Submission by Civil Society Organizations to theInternational Finance Corporation
Commenting on
The Social and Environmental Sustainability Policy,
Performance Standards and Disclosure Policy
11 March 2010
Introduction
The undersigned civil society organizations have prepared this joint submission toprovide an overview of many of our concerns related to IFC’s Policy on Social andEnvironmental Sustainability, the Performance Standards, related guidance documents, and theDisclosure Policy. We believe these concerns should be explored and addressed further throughIFC’s current consultation and review process.
This review provides an important opportunity to respond to critical developments in thelast three years, including, for example, the adoption of the United Nations Declaration on the
Rights of Indigenous Peoples by the United Nations General Assembly (UNDRIP); increased
progress in understanding the responsibilities of private actors with respect to human rights;
increased understanding of the urgent need to respond to climate change; and a significant
increase in the development and use of new approaches to lending.
The review also provides a much-needed opportunity to incorporate lessons learned in
response to the financial crisis. The crisis underscored the need to provide clear expectations andstandards for private sector actors, as well as adequate transparency, due diligence, and oversightprocedures to ensure that risks are assessed and addressed fully. We believe the approachassumed by IFC in 2006, prior to the crisis, to introduce greater flexibility in IFC standards andto shift monitoring and supervision responsibilities to private sector clients, is clearly
inconsistent with new hard-learned lessons about how to deal with financial risks and poses
problems for securing strong development outcomes.
For example, IFC’s growing support in recent years for financial intermediaries –including non-banking private financial institutions engaging in high leverage practices andtaking significant financial risks – is not consistent with expectations of the general public. The
expectation is that multilateral public support will be awarded to the private financial sector on
the basis of much stricter and more sound due diligence, while support to the types of actors
who substantially contributed to the financial crisis of the last two years will be avoided.
Unfortunately, the foundational document for this review, ―IFC’s Policy and PerformanceStandards on Social and Environmental Sustainability and Policy on Disclosure of Information:
Report on the First Three Years of Application,‖ requested by the Board, inadequately prepares

IFC to respond to these critical developments and lessons learned. Instead, IFC’s approach tomeasuring effectiveness demonstrates a bias towards responding to the needs of IFC’s private
sector clients rather than, and perhaps to the detriment of, the concerns of local communities andthe environment.
For example, in this report, IFC management focused exclusively on soliciting the viewsof its private sector clients, which is an insufficient barometer of the ―effectiveness‖ of the IFC
Policy and Performance Standards. The failure of IFC management to interview a single
community for the report, despite the opportunity to do so provided by the 182 projects that havebeen under IFC’s supervision for over a year, is a strong indication that IFC is not, in practice,committed to ensuring that the Policy and Performance Standards are implemented effectively toprotect communities and the environment, as intended.
We believe research and reports prepared by the Compliance Advisor Ombudsman(CAO) and the Independent Evaluation Group will be important inputs for consideration by IFC
during the review process.
Some key concerns of our organizations include those related to environmental and social
due diligence and oversight; accountability; development outcomes; human rights; biodiversity;
climate change; financial intermediaries; and disclosure of information. This overview,
however, does not represent a comprehensive review of all issues of importance to civil society
and local communities; our organizations and others will be providing more detailed feedback onthese and other issues.
Environmental and Social Due Diligence and Oversight
IFC’s Due Diligence and Oversight
IFC’s policy and practice do not provide the environmental and social due diligencerequired to support development that alleviates poverty and does not harm local communities.
Provisions of IFC’s Social and Environmental Sustainability Policy and the Environment andSocial Review Procedure (ESRP) that relate to pre-appraisal, appraisal, and supervision ofprojects are fundamentally deficient in several respects. Moreover, inadequate implementation
has undermined existing due diligence requirements.
The Policy and ESRP promote a dangerous overreliance on client-provided informationthat has not been adequately verified for accuracy or comprehensiveness by IFC or otherindependent sources. Too often, unverified information provided by the client forms the basis
for critical and significant decisions by IFC, including decisions related to: (1) whether the
project is characterized as one with significant adverse impacts and, in turn, whether external
experts are necessary and broad community support for the project must exist; (2) what isincluded in action plans; and (3) whether the client is meeting commitments reflected in the2action plan and loan agreement. These decisions profoundly impact communities anddevelopment results.
Compounding the problems raised by reliance on unverified information is the related
lack of a clear requirement in the ESRP that IFC provide any critical evaluation of the robustnessof the client’s environmental and social impact assessment. The ESRP directs IFC primarily toevaluate the ―scope‖ of the assessment.
Inadequate requirements for categorization of projects are also problematic. IFC’s failure
to categorize projects accurately based on risks has, we believe, contributed to violations ofcommunity rights in IFC investments in Indonesia, Nicaragua and other locations.1 USAID’s
technical review of two projects – Bankers Petroleum in Albania and Peter Hambro Mining PLC
in Russia (an exploratory project) – found that both of these project had the potential to posesignificant environmental and/or social impacts (in the latter project due to potential expansion),and thus should have been designated as category ―A‖ rather than category ―B‖ projects.
Improper categorization leads to a failure to incorporate environmental and social requirements
necessary for effective risk management. It also leaves projects that have potentially significant
impacts less transparent, since disclosure requirements vary depending on project category.
Implementation of existing pre-appraisal, appraisal, and supervision requirements isinadequate as well. One such example is highlighted in the Compliance Advisor Ombudsman’s
audit report in response to a complaint about IFC’s loans to the Wilmar Corporation. The audit
report states, ―Because commercial pressures dominated IFC’s assessment process, the result
was that environmental and social due diligence reviews did not occur as required.‖ The
reporting structure may be one factor, among others, limiting effective implementation; because
Environmental and Social specialists have a different reporting line than loan officers,
information provided by these specialists may not be given the same consideration as
information that is strictly financial.
Additionally, failures by IFC to ensure that clients are meeting obligations to makeassessments public, report to communities on implementation of action plans, and establish
strong grievance mechanisms, are evidenced in IFC’s loan to Nicaragua Sugar Estates Limited(NSEL) in Nicaragua and other projects. Communities in Nicaragua, for example, which fearthat an IFC project is gravely affecting community health, have not been able to access impact
assessments, have not received reports from NSEL describing measures taken to implement
action plans, and do not believe mechanisms exist to address their concerns effectively.2

