IFC Performance Standards Revisions Entering Final Lap

In its recent CODE Progress Report on IFC Sustainability Framework Review and Update ( December 1, 2010), IFC notes that, with exceptions (such as the Access to Information Policy), majority of proposed changes are clarifications rather than material changes. 

Please visit updated blog post: Remaining Obstacles to Revisions of IFC Performance Standards

The IFC Performance Standards, which provide the basis for the Equator Principles (which is also undergoing a review process I blogged about earlier) used by project finance banks and Export Credit Agencies (ECAs, such as Export Development Canada or EDC), is now in the third and final revision and consultation phase. IFC notes that the proposed changes are designed to reflect the evolving nature of the sustainability agenda and IFC’s business model. IFC notes that its commitments towards climate change, human rights, gender, corporate governance, as well as capacity building have been clarified or strengthened.

Example of proposed changes include project/investment categorization. This is expected to increase the number projects classified as A-level (or high risk). These will require more extensive social and environmental impacts assessments (SEA or ESIAs). IFC also proposes to introduce a more segmented and risk-based categorization (FI-1-FI-3) for investment in and through financial intermediaries. These constitute nearly half of IFC’s new investments each year.

Human Rights issues are addressed in changes to Performance Standard 1 and its accompanying Guidance Note. These will provide information on how to use human rights impact assessments (HRIA) as a voluntary risk management tool in high risk situations.

Approach to Labor and Supply Chain issues have also been strengthened. IFC proposes to expand the scope for labor and supply chains to include non-employee workers contracted directly by a client, and to ensure that working conditions for migrant and non-migrant workers are comparable.

IFC is also seeking to strengthen stakeholder engagement, particularly in relation to local communities. IFC is proposing that clients should demonstrate that they have obtained Broad Community Support (BCS) and Free, Prior and Informed Consent (FPIC) for Indigenous Peoples, when applicable. (See also one of my earlier blog about FPI-Consultation and FPI-Consent)

IFC is also proposing a major shift to its Access to Information Policy (AIP). The proposed changes will require IFC to disclose more project-level environmental, social, and development impact information during all stages of the project.

Highlighted changes to existing policies and Performance Standards can be accessed here. IFC has planned a series of consultation meetings in Mumbai, Tokyo, Lima, Peru, Johannesburg, Cairo, Paris, and Washington DC. These are planned between January and March 2011 and further details can be accessed here.

Do you feel that these changes simply provide a policy catch-up with improving practices at IFC? Or do you feel that these changes will create an undue burden on IFC and/or its prospective clients? Ultimately, do you expect that these changes will direct IFC’s investments towards more sustainable private sector investments?

About the author: Mehrdad Nazari (MBA, MSc, LEAD Fellow) is a Corporate Responsibility, Sustainability Reporting & ESIA Advisor, and Director of Prizma. He was previously an environmental consultant with Dames & Moore, Principal Environmental Specialist at the EBRD and CSR Research Director at CoreRatings. Mehrdad is a GRI-approved trainer on GRI's sustainability reporting framework and a licensed AA1000 Assurance Provider.

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