World Bank: International Finance Corporation (IFC) & Multilateral Investment Guarantee Agency (MIGA) | Compliance Advisor Ombudsman (CAO)
International Finance Corporation (IFC)
Headquarters: Washington, D.C., United States
Member Countries: 184
Largest Shareholder: United States
Mission: To promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives.
Multilateral Investment Guarantee Agency (MIGA)
Created In: 1988
Headquarters: Washington, D.C., United States
Member Countries: 181
Largest Shareholder: United States
Mission: To promote foreign direct investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve people’s lives.
The Accountability Office: Compliance Advisor Ombudsman (CAO)
Established in: 1999
Functions: Compliance Review, Dispute Resolution, Advisory
The IFC is the largest global development institution focused exclusively on the private sector in developing countries. The IFC has 184 member countries and works in more than a 100 developing countries to leverage private sector funding and encourage investment.
The IFC’s Environmental and Social Performance Standards define IFC clients’ responsibilities for managing their environmental and social risks.
The MIGA supports and encourages foreign direct investment. It has a set of social and environmental standards that investments must follow in order to obtain its guarantee. MIGA also has social environmental performance standards that apply to projects it covers.
The Accountability Office
The Compliance Advisor (CAO) is the accountability mechanism that receives complaints that stem from projects financed by the IFC or investments guaranteed by MIGA.
The CAO has three functions:
- The ombudsman (dispute resolution) function – The ombudsman is a dispute-resolution mechanism that seeks to resolve disputes in a mutually agreeable and flexible way without finding fault. The goal of the ombudsman is to improve social and environmental outcomes on the ground. Project-affected people may bring complaints to the ombudsman.
- The compliance function – The CAO may oversee investigations of IFC and MIGA social and environmental performance to ensure that IFC and MIGA have complied with their policies, procedures, and guidelines. Compliance investigations are undertaken only at the request of IFC or MIGA staff, at the CAO’s discretion, or in response to concerns raised in a complaint to the ombudsman.
- The advisor function – The CAO gives advice to the president of the World Bank Group and staff of IFC and MIGA about particular projects or policies through the advisor function.
Submit a complaint to the CAO if:
- You are a person, group or organization (or their representative)
- You have been, or are likely to be affected by the social or environmental aspects of an IFC or MIGA project
If the CAO determines that your complaint is eligible, it will conduct an assessment to determine which CAO role the parties are seeking. If dispute resolution is available, the CAO will facilitate a process designed to address the issues in the complaint with the goal of reaching a mutually agreeable solution. The dispute resolution process is voluntary and can only move forward if all parties agree. If complainants seek compliance, or if no agreement is reached through the dispute resolution process, the CAO will conduct an appraisal and may initiate a full compliance investigation to determine adherence to IFC or MIGA social and environmental policies. Compliance investigation reports are made public and the CAO monitors changes until the IFC and/or MIGA take steps to resolve noncompliance.
Pushing for Transformative Change to the IFC/MIGA Accountability Framework
In 2019, following the wake of cases that have demonstrated the weak state of accountability at the IFC and MIGA, the World Bank Group (WBG) board of directors initiated a review of the IFC’s environmental and social accountability framework. The review, which is being conducted by an external review team, includes an evaluation of the role and effectiveness of the Compliance Advisor Ombudsman (CAO), the independent accountability office for the IFC and MIGA, as well as the institution’s response to problems when they arise. Accountability Counsel is participating in this process as part of a multi-stakeholder reference group that will provide input to the review team.
While we welcome the ability to provide input as a part of the reference group, we are concerned about the overall lack of transparency and limited public participation in the review process. To this point, we and partner organizations submitted a joint letter in October 2019 to the WBG board and the review team to push for public disclosure of the Terms of Reference and other documents pertaining to the review, adequate public consultations that include opportunities for communities to submit input in their own language, and the release of the review team’s report and recommendations before any decisions to change the accountability framework.
As we engage in this process, our substantive input is informed by our experience supporting communities around the world harmed by IFC and MIGA activities, research into all IFC and MIGA activities that have led to CAO complaints, and a decade of policy advocacy around WBG accountability. To date, we have supported communities in India, Kenya, Mongolia, Panama, Peru, and Ukraine in cases to the CAO. Each case has exposed gaps in accountability that the IFC and MIGA must understand to avoid and remedy harm to communities.
On October 11, 2019, we joined civil society partners in submitting initial recommendations to the review team to draw attention to accountability gaps concerning disclosure, IFC responsiveness to CAO findings, and access to meaningful remedy. In January 2020, we followed up those initial recommendations with case examples that demonstrate concrete ways to improve complaints processes and institutional responses to harm.
The review team is expected to issue a report with recommendations to the WBG board by May 2020. We will work to make sure that this process results in a stronger accountability framework at the IFC, MIGA, and CAO, for the benefit of communities around the world.
