Activists cautiously optimistic about new IFC accountability policy

The International Finance Corp.’s new accountability policy came into effect Thursday, the culmination of a yearslong process that included a landmark case the institution lost before the U.S. Supreme Court.

The policy, which was approved by the institution’s board at the end of June, is designed to make it easier for communities negatively affected by IFC projects to seek redress by streamlining the complaints process and allowing the institution to respond more rapidly.

In addition, the policy aims to improve oversight over the organization by placing the ombudsman’s office outside the control of the institution's management. The Office of the Compliance Advisor/Ombudsman, or CAO, now falls directly under IFC’s board of directors, instead of being inside the president’s office.

The changes have largely been welcomed by watchdog groups, even as they cautiously noted that implementation will be key. There is also an open question about what types of remedies will be made available to people who have suffered social or environmental harm due to projects involving IFC, the private sector wing of the World Bank.

“I think it is a really good step in the right direction,” said Jolie Schwarz, a senior policy adviser at Oxfam, which has been tracking IFC projects and their impact on communities around the world.

“We are very hopeful this system will deliver,” Schwarz added.

The policy is the result of internal discussions going back years. However, a major catalyst was a 2019 ruling by the Supreme Court, which found that IFC could be sued in domestic U.S. courts in certain circumstances.

The case, Jam v. International Finance Corp., centered around a community in India that sued IFC over a polluting coal-fired power plant in the coastal state of Gujarat that the petitioners said caused damage to their air, land, and water resources.

“The new CAO policy marks an important milestone,” said Margaux Day, policy director at the Accountability Counsel, an advocacy group focused on internationally financed projects. “It improves the accountability process by making it more accessible to and effective for the communities who need to access it.”

The IFC accountability mechanism is being watched closely by advocates and other lending institutions.

CAO, which was first established in 1999, has long been seen as one of the better independent accountability mechanisms in the development finance field, and policy watchers told Devex they hope other institutions will soon adopt similar approaches.

“We have ramped up our efforts to proactively address issues raised by our stakeholders and better assess our impact,” said IFC Managing Director Makhtar Diop in an emailed statement as the policy went into effect.

Janine Ferretti, vice president at CAO, told Devex that the new policy will provide a more transparent, responsive, and predictable process for people around the world, and one that is less cumbersome.

“Communities are the ones who carry the burden when there are unintended impacts,” Ferretti said, adding that the new policy has “an emphasis on addressing the concerns of the affected communities.”

Ferretti said the next step will be ensuring that there are practical ways to resolve problems that may emerge from projects involving IFC.

The Accountability Counsel and Oxfam both said a key step going forward is for IFC to develop a mechanism, possibly a “remedy fund,” that could swiftly offer redress for communities in need.

Some legacy cases, such as one involving a tea plantation in India where IFC was invested and where workers suffered poor conditions, are being watched to see what remedies may be forthcoming.

“The remedy mechanisms have not been fully fleshed out yet,” Schwarz said. “A lot still needs to be determined. We have to see how the policy put in place delivers.”