Presentation by Morgan Landy, IFC on Dinant

Atul, IFC

• We are development institution, E&S importance in our work is growing
• We have world leading standards, but we must make sure we don’t fail in implementation
• We failed to consider broader contextual issues on the Dinant case, we focussed too much on the industrial side
• Sequencing:
  • Stop further violence
  • We are trying to develop best practice on security forces
  • We have a draft out on a revised action plan and we are discussing with the board
  • We would like feedback on what we are proposing

Juan Banderas from Madre Tierra, Honduras

• We have a repressive state with strong military and impunity; you know there are 100 farmers who have been killed – this is post mortem, why didn’t you do ex ante evaluation on Dinant
• This is not complexity in Honduras it is injustice, you don’t need to study to find this
• Dinant will intimidate the community when you try to do consultation; Aguan and the whole country is living in fear of violence and is very militarised
• Security is a problem, including corruption in this area
• Human rights issue is not in the consultation process and the IFC’s thinking; but human rights are essential
• There is also a synergy of other projects – for example mining, biofuels which are destroying the environment; this also increases poverty for example by increasing dengue and malaria
• The political setting means you need to change your model of research
• There is no plan for human rights in the proposal

Atul – We recognise that this will not be easy, we want someone independent to manage the consultation process to deal with the complexity; Dinant needs to have good relationships with the community; We clearly didn’t do effective due diligence in this case

Knud – this is the first time we have heard mea culpa from IFC, I hope action will follow words; I am not confident in the IFC’s learning curve especially in palm oil because we had good dialogue that didn’t produce results. We want to something really change.

Kate – we tried to bring others; the security issue is a symptom not a root cause; the land conflict is the root cause of this. There needs to be an independent commission to oversee the work of the special investigation unit; the IFC has influence to work through this. The audit talks about systemic issues – but there is nothing in there about the culture and incentives of staff. E&S is not a risk to be managed it needs to be a guiding principles of your investments. Hard to be convinced given that risk classification is still a problem.

Morgan – on staff incentives and culture, we read the report; I have been at IFC for 20 years – IFC attracts people who care about development and care about these issues. It is not the people. It is the decision making systems – how do we escalate issues and get the right people to make the choices.  We need to ensure we implement policies. It is the mechanics of doing these properly.

Atul – need to make sure this is not an E&S department issue – the front line investment officer has to see this. Not in staff interest to get clients in trouble or make our IFC reputation bad. Since 2010 palm oil review – we have been making changes and I think the palm projects since then are better. On the FI in Honduras we can take another look at this. We didn’t fully appreciate the context, level of violence escalated since the investment. We want to see the land issue making progress. Need all stakeholders to come together including government. We will reach out to the communities.

Morgan – we have already learned that we will do drafts and be open for lessons

Sasanka – thank you for doing this is a draft; the incentives and culture change needed, cf the staff survey; equalising the E&S risk and financial risk requires staff changes, budgets; what can you tell us about risk categorisation; what are the triggers and ways to reform incentives

Vince – what about things like SESA, what are the criteria for a good situation analysis? Security forces – this is not going to be a one-off case b/c of fragile state focus – this can be a programme; in terms of selectivity it can be obvious IFC needs to do this, but is this really the comparative advantage of the IFC in any scenario? How to scale up? We also want to see the info and methodology and disclosure on the Dinant baseline surveys. On security forces, how do you have integrity in vetting staff on security forces? – this a big business with underworld links.

Morgan – we have 60-65 E&S specialists, no one else has that kind of expertise; we need to keep modifying our skill sets as needed; if we are going to invest in conflict countries, we need to have relevant expertise to understand contexts and risks. This is a big challenge, we are getting outside support to help the client; IFC Roadmap to the board last week – board also questioned the budget, it will be presented in a month

Atul – given our development mandate, we struggle to determine when is the right time to engage. There is an imperative to create jobs, many want us to engage as soon as possible. There will be a judgement call, we hope it to be reasonably informed. We have good capacity on the ground now. In Agribusiness we talk to WB colleagues to get input. Country situation analyses are being undertaken now – to get a feel for the risks involved. Often it will be case by case to decide when to get a country situational analyses. Don’t compare E&S versus IO, we need to think E&S staffing compared to need, it is specialised need; IOs need to understand E&S issues

Morgan – we have a few specific gaps, and helping clients that get in trouble.

