IFC Violated Disclosure Policy, Watchdog Says

17 January 2014

The World Bank’s private sector lending arm, the International Finance Corporation (IFC), violated IFC disclosure policies in connection with a controversial loan in Honduras, according to the IFC’s investigative branch.

The report by the Compliance Adviser/Ombudsman (CAO) concerned the IFC’s investment in Corporación Dinant in Honduras, a palm oil and food company “which has been associated with extensive human rights abuses, including the killing, kidnapping and forced eviction of farmers,” according to a group of civil society groups who have recently criticized the IFC’s response to the watchdog’s recommendations.

The CAO’s comments on transparency are just one among many criticisms leveled.

The IFC is faulted for not following policies to protect local communities. It failed to adhere to its own safeguard policies and let the company breach those policies, the report says. The IFC also “either failed to spot or deliberately ignored the serious social, political and human rights context in which this company is operating or where it did, failed to act effectively on the information,” the groups summarized in a recent letter.
Among other things, they called for consultations with the farmers´ organizations in the area and the suspension of any further disbursements to Corporación Dinant.

Regarding information, the report says the IFC has failed to disclose the Dinant Environmental and Social Assessment.

Text of the findings under a “Disclosure & Consultation” heading:

Key Findings

• IFC’s failure to disclose the Dinant E&S Assessment was not compliant with its Policy on Disclosure of Information (para. 13). IFC remains non-compliant on this point.
• IFC supported a breach of PS1 (paras 20 & 26) by: (a) accepting the client’s disclosure of a modified translation of the ESRS in the place of the E&S Assessment, and (b) failing to assure itself that the client’s ESAP was disclosed to affected communities in an accessible form.
• IFC failed to ensure that the Dinant E&S Assessment met the consultation requirements set out in PS1 (para. 21).

IFC’s public disclosure of information around this investment was limited to its E&S review summary (ESRS) and Action Plan. Dinant disclosed a modified version of the ESRS through local government offices. CAO finds that IFC’s failure to disclose Dinant’s E&S Assessment document was in breach of its Policy on Disclosure of Information. Further, CAO finds that IFC supported a breach of PS1 by: (a) accepting the client’s disclosure of a modified translation of the ESRS in the place of the E&S Assessment, and (b) failing to assure itself that the client’s ESAP was disclosed to affected communities in an accessible form.

With regard to consultation, CAO finds no evidence that the communities living most proximate to Dinant’s properties were consulted during the preparation of the E&S Assessment, or in relation to the ESAP. The rationale for foregoing consultation as explained by IFC was that the project did not pose adverse impacts to local communities, and therefore that consultation was not required. Given the risks described in the E&S Assessment and acknowledged by IFC in applying E&S category B to the project, CAO finds that consultation was required as part of the E&S Assessment process. In not ensuring that this occurred, IFC failed to properly apply the Sustainability Policy, which requires IFC to ensure that its client’s E&S Assessment meets the requirements of PS1.

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Filed under: IFTI Watch

ABOUT IFTI WATCH

In this column, Washington, D.C.-based journalist Toby J. McIntosh reports on the latest developments in information disclosure in International Financial and Trade Institutions (IFTI).
Contact: freeinfo@gwu.edu or
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