1

See, for example: The Compliance Advisor Ombudsman. Audit of IFC's investments in: Wilmar Trading, Delta
Wilmar CIS, Wilmar WCap and Delta Wilmar CIS Expansion, June 19, 2009.
2
See, for example: Compliance Advisor Ombudsman. Stakeholder Assessment Report Regarding Community andCivil Society concers in relation to activities of the Nicaragua Sugar Estates Limited (NSEL), Nicaragua, December
2008.

3

More fundamentally, too often communities are not made aware that IFC has invested ina given project, that environmental and social requirements apply, and that they have rights to
information and accountability.
Client Assessments, Monitoring and Reporting
Civil society organizations and communities have observed that client assessments ofsocial and environmental impacts are notably flawed in many projects. These flaws can be
explained in part by inadequate assessment requirements.
For example, IFC’s definition of ―associated facilities‖ often excludes assessment of the
upstream and downstream impacts of the project. IFC requires that clients conduct a social andenvironmental assessment covering the project’s ―area of influence,‖ which encompasses theprimary project site as well as ―associated facilities that are not funded as part of the
project…and whose viability and existence depend exclusively on the project and whose goods
or services are essential for the successful operation of the project.‖ In practice, IFC’s
interpretation of the definition of ―associated facilities‖ has proven unreasonably narrow.
According to the United States’ statement in February 2008 on the Peru LNG project, ―IFC’s
definition of associated facilities for environmental assessment is actually narrower than that
adopted by IDB, as well as inconsistent with what we believe are the standards under U.S.
domestic environmental law and international good practice.‖ To address this shortcoming, IFC
should remove the phrase ―and whose viability and existence depend exclusively on the project‖from its ―associated facilities‖ definition in order to ensure consideration of all dependent
components of the project.
To strengthen impact assessments as a risk management tool, IFC should, additionally,require clients to:
Include a ―no project‖ alternative within the impact assessment;
Account for and publicly report direct and indirect GHG emissions associated withproject activities;
Identify impacts to all ecosystem services;
More effectively consider cumulative impacts of projects on regional development; andAssess the potential human rights impacts of projects (described below).
Inadequate implementation by IFC clients of assessment, monitoring and reporting
requirements is also a significant problem. As noted above, IFC clients have failed to implement
critical requirements that IFC has failed to adequately monitor.
4

Accountability
Despite requirements in Performance Standard 1 that clients respond to communities’
concerns, including through the establishment of ―grievance mechanisms,‖ we have not seen
progress in this regard. Over 500 projects have been approved by IFC since the PerformanceStandards came into force in 2006. Yet it is not clear how many of them have robust project levelgrievance mechanisms; IFC did not include this information in its three year report or 2009 Good
Practice Note. Communities with whom we have engaged in the context of IFC projects have
either not known the mechanisms exist, or believe them to be useless. At a minimum, grievancemechanisms should be independent and have the trust of communities. They should be easy toaccess and able to address communities’ complaints effectively and in a timely manner.
More specifically, Performance Standard 1 should mention that company-sponsoredmechanisms should exist within an ―accountability framework‖ that includes: (1) community
access to remedies through courts, the Compliance Advisor Ombudsman (CAO), and otherindependent dispute-resolution bodies; (2) third party monitoring and verification; and (3) public
reporting. Furthermore, IFC should require clients to disclose the existence of the CAO and how
to access it.
To secure the trust and buy-in of communities, essential elements of local grievancemechanisms, Performance Standard 1 should clearly state that the client shall work in
consultation with the community to establish a grievance mechanism. The paragraph should alsomention that monitoring, reporting and evaluation are essential elements of a community-based
grievance mechanism, as discussed in the CAO’s 2008 Advisory Note on this subject.
Reporting Development Outcomes on a Project-Level
When IFC adopted the existing Policy and Performance Standards, it announced that it
was moving from a rules-based lending approach to an outcomes-based approach.3 However, as
IFC reduced prescriptive control over lending – offering clients greater flexibility in meeting
environmental and social goals and relying more on clients for monitoring and supervision – itweakened accountability and neglected evidence-based development reporting. To strengthen
accountability and truly demonstrate IFC’s progress toward achieving its poverty reduction
mandate, the updated Sustainability Framework must introduce a robust framework for public
reporting on development outcomes for each project.
(1) Reporting on development outcomes should be at the project level.
Currently, the IFC reports on development outcomes annually, aggregating results bysector or area, rather than at a project-level. For example, the IFC does not require any tracking
3

http://www.ifc.org/ifcext/enviro.nsf/AttachmentsByTitle/pr_PolicyReviewFactSheet/$FILE/FactSheet.pdf

