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Revamped social and environmental standards at the World Bank’s private
sector lending arm will come into effect at the end of this month.
The ‘performance standards’, made public last month, replace the International Finance Corporation’s ‘safeguard policies’ that were introduced in 1998 and are now considered out of date.
The IFC says the standards, which will provide a framework for its $19.3billion-a-year (£11bn) loan portfolio in the developing world, are significantly stronger and more wide-ranging than the existing policies.
They will have ramifications beyond the IFC’s own lending because the previous safeguard policies formed the basis of the Equator Principles, guidelines used by financial institutions to assess the social and environmental risks involved in funding dams, power stations and similar large projects.
Following a brief consultation, the 41 financial institutions that have signed the Equator Principles are expected to apply the new standards from 30 April to loans worth more than $97bn annually – around 80 per cent of global project lending. The standards will apply to projects with a value greater than $50m.
They cover eight areas, including labour and working conditions, involuntary resettlement and the rights of indigenous peoples. For the first time they also refer to core International Labour Organization standards on forced labour, child labour, discrimination, freedom of association and collective bargaining. Companies bidding for IFC loans would have to review a project’s effects on health and safety in nearby communities and to quantify greenhouse gas emissions.
The standards took two and a half years to draft – much longer than expected, mainly because some non-governmental organizations objected that the policies were being watered down (EP7, issue 6, p8).
David Hunter of the Law School at American University in Washington DC, said that the new standards did not acknowledge UN norms on human rights.
However, the Brussels-based International Confederation of Free Trade Unions described them as a ‘major step forward’ for workers’ rights, and Rachel Kyte, the IFC’s environment and social development director, maintained: ‘There is not one place where I think we are diluting our standards. We’ve introduced standards in areas where we’ve been silent before, or where we’ve been equivocal. Now we’re being absolutely unequivocal.’
The ‘performance standards’, made public last month, replace the International Finance Corporation’s ‘safeguard policies’ that were introduced in 1998 and are now considered out of date.
The IFC says the standards, which will provide a framework for its $19.3billion-a-year (£11bn) loan portfolio in the developing world, are significantly stronger and more wide-ranging than the existing policies.
They will have ramifications beyond the IFC’s own lending because the previous safeguard policies formed the basis of the Equator Principles, guidelines used by financial institutions to assess the social and environmental risks involved in funding dams, power stations and similar large projects.
Following a brief consultation, the 41 financial institutions that have signed the Equator Principles are expected to apply the new standards from 30 April to loans worth more than $97bn annually – around 80 per cent of global project lending. The standards will apply to projects with a value greater than $50m.
They cover eight areas, including labour and working conditions, involuntary resettlement and the rights of indigenous peoples. For the first time they also refer to core International Labour Organization standards on forced labour, child labour, discrimination, freedom of association and collective bargaining. Companies bidding for IFC loans would have to review a project’s effects on health and safety in nearby communities and to quantify greenhouse gas emissions.
The standards took two and a half years to draft – much longer than expected, mainly because some non-governmental organizations objected that the policies were being watered down (EP7, issue 6, p8).
David Hunter of the Law School at American University in Washington DC, said that the new standards did not acknowledge UN norms on human rights.
However, the Brussels-based International Confederation of Free Trade Unions described them as a ‘major step forward’ for workers’ rights, and Rachel Kyte, the IFC’s environment and social development director, maintained: ‘There is not one place where I think we are diluting our standards. We’ve introduced standards in areas where we’ve been silent before, or where we’ve been equivocal. Now we’re being absolutely unequivocal.’
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