Rider – new guidance tools on the web site, lots of it are guidance notes and good practice; IOs are meant to look at all areas; even specialists look at a broad range of areas and core competencies. Recent updated guidance notes – supply chain issues, cumulative impact analysis. SESA doesn’t make sense at a project level – work with colleagues at the Bank to promote good practice and lessons from CAO

Peter  – you aren’t addressing the institutional culture; the Banks new SCD are not dealing with E&S risks

Dr. Juan – you need to make a political decision in a place like Honduras, what is the guideline? Business? Or ethical, human rights and environment?

Meg Taylor – “fragility” is resented label, conflict analysis is needed to be deeper, especially on land; we are uncomfortable with the proposals on past security breaches because the communities are not going to work with this; what is the right sequencing. I don’t believe IFC senior management really speak the language of E&S issues, and they need to. Until there is management buy-in it will continue to be an issue.

Morgan – I disagree on the institutional culture, it is about talking about some issues, reluctance to focus on targets, moving away from volume targets; IOs respond to incentives and language is important. What trade-offs do we make? And who decides? I don’t see an institutional failure of culture, thought we can do better. In power/infra/mining – our clients are sensitive to the issues they know they can be haunted by this. Each sector goes at a different pace. Infra business we don’t see many new cases. Now this is agri and FI, and continual evolution. Need to select the right clients and tools. We need to get our client to meet our contractual standards in Dinant.

Atul – incentives is a challenge within the institution, there are no perfect targets; we are reducing the emphasis on volume targets; in my sector we are shrinking targets; in agribusiness we and our clients need to improve understanding. Please feedback on the action plan.

Morgan – w

Atul, IFC

• We are development institution, E&S importance in our work is growing
• We have world leading standards, but we must make sure we don’t fail in implementation
• We failed to consider broader contextual issues on the Dinant case, we focussed too much on the industrial side
• Sequencing:
  • Stop further violence
  • We are trying to develop best practice on security forces
  • We have a draft out on a revised action plan and we are discussing with the board
  • We would like feedback on what we are proposing

Juan Banderas from Madre Tierra, Honduras

• We have a repressive state with strong military and impunity; you know there are 100 farmers who have been killed – this is post mortem, why didn’t you do ex ante evaluation on Dinant
• This is not complexity in Honduras it is injustice, you don’t need to study to find this
• Dinant will intimidate the community when you try to do consultation; Aguan and the whole country is living in fear of violence and is very militarised
• Security is a problem, including corruption in this area
• Human rights issue is not in the consultation process and the IFC’s thinking; but human rights are essential
• There is also a synergy of other projects – for example mining, biofuels which are destroying the environment; this also increases poverty for example by increasing dengue and malaria
• The political setting means you need to change your model of research
• There is no plan for human rights in the proposal

Atul – We recognise that this will not be easy, we want someone independent to manage the consultation process to deal with the complexity; Dinant needs to have good relationships with the community; We clearly didn’t do effective due diligence in this case

Knud – this is the first time we have heard mea culpa from IFC, I hope action will follow words; I am not confident in the IFC’s learning curve especially in palm oil because we had good dialogue that didn’t produce results. We want to something really change.

Kate – we tried to bring others; the security issue is a symptom not a root cause; the land conflict is the root cause of this. There needs to be an independent commission to oversee the work of the special investigation unit; the IFC has influence to work through this. The audit talks about systemic issues – but there is nothing in there about the culture and incentives of staff. E&S is not a risk to be managed it needs to be a guiding principles of your investments. Hard to be convinced given that risk classification is still a problem.

