Politics of Poverty

New year, new IFC?

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Free, Prior Informed Consent requires an ongoing process of community engagement and participation.

Last August, we lauded the International Finance Corporation (IFC)—the private sector lending arm of the World Bank Group—for releasing revised social and environmental standards for the companies it funds that include some important new requirements to reduce the risk associated with its projects. We were particularly excited to see that the IFC now requires its clients to 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.

Unfortunately, some of the language included in the new guidance for companies that IFC published this month raises questions that, if not clarified, threaten to undermine the IFC’s precedent-setting requirement.

In order for the IFC’s new FPIC requirement to be meaningful, it must allow for the possibility that communities will decide not to accept projects, and it must represent an ongoing process of community engagement and participation. However, the IFC’s new client guidance—specifically its “guidance notes,” which provide additional direction and detail for clients on how to implement the standards—muddies the water around these essential elements of FPIC.

FPIC processes aim to ensure that indigenous communities have the opportunity to participate in decision-making around development projects that affect their lands, cultural identity, and livelihoods. FPIC means that communities receive adequate and timely information about projects, and have the opportunity to approve or reject projects. In other words, if indigenous communities do not consent to a project, then the IFC—which receives public funds—should not approve financing of the project.

However, the guidance notes state that there may be cases in which, “…the engagement process with Affected Communities of indigenous peoples is not yet sufficiently advanced to have obtained FPIC at the time of project approval.” This statement suggests that the IFC would consider approving a project prior to securing indigenous peoples’ FPIC for that project. How, then, would the IFC react if communities ultimately decide that they do not want the company to proceed with the project? Would the IFC withdraw its funding?

The new guidance also offer clients a significant loophole to avoid FPIC implementation, stating that, “Where key project decisions such as land acquisition and resettlement are not managed by the client, it may not be possible for the client to achieve all elements of this Performance Standard, including the requirement of FPIC.” Governments often manage land acquisition and resettlement issues, but that should not free companies from the responsibility of ensuring that communities have been treated fairly and agreed to the project before the IFC makes a financing decision.

Finally, the guidance notes tell companies that, “FPIC can only be provided at a single point in time.” Procedurally, gaining FPIC is not a ‘one-off’ procedure, but instead an ongoing process. FPIC should start before exploration—prior to the issuing of concessions—and continue throughout the life-cycle of the project. In order for companies to maintain a true social license to operate, they must fulfill their commitments to communities. The power of the license is that it may be revoked if the rules are not followed.

The global debate around FPIC is not limited to the private sector, but also includes governments and civil society. While technically the IFC’s policies apply solely to their clients, the IFC now has the opportunity to develop guidance that sets a precedent for a much wider set of actors. Right now, for example, the Peruvian government is considering how to regulate an Indigenous Peoples Consultation Law which it passed last year. The law specifies that consultations should aim to secure indigenous peoples’ agreement or consent, and the government is now grappling with important implementation-related questions, such as how to ensure adequate community representation and participation in consultations.

The IFC has a very important window of opportunity to influence global implementation of FPIC—let’s hope they don’t decide to waste it.

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