Recommendations to International Finance Corporation (IFC) on Policy
and Performance standards on Social & Environmental Sustainability,
and Policy on Disclosure of Information

November 2009

Japan Center for a Sustainable Environment and Society (JACSES)
401 Sanshin Bldg. 2-3-2 Iidabashi Chiyoda-ku Tokyo 102-0072 Japan
Tel: +81-3-3556-7325 Fax: +81-3-3556-7328
Email: jacses@jacses.org URL: http://www.jacses.org/en/

Friends of the Earth Japan (FoE Japan)
3-30-8-1F Ikebukuro Toshima-ku Tokyo 171-0014 Japan
Tel: +81-3-6907-7217 Fax: +81-3-6907-7219
E-mail finance@foejapan.org URL: http://www.foejapan.org/en/

On April 30, 2006, International Finance Corporation (IFC) adopted the Policy and PerformanceStandards on Social & Environment, and the Policy on Disclosure of Information. However, several
projects financed by IFC have not complied with these policies appropriately. The following
recommendations to IFC are proposed based on comparison with other Multilateral Development Banks’policies, and on the review on IFC-funded projects which were approved after the date.

Recommendation 1:
In the objectives of Performance Standards (PS) 1, a requirement to improve or at least restore
the livelihoods and standards of living of affected people due to non-land-related displacement
should be added.
Rationale:
This requirement for land-related displacement is in PS 5, however, the PS 5 does not covernon-land-related displacement. So, the requirement should also be included in PS1..

Recommendation 2:
The impacts associated with supply chains should be inquired in all projects.
Rationale:
The PS 1 states “The impacts associated with supply chains will be considered where the resource
utilized by the project is ecologically sensitive.” However, the trigger of the requirement is unclear.

In Bertin project, impacts associated with supply chains have not been covered appropriately insocial and environmental assessment processes. (See Case 1 of Appendix 1).

Recommendation 3:
In social and environmental assessment process in Category A projects, Independent experts
should be required to retain.
Rationale:Independent environmental assessment experts are required to retain in Category A projects inWorld Bank (See para. 4 of OP 4.01).

In Bertin and Bujagali Energy project, potential impacts have not been covered appropriately insocial and environmental assessment processes. It is urgent to enhance credibility and integrity ofassessment’s results and mitigation measures (See Case 1 and 2 of Appendix 1).

Recommendation 4:
Social and environmental assessment reports, Action Plans and monitoring reports should betranslated into languages understandable and accessible to affected peoples.
Rationale:
Language is a key for affected people to participate in development process. The current policy fails
to set a minimum range of document that clients must translate.

In Lanco Amarkantak Thermal Power Station project, the Action Plan has not been translated intoHindi, and consultations with affected peoples have not been conducted appropriately (See Case 32

of Appendix 1).

Recommendation 5:
Social and environmental monitoring reports (progress reports) should be disclosed to affected
people and the public, which should be required in PS 1.
Rationale:It is unclear how clients implement Action Plans appropriately, and how they address unexpectedsocial and environmental issues raised after finalization of Action Plans.

Disclosure of social and environmental monitoring reports is required to borrowers/clients in AsianDevelopment Bank’s project (See para. 17 of Safeguard Requirements 1, para. 26 of Safeguard
Requirements 2 and para. 20 of Safeguard Requirements 3 of Safeguard Policy Statement).

In Bertin, Bujagali Energy and Wilmar Project, potential impacts have not been covered
appropriately in social and environmental assessment processes (See Case 1, 2, and 4 of Appendix
1).

Recommendation 6:
Impacts on climate change due to deforestation should be assessed in social and environmental
assessment process.
Rationale:
Reduction of greenhouse gas emission is recommended in PS 3. However, PS 3 does not cover theimpacts on climate change due to project-related deforestation.

It is said that greenhouse gas emission by land use, land use change, and forestry (mainlydeforestation and forest degradation) accounts for approximately 20% of overall emission in theworld.

In Bertin project, potential impacts on climate change due to the project-related deforestation havenot been considered in the social and environmental assessment (See Case 1 of Appendix 1).

Recommendation 7:
Free, prior and informed consent (FPIC) should be obtained from the indigenous peoples, if there
are impacts on indigenous peoples.
Rationale:UN Declaration on the Rights of Indigenous Peoples, which was adopted by the General Assembly,
requires the requirement of FPIC.

Inter-American Development Bank requires to promote mechanisms and processes in order to take
into account the general principle of FPIC.