Morgan – on staff incentives and culture, we read the report; I have been at IFC for 20 years – IFC attracts people who care about development and care about these issues. It is not the people. It is the decision making systems – how do we escalate issues and get the right people to make the choices.  We need to ensure we implement policies. It is the mechanics of doing these properly.

Atul – need to make sure this is not an E&S department issue – the front line investment officer has to see this. Not in staff interest to get clients in trouble or make our IFC reputation bad. Since 2010 palm oil review – we have been making changes and I think the palm projects since then are better. On the FI in Honduras we can take another look at this. We didn’t fully appreciate the context, level of violence escalated since the investment. We want to see the land issue making progress. Need all stakeholders to come together including government. We will reach out to the communities.

Morgan – we have already learned that we will do drafts and be open for lessons

Sasanka – thank you for doing this is a draft; the incentives and culture change needed, cf the staff survey; equalising the E&S risk and financial risk requires staff changes, budgets; what can you tell us about risk categorisation; what are the triggers and ways to reform incentives

Vince – what about things like SESA, what are the criteria for a good situation analysis? Security forces – this is not going to be a one-off case b/c of fragile state focus – this can be a programme; in terms of selectivity it can be obvious IFC needs to do this, but is this really the comparative advantage of the IFC in any scenario? How to scale up? We also want to see the info and methodology and disclosure on the Dinant baseline surveys. On security forces, how do you have integrity in vetting staff on security forces? – this a big business with underworld links.

Morgan – we have 60-65 E&S specialists, no one else has that kind of expertise; we need to keep modifying our skill sets as needed; if we are going to invest in conflict countries, we need to have relevant expertise to understand contexts and risks. This is a big challenge, we are getting outside support to help the client; IFC Roadmap to the board last week – board also questioned the budget, it will be presented in a month

Atul – given our development mandate, we struggle to determine when is the right time to engage. There is an imperative to create jobs, many want us to engage as soon as possible. There will be a judgement call, we hope it to be reasonably informed. We have good capacity on the ground now. In Agribusiness we talk to WB colleagues to get input. Country situation analyses are being undertaken now – to get a feel for the risks involved. Often it will be case by case to decide when to get a country situational analyses. Don’t compare E&S versus IO, we need to think E&S staffing compared to need, it is specialised need; IOs need to understand E&S issues

Morgan – we have a few specific gaps, and helping clients that get in trouble.

Rider – new guidance tools on the web site, lots of it are guidance notes and good practice; IOs are meant to look at all areas; even specialists look at a broad range of areas and core competencies. Recent updated guidance notes – supply chain issues, cumulative impact analysis. SESA doesn’t make sense at a project level – work with colleagues at the Bank to promote good practice and lessons from CAO

Peter  – you aren’t addressing the institutional culture; the Banks new SCD are not dealing with E&S risks

Dr. Juan – you need to make a political decision in a place like Honduras, what is the guideline? Business? Or ethical, human rights and environment?

Meg Taylor – “fragility” is resented label, conflict analysis is needed to be deeper, especially on land; we are uncomfortable with the proposals on past security breaches because the communities are not going to work with this; what is the right sequencing. I don’t believe IFC senior management really speak the language of E&S issues, and they need to. Until there is management buy-in it will continue to be an issue.

Morgan – I disagree on the institutional culture, it is about talking about some issues, reluctance to focus on targets, moving away from volume targets; IOs respond to incentives and language is important. What trade-offs do we make? And who decides? I don’t see an institutional failure of culture, thought we can do better. In power/infra/mining – our clients are sensitive to the issues they know they can be haunted by this. Each sector goes at a different pace. Infra business we don’t see many new cases. Now this is agri and FI, and continual evolution. Need to select the right clients and tools. We need to get our client to meet our contractual standards in Dinant.

Atul – incentives is a challenge within the institution, there are no perfect targets; we are reducing the emphasis on volume targets; in my sector we are shrinking targets; in agribusiness we and our clients need to improve understanding. Please feedback on the action plan.

Morgan – w