5

or reporting on the number of people displaced by each project, or on the impoverishment orenrichment of displaced people. Project-level disclosure would serve as an important gauge toassess which types of projects have actual positive impact on communities and contribute topoverty reduction. Such measures are necessary to determine if displaced people’s standards ofliving improve and whether their livelihoods are restored.
Development outcome tracking should be continuous and include interim and completion
reports. A project-by-project approach allows for monitoring of progress toward anticipateddevelopment outcomes and enables project managers/civil society to spot problems early. Suchaims are not foreign concepts for several of the international financial institutions. The InterAmerican Development Bank (IDB)’s Loan Review Documents and the World Bank
IBRD/IDA’s Implementation Completion and Result reports can serve as examples of ongoingand ex-post reporting. The European Bank for Reconstruction and Development (EBRD) has
also started disclosing brief evaluations of its projects on its website.
(2) Outcome tracking should emphasize progress on sustainable development and resultin quantitative and qualitative reports for each project.
IFC’s vision is that ―people should have the opportunity to escape poverty and improvetheir lives.‖ As such, project impact reports must emphasize achievements in poverty reduction,
empowerment, expansion of opportunities in communities, and sustainable development, aside
from the business and financial performance of the project. IFC should also report on qualitative
outcomes, such as equity in terms of the prevailing power relations in the project, and progresson protection of the rights and interests of women and vulnerable groups, particularly when it
comes to participation, consultation, land titles, property rights, compensation and decision
making. Reporting on qualitative improvements cannot be achieved with the few quantitative
indicators currently captured by IFC’s Development Outcome Tracking System (DOTS). IFC
should supplement quantitative data with narrative reports elaborating whether and how
anticipated development outcomes have been achieved.
(3) IFC should disclose relevant client documentation.
IFC can strengthen development outcomes reporting by making client’s documents
publicly available on its website in addition to the disclosure of its own assessment. IFC candisclose how its clients are implementing Community or Indigenous Peoples Development Plans(IPDP), any benefit sharing agreements that project sponsors and affected communities agree on,or client reports on social assistance provided to communities. This measure will reinforce theclient’s responsibility to report on development outcomes to communities directly. Disclosing
client’s reports on impacts is consistent with the 2008 recommendation of IFC’s Compliance
Advisor/Ombudsman (CAO) on improving local development impacts at the project level.
(4) Reporting should capture both positive as well as negative outcomes.
6

IFC’s DOTS and client-submitted information capture mostly positive outputs such as thenumber of jobs created or amounts spent in the local economy. Certain projects, however, resultin differentiated impacts, creating opportunities for some groups, but harming others. Any
reporting on project outcomes should include information on both winners and losers,
considering the wider impact in the community, supply chain or the sector. Such an approachhelps reveal when the vulnerable bear the negative impacts disproportionately or whether project
benefits target those most in need.
(5) Sensitive projects should be subject to independent impact assessments.
For high-risk projects, the IFC Sustainability Policy should require an independent indepth evaluation of project impacts and contribution to sustainable development. Thisrequirement is in-line with the current requirement of the Multilateral Investment Guarantee
Agency (MIGA) for impact assessments as outlined in its disclosure policy. The IFCcommissioned report on the Yanacocha gold mine project is an example of such third-party
assessments.
(6) The project should be evaluated on its replicability and strategic value.
The IFC’s Summary of Proposed Investments and subsequent outcome reporting shouldreflect the strategic value of the project and how IFC’s value addition can be replicated. The
strategic value of a project involves demonstrating how a project has advanced the relevant
institutional, national and sector-wide development objectives of a country. Replicability should
point to poverty reduction and sustainability solutions that can be adopted and scaled up byothers across the sector or within the supply chain.
Human Rights
IFC activities can significantly impact human rights. The Chad-Cameroon Oil &Pipeline project, for example, is an IFC investment that is associated with deepening poverty,
deterioration in governance, and violent conflict. The IFC remains engaged in the project eventhough IDA/IBRD withdrew from it in 2008 citing systematic violations of loan agreements by
the Chadian government. The Policy and Performance Standards do not ensure that humanrights are respected fully and are not adequate to prevent a repetition of the Chad-Cameroon
outcome elsewhere.
We are concerned that IFC’s current sustainability and risk management framework
seeks primarily to minimize and manage risks that social and environmental concerns pose to theproject and to IFC’s clients, and does not fully take into account risks that projects may pose to
individuals and communities likely to be affected.

7

This approach to risk and harm is neither effective nor adequate from a human rights
perspective. The starting point for assessing human rights-related risks should at least consider
the following:(1) Will any action in this project produce a foreseeable risk to rights of individuals andcommunities likely to be affected? If so have reasonable steps been taken to avoid thoserisks?
(2) What foreseeable impact will this project have on rights not directly affected by the
project (for example, wider issues related to access to food)? This assessment may inturn lead to reasonable adjustments to the project to reduce or avert the foreseeable
impacts.
IFC’s current Performance Standards do not address these concerns, presenting, instead,alternative lower standards that undermine a common, clear and consistent understanding ofrights. Moreover, they do not cover the whole range of human rights that IFC’s activities may
impact. While the Guidance Notes that accompany the Performance Standards reference somehuman rights standards and treaties, these references do not fully embrace recognition andimplementation of key human rights standards, and, as non-binding guidance, fail to require any
such recognition or implementation. Failure to carry out adequate human rights due diligence canresult in serious human rights abuses that often disproportionately affect the most marginalized
people and communities.
The current review of the IFC’s sustainability framework offers an opportunity to ensurethat IFC’s Policy, Performance Standards, and Guidance Notes are made consistent withinternational human rights standards and provide more effective human rights protection for
affected people and communities.
More specifically, the review provides an opportunity for the IFC to increase protectionof human rights by explicitly and fully recognizing human rights standards and ensuring
comprehensive and robust human rights due diligence in all IFC project activities and throughout
the project cycle.
At a minimum, as a pre-requisite for loan approval, a human rights impact assessmentthat explicitly applies the human rights legal framework must be performed. The findings of thisassessment should be made available to the public as part of IFC’s due diligence process.
Any human rights impact assessment should: be adaptable to different circumstances andphases of IFC-supported projects; uphold rights to participation and access to information for allaffected communities; ensure non-discrimination and equality; and include appropriate
mechanisms for people whose rights are negatively affected to hold those responsible to account.
8

