progress in this space was most recently presented in apaper to CODE on July 12, 2022, as part of the update on implementation of the non-Policy actions recommended
by the External Panel Review.
C. CAO Policy
12. The recently adopted CAO Policy now includes several elements that further strengthen IFC/MIGA’s Approachto remedial action. It reflects an emphasis on the early and proactive resolution of complaints by IFC/MIGA andtheir clients, including an option to refer complaints to IFC/MIGA (with the consent of the complainant) for early
resolution prior to starting a CAO process,13 and an option to defer a compliance investigation if a credible plan isput forward to address E&S concerns, with CAO specifically considering “whether Management has provided astatement of specific remedial actions.”14 The CAO Policy also provides for CAO to make recommendations for
IFC/MIGA to consider when developing a MAP after a compliance investigation “related to the remediation of
Project or Sub-Project-level non-compliance and related harm, and/or steps needed to prevent future noncompliance, as relevant.”15 IFC/MIGA are working with CAO on establishing effective engagement processes
supporting remedial action through the entry points provided by the IFC/MIGA CAO Policy.
D. The Remedy Ecosystem: Roles and Responsibilities
13. IFC/MIGA SFs and the CAO Policy clearly distinguish among the respective roles of IFC/MIGA, clients, andthe CAO:•

IFC/MIGA clients/sub-clients16 have the primary responsibility for managing E&S risks and impacts in amanner consistent with the Performance Standards, including through the implementation of ESAPs agreed
with IFC/MIGA (or, in the case of Financial Intermediaries (FIs), between the FI and its clients).

•

IFC/MIGA are responsible for undertaking E&S due diligence during appraisal and supervision efforts
during an investment’s lifetime to identify key E&S risks and impacts and assist clients to implement
IFC/MIGA-supported projects in accordance with the requirements of the Performance Standards.

•

CAO, as part of its purpose (and without excluding involvement of other stakeholders), facilitates accessto remedy for people affected by IFC/MIGA projects, and recommends remedial actions to address
noncompliance and harm, where appropriate. IFC/MIGA engages with CAO throughout its Dispute
Resolution and Compliance processes as provided in the CAO Policy.

14. MIGA provides PRI or credit enhancement instruments to equity providers, lenders, or other investors, as
appropriate to the instrument, who invest in eligible projects. Unlike IFC and other investors who extend direct
equity or debt financing to projects, MIGA does not have a direct contractual relationship with the project company
responsible for implementing the project. Therefore, MIGA seeks to enforce its requirements, including E&S
requirements, through its contractual counterparty, i.e., the guarantee holder, making MIGA one step further
removed from the projects compared with IFC and other direct investors. This structural difference results in
MIGA's role in the project and influence on a project company being different than that of an equity holder or lender(e.g., MIGA exercises its contractual rights against its guarantee holder, who is then expected to use its contractual

13 CAO Policy (June 28, 2021), paragraph 39.
14 CAO Policy (June 28, 2021), paragraph 92.
15 CAO Policy (June 28, 2021), paragraph 120.
16 Throughout this paper, the term “client” is typically used to refer to the project company. MIGA does not have any contractual

relationship with the project company. Instead, MIGA’s contractual relationship is with the guarantee holder (e.g., equity investor or
lender). See para. 14.

5

October 31, 2022
influence on the project company).17 For this reason, the roles and responsibilities of MIGA within the proposed
Approach reflect the differing role of MIGA and MIGA’s guarantee holder in project structures.18
15. In accordance with this delineation of roles and responsibilities between IFC/MIGA and IFC/MIGA clients
under the SFs, IFC/MIGA embrace the concept of a remedy ecosystem in which various actors have differentiatedbut complementary roles to play in relation to remedy. Remedial action should be provided by clients whose projects
cause adverse E&S impacts. IFC/MIGA proactively work with clients to support them in meeting their contractual
E&S obligations. When there is insufficient action by clients, IFC/MIGA may facilitate remedial actions throughexercising their influence with clients and, as appropriate, with other actors. IFC/MIGA may also support enabling
activities such as offering technical assistance or capacity building. IFC/MIGA facilitate and support remedialactions in cooperation with other actors in the remedy ecosystem, such as government entities including
municipalities; other financiers/investors; and CSOs and NGOs (see paragraph 20, below).
E. Enhancements
16. The Approach builds on the existing SFs and the CAO Policy. It would introduce a number of enhancements
to the already existing core elements, several of which are already being implemented in the context of the
IFC/MIGA response to the External Review recommendations19 and through other ongoing activities to improve
E&S management.
17. Preparation for remedial action.20 Preparation needs to occur early in the project cycle in order to better
position IFC/MIGA to facilitate and support their client’s preparedness for remedial actions when necessary, andto exit responsibly when relevant. These efforts would focus on assessing, increasing, and deploying IFC/MIGA’s
influence with clients and third parties. IFC/MIGA will also monitor client preparedness and assess the effectivenessof grievance mechanisms as part of IFC/MIGA supervision efforts. The proposed enhancements would include: (i)strengthening assessment processes; (ii) expanding possibilities for financing by clients, including through costing
ESAPs where relevant; (iii) exploring additional contractual provisions; and (iv) considering other actions to
support low-capacity clients operating in the private sector.
a. Preparation through strengthening the assessment process. IFC/MIGA are planning to introduce new tools
during appraisal and supervision to better set IFC/MIGA client expectations and assess client preparedness for(including understanding of) remedial actions. Assessments would be informed by discussions with the client(alongside or as part of more general appraisal discussions), together with a review of the client’s track record
on E&S, including with respect to past remedial actions, as applicable. IFC/MIGA are planning to develop andtest the following:•

