The appointment of Makhatar Diop as Managing Director and Executive Vice President of the International Finance Corporation (IFC) comes at a critical time for the institution. Not only is the IFC providing fast track financing to address the ongoing COVID-19 pandemic, but the appointment comes amid a major reform process around the IFC’s approach to accountability. Although the External Review of the IFC and Multilateral Investment Guarantee Agency (MIGA) Environmental and Social Accountability was concluded in June 2020, the process of reform is ongoing. BIC has advocated throughout this process around the need for significant change within IFC management to enable management to better respond to concerns and grievances from affected communities, as well as to strengthen the office of the Compliance Advisor Ombudsman.
In September 2020, BIC and four of our partners submitted joint comments to the World Bank Group’s Board of Directors as part of the public consultation on strengthening E&S accountability at the institutions. The IFC/MIGA Board is still considering its recommendations and has yet to endorse or adopt any of them. Nonetheless, the installation of new leadership at the IFC presents an opportunity for the institution to recalibrate its policies and practices and to implement reforms that realign the IFC/MIGA with its stated missions.
Implementing the following recommendations will help the IFC/MIGA bolster their accountability framework and improve transparency:
- Endorse the external review team’s recommendations. The open and transparent implementation of the recommendations is essential to strengthen the Compliance Advisor/Ombudsman (CAO) and address shortcomings such as the antagonistic response by management to CAO investigations, and the lack of remedy for project-affected peoples. IFC/MIGA needs to create an implementation plan centered around the needs of project-affected communities and design a flexible response system that can adapt to these specific needs and project circumstances.
- Establish a framework and fund for remedial action at the IFC. In response to CAO findings of non-compliance, IFC/MIGA needs to prepare a time-bound Management Action Plan (MAP) approved by the Board with robust monitoring of implementation. A dedicated remedy fund should be established and resourced. Communities’ access to remedy must not be restricted by factors such as divestment or early loan repayment. The framework for remedial action needs to specifically address how access to remedy will be achieved even when the client relationship with IFC/MIGA has ended.
- Strengthen CAO’s independence and capacity to respond to complaints. IFC/MIGA needs to support a strong, independent CAO VP so the accountability mechanism can be responsive to complainants and function as the mechanism for recourse it was designed to be. With an increasing caseload, CAO also needs to be adequately funded and given the resources to meet its responsibilities in a timely manner, especially as the IFC invests more in conflict-affected and fragile states. A strong, well functioning CAO will help IFC/MIGA to develop a robust culture of accountability and prioritize the needs of communities who are all too often left behind.
- Improve Access to Information. Although the IFC’s Access to Information Policy calls for the timely and accurate provision of information to stakeholders and other interested parties, the policy is not consistently implemented. Civil society and affected communities are often unsure about what should be disclosed. Because, in many cases, clients have the discretion to approve, or refuse, disclosure of critical documents, the IFC is much more likely to ultimately release documents that are favorable to the client, turning information disclosure into a public relations activity. Without access to these critical documents, project-affected communities are often unable to properly raise their concerns around projects or to seek redress when they experience project-related harms. Moreover, this puts project-affected communities at a disadvantage when they engage in a dispute resolution process through the CAO.
With new leadership at a pivotal moment, the IFC has the opportunity to undertake significant reforms that can improve accountability and transparency at the institution, enabling it to raise the standards for private sector lending across the development landscape. As IFC works to support the recovery from COVID-19 and increases its engagement in fragile and conflict-affected states, an embrace of a strong accountability framework and more accessible project information would strengthen the effectiveness of the projects and contribute to the goals of ending poverty and boosting shared prosperity.