IFC Board approves Performance Standards

Washington, 23 February: The International Finance Corporation (IFC) announced the final approval of its revised social and environmental standards on Tuesday.

The new Performance Standards introduce a number of additional requirements to the IFC's lending criteria. Large companies in the developing world applying to the IFC for a loan, for example, will now have to report on their greenhouse gas emissions.

Other additions for companies include stronger safeguards on biodiversity protection, the introduction of grievance mechanisms for workers and local communities, new measures on the use of security services, and guarantees for community health and safety.

"This new approach delineates very clearly for our clients and prospective clients exactly what we expect from them in terms of their environmental and risk management going forward", says Rachel Kyte, director of environment and social development at the IFC, which is the private sector arm of the World Bank.

The revised standards aim to increase the transparency and accountability of IFC's lending procedures. All loan applicants will be required to submit comprehensive social and environmental assessments prior to a loan agreement. These will be made publicly available by the IFC.

Projects judged by the IFC to have a major impact on indigenous groups, the environment or to involve other "high-risk" issues will be required to report on a regular basis to both the IFC and the effected community.

"This [new approach] is output-based, which means we are looking at results and what will actually happen, rather than as before a more box-ticking procedure", explains Lars Thunell, executive vice-president of IFC.

The development of the new standards has been wracked with controversy, with the original deadline for their completion put back, partly as a result of criticisms from parts of the NGO community.

A consortium of campaign groups attacked the IFC's use of "discretionary language" in the new standards. In a joint statement issued on Tuesday, they also criticised the IFC's failure to explicitly acknowledge other international standards, such as the United Nation's norms on human rights and transnational corporations.

"The slippage is a clear weakening of IFC's commitment to 'do no harm'," said David Hunter, Department of Law, American University.