Guidance material and staff training to assess the potential sources and extent of influence that IFC/MIGA
may have with a client or relevant third party, specifically with respect to influencing actions on E&S issues
and ability to exit responsibly. IFC/MIGA would identify additional ways to build influence, especially forhigher E&S risk transactions, as needed. This would include ways to (i) use influence with clients—
including commercial influence and legal influence; and (ii) use influence with others—including influence17

For example, when MIGA provides non-commercial risk mitigation products to lenders or swap providers, MIGA's direct contractual
client is the lender or swap provider that makes a financial investment in the project, in which case MIGA's influence on the project will also
be limited to the rights these clients have under their respective finance documents.
18 See paragraph 33 regarding application of the Approach pilot only to MIGA’s PRI instrument.
19 The External Review recommendations also included a large number of non-CAO Policy actions for IFC/MIGA to implement. These
actions include improvements in E&S risk management, new tools, procedures, and guidance in a number of areas. IFC/MIGA reported on
implementation progress in updates to their Boards on March 24, 2021, June 15, 2021, and July 12, 2022.
20 IFC/MIGA is taking a holistic view to upfront actions, which will support preparing for remedial actions and responsible exit, and moregenerally avoiding or minimizing E&S issues and increasing IFC/MIGA’s influence to better address E&S issues.

6October 31, 2022
through innovation and convening. IFC/MIGA would explore ways up-front to build influence and use
influence throughout the full project cycle.
•

Guidance material and staff training to strengthen IFC/MIGA assessment of client preparedness for ESAP
implementation, as well as specifically for remedial actions. This would include determining whether
clients understand IFC/MIGA expectations with respect to providing remedial action, demonstratecommitment to meeting these expectations, and have the capacity (both financial and technical) to provide
for remedial action, if necessary. Key aspects of the client’s due diligence systems, its track record,
including assessing existing or legacy conflict or harms, evidence of grievance mechanism effectiveness,and the quality of stakeholder mapping, would also be considered. IFC/MIGA would also advise clients on
how to provide stakeholders with information to access remedy, including project- and operational-levelgrievance mechanisms, as well as other parts of the grievance infrastructure, including the CAO. IFC/MIGA
would also assess the capacity and commitment of any relevant third parties.

b. Preparation through the review of client resources for remedial actions. IFC/MIGA would better review,
confirm, and in some cases, require clients to mobilize resources for remedial actions, in line with theassessments undertaken (see paragraph 17(a)) and with the nature (including risk level) of the transaction, where
relevant, for example, if there is a risk that funds for implementation may not be sufficient, costing ESAPs sothat clients fully understand the financial resources required and confirming the client’s available resources.
For select projects— for example, those that require additional approaches to build influence throughout the
project cycle— IFC/MIGA would explore suitable financial instruments to provide greater assurances of theclient’s ability to address impacts (e.g., insurance, bonds, etc.) if reasonable in the context considered. The useof such instruments is highly contextual and cannot be a uniform requirement. IFC/MIGA may consider, on acase-by-case basis, certain instruments, provided they are relevant and available for the particular project
structure, effective in the given circumstances, and not excessive in their cost or unreasonably burdensome intheir oversight/implementation (see further explanation of the rationale for case-by-case considerations in box1). Where relevant, IFC/MIGA would conduct a review of available instruments and determine their potential
application to inform decision-making on this matter.
Box 1. Client Contingency Funding Considerations

IFC/MIGA would continue to pursue a fit-for-purpose approach and selectively consider contingency funding by
clients on a case-by-case basis, when needed and appropriate. The rationale for the case-by-case approach includes:•

There are existing funding approaches already in place: The implementation of the SFs already employs
modalities that contribute to mitigation measures having the requisite funding possibilities. These include
insurance assessments (which entail reviewing the project’s E&S risks and exposures, guiding the client on
insurance management, and monitoring insurance coverage through the life of the investment); cash waterfall
account structures (for project finance) whereby all project revenue is to be deposited into project accounts thatare pledged to IFC as part of its security package and directed to fund the client’s capital expenditures and/or
operating expenses to comply with the client’s contractual obligations relating to compliance with the PerformanceStandards; and bankable feasibility studies and contingency cost lines (in the context of high-risk infrastructureand natural resource projects). Instead of introducing new contingency funding requirements, these existing
approaches could be further enhanced, where required, by the costing of ESAPs, and then by pursuing selective
additional requirements.

•

Minimize unnecessary costs for clients: Blanket contingency funding requirements indiscriminately raise project
costs, decrease IFC’s and MIGA’s competitiveness, and could unnecessarily undermine development impact byreducing the likelihood of the project reaching financial close (given higher capital requirements).

•

Strategically tailor requirements: IFC/MIGA will use influence and remedial actions assessments to focus IFC
and MIGA efforts where they are most needed and then design products tailored to the specific client, without

7

October 31, 2022
causing delays in resolving E&S issues in cases where the client could move forward without such requirements.
This will take into account the fact that, in many markets and project contexts, suitable instruments are simply notavailable, and a case-by-case approach is necessary in order to explore and develop suitable instruments. Engaging
with the client during this process is also a key tool to build IFC’s and MIGA’s influence and client commitment.

