Transparency of Financial Sector Investments Should be a Priority for IFC Reform Process: Save Lamu
The final report of the external review of environmental and social accountability at the International Finance Corporation (IFC) makes critical recommendations to enhance the transparency and sustainability of the IFC’s financial intermediary (FI) portfolio. The IFC invests billions of dollars into FI clients such as commercial banks, private equity funds and hedge funds, who then on-lend to generally-obscure subprojects with little oversight. The report encourages the IFC to undertake important reforms to improve accountability for environmental and social impacts, including greater due diligence, supervision and transparency of its FI investments. The report also recommends that the IFC’s accountability mechanism, the Compliance Advisor/Ombudsman (CAO), take steps to clarify its approach to FI cases, to achieve greater predictability and accessibility for affected communities.
Save Lamu, a Kenyan community-based organization that has direct experience with the challenges of obtaining accountability for FI investments, welcomes these recommendations. In a comment submitted to the Board of Directors, supporting the recommendations from the external review team, its members wrote:
“Save Lamu is a community-based umbrella organisation made up of over 40 other organisations from Lamu, Kenya. Together with the Kwasasi Mvunjeni Farmers Self-Help Group, Save Lamu filed a complaint to the CAO in April 2019 about the risks and impacts of a proposed coal-fired power plant, planned for construction on the delicate and biodiverse Lamu coastline. The IFC was linked to that development through numerous financial intermediary investments. Those FI links were difficult to identify and by the time the complaint was filed, the links were broken.
We believe that the IFC needs to strengthen its commitment to accountability by changing its own policies and by supporting a strong and independent CAO. We strongly agree with the report’s recommendation that the IFC strengthen its due diligence and supervision of FI clients and enhance the transparency of IFC-funded portfolios and sub-projects. We also support the recommendation that the IFC and its clients provide remedy for harms caused by IFC projects. We expect the IFC to respond to the recommendations in the report with urgency and in good faith. We look forward to being included in the development of new policies and procedures through public consultations.”
Accountability Counsel joined with over 40 organizations to comment on the final report of the external review and will continue to push for transparent, inclusive consultation as its recommendations are considered, adopted, and implemented. For these and other comments on the external review, please see:
- “Joint Comment on Report and Recommendations from the External Review of IFC/MIGA E&S Accountability, including CAO’s Role and Effectiveness” – Accountability Counsel + 45 Partner Organizations
- “Realizing the Right to an Effective Remedy within the IFC/MIGA Accountability Framework” – Bank Information Center, Inclusive Development International, Accountability Counsel, Center for International Environmental Law, Arab Watch Coalition
- “Comment on External Report on the Topic of IFC/MIGA Engagement in CAO Processes” – Accountability Counsel
- “Implementing the External Review Requires IFC to Provide Remedy to Assam Tea Workers” – Stephen Ekka (PAJHRA), Wilfred Topno (PAD), Jayshree Satpute (Nazdeek), Anirudha Nagar (Accountability Counsel)
- “Ukrainian Communities Support Recommendations for Strengthened IFC Accountability” – Lani Inverarity (Accountability Counsel)
- “Joint Comments and Recommendations on Financial Intermediaries and E&S Accountability Section of the External Review of IFC/MIGA E&S Accountability, including CAO’s Role and Effectiveness” – Recourse, Oxfam, Inclusive Development International
For more information about Save Lamu’s frustrating experience challenging financial intermediary investments, please visit this page on our website.