Failure by an IFC client to ensure that IFC projects are respecting human rights should
carry severe consequences. Such consequences could include measures such as breach ofcontract, revocation of outstanding funds, disbarment of the company from future IFC support,
and a requirement for IFC to conduct an internal investigation as to whether adequate due
diligence was carried out.
IFC must, additionally, ensure that a host government’s ability to strengthen laws andpolicies relating to human rights, as well as other social and environmental concerns, is not
limited by stabilization clauses in host government agreements. Joint research promoted by the
IFC and Professor John Ruggie, the United Nations Special Representative of the Secretary
General on the issue of human rights and transnational corporations and other businessenterprises, indicates that stabilization clauses can, and do, impact human rights and should be
addressed.
Some examples of gaps in the current coverage of human rights protection in the
Performance Standards are outlined below.
Indigenous Peoples’ Rights
Although IFC and the World Bank have contributed to the development of safeguards toprotect the rights of indigenous peoples, the Policy and Performance Standards must be upgraded
to ensure consistency with international human rights standards, including the United Nations
Declaration on the Rights of Indigenous Peoples (UNDRIP). IFC must ensure, as part of thisprocess, that revisions to its sustainability framework achieve this consistency.
Article 42 of the UNDRIP indicates specifically, ―The United Nations, its bodies,including the Permanent Forum on Indigenous Issues, and specialized agencies, including at thecountry level, and States shall promote respect for and full application of the provisions of thisDeclaration and follow up the effectiveness of this Declaration.‖
The UNDRIP, which affirms rights that are recognized and protected by binding
international conventions, contains specific requirements related to free, prior informed consent.
For example, the UNDRIP requires that consent be sought in good faith for any activity thatmight affect the lands, territories or resources of indigenous peoples; before any relocations(which are prohibited in the absence of consent of indigenous peoples); before adopting or
implementing legislative or administrative measures that might affect indigenous peoples; andwhen indigenous peoples’ cultural, intellectual, religious and spiritual property are to be used.
Lack of consent should prevent any activities or decisions that might directly affect indigenous
peoples’ property rights.

9

Paragraph 20 of IFC’s Policy on Social and Environmental Sustainability states that―…IFC assures itself that the client’s community engagement is one that involves
free, prior, and informed consultation and enables the informed participation of theaffected communities, leading to broad community support for the project within theaffected communities, before presenting the project for approval by IFC’s Board of
Directors. Broad community support is a collection of expressions by the affected
community, through individuals or their recognized representatives, in support of the
project.‖
Neither on paper nor in practice do the IFC’s Sustainability Policy and PerformanceStandard 7 on Indigenous Peoples fully honor the principle that indigenous peoples have theright to free, prior and informed consent before significant decisions are made or actions takenthat would affect their lands, territories or resources. As currently implemented, the broad
community support (BCS) standard does not ensure that communities with a special attachment
to their land and resources and with distinct cultures and languages have provided their ―free,prior and informed consent.‖ To date, IFC’s apparent approach to BCS in practice is todetermine if significant objections exist to a project. In the absence of major objections, IFC
staff assumes the project has ―support.‖ This approach clearly does not ensure that ―consent‖ ofindigenous communities has been secured, or even that a project has support. It also does not
ensure that indigenous peoples’ right to determine how they engage in decision-making
processes is respected. IFC and its clients must be required to inform indigenous peoples thatthey have the right to provide or withhold their consent, and that indigenous peoples have theright to withdraw from ―good faith negotiations‖ with companies if the proposed terms ofagreement are unacceptable. If indigenous peoples withdraw from negotiations the project
should not proceed.
Broad Community Support
Currently complicating a review of an IFC determination of broad community support isthe lack of transparency related to evidence used by IFC to make this determination. The IFC
must provide local communities and civil society organizations with an opportunity to review all
information substantiating IFC’s determination of broad community support and an opportunity
to critique or support these findings. IFC should publish, in advance of IFC consideration ofprojects, all documentation pertaining to the determination of support.
Considering the importance of the good faith negotiation and broad community support
standards, and the relative lack of information on systematic implementation of these standards
by the IFC, IFC must undertake a focused review of these standards, in close consultation with
communities. This should include an examination of (1) how the standards have been applied inpractice in order to assess quality of compliance; (2) weaknesses that need to be addressed; and10

(3) lessons learned from affected communities and their representatives about how the provisions
can be improved.
Women’s Rights
The 1979 Convention on the Elimination of All Forms of Discrimination against Women
creates a framework for ensuring equal protection and non-discrimination based on gender. IFC
Performance Standards, however, do not consistently acknowledge the differing impacts ofdevelopment on gender. For example, women sometimes lack a voice in local governance, areoften the primary labor force and yet have limited rights to own property, tend to have primary
responsibility for growing food and collecting water, and have distinct health care concerns. All
areas covered by the performance standards potentially have gender impacts.
Some key gaps in the Performance Standards include: (1) lack of a requirement toguarantee fair labor standards and equal labor opportunities for women in affected communities;(2) inadequate requirements to address security and health concerns prioritized by women; (3)inadequate protections for the rights of women who do not have recognized title to land, but are
the primary agricultural labor force; and (4) impact assessments that often fail to disaggregate
data or consider the differential impacts on women.
Housing and Land Rights
The right to live in adequate housing is implicated in numerous IFC-financed projects. In
particular, housing and land rights require security of land tenure and legal protection against
eviction, harassment, and threats. Major problems occur when a project displaces communities;
displacement often leads to impoverishment, including homelessness, loss of livelihoods, foodinsecurity, and disruption of community cultures and support networks. Performance Standard
5, which focuses on land acquisition, inadequately addresses these concerns.
First, Performance Standard 5 extends protections only to those physically or
economically displaced by land-acquisition, leaving those who have been constructively evictedbecause their lands have become unliveable as a result of polluted fisheries, water, and air,without any protections. Second, IFC does not require clients to replace lost land with land.
This fails to meet the United Nations’ Basic Principles and Guidelines on Development-based
Evictions and Displacement, which states that land takings ―should be compensated with landcommensurate in quality, size and value or better‖ (emphasis added). Finally, the IFC
requirement that clients ―improve, or at least restore‖ the livelihoods of displaced people inpractice does not secure improvements to livelihoods. Peer institutions, such as the AsianDevelopment Bank, clearly require the improvement of livelihoods. In this regard, IFC should
identify displaced people as project beneficiaries and emphasize that mechanisms for project11

