IFC announces changes to environmental and social framework after loss of immunity in the US

30 July 2019

On 13 June, Philippe Le Houérou, the CEO of the International Finance Corporation (IFC), the World Bank’s private sector lending arm, announced significant changes to how the organisation manages environmental and social (E&S) issues, beginning 1 July. The announcement highlighted the move of the IFC’s Environment, Social and Governance Advice and Solutions department out of the Legal Vice Presidency and into the Operations Vice Presidency, and the creation of a new Environment and Social Policy and Risk department, managed by a senior director reporting directly to the CEO.

Pointing out the need to “improve E&S risk management and accountability [and] close any existing gap in IFC’s responsiveness to complaints from affected communities,” Le Houérou announced a 20 per cent increase in staff working on E&S issues.

As reported in June by news site Devex, the changes come after a historic United States Supreme Court ruling in February, which found that the IFC does not benefit from absolute immunity from prosecution in the US. The ruling opens the door to the possibility that the IFC may be held liable for the harms from projects it finances and may have to compensate the group of Indian fisher folk who brought the case against it in US courts (see Observer Spring 2019). Devex reported that, “Honduran farmers are also attempting to sue the IFC in US courts over its financing of palm oil projects that have been linked to death squads” (see Observer Winter 2014).

Organisations working with affected communities to hold the IFC accountable for the negative consequences of its investments cautiously welcomed the changes and reiterated their willingness to work with the IFC to improve its management of E&S risks and ensure the perspectives of communities are adequately considered. The need for immediate action was highlighted in a July report by the Coalition for Human Rights in Development and the Defenders in Development Campaign, which detailed the continued risk to human rights defenders who attempt to oppose projects financed by the IFC and other development finance institutions (see Observer Summer 2019).