Recommendation 8:
Areas having biodiversity that support local communities’ basic needs should be one of thecriteria for critical habit in Performance Standard 6.
Rationale:3

Wording of current Performance Standard 6 “areas having biodiversity of significant social,economic or cultural importance to local communities” can exclude such areas that provide basic
needs of local communities. Thus the word “significant” in paragraph 9 should be removed.

Recommendation 9:
In areas of critical habitat, the client should not significantly convert or degrade such habitat.
Rationale:In paragraph 10 of current Performance Standard 6, there are three requirements that can beexemptions of projects that cause significant conversion or degradation of critical habitat, which
threaten various values of biodiversity in the areas.

Recommendation 10:
Social and environmental monitoring reports (progress reports) should be disclosed on the IFC’swebsite upon receipt, which should be required in IFC’s Policy on Disclosure of Information.
Rationale:
Disclosure of social and environmental monitoring reports is required to Asian Development Bank
(See para. 53 of Safeguard Policy Statement).

In Bertin, Bujagali Energy and WIlmar Project, potential impacts have not been covered
appropriately in social and environmental assessment processes (See Case 1, 2, and 4 of Appendix1).

Recommendation 11:
IFC’s monitoring results including site visits reports should be disclosed on the IFC’s website,which should be required in IFC’s Policy on Disclosure of Information.
Rationale:
IFC conducts project monitoring after financing. However, there is no obligation for IFC to disclose
its monitoring results.

In some cases, IFC conducts site visits of certain projects with social and environmental risks andImpacts. To be fully accountable with the project monitoring, IFC should disclose its monitoring
result including site visits reports.

4Appendix 1: Review of Recent IFC-financed Projects - For a Reference at the Revisions of Policy
and Performance Standards on Social & Environment and Policy on Disclosure of Information -Case 1: Bertin LTDACountryBrazilCompany Name

Bertin LTDA

Environmental

A

Category
Finance Status

Canceled on June 12, 2009 1 (Approved on March 8, 2007) 2

Project Description

Bertin LTDA is a leading Brazilian cattle slaughterer, meat/hide processor andexporter. The company procures 85% of its cattle from independent farmers
and keeps an 80,000 heads farm and a 100,000 heads feedlot in reserve. Thepurpose of the project is to increase its beef product range and to expand its
production sales.

Problems

1.

The deforestation of 270,000-320,000 hectares forest, which is highly likely
to be induced by expanding the production capacity, is violations of bothnational law and federal government’s sustainable forestry directive(violation of para. 4 of PS 1).

2.

Impacts associated with supply chains have not been considered (violationof para 6, PS 1).

3.

Impacts on climate change due to the deforestation have not been
considered appropriately (violation of para. 6 of PS 1).

4.

IFC ignored the warning on the project-induced expansion of deforestation
raised by the Bank’s own Independent Evaluation Group (IEG). IFC’s due
diligence process has not been conducted appropriately.

Reference1
2

Bretton Woods Project, 3 Greenpeace 4

http://www.ifc.org/ifcext/disclosure.nsf/Content/Brazil_Bertin

http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/b9189fae46d04f328525723300
780f9d?opendocument3
http://www.brettonwoodsproject.org/art.shtml?x=552157
4
http://www.greenpeace.org/international/press/releases/world-bank-withdraws-bertin-loan-130609
5Case 2: Bujagali Energy Ltd.
CountryUganda

Company Name

Bujagali Energy Limited

Environmental

A

CategoryFinance Status

Active (Approved on April 26, 2007) 5

Project Description

The project consists of the development, construction and maintenance of arun-of-the-river power plant with a capacity of up to 250 MW on the River Nile,at Dumbbell Island in Uganda. The project company will also manage theconstruction of approximately 100 kilometers of 132 kV transmission line.

Problems

1.

Cumulative impacts with series of other projects and impacts oftransmission lines have not been considered (violation of para. 5 of PS 1).

2.

Declined water levels of Lake Victoria have not been assessed (violation ofpara. 5 (iii) of PS 1).

3.

Despite technically complex issues such as described above are involved,
external experts have not been retained (violation of para. 7 of PS 1).

4.

Livelihoods and standards of living of the people displaced have not been
restored since requirement to census all displaced persons was neglectedand public consultation process was truncated (violation of para. 8 of PS5).

5.

Bujagali Falls have been misjudged as a cultural resource for the people
lived in vicinity, and consultation process excluded wider people of theBasoga community (violation of para. 6 of PS 8).