Ensuring Responsiveness to Accountability Office Findings
Accountability Counsel joins colleagues around the world in alarm over a trend at the WBG. Increasingly, the bank’s management is refuting the findings of the bank’s independent accountability offices, the Inspection Panel and CAO, instead of developing plans to address confirmed violations of bank policy.
In November 2013, Accountability Counsel and colleagues sent a letter to President Kim demanding an end to this pattern. In a June 2016 blog post, we called for the bank’s leadership to reject the false choice between rights and development. Our work is particularly important in a time where the bank is seeking to increase the private sector’s role in the development. As our recent Devex article outlines, if accountability is not strengthened at the bank, the bank’s efforts to “crowd in” the private sector will be a setup that harms the poor and vulnerable and widens the wealth and equity gap. We are also advocating for a change in incentives for bank staff, which should include incentives for robust due diligence, community consultation, and constructive engagement with the accountability offices’ complaint processes.
We continue to engage bank leadership to ensure that the bank appropriately responds to its accountability offices, facilitates remedy for harmed communities, and implements lessons learned for future projects.
Supporting the Fight Against IFC Impunity
As Accountability Counsel supports communities bringing complainants to the CAO, our partners have explored other means of holding institutions like the IFC accountable. Jam et al. v. International Finance Corp., a landmark lawsuit brought by fishing communities in India and their lawyers at EarthRights International, challenged the WBG’s claim to absolute immunity in U.S. courts. The case reached the Supreme Court in 2018. Accountability Counsel helped co-author a joint amicus brief with several partners in support of the communities challenging the IFC’s absolute immunity. The amicus brief argues that ending legal impunity for abuses will realign incentives to better ensure that international institutions are accountable for their actions, ensure that communities seeking justice have greater leverage, and lead to better development outcomes.
On 27 February 2019, the Supreme Court issued its decision for the case, ruling in favor of the fishing communities and holding that the IFC does not enjoy absolute immunity. This decision will have a profound effect on accountability in development finance. Accountability Counsel will continue to explore how to utilize this decision to provide communities that have been negatively affected by development finance with additional and more effective avenues for redress.
Accountability for IFC Financial Intermediary Lending
Accountability Counsel has also been actively working with partners to ensure that IFC financing of financial intermediaries – other banks and funds – does not harm vulnerable communities and that communities are able to effectively seek remedy for harms at the IFC’s accountability office. We have engaged the IFC’s leadership on FIs, which has resulted in commitments to improve the IFC’s environmental and social processes for its investments in the financial sector.
Accountability in Impact Investing
In December 2018, Accountability Counsel participated in an in-person consultation on the IFC’s draft Investing for Impact: Operating Principles for Impact Management (the Principles). The Principles will be a set of voluntary guidelines for impact investors, touching on impact strategy, assessment, and monitoring. Accountability Counsel and several partners made a joint submission to the IFC, and are advocating for revisions to the Principles that would commit signatory investors to implement a systematic approach to avoid and remedy negative impacts, consult and receive grievances from local communities impacted by their investments, and adhere to high transparency standards. The IFC published the final version of the Principles in March 2019. We will continue to engage with IFC on matters that intersect with our broader impact investing advocacy.
- Past Advocacy
Documents by Release Date
Jan 2020 – Accountability Counsel submitted a series of recommendations for the external accountability review of IFC, MIGA, and the CAO. Based on our experience helping communities seek redress for bank-financed harm, we recommended: (1) extending time eligibility for complaints; (2) not deferring compliance investigations; (3) allowing communities to access dispute resolution and compliance review in the sequence of their choosing; (4) requiring bank participation in dispute resolution when welcomed by communities; and (5) creating a remedy fund to assist in redressing harm.
Oct 2019 – Accountability Counsel and partners sent a joint letter to the World Bank Group Board of Directors and the external review team tasked with assessing the accountability framework of IFC and MIGA as well as the effectiveness of the CAO. The letter challenged the lack of transparency and inadequate opportunities for community input in the review process.
Oct 2019 – Accountability Counsel and partners submitted initial joint comments for the external review of IFC/MIGA environmental and social accountability framework, which includes an evaluation of the CAO’s role and effectiveness.
Mar 2019 – The IFC released the final version of the Impact Investing: Operating Principles for Impact Management.
Dec 2018 – Accountability Counsel and partners submitted joint recommendations to the IFC on its draft Impact Investing: Operating Principles for Impact Management, recommending that the IFC strengthens the Principles by including explicit references to good accountability practices.
Nov 2013 – Accountability Counsel and partner organizations sent a joint letter to World Bank President Jim Kim.
Jun 2013 – Accountability Counsel and SOMO published a Compliance Advisor Ombudsman (CAO) Guide.
Jan 2013 – The CAO released its Operational Guidelines.
May 2012 – The CAO released a Draft Operational Guidelines.
Sep 2009 – The IFC released a Good Practice Note: Addressing Grievances from Project-Affected Communities.