By Philippe Le Houérou
This piece was originally published on Devex.
Our job at the International Finance Corporation is to support and promote responsible private sector development. The projects we finance impact people and the environment, and because development is not a science, sometimes things do not go as expected. We must recognize this reality and do our best to minimize potential negative impacts of development, just as we strive to maximize positive impact.
That is why we developed strong environmental and social standards nearly two decades ago. But these standards — which are stronger than most local laws — can sometimes be hard to achieve.
Those impacted must have a place to turn to when outcomes are not as expected. Our clients must put in place effective grievance mechanisms to allow employees, communities, and other stakeholders to voice their concerns. But our shareholders recognized this might not be enough and created the Office of the Compliance Advisor and Ombudsman, or CAO.
Recently, in the context of IFC’s strategy to engage in more challenging markets and litigation questioning the extent of our accountability, our board has decided to review our environmental and social accountability framework, including the role and effectiveness of CAO.
I, for one, embrace a board review.
Accountability could not be more important to me. We work at IFC because we believe the private sector can create markets, opportunities, and jobs for people in developing countries who urgently need them. I am accountable to the president of the World Bank Group and to our board.
All of us at IFC are accountable to the people benefiting from and affected by projects we finance, as well as to our creditors and borrowers, and to our development partners. We are accountable for monitoring our clients’ projects, anticipating the impact on communities and the environment, and doing our best to meet our development objectives in an environmentally and socially responsible manner.
CAO’s mission — which also is the independent accountability mechanism for the Multilateral Investment Guarantee Agency — is very clear: to “address the concerns of individuals or communities affected by IFC/MIGA projects; enhance the social and environmental outcomes of IFC/MIGA projects; and foster greater public accountability of IFC and MIGA.”
CAO responds to complaints by people affected by our clients’ projects and seeks to resolve disputes. It also conducts investigations into the projects to determine whether we are complying with our own policies and procedures. And it gives independent advice on broader issues and concerns to the president of the World Bank Group, to the MIGA CEO, and to me.
I look forward to the conclusions of the independent review of our accountability framework. But, as IFC’s CEO, I must ask myself what can be done today to bolster accountability in my own organization.
I strongly believe that we have some of the world’s best experts on environmental and social sustainability — and I know that the adverse issues that can arise in the implementation of development projects are always at the forefront of their minds. We are lenders and investors, and we have a role to play in capacity building and oversight to help our clients meet our standards. I often hear stories about how our staff have been creative and strategic in problem-solving and I applaud them for that.
That said, we can do better.
In particular, we need to be more proactive in solving issues when we become aware of them and quicker at identifying mistakes and course correcting.
Going forward, when we become aware of complaints or concerns, we will look into them more systematically. This does not preclude the CAO process, but early-stage prevention and proactive problem solving are always better.
We should not wait for the CAO’s findings as we often have done in the past. I pledge we will engage immediately to see what we can do to resolve the issue. If a private sector client does not deliver on their commitment to the standards over time, as a last resort, we will take the tough decision to enforce the terms of our agreements with them and withdraw or exit from the project.
Secondly, when CAO launches an investigation into a project, we have recently set up a new peer review process to quickly analyze issues and identify learnings to implement immediately across all projects. This team will be independent of the original project team and will review the history and the evolving context of the project and work with IFC colleagues and clients on implementing an action plan.
These efforts will require more dedicated IFC resources. They also will require a change in our behavior and culture.
As we move forward in more challenging markets, in line with our strategy to do more in the poorest and fragile countries, I expect these issues to become even more difficult in the years ahead. That is why we must make these changes now.
We must nurture a culture in which we react proactively to fix problems. We will be more transparent about what went wrong in the first place. When we make a mistake, we will own it, and we will do our best to rectify the problem. I pledge that we will learn faster from failure.
We believe in accountability, and we will continue, with humility and determination, to improve our important work to bring more private sector development to give people more opportunity for a better life.
Philippe Le Houérou is the Chief Executive Officer of the International Finance Corporation.