Reference

World Bank’s Inspection Panel, 6 International Rivers 75

http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/21e1f67a14f119e28525724a00
667e87?opendocument6

http://web.worldbank.org/WBSITE/EXTERNAL/EXTINSPECTIONPANEL/0,,contentMDK:21247695~pa
gePK:64129751~piPK:64128378~theSitePK:380794,00.html
7
http://www.internationalrivers.org/en/africa/bujagali-dam-uganda
6

Case 3: Lanco Amarkantak Thermal Power StationCountry

IndiaCompany Name

Lanco Amarkantak Thermal Power Private Limited

Environmental

A

Category
Finance Status

Active (Approved on June 1, 2007) 8

Project Description

The company involves the construction, operation and maintenance of a 600
MW (2 * 300 MW units) coal based thermal power plant in Patadi village, Korba
district of the state of Chhatisgarh, India. The project also involves theconstruction of a switchyard and 32 km long 400 kV transmission line.

Problems

1.

Action Plan has not been disclosed at local Panchayat office. None has
seen a Hindi translation of the Plan (violation of paras. 16, 20 and 26 of PS
1).

2.

Comprehensive social impact assessment was published more than three
years after land acquisition process began (violation of para. 20 of PS 1).

3.

The social impact assessment and IFC’s social and environmental review
summery has not been disclosed in local language and some people
claimed that community leaders were bribed. Thus Consultation process
has not been conducted appropriately. Also, the early stages of theconsultation process have not been documented (violation of para. 21 ofPS 1).

4.

Compensation does not reflect market price and is not enough to buy
equivalent land in the area. Livelihoods and standards of living of thepeople displaced have not been restored. At the end of 2004, the firstphase of resettlement took place. Jobs had been provided to only one thirdof affected households and income generation activities had not been
implemented.

5.

(violation of para. 8 of PS 5).

Free, prior and informed consultation with affected Adivasis has not been
carried out (violation of para. 9 of PS 7).

Reference89

Forest People Programs 9

http://www.ifc.org/IFCExt/spiwebsite1.nsf/0/c126975a64d3306e852572a0004807bd?OpenDocument
http://www.forestpeoples.org/documents/ifi_igo/ifc_india_lanco_press_rel_dec08_eng.shtml
7

Case 4: Wilmar Trading (IFC Project No. 20348), Delta–Wilmar CIS (No. 24644), Wilmar WCap (No.
25532), Delta–Wilmar CIS Expansion (No. 26271)
Country

No. 20348 and 25532: Indonesia
No. 24644 and 26271: Ukraine

Company Name

No. 20348 and 25532: WilmarTrading Pte.Ltd.
No. 24644 and 26271: Delta-Wilmar CIS Ltd.

Environmental

No. 20348 and 25532: CCategoryNo. 24644 and 26271: B

Finance Status

No. 20348: Completed (Approved on May 3, 2004) 10
No. 24644: Active (Approved on June 27, 2006) 11
No. 25532: Completed (Approved on December 20, 2006) 12
No. 26271: Pending Distribution (Approved on October 20, 2008) 13

Project Description

No. 20348: To scale up the offtake of crude palm oil (CPO) from palm oil
plantations in Indonesia and process them into refined oil
No. 24644: To construct, equip and place into operation a 1,500 metric ton per
day CPO refinery.
No. 25532: To enable to meet its working capital needs to purchase CPO frompalm oil plantations in Indonesia and process them into refined oil for export
No. 26271: Additional finance for expansion of capacity of the refinery andrelated infrastructure.

Problems

1.

These projects have been financed with incorrect categorization.

2.

Social and environmental impact assessments or action plans are notpublicly available

3.

(violation of para. 20 and 26 of PS1)

The supply chain plantations and other companies related to the project
are not taking into account in the assessment (violation of para.6 of PS1)

4.

The company has not established the area to be compensated tosmallholdings (violation of para. 8 of PS 5).

5.

The project involved with clearance of primary forests and area of highconservation value (violation of para.16 of PS6)

6.

Free, prior and informed consultation with indigenous peoples has not10

http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/64d0058360ce6dbc852
56dd6005e35e0?opendocument11

http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/8c6382c5ada5feee8525
738e0054259e?opendocument12

http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/68bdeb3d4fe3b5d3852
5738e0050bd85?opendocument13

http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/dcdc081efe24c7ca852574
890079b13e?opendocument
8

been carried out (violation of para. 9 of PS7).
Reference

CAO Audit Report 1414

http://www.cao-ombudsman.org/uploads/case_documents/Combined%20Document%201_2_3_4_5_6_
7.pdf
9