Markets working to support sustainable development

IFC Performance Standards on Social and Environmental Sustainability

The International Finance Corporation (the private sector investment body of the World Bank) has developed a set of Performance Standards to review the suitability of projects for direct financing. If a project is not expected to meet the standards over a ‘reasonable period of time’ then the IFC will not provide finance.

There are also several types of activity that the IFC does not finance e.g. production/trade of weapons, alcohol, tobacco, illegal products or activities.The Performance Standards are based on 8 areas:

  • Social and Environmental Assessment and Management System
  • Labour and Working Conditions
  • Pollution Prevention and Abatement
  • Community Health, Safety and Security
  • Land Acquisition and Involuntary Resettlement
  • Biodiversity Conservation and Sustainable Natural Resource Management
  • Indigenous Peoples
  • Cultural Heritage

These standards help the IFC to enhance transparency and accountability of its actions. They also help clients manage the environmental and social risks of project development. These standards are deisgned to increase the sustainable development impact of private sector projects and help to mitigate any adverse effects these projects may have.

Market coverage: 

In 2012 the IFC invested US$20 billion in 576 new projects in 103 countries, taking the total number of organisations to 1825. More than half of these countries are served by the International Development Association (the World Bank fund for 'poor countries'). In 2012 there was an increase in funding for African countries as well as environment and climate change related projects. The great majority of IFC's investment is in trade finance and financial markets.

Background information: 

The International Finance Corporation (IFC) is part of the World Bank Group and finances private sector projects in the developing world. It was established in 1956.

IFC finances projects across many sectors including: agribusiness, financial markets, health and education, infrastructure, manufacturing and services, oil, gas and mining, ICT.The 2nd set performance standards came into effect on 1st January 2012. The updates reflect "the evolution in good practice for sustainability, incorporating modifications on challenging issues such as supply-chain management, resource efficiency, business and human rights, and climate change"

Funding source: 

The IFC is funded by donor country contributions. The IFC 2012 Annual Report states that it has assests of US$75 billion.

Notable information: 

The IFC Principles acted as the model for the development of the Equator Principles for investment and financing by the private sector.