benefit-sharing in addition to compensation (whether cash- or land-based) are necessary forsustainable resettlement.
Finally, an underlying issue limiting the development effectiveness of displacement andresettlement programs is the lack of sound economic evaluation. While IFC is proud of thequality of its mandated economic and financial feasibility project analyses, it does not require theapplication of the same economic and financial feasibility tests to resettlement action plans(RAPs). Numerous studies have shown that project costs, including resettlement costs, areroutinely under-estimated, while project benefits are overstated. This ongoing failure toadequately measure the full costs of resettlement implementation allows IFC clients to underfinance and under-budget resettlement operations, ultimately resulting in impoverishment of
displaced persons.
Water-related rights
Affordable and equitable access to water and sanitation is not explicitly mentioned in thecurrent iteration of IFC Performance Standards. Currently, the standards address impacts towater resources and overall water quality, but do not identify potential project impacts related toaccess, cost of service, distribution, or other issues related to access to water. These are criticalissues that must be addressed, particularly when the project itself is a water supply and/or
sanitation project. These issues could be covered in Performance Standard 1, as well as
Performance Standards 2, 3, and 4.
Access to water is an issue of particular concern in emerging markets. As the United
Nations acknowledged in 2002, the right to water ―is a pre-requisite to the realisation of all otherhuman rights.‖ In that context, it is incumbent on IFC to ensure that water quality and access
implications are an integral part of the performance standards used for assessing the impacts ofall development projects.
Labor Rights
IFC’s Performance Standard 2 marked an important step towards integrating theInternational Labour Organization’s Core Labour Standards (CLS) in its projects. Taking place
during a global unemployment crisis, this policy review offers an important opportunity for the
IFC to improve its approach to labor issues. Chief among our recommendations in this area isthe need to strengthen language on the clients’ obligation to avoid job reductions, closing theexisting gap by requiring clients to examine and adopt alternatives to the greatest possible extent.
We also recommend that IFC develop improved categorization and explanation of projectrisk, taking account of the fact that some activities may have low environmental risks but highrisks for labor standards violations (or vice versa). This distinction would help to address one
12issue with investments in financial intermediaries, where labor risks continue to be significant
even where there are minimal environmental risks.
In addition, we recommend that IFC take greater responsibility for project impact byextending the application of PS 2 to cover ―indirect‖ employees in its supply chain. IFC’s
Performance Standards should explicitly state that a client’s employees are considered part of―affected communities,‖ and that the client is required to engage with its employees and theirrepresentative associations. Evidence of this constructive engagement should be reported
through the obligatory Social and Environmental Assessment, and in any Action Plan that may
be required to assure client compliance. We further recommend that both these documents be
publicly disclosed through the IFC project website for all projects, in order to address access to
information problems that we have experienced.
Climate Change
IFC continues to support fossil fuel-intensive projects, despite the long-term costs that
impact human health as well as the environment. IFC should help its clients consider the fullcosts associated with such projects by accounting for and publicly reporting greenhouse gas(GHG) emissions and analyzing the options available to incorporate low carbon technologies
into each investment.
IFC currently has only a limited number of climate change-related requirements within
the Performance Standards and no requirements for IFC in the Sustainability Policy.
For IFC, the updated Sustainability Policy should include an institution-widecommitment to phase out investments in fossil fuels. This is consistent with the September 2009
Pittsburgh G-20 Summit commitment,4 as well as recommendations from the 2004 Final Reportof the World Bank Extractive Industries Review (EIR), to phase out fossil fuel subsidies. The
EIR recommended that IFC funding for new investments in the coal sector should cease, lending
for the oil sector should be phased out, and any new investments in fossil fuels should focus
selectively on natural gas as a transition fuel.
IFC also has continued to support large-scale livestock projects, including in the Amazon
Forest Region, despite: (a) a 2001 World Bank livestock strategy statement recommending
avoidance of further investments in such projects; (b) a citation in the 2010 World Development
Report to an estimate by the Food and Agriculture Organization (FAO) in 2006 that18% of
GHG emissions are attributable to the livestock; and (c) a finding, published in a 2009 reportauthored by current and former World Bank Group staff members and published by the4

Leaders' Statement: The Pittsburgh Summit, September 24-25, 2009, para. 24.
http://www.pittsburghsummit.gov/mediacenter/129639.htm

13Worldwatch Institute, that at least 51% of GHG emissions can be attributed to the entire life
cycle and supply chain of livestock projects.
The IFC should devote development funds to investments in renewable energy resource
development, emissions-reducing projects, clean energy technology, energy efficiency andconservation, and other efforts that delink energy use from greenhouse gas emissions.
In order to trigger a portfolio shift towards low carbon technologies, clear commitments
should be made to reduce total emissions according to a set timetable. New targets adopted by
the Overseas Private Investment Corporation (OPIC) and Export-Import Bank (EXIM Bank) in
the US offer a concrete model to implement such commitments. A new reduction commitment
might represent the most important short-term contribution of the World Bank Group to tacklingthe climate emergency.
It would be strategic for the IFC to adopt an ―exclusion list‖ of technologies to guaranteethat most of its resources are channeled toward interventions that contribute to emission
reduction targets and do not have significant adverse social and environmental impacts.
Additionally, due diligence requires that IFC assess the risk that climate change poses to
its proposed investments, understanding, for example, how climate change-induced hydrologicalvariations might affect the viability of a proposed hydropower project.
IFC requires that greenhouse gas emissions be quantified by clients only for projects with―significant emissions.‖ This requirement covers projects that emit at least ―100,000 tons CO2
equivalent per year for the aggregate emissions of direct sources and indirect sources associatedwith purchased electricity for own consumption,‖ but fails to account for a large number ofprojects that cumulatively have a significant impact across IFC's portfolio.
The following modifications to Performance Standard 3 are necessary to reflect
developments in GHG accounting since 2006 when the standards were adopted:
Reduce the threshold for GHG accounting from 100,000 tonnes CO2 equivalent per year
to 25,000 tonnes to be consistent with best standards globally;5
Quantify and publicly disclose GHG emissions for all direct and indirect sources, such as
downstream combustion of fossil fuel energy extracted, refined and transported by IFCbacked ventures, as well as land use change resulting from projects including foregonecarbon absorption in land set aside for livestock and feed production. This is particularly
important for land intensive projects such as forestry, agriculture, livestock mining, oiland gas, and hydropower;
5

