IFI governance


“NGO pressure” vital in private sector changes

18 June 2001

The International Finance Corporation – an arm of the Bank Group which supports private investment – has released a new strategy. It reveals a number of significant changes in emphasis, notably an increased focus on social and environmental issues. It admits that its attention to such matters is partly the result of “pressure from NGOs, shareholders, and civil society and local communities which have begun to insist that their concerns be respected.”

The IFC promises “more pro-active engagement in the area of sustainability – to help ensure development that is viable over the long term in its financial, economic, environmental and social dimensions.” By doing more on the environment, corporate governance and social impacts, the Corporation aims to move beyond mere compliance with minimal “do no harm” Bank procedures.

The Strategic Directions paper, however, reveals continuing contradictions in the Corporation’s approach. The IFC is still very concerned with the financial aspect of its own balance sheet and is unsure what level of risks it should take. It is moving to adopt a more rounded approach to impact measurement, including a departmental scorecard. This is welcome, but it is unclear who will make the difficult judgements required to assess social impacts. The strategy in fact admits that “much of the work determining the operational implications of the sustainability focus remains to be done” and hints that the understanding of “development impact” may move only marginally beyond contributions to economic growth and employment. An “annual client survey has been developed and is under implementation”, but it is unclear whether only corporate clients, or all stakeholders, will be interviewed.

NGOs will continue to challenge the IFC to go further on this agenda. And while the Corporation still pledges to “continue to push for reforms and privatisation on a wide scale” it is bound to remain controversial. This is especially so as it continues to gear up its work in the social sectors.

IFC milestones on social and environmental issues

1993: IFC-specific environmental policy and procedure;

1994: IFC Information Disclosure Policy;

1997: Environmental Investment Unit established;

1998: Major strengthening of disclosure, environmental and new social policies and procedures;

1999: Compliance Advisor Ombudsman office established;

1999: Publication of Guide on Public Consultation and Disclosure;

1991-2000: Environmental and social staff increases from 1 to over 50 professionals;

2001: Publication of Community Development Guide;

2001: Launch of IFC Sustainability Initiative;

2001: Initiation of World Bank Group’s Review of Extractive Industries;

2001: Environmental and Social Issues in Private Sector Finance, IFC Lessons and Experience #8

Source: IFC Strategic Directions, March 2001

IFC Strategic Directions paper (PDF file)

The IFC‘s page for NGOs

Critical analysis of IFC policies and projects