c. Preparation through use of revised contractual provisions. IFC/MIGA would review existing contractual
provisions and consider whether it would be feasible and useful to introduce additional ones to better signal up
front the importance of addressing E&S impacts, increase preparedness for providing remedial actions if
necessary, and possibly position IFC/MIGA to exercise increased influence throughout the project cycle.
Examples of potential contractual provisions that IFC/MIGA would explore further include those related tofinancial incentives to encourage compliance with the Performance Standards; client commitments toremediate/develop remedial plans for certain potential adverse impacts (including IFC/MIGA’s expectations
that clients provide remedy for harms caused due to non-compliance with E&S requirements); participation inalternative dispute resolution (e.g., IFC/MIGA would observe developments related to arbitration and consider
testing relevant provisions related to arbitration between the client and affected communities or individuals);
strengthening the existing provisions on responsibilities to report on and assess allegations and adverse impacts
emerging from serious incidents; responsibilities for remedy or compliance with other E&S-related
requirements post exit (e.g., for a fixed period of time); specific contractual remedies, including for noncompliance with E&S requirements; strengthening provisions to participate in the CAO process, including
Management Action Plan (MAP)21 preparation; and considering how support for remedial actions extend to
relevant third parties (e.g., associated facilities, sub-contractors). Actions related to client resources (seeparagraph 17(b)) would also be addressed as relevant in financial agreements. Many of the foregoing changes
would be innovations that are not consistent with current market practice, and IFC/MIGA may face resistancefrom clients to their introduction. As mentioned in paragraph 12, as an insurance provider, MIGA, unlike IFC,
does not have a direct contractual relationship with the project company responsible for the implementation of
the guaranteed project. Therefore, MIGA will evaluate the applicability of the additional and revised contractual
provisions outlined in this section, taking into account the nature of its business model, including its indirect
relationship with the project company.
d. Additional action for capacity development. IFC/MIGA would particularly focus on capacity building for lowcapacity clients operating in the private sector. For such clients, where appropriate and depending on IFC/MIGA
assessment of client’s preparedness for remedial actions, IFC/MIGA would consider conducting additional
capacity building activities meant to build both clients’ risk mitigation capacity, as well as preparedness andunderstanding of their responsibility for providing remedial actions if harm occurs as a result of non-compliancewith E&S requirements.
18. Access to remedy. IFC/MIGA would continue to work towards enhancing access to remedy for communities
and those impacted as a result of non-compliance with IFC/MIGA’s E&S requirements through the following:(i) New guidance materials and training for clients and IFC/MIGA staff on how to make project-levelgrievance mechanisms more effective in addressing stakeholder concerns and complaints, based on aholistic portfolio wide review (currently underway) of client-supported grievance mechanisms.
(ii) The Stakeholder Grievance Response (SGR) function—which has been established in the E&S Policy and
Risk Department—provides another pathway for responding to E&S issues raised in IFC projects. SGR
actively manages IFC’s responses to both CAO and non-CAO complaints. IFC is currently developing new
21 The MAP is a vehicle to formalize IFC/MIGA commitments to client and management remedial actions to respond to findings ofnoncompliance and related harm. The MAP is consulted on with clients and complainants and approved by the Boards (CAO Policy,
paragraphs 130-138).

8

October 31, 2022
guidance and has increased staffing capacity and resources to strengthen SGR’s work. MIGA is in theprocess of developing a similar grievance response function, modified for MIGA’s size, portfolio, andbusiness model.
(iii) The recently adopted CAO Policy includes several elements that further strengthen IFC/MIGA’s ability toanticipate, minimize, prepare for, and facilitate access to remedy. IFC/MIGA proactively encourage theirclients to share information with stakeholders regarding grievance mechanism channels, including the
CAO.
19. Facilitating and supporting remedial actions by clients and others. IFC/MIGA would pursue a continuumof possible responses including a range of ways to facilitate and support remedial actions, to be deployed inaccordance with the unique circumstances of each individual case:a. Exercising influence. IFC/MIGA would assess their practices and seek to improve the effectiveness of their
existing influence within the current frameworks (e.g., linking key E&S actions with disbursement, adequately
managing waivers, amendments, extensions, etc.). In addition, they would seek to increase influence throughproposed preparedness steps (see paragraph 17) to prompt remedial action by the client. The type of influence
IFC/MIGA may have, and the roles being played by other relevant actors, would help determine how influence
may be exercised. Applying influence could entail, for example, considering whether to exercise applicablerights or remedies under the relevant agreements, or working closely with other lenders, governments, or parent
companies.
b. Enabling activities for remedial action. In situations where the client lacks capacity to resolve complaints,
IFC/MIGA may additionally support the client or relevant third parties throughout the project cycle, including
during a CAO dispute resolution process, at the end of a CAO compliance investigation, or during a non-CAO
complaint process. This could entail support for enabling activities such as technical assistance, capacity
building, fact-finding, dialogue facilitation, or community development which could be provided in the context
of CAO cases or otherwise. Where possible, IFC/MIGA would also work within the broader remedy ecosystem
to mobilize other stakeholders.
20. IFC/MIGA are often only one of many financiers/guarantors and would need to always act in the context of thebroader remedy ecosystem. Even in cases where IFC/MIGA takes all actions contemplated under the Approach,this may alleviate but not fully address the E&S harm.
21. The approach to facilitate and support remedial action described above should not be construed as creating a
duty, responsibility, or liability to any person, nor should any involvement by IFC/MIGA in any remedial action be
construed as an admission of duty, responsibility, liability, or obligation. Any steps taken by IFC/MIGA, would beconsidered ex gratia.
F.

