The IFC and incorporation of rights into its performance standards

Submission to the U.N. Special Representative on Human Rights and Transnational Corporations and Other Business Enterprises

3 November 2009 | Statement

By The Bretton Woods Project and the Center for International Environmental Law

The Performance Standards on Social and Environmental Sustainability (Performance Standards) of the International Finance Corporation (IFC) have become the most widely accepted framework among international project financiers to address social and environmental impacts of projects they support. We believe the Performance Standards do not adequately reflect the carefully-crafted recommendations that the U.N. Special Representative to the Secretary General on Human Rights and Transnational Corporations and other Business Enterprises has advanced, and, as a result, the Performance Standards do not ensure that the IFC and its clients meet their responsibilities to respect human rights. We urge the U.N. Special Representative to engage with the IFC as it conducts its review of the Performance Standards to help ensure that the revised Performance Standards provide a framework that is robust and adequately implemented.

Recently, the IFC had an opportunity to indicate how the Performance Standards have to date responded to the U.N. Special Representative’s recommendations. In its ‘Report on the First Three Years of Application’, the IFC fails to demonstrate that these recommendations are being met in the over 180 projects that have been approved for over a year, and instead raises doubts that the IFC truly understands the importance of responding to community rights. Although the IFC was directed to review implementation of the Performance Standards in the past three years, not a single community was interviewed for the report (over 150 private sector clients were consulted). In the absence of information from communities relating their experiences with IFC projects, assessing the extent to which the Performance Standards are providing adequate protection for communities’ rights is difficult.

A previous submission to the U.N. Special Representative from the Center for International Environmental Law, Bank Information Center, BankTrack, Oxfam Australia, and the World Resources Institute, entitled ‘The International Finance Corporation’s Performance Standards and the Equator Principles: Respecting Human Rights and Remedying Violations?,’ indicates that the Performance Standards are lacking in several respects:

  • Fail to explicitly reference human rights-The Performance Standards lack a comprehensive human rights framework. They do not require clients to adhere to principles enshrined in key international conventions, and they explicitly mention human rights in only Performance Standard 2 (relating to labor) and the voluntary guidance notes (relating to indigenous peoples). Because IFC projects can implicate all internationally recognized human rights, international human rights standards should be referenced throughout the Performance Standards.
  • Lack adequate framework for HR due diligence– The Performance Standards do not require that IFC project sponsors perform a human rights impact assessment, the due diligence required to discharge their responsibilities. Even the assessment that is currently required is not being well implemented. As highlighted by the recent audit conducted by the IFC’s Compliance Advisor Ombudsman in the Wilmar case, the assessment conducted by the project sponsor failed to identify and evaluate significant impacts to communities’ land rights.
  • Lack adequate grievance mechanisms– Over 500 projects have been approved by the IFC since the Performance Standards came into force in 2006. Yet it is not clear how many of them have robust project level grievance mechanisms; the IFC has not included this information in its three year report. Communities with whom we have engaged in the context of IFC projects have either not known the mechanisms exist, or believe them to be useless.

We ask the U.N. Special Representative to:

  1. Emphasize the need for the Performance Standards to incorporate a human rights framework. The review of the IFC’s Policy and Performance Standards provides a unique opportunity to operationalize the U.N. Special Representative’s framework and ensure that its impact is widespread;
  2. Clarify the relationship of IFIs more broadly to member States’ responsibilities to respect, protect and fulfil human rights, and indicate what this requires with respect to IFI policies and standards; and
  3. Urge the IFC, during its review of the Performance Standards, to ensure that the standards reflect the protect, respect and remedy framework, including in relation to corporate responsibility in the context of supply chain and financial intermediary issues.