Politics of Poverty

Big victories for indigenous peoples and transparency advocates

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Free Prior and Informed Consent is crucial to ensuring that indigenous communities participate in decision-making processes that affect their lands, cultural identity, and livelihoods.

Big wins for the poor sometime come in unlikely venues. This week the International Finance Corporation (IFC)–the private sector lending arm of the World Bank Group–released its new and, in some ways, improved policies designed to protect the environment and communities. The IFC has been criticized for funding high-risk projects in sectors like oil, gas, and mining that entail serious risks for local communities. IFC’s new policies–its so-called “Sustainability Framework”–outline social and environmental requirements for the companies that it funds in order to reduce the risk associated with its projects.

Why is this important? IFC’s social and environmental policies have far reaching impact. IFC invested $18 billion in 528 projects in FY2010, including FY10 commitments of more than $1 billion in the oil, gas, mining, and chemicals industries and just under $1.6 billion in infrastructure. In many cases, its financing is relatively modest but often serves to catalyze projects and bring in other lenders. Its policies are often emulated by other international public lenders – such as export credit agencies – and by private commercial banks such as Citigroup, Barclays, Credit Suisse, and many others who belong to the Equator Principles, a set of standards for reducing social and environmental harm adopted by 72 export credit agencies and private banks. In that sense, when the IFC changes its policies, it can be big news.

For these reasons, Oxfam and other NGOs have been in the trenches over the past two years trying to wrench out improvements. IFC’s new framework includes a precedent-setting requirement that its clients secure the Free Prior and Informed Consent (FPIC) of indigenous communities prior to launching development activities expected to generate adverse impacts on their lands and natural resources. FPIC is critical to ensuring that indigenous communities participate in decision-making processes around development projects that affect their lands, cultural identity, and livelihoods. FPIC will also benefit governments and companies seeking to promote long-term sustainability and prevent conflict around high-impact development projects. Increasingly, companies and investors are beginning to acknowledge FPIC as best practice.

The IFC’s updated Sustainability Framework also promotes increased transparency in the oil, gas, and mining sectors by requiring extractive industry clients to disclose their contracts with host governments. This will help to prevent secret deals and enable citizens to hold their governments accountable for decisions regarding natural resource management. Internationally, several governments already recognize contract disclosure as best practice. Most recently, Ghana’s Ministry of Energy posted all of its petroleum contracts online in May.

These are big wins, but as with any new policy, implementation must be closely watched. We hope that IFC’s new FPIC and contract disclosure policies will set in motion a ripple effect among other international financial institutions, export credit agencies, companies, and governments, helping to reduce social conflict and increase transparency around large-scale development projects globally.

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