Internal capacity and financing

22. The current costs of implementation of the SFs by IFC and MIGA are noteworthy. The staff resources IFC
dedicates to its E&S risk management and accountability function are significant relative to the size of its operations
and compare favorably to all other MDBs operating in the private sector space. From a total resources’ viewpoint,
CEG’s budget has more than doubled over the past 10 years from $29.6 million in 2011 to $63.1 million in 2022.
Since 2019 IFC has also allocated on average $10.5 million per year to the E&S Policy and Risk Department. The
total number of E&S specialist positions has grown from less than 60 in 2011 to 129 (combined for CEG and CES)in 2022. IFC currently has about 11 E&S staff per $1 billion of commitment, compared to 2-4 for other MDBs.
MIGA also continues to increase resources available for E&S risk management. In FY22, a second Sector manager
position was created in the MIGA Economics and Sustainability Department (MIGES) as well as four new E&S
positions, bringing the total team to 15 E&S staff, more than doubling the 2011 number of 6 E&S specialists. The
9

October 31, 2022
CAO budget has also grown significantly over the past 10 years, from $4.95 million to $9 million, indicating thecaseload and complexity of issues. IFC’s contribution to CAO’s FY23 budget was at the level of $8.64 million and
MIGA’s contribution $0.36 million. In light of IFC/MIGA’s increased exposure to FCS/IDA countries, theappropriate allocation of resources for E&S due diligence and supervision will need continued attention throughthe normal budgetary process. Also, the cost of implementation of IFC/MIGA E&S requirements by clients,
especially those operating in FCS/IDA countries, should not be underestimated and will depend on a number offactors such as the gap between existing E&S laws and regulations and IFC/MIGA Performance Standards, thecomplexity and risk profile of projects, sectors of operations, etc..
23. IFC/MIGA facilitation and support for clients’ remedial actions are currently financed by, in the case of IFC,
the underlying project’s existing funding structure and in the case of MIGA, the current application of its
Performance Standards and Sustainability Policy. The framework is in place to request a budget increase if such
resources are needed from their regular budgets and are drawn from funds used, for example, for appraisal,
supervision, and advisory services. IFC plans to continue financing facilitation and support activities for clients’and third parties’ remedial actions through various available sources. IFC is considering other available options
including using donor funds for additional financing of technical assistance. Per its Sustainability Policy, MIGA
may provide additional limited advisory/technical assistance services to clients either through budgetary resourcesor through leveraging funds from donor-funded facilities.
G. Processes
24. Pursuing facilitation and support for remedial action of client and others would be built into existing processes,
where relevant, and otherwise structured to be as effective and efficient as possible, without creating duplicative or
separate processes. In a CAO compliance investigation, the proposed actions, including client remedial actions
and/or IFC/MIGA facilitation and support of remedial actions, would be reflected in MAPs.22 In all other cases—
other CAO processes (referral, dispute resolution, and deferral) and non-CAO complaints and incidents that may
arise during normal supervision—client actions would be documented in the CAP23 to be agreed with the client,
and/or the IFC/MIGA Management Response as part of a deferral request.
Table 1. Process depending on the trigger

Trigger/context

Facilitation and support process

CAO compliance investigation

MAP

CAO compliance appraisal

CAP and Management Response

CAO referral, CAO dispute resolution, non-CAO
complaints, other incidents

CAP

25. Meaningful engagement. Throughout these processes, IFC/MIGA would consider how to engage
meaningfully with affected stakeholders. Engagement should aim at understanding what stakeholders desire withrespect to remedial actions, including the form of remedial actions (as per Footnote 5). Engagement should betimely, inclusive, and highly sensitive to any project-specific concerns, including any fears of reprisal.
26. Approach to responsible exit. The Approach is aligned with and complemented by IFC’s approach toresponsible exit, as follows:•

Preparing for exit. The approach to responsible exit affirms the importance of taking actions early in the
project cycle to avoid or minimize adverse impacts and strengthen IFC’s influence and client preparedness

22 See Footnote 21 for MAP.
23 See Footnote 9 for CAP.

10

October 31, 2022
for addressing E&S issues. This encompasses the same actions being considered under Preparation for
remedial actions, which include analyzing influence to exit responsibly (see paragraph 17). These actions
would constitute a consistent, integrated effort to both prepare for remedial action and to prepare for exit.
•

Responsible exit. The Approach is also aligned with responsible exit later in the project cycle through theapplication of the responsible exit principles. The set of responsible exit principles include among themaddressing E&S issues and using the practicable leverage at IFC’s disposal to implement the ESAP andother CAPs and to attempt to address and/or mitigate any other adverse E&S risks and impacts that are bothlikely and severe post-exit, which is consistent with the SFs and the proposed Approach. The principles
also explicitly establish that a responsible exit may trigger the need for remedial actions, which would thenbe implemented in accordance with any relevant aspects of the Approach. In other words, the responsible
exit principles should be understood as another entry point for IFC to pursue facilitation and support asneeded, while they also include broader actions and considerations (such as development impact).

•

Pilot period. Finally, the approach to responsible exit is currently being piloted. Since the responsible exit
pilot is expected to run through FY23, any lessons learned, specifically if facilitation and support ofremedial actions are pursued in the context of exit, will be used to inform the proposed Approach.

27. MIGA is currently exploring how a “responsible exit” could apply in the context of MIGA guarantees,
recognizing that MIGA is an insurance provider (not an investor) and its contractual rights to exit a project are
explicitly defined under the MIGA contracts of guarantee. As a result, exits driven by MIGA are very rare.