The 100,000 ton threshold is outdated. For example, new standards in the US government set a GHG accounting
threshold at 25,000 tonnes. See: http://www.epa.gov/climatechange/emissions/ghgrulemaking.html.

14Remove the option for clients to offset GHG emissions, instead requiring clients to
conduct an overall assessment of options for best available low-carbon technologies; andExtend GHG accounting and climate relevant policies to the activities of financial
intermediaries.
Finally, it is important for IFC to consider and address the relationship of human rights tothe broader range of IFC climate-change activities. Many fossil fuel projects adversely impact
human rights by inducing local and regional conflict, worsen poverty by increasing inflation
related to local housing, food and other essential costs, and adversely impact health through the
spread of sexually transmitted diseases from migrant largely male work forces. Moreover, IFC
financing is likely to be channeled increasingly towards biofuel projects (which often displacepoor communities from agricultural land), forest management (which can affect communities’
access to water, food, and cultural resources), and large hydropower. As countries adapt toaddress unpreventable impacts of climate change, certain IFC-supported activities may havehuman rights implications—such as forced resettlement from flood-prone areas. IFC climatechange standards should assess the potential for these risks.
Biodiversity
We would like to see considerably improved discussion and guidance regarding the useof ecosystem standards and knowledge for these types of planning and assessment applications.
The scientific and conservation community has developed a comprehensive suite of standards
and knowledge elements regarding the distribution and status of terrestrial, freshwater andmarine ecosystems. This ecosystem level information is systematically applied to addressconservation planning and resource management issues, environmental review, and the planningof development projects. These knowledge elements should be free and open to the public tohelp advance science, ensure productive dialogues and improved the well-being of people who
depend on healthy natural systems. It is important to underscore the enormous benefits gained
through the practical application of standardized ecosystem-level standards and information for
Performance Standard 6, Criterion 4, 5 and 6.
Financial Intermediaries
IFC activities funded through financial intermediaries (FI) represent a longstanding andenormous shortfall and loophole of the Policy and Performance Standards, resulting inunacceptably poor social and environmental performance of a substantial portion of IFC
investments. The Performance Standards and the Sustainability Policy largely fail to provide
specific application guidelines to FIs.
Where FI-specific guidance is provided, requirements are riddled with problems andambiguity. For example, the Environmental and Social risk-rating system (low, medium, high)15

is based on the average make-up of a FI’s current portfolio of investments, not individual
projects. Furthermore, it involves review of the FI's existing portfolio of investments only, anddoes not address future investments that will actually be receiving IFC-provided funding.
In addition, only portfolios deemed by IFC staff as posing a high-risk are subject to the
Performance Standards. This appears to trigger only the requirement of a social andenvironmental management system, with no further elaboration of an evaluation of relevant
individual Performance Standards. Finally, each FI has a portfolio of projects that are considered
IFC-supported sub-projects and yet there is no public information available on individual
investments. Even for high-risk FI portfolios, there is no public information in the Summary of
Proposed Investment on project types, on applicable Performance Standards (with the exceptionof Performance Standard 2, Labor and Working Conditions), or whether the FI has a social andenvironmental management system in place that meets IFC requirements.6
Growing Importance – Declining Performance
Since the inception of the Performance Standards, FI operations represent 40% of IFC
projects (or 223 projects). Moreover, IFC staff has indicated that this percentage is slated toincrease even further in coming years. The actual number of investments is even higher
considering that each FI represents a portfolio of investments. Although IFC has recently
increased the number of FI environmental specialists from one to four, and has increased overall
supervision of FI operations, this has not translated into improved performance. The most recent
IEG evaluation of IFC’s performance (2009) found that environmental and social performancehas declined sharply for FI operations (2006 to 2008).
In addition to general concerns regarding inadequate coverage by the PerformanceStandards of FIs, many specific concerns relating to Private Equity Funds and the use of offshorebanking as tax havens exist. As part of the review process, IFC needs to provide more
information and consultation on these specific concerns.
Policies must be revised to include adequate FI-specific requirements
The current Sustainability Framework leaves wide loopholes for high-risk projects toreceive IFC support without meeting fundamental social and environmental safeguards. This is
unacceptable and must be resolved fully with significant FI-specific requirements added to thecurrent policies, including:

6

IFC’s treatment of financial intermediaries is not consistent with an international trend toward greater FI
accountability. For example, recent US legislation relating to the Overseas Private Investment Corporation requiresthat environmental, transparency and internationally-recognized worker rights and human rights standards of the
Corporation and its investors shall be consistently applied to all projects, funds and sub-projects supported by the
Corporation.

