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May 13, 2005
IFC Urged to Include Corporate Screens and Address Climate Change in New Standards
by William Baue
A group of socially responsible investment practitioners recommends revisions to new International
Finance Corporation social and environmental sustainability standards.
SocialFunds.com --
Late last month, the public commentary period ended on the Consultation Draft of the Policy on Social and Environmental
Sustainability and Performance Standards that the International Finance Corporation (IFC) released on August 12, 2004. The IFC, the
private lending arm of the World Bank,
proposed these new standards to upgrade its existing Safeguard Policies.
On April 29, a group from the socially responsible investing (SRI) community submitted a letter to the IFC
making several recommendations on top of those included in an August 17, 2004 letter from an even larger SRI
contingent.
 "I think the World Bank and IFC understand
that the SRI community has a unique perspective in that we're investors but we also understand the
social and environmental criteria and issues," said Lauren Compere, chief administrative officer of
Boston Common Asset Management.
"The IFC outreached to the SRI community, saying 'We want to have formal engagement with you and
make sure you are part of the consultation dialogue process.'"
As a member of the Social
Investment Forum (SIF) International
Working Group (IWG) steering committee, Ms. Compere spearheaded engagement with IFC. She helped
organize a summer 2004 workshop with IFC and World Bank representatives attended by 30
professionals from the SRI community, as well as a November 2, 2004 consultation.
"Given
our expertise, they need to take notice of what we're recommending and highlighting as particular
concerns," Ms. Compere told SocialFunds.com.
The SRI letter sent at the beginning of the
consultation period primarily asks the IFC to adopt a robust and transparent corporate screening
process, including an updated and expanded Exclusion List of no-go zones.
"In order to
further position the IFC on the cutting edge of environmental and social sustainability, corporate
screening must be an integral part of its sustainability framework, not buried in its
operational procedures," the letter states.
Rachel Kyte, director of IFC's Environmental
and Social Development Department, responded in a September 24, 2004
letter archived in a database of comments submitted by external organizations.
"Corporate screening is
an integral part of our credit review and sponsor due diligence," Ms. Kyte wrote. "Whilst our
operational procedures are not currently made public, we are examining whether elements of them
could be."
The SRI letter from the end of the consultation period reiterated its earlier
recommendations, and added others. Specifically, it asks IFC to incorporate several policies from
the Extractive Industries Review (EIR) that
are not currently included in the Consultation Draft of the standards. As well, the letter asks
IFC to address climate change and greenhouse gas (GHG) emissions more comprehensively. Currently,
"Performance Standard 3--Pollution Prevention and Abatement" briefly addresses GHG emissions.
In addition to critiquing the drafted policy changes, Ms. Compere also critiqued IFC's process
for determining the changes. For example, IFC intended to close the consultation period in
December 2004, but agreed to postpone the deadline under pressure from banks that adhere to the Equator Principles as well as
nongovernmental organizations (NGOs). The Coalition of Global Rights, Rules, and Responsibilities
(GRRR), a group of NGOs such as Friends of
the Earth (FoE) and Rainforest Action Network
(RAN), documents what it perceives to be
shortcomings in IFC policies and practices on its website.
Ms. Compere, a member of GRRR,
also expresses concern that external organizations will not get a chance to preview the revised
standards before they are submitted to the Committee on Development Effectiveness (CODE), a
sub-committee of IFC's Board.
"We have not seen a document that shows how IFC is
incorporating the recommended changes," Ms. Compere said. "We've been told they are not going to
put out a pre-CODE draft, so we're not going to get a chance to comment on changes before they go
to the Board committee."
"IFC will allow us to respond to the CODE draft and they
are putting it out earlier," Ms. Compere said, acknowledging that IFC does allow feedback, albeit
later in the process than she and her NGO colleagues would prefer.
It remains to be seen
how extensively IFC will incorporate recommendations from civil society organizations, including
the SRI community, in its final Policy on Social and Environmental Sustainability and
Performance Standards.
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SRI World Group, Inc. All Rights Reserved.
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