III. Key Considerations for IFC/MIGA’s Contribution to Remedial Actions
28. The SFs clearly establish the delineation of roles between IFC/MIGA and their clients and the facilitating andsupporting roles that IFC/MIGA can play in the remedy ecosystem. Consistent with the purpose and mission of
IFC/MIGA and the fundamental purposes and objectives of the SFs, IFC/MIGA are not guarantors of clients’performance or compliance with Performance Standards or other E&S requirements, nor are they insurers of E&S
risks. IFC/MIGA conduct due diligence and monitoring and supervision efforts to determine whether the businessactivities they support are implemented in accordance with their E&S requirements. If harm occurs as a result of
non-compliance with E&S requirements, IFC/MIGA are committed to facilitating and supporting clients’ andstakeholders’ remedial action to address the harm within the scope of the existing SFs and the proposed holistic
Approach.
29. The Approach presents IFC/MIGA with a range of possible ways to facilitate and support remedial actions byclients and other stakeholders, which may range from exercising IFC/MIGA influence with clients and third parties
to facilitate implementation of E&S requirements to supporting enabling activities in cooperation with other actors
in the remedy ecosystem.
30. Roles and responsibilities. The Approach is based on a clear division of roles and responsibilities, without
IFC/MIGA assuming (expressly or implicitly) any of the responsibilities that rest with the project company, client,or sponsor. Under the SFs, the primary responsibility for identifying, avoiding, mitigating, and remediating any
risks and harms rests with the project company, client, or sponsor, as appropriate. The Approach is not intended tomodify or blur the lines between the responsibilities of the client and those of IFC/MIGA under the SFs. It seeks topreserve how different actors understand and fulfill their roles and responsibilities and facilitate contribution of
direct financing of remedial action, as appropriate, and to avoid disincentivizing a client from fulfilling its
responsibilities or create expectations that IFC/MIGA would fulfill those responsibilities instead. Accordingly,
IFC/MIGA would not expect to provide direct financing of remedial action but nothing in the Approach would
preclude IFC/MIGA from considering the provision of direct financing for remedial action in exceptional11

October 31, 2022
circumstances, subject to existing policies and procedures. Moreover, the Approach is intended to complement, notlimit, existing policies and procedures.
31. Mitigating litigation risk. A focus on facilitating and supporting remedial actions by the client or otherstakeholders seeks to accomplish the ultimate goal of remediating harms without exposing IFC/MIGA to theincreased litigation risks (and corresponding significant costs) that could result from providing for a new systemic
process to financing of direct contribution to remedial actions by IFC/MIGA. However, the proposed Approach
does not guarantee the elimination of litigation risks and associated costs. Currently IFC allocates the amount of$15 million annually to cover legal costs associated with litigation cases
32. Financing of facilitation and support for remedial action. IFC/MIGA would finance facilitation and support
activities for clients and other stakeholders’ remedial actions through various available sources. This should bemanaged so as not to be viewed as an uncapped/open ended financial liability for IFC/MIGA’s balance sheets,
which would have negative impacts on IFC/MIGA’s financial sustainability and/or IFC’s credit rating.
IV. Potential Impact on Other DFIs
33. Private Sector Focus. The Approach addresses specific issues arising in the context of IFC/MIGA’s businessmodel and mandate, which are distinct from those of other DFIs focused on financing sovereign clients. In private
sector financing, relationships between IFIs and clients are one-off (except in the case of repeat financing), with therelationship ending once the loan is paid or equity sold. In sovereign operations, where the client is an agency oraffiliate of the member country, the relationships that are required to discuss, design, and implement appropriate
remedial actions remain in place, separate from the DFI’s loan, and an approach like the one contemplated by theApproach is not necessary or applicable. For the same reason, the Approach will not apply to MIGA’s NonHonoring of Sovereign Financial Obligations (NHSFO) and Non-Honoring of Financial Obligations by a StateOwned Enterprise (NHFO-SOE) instruments, which provide credit enhancement guarantees for public sector
projects of sovereign, sub-sovereign, or state-owned enterprises, as applicable. IFC/MIGA have not analyzed
sovereign DFI borrowers, including sovereign borrowers benefiting from MIGA’s NHSFO and NHFO-SOE
instruments; their ownership of, and/or responsibility for, projects financed by DFIs or MIGA NHSFO and NHFOSOE guarantee holders; nor the role of DFIs and MIGA’s guarantee holders in these contexts. For other DFIs andMIGA’s NHSFO and NHFO-SOE instruments, additional analysis would have to be conducted before evaluating
any of the proposals contained herein.
34. DFI Coordination. Since many DFIs endeavor to follow a largely harmonized approach to E&S risk
management in their E&S policies, it would be appropriate that those DFIs focused on private sector financing toalso share and coordinate their respective approaches to remedial actions to the extent possible.
V. Pilot Period
35. Overview. The Approach would be implemented for an initial pilot period (guided by IFC/MIGA’s respective
Management Directives) of four years, from January 2024 to December 2027 (Q3FY24-Q2FY28), to provide
sufficient time and to align with the review and reflect lessons learned from implementation of the CAO Policy,
including implementation of MAPs and experience with the SGR function. This would allow IFC/MIGA to further
test the Approach, draw lessons learned, and refine it, rather than locking into an approach at the outset that may
not be as effective or as efficient as intended. It is anticipated that an IFC Management Directive would govern thepilot period for IFC, and a similar document would govern the MIGA pilot. These would be issued in Q1FY24, .
IFC/MIGA are currently assessing and developing relevant tools, which would be rolled out during the Approach
preparation phase that would run from July 2023 through December 2023. During the preparation phase, IFC/MIGA
would proceed with the implementation arrangements; build necessary capacity; finalize systems, procedures,
guidance and reporting requirements, as well as refine relevant tools and conduct training and outreach in order to12

