Due Diligence

Assessing Social & Environmental Risks & Opportunities

Social and environmental analysis is an integral part of every IFC investment. Early involvement of IFC's social and environmental specialists contributes to a greater understanding of clients' needs and of the environmental and social risks and opportunities associated with a proposed investment. IFC can help companies gain competitive advantage by reducing and managing environmental and social risk and by identifying opportunities to enhance business value. Learn more...

Unique Markets, Responsible Investing: IFC’s Integrity Due Diligence Process

IFC works with a diverse range of development partners: from multi-nationals to small local companies, and from government institutions to NGOs, in both investment and advisory services projects. IFC conducts integrity due diligence (“IDD”) on its business clients and partners as described in this booklet. This is similar to the “Know Your Customer” process used in the financial industry. IDD is critical to ensure that IFC works with reputable and sustainable business partners so that its investments are successful, its resources are used effectively, and its development objectives are met.

Public Private Partnerships

IFC is committed to promoting best practice when it comes to transparency in PPPs. IFC encourages all its advisory clients to follow the World Bank Group Framework for Disclosure in Public-Private Partnerships. IFC will promote the Framework among its government clients to inform them about disclosure best practices.

Additionally, whenever IFC invests in PPPs, we conduct due diligence to confirm that the contract terms conform to relevant market practice, any substantiated allegations of bribery or corruption are investigated, there are positive economic and social returns, and service rates are sustainable. Going forward, when considering an investment in a PPP, IFC will also undertake due diligence regarding the host Government’s disclosure framework as it applies to the proposed investment.

IFC’s Governance and Accountability Framework

For an overview of the governance of the World Bank Group (WBG) and IFC’s relationship to other WBG member institutions as well as to the WBG oversight and accountability units, please refer to this booklet. It also details the roles and responsibilities of IFC’s Board of Governors, Board of Directors and management structures and provides a summary of IFC’s investment approval process and risk management functions.

Managing Conflicts of Interest

IFC engages in a broad range of activities in support of its development mission, including providing advisory services to governments and private clients and making investments (debt, equity or hybrid) in clients. As a result of this broad range of activities, there is a risk that actual or perceived operational conflicts of interest can arise.

An IFC operational conflict of interest can arise if IFC engages in multiple roles in connection with the same project or sector. IFC is committed to properly manage such operational conflicts to ensure that our interests and the client's – whether it is a government or private entity – remain aligned and that we do not compromise our responsibilities to clients.

Consistent with best practices in the financial services sector, IFC has established an operational conflicts risk and compliance team and adopted robust policies and procedures for the management of such conflicts. Best-practice measures we have adopted can include:

  • Sequencing or reducing the scope of conflicting roles.
  • Full disclosure to and/or consent from affected parties.
  • Separation of advisory and investment teams.
  • Segregation of internal information flows.

IFC Senior Management is responsible for managing operational conflicts as a key component of approval processes. Staff members regularly receive training and guidance from IFC’s operational conflicts risk and compliance team.

This booklet provides an overview of IFC Conflict of Interest frameworks for addressing personal COIs of staff members and COIs related to nominee directorship positions.

Assessing Tax Risk, including Use of Intermediate Jurisdictions by Private Sector Clients

Tax evasion is unacceptable in any part of a transaction in which IFC is involved. IFC exercises due diligence to confirm that the structures in which it invests are chosen for legitimate reasons and are not being used for tax evasion, abusive tax practices, or other illegitimate purposes.

On January 23, 2023, a policy update went into effect on the use of intermediate jurisdictions (IJs) in IFC and other World Bank Group private sector operations. The update responds to input from our member countries, clients and other stakeholders.

The Policy :

  • Aligns the principles for the use of IJs by clients in IFC projects with leading international standards and practices, including the objectives, practices and principles of the Global Forum’s Exchange of Information on Request (EOIR) and Automatic Exchange of Information (AEOI); the OECD Base Erosion and Profit Shifting Inclusive Framework (BEPS IF); and the Financial Action Task Force (FATF) measures for combating money laundering and terrorist financing.
  • Requires IFC to conduct tax due diligence on transactions including IJs in the project control structure or involving material cross border related party transactions to determine that the structure is not designed for tax evasion, abusive tax planning purposes or artificial profit shifting. Tax due diligence focuses on corporate and withholding taxes to be paid at the project enterprise level or in the host country.
  • Requires IFC to disclose to its Board the use of IJs and information about their EOIR rating, commitment to AEOI and BEPS IF, and position on FATF lists where relevant.

Insurance Services

Insurance specialists, who are part of each IFC investment team, provide client support in the assessment of project-specific business risks and exposures and guidance on the structuring of appropriate, cost-effective methods for mitigating, treating, or transferring risks (including insurance solutions). Early involvement in the project cycle helps ensure that project sponsors receive fast, constructive feedback and guidance on risk identification and mitigation.

Anti-Corruption & Anti-Fraud

IFC is at the forefront of the market and of development institutions in guarding against fraud and corruption in its projects. This approach complements and supports IFC's determination to act as a leader on sustainability. Avoiding fraud and corruption is necessary to ensure that IFC's investments are successful, that its resources are being used effectively, and that its development objectives are met.

Former Senior Officials

Many IFC staff worked in the private sector before joining IFC and many go on to make valuable contributions in the private sector after leaving IFC. We consider this a strength of our institution. We manage such staff transitions with great care. IFC has procedures and follows World Bank Group ethics policies to mitigate potential conflicts of interest when senior staff leave IFC and join organizations that may have an investment or advisory relationship with IFC.