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IFC's New Sustainability Policies
Joel Makower, 5 Oct 05

The International Finance Corporation, the private-sector arm of the World Bank Group, has just released for public comment revised drafts of its Policy and Performance Standards on Social and Environmental Sustainability and its Policy on Disclosure of Information.

These documents aren't just bureaucratic paperwork. They are at the heart of IFC's framework for addressing social and environmental issues for its nearly $2.5 billion portfolio of loan and equity financing for private-sector projects in the developing world. Among other things, the standards govern the lending policies of the 33 major banks that have signed the Equator Principles, which these banks apply globally to all development projects with a capital cost of $50 million or more.

IFC has ten policies intended to protect the environment and vulnerable social groups from being harmed by its operations. These "safeguard policies" -- introduced since the early 1980s in response to activist concerns -- cover issues such as involuntary resettlement, forestry, indigenous peoples, environmental assessment, natural habitats, and cultural property. (The World Bank itself has a similar but slightly different set of policies geared to its public-sector constituency.)

Activists on both the left and right have long railed against the World Bank and IFC, among other multilateral lending organizations, regarding the social and environmental impacts of their projects. Among the charges were that their lending policies financed ecological destruction, human rights violations, and forced massive resettlement.

In recent years, IFC has been rethinking its policies, and the latest iteration of its safeguards are one product of that thinking. The latest proposed policies were first released in August 2004 as part of an eight-month consultation process involving a wide-range of nonprofits, businesses, IFC clients, World Bank staff, and other interested parties. The fruits of those labors, involving considerable revisions, are reflected in this newest draft.

IFC says it is taking a new, "outcomes-based approach" to environmental and social protections. "We think this is a new approach to doing business," Motoko Aizawa, program Manager for IFC's safeguards policy Update, told me recently. "First and foremost because we think our approach will enable business to reassess how it does business through the lens of social and environmental assessment, using management systems much as they manage financial issues."

One hope is that by focusing on outlines instead of proscribing solutions, the policies will avoid some of the gaming that has gone on in the past. Example: Under the old standard, dams over 15 meters high were required to address a range of environmental and social risks. As a result, many dams were designed to be just 14 meters high to avoid being affected. The new standards would require dam projects to address specific environmental and social goals no matter what their height.

Not everyone agrees with this thinking. Some environmentalists, for example, believe that not using traditional command-and-control specifications will weaken projects' environmental and social standards. Such thinking mirrors a debate taking place for years in the world of environmental regulation of business, in which federal and local government programs have experimented with more flexible approaches to meeting regulatory objectives, much to some activists' chagrin.

Whether IFC's latest policy proposals significantly strengthen or weaken environmental and social standards around the world remains to be seen, of course. But the conversation taking place there seems like a healthy one, more likely than not to produce positive outcomes.

You are encouraged to read the policies, decide for yourself, and let IFC know what you think.

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