14 August 2008 | Washington, DC
A new study finds that international project financiers, including the leading international banks and the International Finance Corporation (IFC), do not have a robust framework for minimizing the social risks posed by their projects.
A new study finds that international project financiers, including the leading international banks and the International Finance Corporation, do not have a robust framework for minimizing the social risks posed by their projects. The study—"The International Finance Corporation's Performance Standards and the Equator Principles: Respecting Human Rights and Remedying Violations?"—notes that recently-adopted standards are not likely to reduce potential human rights-related conflicts that may arise in projects.
The Center for International Environmental Law (CIEL) and the Bank Information Center (BIC), with support from World Resources Institute, Oxfam Australia and Banktrack, used the Danish Institute for Human Rights' Human Rights Compliance Assessment tool (HRCA) to analyze the extent to which the International Finance Corporation's Performance Standards explicitly or implicitly address human rights concerns. These Standards have been adopted by the "Equator Principle Banks" as the "Equator Principles." The analysis determined that the Standards and Equator Principles fail to address most critical human rights adequately and fail, even, to ensure that human rights concerns are assessed.
The shortcomings of the Performance Standards and Equator Principles, and the risks these shortcomings pose, are significant given the relevance of human rights concerns in the project finance context and the widespread application of the Standards and Principles.
To assess the relevance of human rights to project finance, the groups reviewed sixty-one projects that have generated complaints from locally-affected communities, and determined that these projects implicated most of the internationally recognized human rights. Among the rights most often implicated were the right to food, right to property, right to life, and right to health.
The Performance Standards and Equator Principles, intended to address social and environmental risks, enjoy extensive application. In 2007, US$52.9 billion of project finance debt in emerging market economies was subject to the Equator Principles, representing over 70 percent of all such financing in emerging markets. In addition, the export credit agencies (ECAs) of the members of the Organization for Economic Co-operation and Development have agreed to adopt the Performance Standards as a common environmental and social benchmark for export credits and loan guarantees.
The groups have submitted this paper to the United Nations Special Representative of the Secretary General on the issue of human rights and transnational corporations and other business enterprises, Professor John Ruggie, requesting his attention to this issue.
The Study and appendices can be found at: CIEL's website.
Also listen to Steve Herz’s audio commentary at Corporate Watchdog Media.
For additional information
Anne Perrault, CIEL, 202.742.5850;
Steve Herz, BIC, 510.338.1237;