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.
Working with Offshore Financial Centers
Tax evasion is unacceptable in any part of a transaction in which the World Bank Group is involved. Strengthening tax systems and anti-corruption efforts in developing countries is at the center of the World Bank Group's strategy for curbing tax evasion and appropriate use of public resources. In addition, the Bank Group 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, tax abuse, or other illegitimate purposes. IFC is committed to advancing the international tax transparency agenda.
On November 10, 2011 the World Bank Group Board of Executive Directors approved a new policy on the use of offshore financial centers in World Bank Group private sector operations. The policy incorporates the standards of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum). More information on the Global Forum can be found at www.oecd.org/tax/transparency. The policy is effective immediately. As a fundamental part of the new policy, IFC will continue to offer technical assistance to those member countries that request it to improve their overall tax transparency.
On June 26, 2014 the World Bank Group Board of Directors, including the Board of IFC, approved a procedural update to the OFC Policy. Since the adoption of the OFC Policy in 2011, the OECD’s Global Forum has further defined and updated its procedures with respect to the Peer Review Process. This procedural update brings the OFC Policy in line with the current procedures of the Global Forum and other International Financial Institutions regarding the timing of determining the eligibility of an Intermediate Jurisdiction under the OFC Policy. The standards for determining eligibility remain the same. The revised policy can be found here.
On July 14, 2016, IFC and MIGA presented an update to the World Bank Group (“WBG”) Board on tax issues and the Policy on the Use of Offshore Financial Centers in World Bank Group Private Sector Operations (the “OFC Policy” or the “Policy”). The update addressed the OFC Policy as well as developments and discussions in the international tax policy environment, given that a period of ongoing rapid change over the near- to medium-term is expected. A summary of the update can be found here.
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.