Businesses increasingly understand that their long-term success is linked to addressing the most urgent development challenges of our time—from poverty and disease to climate change.
Solving these problems is good business. Solving them well—in an environmentally and socially sustainable manner—is better business.
A recent study of IFC’s equity portfolio across emerging markets showed that companies do better financially when they do right by their communities and the environment. A parallel study showed the same for firms that put in place good governance.
The case for sustainability could not be clearer: Businesses can and must focus on societal needs—and must do so in a sustainable manner.
That’s what this issue of IFC PERSPECTIVES is about.
For 62 years, IFC has repeatedly pushed toward the frontier—to go to more difficult markets and bring solutions to more complex challenges. The further we have gone, the more we have been asked by our stakeholders to take on greater challenges. We have done so while maintaining our triple bottom line of impact, profitability, and sustainability.
In short, we know from experience that sustainability and profitability are not incompatible business objectives—it just takes patience and persistence to see results. Barely two decades ago, for example, there was no handbook for managing risks in project finance in developing countries. IFC had no guide for our own investments. So we established a set of standards for managing environmental, social, and governance (ESG) risks.
Today, IFC’s Performance Standards are a global benchmark. This year marks the 15th anniversary of the Equator Principles—which require participating banks to apply our standards when lending in emerging markets. In a remarkable example of voluntary self-regulation by financial institutions, these Principles have now been adopted by 94 banks from 37 countries.
“The Equator Principles are a remarkable example of voluntary self-regulation by financial institutions and have now been adopted by 94 banks from 37 countries.”
The effects have been revolutionary. These standards turned an increasing number of financial institutions into critical agents of sustainable business practices—improving labor and environmental practices and bolstering engagement with local communities. They strengthened insufficient local standards in many markets and encouraged other institutions and regulators to follow suit.
Informed by the banking industry’s experience, institutional investors—who hold nearly $100 trillion in assets under management—are increasingly integrating ESG considerations into their investment decisions. This is the new frontier in sustainability.
In the following pages, we review the remarkable achievements of the Equator Principles. We meet African entrepreneur Mossadeck Bally, who has created a thriving hotel business—with high ESG standards—in one of the world’s toughest markets. And we learn how Costa Rica’s state-run power company, ICE, is taking steps to safeguard the environment as it generates power.
This issue also looks at blockchain’s potential to transform developing countries. And to mark the World Bank Group’s Annual Meetings in Bali, we’ve asked Jim O’Neill to update us on Indonesia’s economy—where it’s been and where it’s going.
I hope these stories encourage you to reflect on how far we’ve come since the Equator Principles were launched 15 years ago—and how sustainability has evolved from afterthought to essential component of every good business plan.
Philippe Le Houérou
CEO, International Finance Corporation
Join the conversation: #IFCPerspectives
Published in October 2018