In November, the 15th meeting of the Independent Accountability Mechanisms Network (IAMnet), comprising officials from IAMs of diverse development finance institutions (DFIs) took place in Washington DC. The meeting coincided with the 25th anniversary of the Inspection Panel (IPN, the Bank’s Independent Accountability Mechanism). Participants took advantage of a civil society organisations (CSO) and IAMnet roundtable and a related symposium at American University to assess progress made to date on questions of accountability of DFI operations and programming. In doing so, the flagship 2016 Glass Half Full (GHF) report published by CSOs, including US-based Accountability Counsel and Netherlands-based SOMO, which stresses that for over 20 years “DFIs have demonstrated that they are either unwilling or unable to fulfil their responsibilities,” was used as a reference point for discussions (see Observer Winter 2016).
Assessing the evolution of IAMs in light of the ongoing US Supreme Court case on the IFC’s absolute immunity from lawsuits (see Observer Winter 2018), several participants during the symposium noted that the case should be seen at least in part as a failure of the accountability system within DFIs, where communities harmed by DFI-financed projects continue to lack access to adequate remedy. As a consequence, they have felt compelled to seek judicial redress in court.
Improved management response and reserve fund remain essential
Focusing on the review of the IPN, which is expected to be completed by the end of 2019, and that of its sister organisation, the Compliance Advisor Ombudsman (CAO, the IAM of the World Bank’s International Financial Corporation – IFC, the private sector lending arm) and the Multilateral Investment Guarantee Agency (MIGA), several participants stressed the reluctance of DFIs’ management to act on IAM recommendations and the executive boards’ poor track record in compelling action by management as keys to the enduring accountability deficit. In line with GHF recommendations, CSOs and academics therefore reiterated their demand that IAMs be given the “mandate to direct DFI staff and clients to take action to address non-compliance and remedy harm.”
It is clear that the current approach to addressing human rights abuses and environmental degradation have proven grossly inadequate to deliver meaningful remedy to affected communities.Kindra Mohr, Accountability Counsel
CSOs stressed that the current IPN system suffers from a conflict of interest inherent in the delegation of monitoring responsibility to management. They therefore called on the World Bank Executive Board to use the review of the IPN to ensure that the Panel is provided a monitoring function, as it is now the only IAM lacking this essential role. Participants also suggested that the board consider the establishment of independent, community-led, monitoring arrangements.
Civil society called on the board to ensure that management adequately responds to findings at investigation and monitoring stages of the complaint process, while emphasising the need to ensure accountability and remedy measures by, for instance, including the costs of potential remedy measures in project design. They stressed that bringing activities back into compliance with environmental and social safeguards is insufficient as “complainants must be made whole if they have experienced harm as a result of DFI-financed activities” and reiterated the need for a reserve fund to adequately address harms caused by DFI investments.
The increasing complexity of projects and financing instruments, including co-financing by DFIs, and the Bank’s increased focus on International Development Association (the Banks low-income lending arm) countries and fragile, violent and conflict-affected states (see Observer Summer 2018), were noted as adding to the urgency of addressing accountability challenges identified throughout the two days of exchanges.
Considering the state of IAMs, Kindra Mohr of Accountability Counsel stated, “It is clear that the current approach to addressing human rights abuses and environmental degradation have proven grossly inadequate in delivering meaningful remedy to affected communities. DFIs should develop a more forward-looking model with the financial tools necessary to ensure a reliable and predictable system of redress.”