Why the change in approach and what does it mean for affected people?
The IFC laimed that it needed to adopt policies that were more outcome-oriented and provided clearer guidance for private sector clients. In the process, the IFC put in place a set of standards that are considerably more flexible than the former safeguard policies. While the overhaul included some improvements - such as inclusion of social as well as environmental assessments as part of a client's project preparation and respect for all core labor standards- major concerns remain about discretionary language and the absense of required timelines and benchmarks for public consultation and disclosure of information. The performance standards increase reliance on client-generated information and self-monitoring by the private sector, raising questions about the independence and objectivity of impact reporting and the comprehensiveness of mitigation measures. Despite the IFC's claim of demonstrating its leadership with the introduction of the performance standards, on some issues, such as human rights and climate change, the IFC's standards are not as rigorous as those of peer financial institutions and some corporations.
A shift with global implications
The revamping of IFC's policies has far-reaching implications. Not only does IFC influence other financial institutions through its own lending and investment activities (which often involve other banks), but IFC also wields significant influence over the more than 40 lending institutions (primarily commercial banks) that have pledged to uphold IFC's social and environmental standards in their own project lending. Known as "Equator Principles," these standards to which the institutions have committe are largely set by the IFC, providing even greater leverage to influence the ways that other lenders treat environmental and social risks and impacts.