16

For each FI, IFC must disclose the completed Financial Intermediary Portfolio
questionnaire, the completed Environmental and Social Management System (ESMS)
questionnaire, all environmental and social performance reports, and all Project Supervision
Reports.
IFC should categorize the individual IFC-supported sub-project investments of an FI
according to the ―A, B, and C‖ system used by IFC direct-project investments with all applicablerequirements of such categorization met by the individual projects.
Given the high proportion of FI projects (40%) in IFC’s portfolio and the declining
performance of FIs, IFC should ensure that, before it continues to make significant FI
investments, it has these necessary policies and capacity to ensure that projects adhere to the
Performance Standards and Sustainability Policy.
In regards to Private Equity Funds and offshore banking, IFC should ensure that its
supported projects are not based in secrecy jurisdictions. In order to ensure appropriate
implementation, all beneficiaries should sign a legally binding agreement that prevents themfrom using secrecy jurisdictions while benefiting from IFC support. In cases where support is
granted to financial intermediaries, IFC should also ensure that all supported banks and otherfinancial intermediaries have stringent safeguards in place against the use of secrecy
jurisdictions. This should include the disclosure of beneficial ownership of financial assets.
Additionally, the IFC should adopt the Financial Secrecy Index promoted by the Tax Justice
Network.7
IFC supported companies and financial intermediaries should present their annual
accounts on a country by country basis, in order to identify where they make profits andtherefore where taxes should be paid.
Disclosure of Information
General Observations
IFC should adopt a presumption of disclosure, subject only to clear and justified
exceptions. IFC’s reliance on its clients to make certain disclosures has inherent weaknesses.
IFC should set clearer standards for their disclosure performance and institute disclosure
oversight mechanisms. IFC should release so-called ―draft‖ documents simultaneous with theirtransmittal to the Executive Directors, including drafts of the Project Assessment Documents,
Program Documents, and policy documents. In addition, IFC should assure full disclosure of theEnvironmental and Social Review Document, as well as post-approval documents, such as
supervision reports, annual monitoring reports and project implementation and completion
reports, and the clients’ environmental and social monitoring reports. IFC should take steps to7

http://www.financialsecrecyindex.com

17

clarify where and how to submit requests, and provide for appeals to be reviewed by anindependent and authoritative body. Finally, as detailed below, requiring full transparency for
extractive industry-related contracts and payments to governments should be a high priority.
Extractive Industry Contract Disclosure
Currently, the IFC Sustainability Policy requires contract disclosure only for ―significant‖extractive industry (EI) projects, defined as accounting for 10 percent or more of projected
government revenues. Such a threshold is arbitrary and has been ineffective in bringing about
any contract transparency in IFC projects as was intended by Bank Management’s commitment
to the Extractive Industry Review. Since the inception of the Policy in 2006, more than 55 IFC
extractive industry projects have been approved and not a single project funded by IFC hastriggered this requirement, even in cases where the arbitrary threshold appears to have been met(e.g., Tullow Oil project to develop the Jubilee offshore oil field in Ghana). Project
developmental and fiscal impacts, especially at the local and regional levels, occur irrespectiveof the size of a country’s total revenues.
The IFC Policy needs to require that all EI investments publicly disclose contracts,
without regard to any threshold size or scope (for more details, please see the Publish What You
Pay-US IFC Policy Review submission). The Sustainability Policy should be revised toincorporate the following:
All IFC-supported extractive industry projects must disclose all contracts, principal andderivative, related to the EI operation to which the government is a party, including, inter alia:
between host governments and companies (e.g. Host Government Agreements, Production
Sharing Agreements, Power Purchasing Agreements, Concession Agreements) and between
governments (e.g. Inter-Governmental Agreements).
In addition, all IFC-supported extractive industry projects must disclose all contracts andagreements affecting the ultimate payments made to the government, such as those involved inpricing methods of the companies and formulas that change government payments based onchanges in commodity prices, project costs, or other factors.

Conclusion
Civil society organizations will continue to provide more detailed submissions on theseand other topics of concern. We urge you to respond to these concerns as IFC revises the Policy,
Performance Standards, the Guidance Notes, and the Disclosure Policy. We would welcome the18

opportunity to discuss these recommendations with you and your staff. Please contact Anne
Perrault, Senior Attorney, Center for International Environmental Law, aperrault@ciel.org.
This submission is endorsed by the following organizations:International and Regional Endorsements
1.
2.
3.
4.
5.
6.
7.
8.
9.

