CAO Contributes to IFC Performance Standards Review

In May 2010, the Compliance Advisor/Ombudsman (CAO) office of IFC/MIGA released its Review of IFC’s Policy and Performance Standards on Social and Environmental Sustainability and Policy on Disclosure of Information. This CAO Advisory Note is a contribution to IFC’s ongoing review and update of its Sustainability Framework about which I blogged previously.

When IFC launched its new Sustainability Framework in April 2006, it defined expectations of IFC’s clients – and clients of Equator Principles Financial Institutions - towards a more outcome oriented approach and more effective community engagement.

The CAO’s review focused on IFC’s implementation in areas relating to community-company relationships and community impacts. As part of its study, CAO reviewed 30 IFC projects, commissioned field work and stakeholder perception surveys for five projects, and conducted outreach to obtained feedback from civil society.

The CAO’s findings acknowledge general improvement of community engagement but identified also variability and gaps and around impact mitigation activities and Action Plans, as well as in reporting on development impact. The CAO report is critical of IFC’s implementation of its Broad Community Support commitment (seel also an earlier blog) and describes IFC’s approach as highly restrictive and not transparent. Also, the Note highlights that IFC’s Advisory Services are not readily available to support lower capacity companies who need extra support to upgrade their management systems.

 In terms of IFC’s Financial Intermediaries, the CAO Note identifies improvements but laments substantial gaps between theoretical environmental and social requirements and their practical application. The CAO Note also suggests that IFC’s environmental and social due diligence is affected by inconsistent support by investment staff in different investment department.

Paging through the CAO’s Advisory Note, I wondered how supported the few environmental and social specialists feel at many of the Equator Principles Financial Institutions and the Export Credit Agencies. Most of them will not have access to the depth of experience and expertise, nor the policy framework and associated mandate available within a multilateral financial institution like the IFC…