October 31, 2022
prepare for implementation. During the subsequent pilot period, IFC would implement the Approach, including all
proposed enhancements, for all new direct investment projects. Relevant elements of the proposed Approach,particularly those related to client’s preparedness, will also be applied to the new FI transactions. MIGA would
implement the Approach, including all proposed enhancements, for all new political risk insurance guarantee
operations. For the avoidance of doubt IFC/MIGA will not require FI clients to establish their own Approachequivalents. The review of the pilot period would coincide with the review of the CAO Policy. The proposal for apilot period reflects the novelty and scale of this undertaking, allowing IFC/MIGA to draw lessons learned thatwould inform the formalization of the Approach.
36. Risk considerations. Although framed in the context of a pilot period, any enhancements made by IFC/MIGA
during this period may also be perceived as creating new de facto expectations on the part of independentaccountability mechanisms, courts, or the public more widely, limiting IFC/MIGA’s ability to change course
following the pilot period. That said, a pilot period is proposed to have the time to assess the likelihood of risksmaterializing in practice and to evaluate their impact. The likelihood and magnitude of these risks and whether
IFC/MIGA have effectively mitigated them will become more evident during the pilot period. In addition, the pilot
period will provide some flexibility by allowing IFC/MIGA to adapt the Approach if and as necessary, by drawing
lessons learned from preparation as well as from cases where IFC/MIGA facilitates and supports remedial action
through clients and others.
37. Implementation. Throughout the pilot period a dedicated core team would track implementation of the
proposed enhancements, including key metrics related to outputs and outcomes; risks materialized/corresponding
mitigation measures; incremental resources used; capacity needs; other lessons learned; and possible suggested
refinements. Additional details on the proposed pilot period are presented in Appendix C.
38. Reporting. IFC/MIGA would keep the Board informed of progress through briefings and reports throughout
the pilot period, including annual reports. The final assessment would be undertaken at the end of the pilot period,in consultation with the CAO and coinciding with the review of the CAO Policy. IFC/MIGA would then submit a
proposal to the Boards, including a refined Approach and the steps to formalize it in appropriate policies orprocedures.
VI. Stakeholder Engagement Plan
39. IFC/MIGA intend to conduct a 45-day public consultation (see Appendix B) on the proposed Approach aspresented in this paper. It would have the following characteristics:•

At the start of the consultation period, all materials as well as questions for feedback would be madeavailable through a dedicated website hosted by IFC/MIGA. The website would also allow for written
feedback.

•

Sessions would be run by professional facilitators. The consultation would include both open sessions andsessions targeting select groups, to support participation by all relevant stakeholder groups (e.g., CSOs,
clients, private sector financial institutions, affected communities, and other development financeinstitutions and their independent accountability mechanisms).

•

Sessions would be held in multiple time zones and multiple languages (Arabic, English, French, Portuguese,and Spanish).

•

A summary of the outcomes of the stakeholder engagement process, including comments and questions
received (without attribution), would be compiled and disclosed on the dedicated website.

13

October 31, 2022
Appendix A. External Review
1. The “External Review of the Environmental and Social (E&S) Accountability of the International FinanceCorporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), including the Compliance Advisor
Ombudsman (CAO)’s Role and Effectiveness” (the External Review) was initiated in 2018 by the Committee on
Development Effectiveness (CODE) on behalf of the Boards of IFC/MIGA. Chaired by former IFC Executive Vice
President, Mr. Peter Woicke, a team of independent experts presented a report with 136 recommendations to CODE
and the Committee on Governance and Executive Directors’ Administrative Matters (COGAM) for discussion on
June 24, 2020. The report included this recommendation: “An IFC/MIGA framework needs to be established for
remedial action in cases in which non-compliance contributes to harm.”24
2. With respect to remedy, the External Review made the following detailed recommendations on establishing aframework and on what it should entail:•“Two mechanisms should be established to fund remedial actions: (1) contingent liability funds from theclient that can be tapped in the event that E&S harm materializes and is linked to the client’s failure to meetthe Performance Standards; and (2) funds that IFC/MIGA can contribute, in the event that either has
contributed to E&S harm.

•

IFC and MIGA should define a framework for remedial action, and the Board should review and approvethat framework, building in part on the Dutch Banking Sector Agreement.

•

IFC and MIGA should develop contingent liability funding requirements and mechanisms for all
investments that present significant E&S risk (at a minimum, all Category A, B, FI 1, and FI 2 investments);•

IFC and MIGA should develop, in collaboration with CAO, and present to the Board a draft policy on theuse of IFC/MIGA resources to contribute to remedy, clarifying the criteria, potential uses, and limitationsof such resources to contribute to remedy.” 25

3. At the June 2020 meeting, CODE/COGAM tasked IFC, MIGA, and the CAO to prepare a roadmap and timeline
for implementing the External Review recommendations. They did so, and on October 26, 2020, CODE/COGAM
endorsed the Final Roadmap Package on IFC & MIGA E&S Accountability, including CAO’s Role andEffectiveness, proposed by IFC/MIGA. In order to respond to the External Review recommendations, IFC/MIGA’s
actions have been clustered into the following three areas: (1) the IFC/MIGA Independent Accountability
Mechanism (CAO) Policy (approved by the Board on June 28, 2021); (2) non-policy actions for IFC/MIGA to
implement; and (3) the review by IFC/MIGA of the recommendations on remedy, which is the focus of this paper.

24 External Review, p. xvii.
25 External Review, pp. 98-99.

14October 31, 2022
Appendix B. Stakeholder Engagement Plan
The following outlines the plan for stakeholder consultation for the Approach to Remedial Action and the Approach
to Responsible Exit. It is subject to change.
Roles and Responsibilities
The consultation will be led by IFC Communications with support from MIGA Communications, as needed. A
select group of IFC and MIGA staff who have been involved in articulating the approaches (the “Core Team”) is
meeting regularly with IFC Communications to advise on approach, coordinate planning, and review documents.
Duration and Timing
The consultation period will last 45 days, commencing within a month of the CODE meeting.
Key Elements of the Consultation Approach
1. Online Consultation Platform•

Survey to collect written feedback: Will use SurveyMonkey—translated into the official World Bank
Group (WBG) languages: Arabic, Chinese, French, Japanese, Portuguese, Russian, and Spanish.

