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IFC Adopts New Environmental and Social Standards

Published 02-21-06

Submitted by International Finance Corporation

Washington D.C. - The Board of Directors of the International Finance Corporation adopted today new environmental and social standards for the organization. The new standards build upon the environmental and social requirements that IFC currently applies to private sector projects it finances in the developing world. A new policy on disclosure, adopted at the same time, will increase transparency requirements.

IFC currently has in place safeguards to minimize the impact of projects on the environment and on affected communities. The new standards will replace these safeguards.

"The new IFC standards are stronger, better, and more comprehensive than those of any other international finance institution working with the private sector," said Lars Thunell, IFC's Executive Vice President. "We aim, with these new policies, to increase the development impact of projects in which we invest. We also seek to give companies operating projects in emerging markets the capacity to manage fully their environmental and social risks and to compete better in a global economy."

The new standards cover more areas than the old safeguards and expand on areas already covered. Specifically, the standards contain new requirements for community health, safety, and security; labor conditions; pollution prevention and abatement; integrated social and environmental assessments; and management systems.

The new standards contain stronger requirements for community engagement and consultation; biodiversity protection; community and worker grievance mechanisms; use of security forces; greenhouse gas monitoring; and greater disclosure of information to the public by IFC and client companies.

The standards adopt a new outcomes-based approach, which requires client companies to have in place effective management systems that allow them to handle social and environmental risks as an integral part of their basic operations and business model.

The new standards are the result of an extensive process of consultation and public comment in which stakeholders, including governments, industries, and civil society organizations, took an active part. The review was triggered both by the realization that the old safeguards had proved inadequate in complex project situations, and by IFC‚s transition to a new business model, which is based on the premise that long-term profitability and strong project outcomes are better secured by companies that manage all of their risks well.

The Equator Principles are also expected to be updated in accordance with the new IFC standards. These are a set of environmental and social guidelines, based on IFC‚s safeguards, that are now applied by 40 leading commercial financial institutions which collectively represent some 80 percent of global project finance.

In approving the new set of standards, IFC‚s Board requested some refinement of the language. Accordingly, the final version of the Performance Standards and Disclosure Policy will be issued as a complete text in the coming weeks.

The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.

The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people‚s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC‚s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit

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International Finance Corporation

International Finance Corporation

The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services.

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