The International Finance Corporation (IFC) has adopted new environmental and social standards for the organisation. These build upon the environmental and social requirements that IFC currently applies to private sector projects it finances in the developing world. A new policy on disclosure, adopted at the same time, will increase transparency requirements.
IFC has in place safeguards to minimise the impact of projects on the environment and on affected communities. The new standards will replace these safeguards.
“The new IFC standards are stronger, better, and more comprehensive than those of any other international finance institution working with the private sector,” says Lars Thunell, IFC’s executive vice-president. “We aim, with these new policies, to increase the development impact of projects in which we invest. We also seek to give companies operating projects in emerging markets the capacity to manage fully their environmental and social risks and to compete better in a global economy.”
The new standards cover more areas than the old safeguards and expand on areas already covered. Specifically, the standards contain new requirements for community health, safety, and security; labour conditions; pollution prevention and abatement; integrated social and environmental assessments; and management systems.
The new standards contain stronger requirements for community engagement and consultation; biodiversity protection; community and worker grievance mechanisms; use of security forces; greenhouse gas monitoring; and greater disclosure of information to the public by IFC and client companies.
The standards adopt a new outcomes-based approach, which requires client companies to have in place effective management systems that allow them to handle social and environmental risks as an integral part of their basic operations and business model.
The new standards are the result of an extensive process of consultation and public comment in which stakeholders, including governments, industries, and civil society organisations, took an active part. The review was triggered both by the realisation that the old safeguards had proved inadequate in complex project situations, and by IFC’s transition to a new business model, which is based on the premise that long-term profitability and strong project outcomes are better secured by companies that manage all of their risks well.
The Equator Principles are also expected to be updated in accordance with the new IFC standards. These are a set of environmental and social guidelines, based on IFC’s safeguards, which are now applied by 40 leading commercial financial institutions which collectively represent some 80% of global project finance.
In approving the new set of standards, IFC’s board requested some refinement of the language. Accordingly, the final version of the performance standards and disclosure policy will be issued as a complete text in the coming weeks.