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introduced in 1998 and are now considered out of date.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.’