•Direct feedback: Stakeholders will be able to submit feedback directly to a dedicated email address.

•

Consultation webpage: The consultation webpage hosted on ifc.org developed for the IFC/MIGA
Accountability Policy (CAO Policy) will be repurposed for expediency given existing IFC IT support andstakeholder familiarity with and positive feedback on the webpage. The MIGA website will have a landing
page that also links to the consultation page. The webpage promoting the stakeholder consultation for the
Approach to remedial action and the Approach to Responsible Exit will launch soon after the CODE
meeting and will detail (i) background and context for the Approach to remedial action and the Approach
to Responsible Exit, including an overview of work to date; and (ii) consultation details (dates, time-zones,
languages, etc.) with links to the survey, RSVPs, and direct feedback options. Consultation content will be
added to the webpage at the beginning of the consultation period and will be made available at least 10 days
prior to the first consultation session.

•

Format: While most sessions will be held online, IFC/MIGA will look for opportunities to hold in-personor hybrid sessions as well.

2. Supporting Materials•

Document(s) outlining the key aspects of the Approach to remedial action and Approach to
Responsible Exit: Will be translated into the official WBG languages and be made available on the
webpage at the beginning of the consultation period.

•

FAQ document: Will be provided to address likely questions and include ways to provide feedback.

3. Promotion of Stakeholder Consultation
The events will be promoted via various IFC and MIGA newsletters, IFC/MIGA and WBG communication
channels, direct stakeholder outreach as needed, and the consultation webpage.

15

October 31, 2022
4. Series of Meetings•

Forums by stakeholder group: Most of the consultations will consist of smaller-sized forums to ensure
stakeholders feel comfortable discussing opinions and providing feedback. Forums will be composed of
specific stakeholder groups (CSOs and communities, private sector, DFIs), with several timeslots available
for each group, so stakeholders can self-select based on time zone and language. Each meeting will belimited to 25-30 participants. A second meeting in the relevant language and time zone will be considered
if more participants than can be accommodated in one meeting express interest.

•

Language: Meetings will be organized and facilitated in English, Spanish, French, and Arabic (the“Meeting Languages”). Portuguese interpretation will be made available during meetings held in Spanish.
Live interpretation in English will be offered in all sessions as well, with support from interpreters who arefamiliar with the relevant terminology.

•

Duration and management: Each meeting will consist of a 2- to 3-hour facilitated session, with supportof at least one notetaker and one member of the Core Team.

•

Registration and outreach: Sessions for private sector clients and DFIs will be organized by invitation
only. Registration for CSOs and community sessions will be open to everyone interested via theconsultation webpage (via SurveyMonkey). Participation will be encouraged through targeted outreach tocore stakeholder groups (including through various IFC/MIGA and WBG networks, and throughcommunity mappings). A minimum of 5 registered participants will be required for any session to be held.
Should that minimum not be reached 2 days before the session, stakeholders who have signed up will be
informed that the session will not take place and will be encouraged to join another meeting or the final
multi-stakeholder session.

•Multi-stakeholder session: After all stakeholder forums have been completed, a multi-stakeholder session
will be held in English, with interpretation available in the Meeting Languages. The session will provide aspace to listen to those participants who were not able to join the stakeholder forums, allow for some crossfertilization between groups, and enable deeper discussion of specific issues, including issues raised during
previous sessions.

•

Other specific meetings: Additional meetings may be scheduled with community individuals or groups,
or other external stakeholders affected by IFC/MIGA projects as relevant, and who are not used toparticipating in consultation meetings, are not aware of the process, or have concerns about providing input
in a public meeting. These could include meetings with community groups and CSOs together, if sorequested. Similarly, specific meetings may be actively scheduled with clients who have a longstanding
relationship with IFC/MIGA and would rather engage in one-on-one conversations with the Core Team.

5. Disclosure of summary of feedback by stakeholder group on the Consultation Platform:
Summaries of meetings and of feedback by stakeholder group will be prepared by the facilitators, with support fromnotetakers. Different versions may be prepared for the Core Team, Board, and public disclosure, respectively, withthe public summaries to be provided along with any publicly disclosed final recommendations.
6. Timeline:-

Webpage will launch soon after the CODE meeting.

-Consultation material will be available at the start of the 45-day consultation period.

16

October 31, 2022-

A report of the consultation process and updated Approach will be submitted to CODE in late 2023 and a
version will be made available for public disclosure thereafter.

