In recent years, the private sector seems to have developed an insatiable appetite for good. Here, an oil company preaches the merits of green energy. There, a giant coffee distributor swears by organic and fair trade coffee. Sudden philanthropy? Not at all. The private sector is waking up to the fact that doing good is good business. Yes, doing good – which really means mitigating long-term risks like environmental degradation, social unrest, and customer boycotts – is profitable. Among financiers as well, the understanding is spreading that good management of environmental and social risks represents a better bet for portfolio performance. The International Finance Corporation is probably the world's expert in helping companies "do good" in the emerging markets. When we invest in an Indonesian forestry company, we help it develop a sustainable production and obtain certification – and thus increase its exports and its profit margin. We help a mining company in Ghana engage with the local community and resettle decently the people displaced by the project, improving their lives in the long run. We also help it minimize its pollution. This kind of work is our daily business. For 50 years now, the IFC has been helping companies invest in the developing world because it believes that private sector growth is an effective instrument for development. Statistics show that, with the flow of private capital into the developing countries (at roughly $350 billion) now more than four times the amount of international aid, private sector investment is critically important to development. In revising and strengthening the environmental and social standards it applies to its investments, IFC intends to increase its ability to help private companies "do good." The new standards will enhance IFC's ability to help client companies manage their risks, and by so doing, identify opportunities to add value by increasing their environmental and social performance. The new performance standards make specific requirements in areas traditionally understood as high risk for companies, the environment and local people: effective social and environment assessment processes, protection and sustainable use of biodiversity, the rights of indigenous peoples, protection of cultural heritage, and the complex process of involuntary resettlement where it cannot be avoided. The new standards also, for the first time, expand requirements to such areas as labor rights, community health and safety, and security. The IFC applies these standards to all of its projects, but its ambition is to influence markets, not just projects and individual clients. We really see our leverage as encouraging others to use these standards, too. The Equator Banks – 40 financial institutions which represent more than 85 percent of global project finance – currently apply IFC standards and also intend to implement IFC's revised standards. Export credit agencies and pension funds are also looking into the possibility of adopting similar principles. The time is right for private companies to start truly integrating environmental and social concerns into their business operations. And, with our new environmental and social standards, IFC stands ready to help client companies manage their risks. | SITE TOOLS   |
