By October 2025, Congress must reauthorize the Better Utilization of Investments Leading to Development (BUILD) Act, which established the U.S. International Development Finance Corporation (DFC) in 2018. DFC included a request for reauthorization in its Fiscal Year 2025 (FY25) Congressional Budget Justification, which must pass for DFC to continue operating past October 2025.
Reauthorization is an opportunity for Congress to require DFC to raise its environmental, social, transparency, and accountability standards and address gaps in DFC’s existing policies. For instance, DFC recently revised its Environmental and Social Policies and Procedures (ESPP), its primary safeguards document that outlines the environmental, social, labor, and human rights requirements for projects that DFC finances globally. While DFC accepted several of civil society’s recommendations to improve the policy, there are points where the ESPP still falls short of what the U.S. requires of the multilateral development banks (MDBs) of which it is a member. We call on Congress to condition DFC’s reauthorization on addressing gaps in its current policies and raising its environmental, social, transparency, and accountability standards to meet and exceed what the U.S. requires of the MDBs, including the following provisions:
1. Improving transparency: DFC’s transparency and access to information standards outlined in its recently revised Transparency Policy and ESPP continue to be well below what the U.S. advocates for the MDBs to meet. In particular, we call on Congress to address the following during the reauthorization:
- Require DFC to match the Pelosi Amendment MDB disclosure requirement. This mandate requires U.S. Executive Directors at the MDBs to abstain or vote against any project with significant environmental impacts if an appropriate environmental assessment has not been conducted and made available to the public 120 days before a vote. Currently, DFC discloses project information for high-risk projects 60 days before Board approval, providing significantly less time for stakeholders and communities to provide input on projects prior to approval.
- DFC should increase its disclosure time for all Category B projects, including environmental and social impact assessments, information on current co-financiers, and stakeholder engagement plans, from 7 days to at least 30 days in advance of Board approval. This would bring DFC in line with the requirements of peer institutions like the International Finance Corporation.
- Update its project database monthly, rather than 45 days after the end of each quarter.
2. Supporting the right to remedy: When DFC’s projects harm communities, these harms must be fully remediated. DFC’s ESPP requires that clients minimize, mitigate, compensate, and/or remedy impacts by applying the mitigation hierarchy in the event of adverse environmental and social impacts. However, through the reauthorization process, Congress should require DFC to also develop, through public consultation, a separate policy on remedy that:
- Develops processes to facilitate and provide remedy in consultation with project-affected stakeholders.
- Includes provisions in contractual agreements requiring remedy in the event of harm and establishes a framework for DFC to contribute to remedy.
- Accounts for how DFC and its clients will remediate harm when DFC or its client exits a project investment.
3. Preserving an independent Office of Accountability (OA): We commend DFC for launching a consultation process to finalize its Terms of Reference for its OA. However, the budget for the OA is part of DFC’s total budget, impeding the ability of the OA to have true independence. We encourage Congress to include provisions in the BUILD Act reauthorization requiring sufficient staffing and a separate budget for the OA. A separate budget would help DFC preserve the independence of its accountability mechanism, avoid conflicts of interest, and create a more proactive approach to addressing complaints from affected communities regarding project related harm.
4. Preventing sexual exploitation, abuse, and harassment (SEA/H): There is an inherent risk of SEA/H, including child SEA/H, in all of DFC’s investments. With this in mind, Congress should require DFC to either develop a standalone policy or integrate measures around preventing SEA/H into existing policies. Within this requirement, DFC must also consider and address the unique SEA/H risks children face, especially marginalized children, such as those who have a disability and/or are LGBTQI+.
As one of the largest shareholders at the MDBs and historically the most vocal advocate for high environmental, social, accountability, and transparency standards at the institutions, the U.S. should demonstrate its commitment to sustainable and inclusive development by holding its own development finance institution to the same standards it calls on the MDBs to meet. A consistent U.S. development policy across DFC and the MDBs is essential for the U.S. to preserve its credibility and leadership with the MDBs, international partners, and project-affected communities. However, it's important to note that MDB policies should be considered the "floor” for DFC. As the United States’ own development finance institution, DFC should be at the forefront of meeting and exceeding industry standards. Engaging in meaningful stakeholder engagement, improving transparency and access to information practices, preserving the independence of its OA through a separate budget, and creating specific policies on preventing child SEA/H are crucial steps to fulfilling DFC’s development mission.