7. Proposed meetings
Stakeholders

LanguageType of Session

Time Zones
coveredDFIs

EnglishClosedConsultation(Hybrid)

Washington DC & Caribbean Countries (AM) - African Countries (PM) Eastern Europe (PM) West and Central Asia (PM)Clients

English (Spanish/French)

ClosedWashington DC & Caribbean Countries (AM) - African Countries (PM) Consultation Online
Eastern Europe (PM)ClosedConsultation Online
Open
Consultation

English (Spanish/French)

Communities&
CSOs

Multistakeholder(Hybrid/Online)

West and Central Asia (PM) - East Asia Pacific (AM)Washington DC & Caribbean Countries (AM) - African Countries (PM) Eastern Europe (PM) West and Central Asia (PM)Open
Consultation Online

West and Central Asia (PM) - East Asia Pacific (AM)

French (English)

Open
Consultation Online

Haiti (AM) - Francophone Africa (PM)Arabic (English)

Open
Consultation
OnlineNorthern Africa (AM) - Arab Peninsula (PM)Spanish/Portuguese(English)

Open
Consultation Online

Central America &South America (AM)English (withinterpretation available)

Open
Consultation(Hybrid)

Global17October 31, 2022
Appendix C. Proposed Approach to remedial action: Pilot Period
Preparing for the Implementation of the Approach to remedial action
It is anticipated that an IFC/MIGA Management Directive will govern the pilot period. This would be issued in July 2023, .
Overview
IFC/MIGA are currently assessing and developing relevant tools, which will be finetuned during the Approach preparation phase thatwill run from July 2023 through December 2023. During the six-month preparation phase, IFC/MIGA will build the necessary
capacity, finalize systems, finetune procedures, and develop guidance and reporting requirements. Additional training and outreach
will be led by a dedicated core team implementing the pilot.
Timeframe

July 2023 – December 2023

Preparation Required for Each Aspect of the Approach
Preparedness
Influence Assessment and Client Preparedness Assessmentfor Remedial• Build tools to conduct influence assessment and client preparedness assessment.
Action• Develop methodology for applying to projects (and integrate into relevant processes).
ESAP costing• Develop ESAP costing guidance and template.
• Develop methodology for applying to select projects (and integrate into relevant processes).
Contractual provisions• Review the existing legal templates and reflect revised/new contractual provisions regarding client responsibility for remedialactions in the legal templates.
• Develop appropriate guidance determining when each provision may be relevant (i.e., subset of project circumstances) andhow (if necessary) it may be tailored.
• Develop methodology for applying to select projects (and integrate into relevant processes).
Facilitation and Develop decision-making methodology and process guidance on assessing and implementing how best to facilitate and support
remedial actions.
SupportGeneral• Develop tracking systems, including key metrics to track for all “Outputs” and “Outcomes” below, and methodologies to support
recalibration of key tools as required.
• Develop processes for pilot implementation.

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October 31, 2022
Implementation of the Approach in the Pilot Period
During the pilot period, IFC/MIGA will implement the Approach, including all proposed enhancements. Throughout
the pilot period, a dedicated core team will track implementation of proposed enhancements in a centralized
database. Key issues to be tracked: key metrics for all “outputs” and “outcomes”; risks materialized/corresponding
Overview
mitigation measures; incremental resources used; capacity needs, other lessons learned; and possible suggested
refinements. IFC/MIGA will engage on the implementation of the proposed Approach with CAO throughout thepilot period.
Timeframe
January 2024 – December 2027
Pilot Activity

Objectives

Outputs

I. Preparedness for Remedial Action
A. Assessments
Implement assessments,
drawing lessons learned anditerating over time.

Strengthen client preparedness toprovide remedial actions when needed
Increase IFC/MIGA influence toaddress adverse E&S impacts

B. Contractual Provisions
Implement in all projects (towhich applicable), drawing
lessons learned and iteratingover time.
II. Facilitation and Support

Use revised/new contractual provisions
to increase client preparedness and
IFC/MIGA influence for when remedialaction is needed

Implement in all relevant
projects, as provided for in the
Approach Board document,
drawing lessons learned anditerating over time.

II. Access to Remedy
1. Project level Grievance
Mechanisms (GM): Follow on
activities to the IFC/MIGA
GM portfolio review

Assessments implemented in projects

Provisions incorporated in contract
templates

Influence – More effectively utilize
IFC/MIGA influence to address adverse
E&S impacts
Support enabling activities for:remedial actions by the client or third
parties to address adverse E&S impacts•

Enhance understanding of client
performance and the efficacy of
IFC’s appraisal and monitoring ofstakeholder engagement and GMs

Case-by-case application
Influence utilized with client, andother actors such co-lenders/coinvestors, governments etc.
Technical assistance, capacity
building, advisory services anddialogue facilitation and others
provided to support/facilitate
remedial action•

19

Results from the review will
inform training programs for
specialists, client capacitybuilding initiatives, and the

Outcomes

Increased/ improved clientawareness of IFC/MIGA
expectations regarding remedialactions and preparedness toprovide remedial action, if
required
Improved utilization of
IFC/MIGA influence to act whenrequired within the remedy
ecosystem
Fewer un-remediated adverse
E&S impacts•

Improved access to remedy
through project level GMs

October 31, 2022
Implementation of the Approach in the Pilot Period
2. Encourage clients to inform• Increase stakeholder’s knowledge
stakeholders of all grievanceand access to all grievancemechanism channels, including
mechanism channels, including
the CAO
CAO

3. SGR Enhancements tofacilitate access to remedy

Strengthen institutional level grievanceresponse mechanism, facilitating accessto remedy

Implement in all relevant
projects, drawing lessons
learned and iterating over time.
III. Lessons Learned: Reporting and Assessment
Assessment of pilot period
Evaluate implementation outputs,(based on key metrics to beanalyzing trends and drawing
finalized in June 2023) in order conclusions on the key aspects of theto draw lessons learned.
Approach.

•

•
•
•

development of knowledge
products and advisory services
programs.
Lessons from CAO caseexamples, developed inconsultation with the CAO, will
be included to enhance thetraining material.
Developing new guidance
Increasing staffing capacity andresources to strengthen its work.
Developing additional tools to
proactively engage withstakeholders

Annual Assessment Reports

20•

Improved knowledge of all
grievance mechanism
channels, including the CAO

Improved responsiveness andresolution of complaints atinstitutional level

CODE kept informed andApproach strengthened.