Johan Frijns, BankTrack, International
Salih Booker, Centre on Housing Rights and Evictions (COHRE), International
Geoff Nettleton, Indigenous Peoples Links, International
Mauricio Alvarez Mora, Oilwatch Mesoamérica, International
V. Lakshmi, Public Services International Asia-Pacific Regional Organisation (PSI-APRO),International
Violeta Corral, Public Services International Research Unit (PSIRU), International
Petr Hlobil, CEE Bankwatch Network, CEE Region (Czech Republic)
Paul de Clerck, Friends of the Earth Europe, Europe
Shining Som, Earthrights International-Alumni Program, Mekong Region (Thailand)Endorsements by Country
10. César Murúa, Fundación para la promoción de políticas Sustentables (FUNDEPS), Argentina
11. Hernán Rolando Medina, FOCO - INPADE, Argentina
12. Juan Carballo, Centro de Derechos Humanos y Ambiente, Argentina
13. Oscar Velasco, Fundación Desarrollo y Equidad, Argentina
14. Charles Roche, Mineral Policy Institute, Australia
15. Jessica Rosien, Oxfam Australia, Australia
16. Luke Fletcher, Jubilee Australia, Australia
17. Ahmed Swapan Mahmud, VOICE, Bangladesh
18. Kazi Zaved Khalid Pasha, Initiative for Right View (IRV), Bangladesh
19. M M Mahbub Hasan, Coastal Development Partnership (CDP), Bangladesh
20. Muhammad Hilaluddin, Angikar Bangladesh Foundation, Bangladesh
21. Zakir Kibria, Solidarity Workshop, Bangladesh
22. ISDE Bangladesh, Bangladesh
23. Pol Vandevoort, 11.11.11 Coalition of the Flemish North-South Movement, Belgium
24. Roberto Smeraldi, Amigos da Terra – Amazônia Brasileira, Brazil
25. Moses Kambou, ORCADE (Organisation pour le Renforcement des Capacites deDeveloppement), Burkina Faso
26. Earth Rights Mekong School Alumni: Khun Chankhe, Burma; Nang Hom Noon, Burma; Sai
Awn Fha, Burma; Leng Sarorn, Cambodia; Peou Chansopheakny, Cambodia; Bounsing, Lao
PDR; Dorn Bouttasign, Lao PDR; Siriluk Sriprasit, Thailand; Tanasak Phosrikun, Thailand;
Tipakson Manpati, Thailand; Le Kim An Nhien, Vietnam; Nguyen Thi Kim Cuc, Vietnam
27. Chhith Sam Ath, The NGO Forum on Cambodia, Cambodia
28. Kay Leak, Conservation and Development on Cambodia (CDCam), Cambodia
29. Nov Piseth, Cambodia
30. Phearum Sia, Housing Rights Task Force (HRTF), Cambodia
1931. Sangthorng LA, Partnership in Action (DPA), Based at ICD-RTK, Cambodia
32. Karyn Keenan, Halifax Initiative Coalition, Canada
33. Marie-Dominik Langlois, Comité pour les droits humains en Amérique latine, Canada
34. Juan Pablo Orrego, O.N.G ―Ecosistemas‖, Chile
35. Oilwatch Costa Rica, Costa Rica
36. Asociación de ecología social (AESO) Costa Rica, Costa Rica
37. Radio Dignidad Costa Rica, Costa Rica
38. Radio Urgente Costa Rica, Costa Rica
39. Sebastien Godinot, Les Amis de la Terre, France
40. Heike Drillisch, GegenStroemung - CounterCurrent, Germany
41. Korinna Horta, Urgewald, Germany
42. Sabine Schielmann, Institute for Ecology and Action Anthropology (INFOE), Germany
43. Stephanie Fried, `Ulu Foundation, Hawaii
44. Dino Dean Gracious Dympep, Meghalaya Peoples Human Rights Council (MPHRC), India
45. Gautam Bandyopadhyay, Nadi Ghati Morcha, India
46. Gururaja Budhya, Urban Research Centre, India
47. Prof Sanjai Bhatt, Department of Social Work, University of Delhi, India
48. Raju Mimi, Idu (Mishmi) Indigenous Rights Association Association (IIRA), India
49. Ravindranath, River Basin Friends (NE) India, India
50. Carolina S. Martha, YLBHI, Indonesia
51. Siti Rakhma, Mary Herwati, LBH Semarang, Indonesia
52. Antonio Tricarico, Campagna per la riforma della banca mondiale (CRBM), Italy
53. Noriko Shimizu, Friends of the Earth Japan, Japan
54. Yuki Tanabe, Japan Center for a Sustainable Environment and Society (JACSES), Japan
55. Azija Kurmanbayeva, Committee For Public Control Over Implementation of State Program,
Kazakhstan
56. Valeria Enriquez, Fundar, Centro de Análisis e Investigación Transparencia y Rendición de
Cuentas, Mexico
57. Ana Romero, Presencia Ciudadana, México
58. Cecilio Solís Librado, Red Indígena de Turismo de México, México
59. Fernando Melo, Promotora de Servicios para el Desarrollo, México
60. Juan Carlos Carrillo, Centro Mexicano de Derecho Ambiental - CEMDA, México
61. Alejandro Rendon Melchor, Red Indigena Hñahñu, del estado de Hidalgo, México
62. Astrid Puentes Riaño, Asociación Interamericana para la Defensa del Ambiente, AIDA,
México63. Chandra Singh Kulung, Association of Nepal Kirat Kulung Language and Cultural
Development, Nepal
64. Anouk Franck, Both Ends, Netherlands
65. Andrew Preston, Association for International Water Studies, Norway
66. César Leonidas Gamboa Balbin, Derecho, Ambiente y Recursos Naturales (DAR), Perú
67. Annie Enriquez Geron, Public Services Labor Independent Confederation (PSLINK),
Philippines
68. Rustam Murzakhanov, NGO Environmental Law Center "Armon", Republic of Uzbekistan
69. Larissa Duarte, Movimiento Campesino en Defensa del Rio Cobre, Republica de Panama
20

70. Lepoldo Gonzales - Presidente de Junta Directiva, Frente Unido en Defensa del Ecosistema FUDECO, Republica de Panama
71. Christopher NG, UNI Apro Regional Secretary, Singapore
72. Claude Kabemba, Southern Africa Resource Watch, South Africa
73. Julián Ezquerra Gómez, Coordiandora de Afectados por Grandes Embalses y Trasvases(COAGRET), Spain
74. Hemantha Withanage, Centre for Environmental Justice, Sri Lanka
75. Roshan Salinda, Green Movement of Sri Lanka, Sri Lanka
76. Anne Perrault, Center for International Environmental Law, U.S.A.
77. Bill Barclay, Rainforest Action Network, U.S.A.
78. Chad Dobson, Bank Information Center, U.S.A.
79. Doug Norlen, Pacific Environment, U.S.A.
80. Ian Gary, Oxfam America, U.S.A.
81. Jeremy Mak, Educational Network for Global and Grassroots Exchange, U.S.A.
82. Joanna Levitt, International Accountability Project, U.S.A.
83. Kate Watters, Crude Accountability, U.S.A.
84. Larry Williams, Sierra Club, U.S.A.
85. Natalie Bridgeman, Accountability Counsel, U.S.A.
86. Shannon Lawrence, International Rivers, U.S.A.
87. Stephen Kretzmann, Oil Change International, U.S.A.
88. Mark Hays, Corporate Accountability International, U.S.A.
89. Frank Muramuzi, National Association of Professional Environmentalists (NAPE), Uganda
90. Ama Marston, Bretton Woods Project, United Kingdom
91. Nick Hildyard, Corner House, United Kingdom
92. Lam Dinh Uy, Center for Biodiversity and Development, Vietnam
93. Anuradha Mittal, The Oakland Institute, Oakland, CA, U.S.A.
94. Michelle Chan, Friends of the Earth, U.S.A.

21