Mobilising financial resources to achieve sustainable development has been a priority for the international community over the last decades. Development finance institutions (DFIs), including national development banks (e.g. the Netherlands Development Finance Company, the Dutch Investment Fund for Developing Countries), multilateral development banks (e.g. the World Bank Group, the Inter-American Development Bank, the Asian Infrastructure Investment Bank) and global funds and instruments (the Green Climate Fund), have a broad mandate to contribute to sustainable development and combat poverty particularly in low- and middle-income countries. Following the adoption of the 2030 Agenda, these institutions have been called upon to accelerate efforts to achieve the Sustainable Development Goals, including by leveraging private investment and prioritizing green finance.
National and multilateral development banks are usually majority-owned by governments and capitalized with public funds, which enhances their creditworthiness when raising money on the international capital markets. They provide a variety of financial and technical services to both states and private sector enterprises: grants, loans, guarantees, equity investment, lending through financial intermediaries, and blended instruments such as public-private partnerships.
The responsibility to respect human rights extends to national and international DFIs. Given their dual nature as state institutions – owned by state shareholders – and business enterprises – operating as banks, investors, fund managers –, both Pillar 1 and 2 of the UN Guiding Principle on Business and Human Rights (UNGPs) are applicable to their policies, conduct and activities.+ Read more
“States should take additional steps to protect against human rights abuses by business enterprises that are owned or controlled by the State, or that receive substantial support and services from State agencies such as export credit agencies and official investment insurance or guarantee agencies, including, where appropriate, by requiring human rights due diligence.”
“States, when acting as members of multilateral institutions that deal with business-related issues, should: (a) Seek to ensure that those institutions neither restrain the ability of their member States to meet their duty to protect nor hinder business enterprises from respecting human rights; (b) Encourage those institutions, within their respective mandates and capacities, to promote business respect for human rights and, where requested, to help States meet their duty to protect against human rights abuse by business enterprises, including through technical assistance, capacity-building and awareness-raising; (c) Draw on these Guiding Principles to promote shared understanding and advance international cooperation in the management of business and human rights challenges.”
According to UNGP 17 and 22, DFIs have a responsibility to conduct human rights due diligence and establish effective remedial mechanisms. This responsibility has been reinforced by states in the context of the Addis Ababa Agenda on Financing for Development:
“(…) we encourage all development banks to establish or maintain social and environmental safeguards systems, including on human rights, gender equality and women’s empowerment, that are transparent, effective, efficient and time-sensitive.”(para 75)
For more than two decades, a growing number of financial institutions have sought to address environmental and social risks connected to their financing through the adoption of environmental and social safeguards and complaints/accountability mechanisms open to project- affected stakeholders.
The World Bank has adopted a series of policies and documents in respect to Access to Information (2015), Environmental Assessment (2013), Involuntary Resettlement (2013), Indigenous Peoples (2013) and Safety of Dams (1996) that are connected to projects it finances. Their Access to Information policy, for example, requires that the Bank makes public any information in its possession that is not on a clear list of exception, thus, making much more information available on key decisions made during project development and implementation. In 2012 the International Finance Corporation adopted a revised series of standards to help its clients improve their business performance, enhance transparency, engage with the people affected to projects with IFC finance, protect the environment, and achieve greater development impact. Eight Performance Standards were adopted in the following fields: Environmental and Social Risk Management, Labour, Resource Efficiency, Community, Land Resettlement, Biodiversity, Indigenous People (including a requirement for free, prior and informed consent under certain circumstances) and Cultural Heritage.
Regional Development Banks have also taken steps towards adopting and/or strengthening safeguard mechanisms. The Asian Development Bank adopted a Safeguard Policy Statement (2009). The Inter-American Development Bank has adopted policies on Environmental and Safeguards Compliance (2006), Involuntary Resettlement (1998), Gender Equality in Development (2010), Indigenous People (2006) and Access to Information (2010). The African Development Bank has an Integrated Safeguards System Policy Statement (2014) , while the European Investment Bank has a policy on Transparency (2015), a revised Environmental and Social Handbook (2013), a Statement of Environmental and Social Principles and Standards (2009) and a Strategy on Gender Equality and Women´s Economic Empowerment (2016). The New Development Bank (formerly the BRICS Development Bank) has adopted a Policy on Information Disclosure (2017) and an Environment and Social Framework (2016).
The Banks have a mixed track record in incorporating UNGPs requirements in their policies and practices. While a very few adopted stand-alone human rights policies (see FMO human rights position statement), the majority include references to human rights in their Sustainability Policies, performance standards and complaints mechanisms. However, the scope and strength of the human rights language and commitment vary significantly.
According to the Coalition for Human Rights in Development, while the policies adopted do not adequately protect communities’ human rights, they can provide them with a powerful tool to demand respect for their human rights. Some civil society organisations have developed tools so that affected communities can better understand the mechanisms that exist to protect their rights in relation to projects that could have a negative impact on them. Inclusive Development designed a Community Guide to the Asian Development Bank Involuntary Resettlement Safeguards as an action resource for people affected by projects funded by the ADB. A similar Guide has been developed for communities affected by projects financed by the IFC, while International Rivers developed an animated resettlement guide video for people affected by Dam Development.
In the context of increasing attacks against human rights and environmental defenders, the DFIs have been called upon to strengthen their due diligence procedures to prevent reprisals against individuals and groups challenging development projects. In his 2017 report to the General Assembly, the Special Rapporteur on the Situation of Human Rights Defenders recommended financial institutions:
” (a) To include in ex ante impact assessments an analysis of the state of civic freedoms in the country of investment as well as the lender’s track record of engaging with defenders; (c) To withhold approval for investment where impact assessments reveal serious threats to civic freedoms and defenders at the country or local level; (d) To develop guidelines that clearly communicate that criticism of activities financed by the institutions is an important part of improving the impacts of development efforts and that reprisals against defenders will not be tolerated.”
The importance of engaging in stakeholder dialogue when financing projects has been reiterated when two European development banks exited the controversial Agua Zarca dam project (Honduras) in 2017, amid local and international tension stemming from allegations that they did not adequately consult the indigenous Lenca people. The dam is considered sacred by the Lenca people, and a number of protestors, including 2015 Goldman prize recipient Berta Caceres, were killed.
- International Rivers, Animated Resettlement Guide Video for People Affected by Dam Development, 2017: https://www.internationalrivers.org/resources/animated-resettlement-guide-video-for-people-affected-by-dam-development-13136
- Inclusive Development, A Community Guide to the International Finance Corporation, 2017: http://www.inclusivedevelopment.net/wp-content/uploads/2017/05/Community-Guide-to-the-IFC-Participants-Manual.pdf
- Coalition for Human Rights Defenders in Development, Human Rights Defenders and Private Sector Development Activities, Trends and Challenges, 2017: http://rightsindevelopment.org/wp-content/uploads/2017/10/Defenders_and_Private_Sector_Devt.pdf
- New Development Bank, Enviromental and Social Framework, 2016: https://www.ndb.int/wp-content/uploads/2017/02/ndb-environment-social-framework-20160330.pdf
- European Investment Bank, Transparency Policy, 2015: http://www.eib.org/attachments/strategies/eib_group_transparency_policy_en.pdf
- Addis Ababa Action Agenda, 2015: https://sustainabledevelopment.un.org/index.php?page=view&type=400&nr=2051&menu=35
- African Development Bank, Integrated Safeguards System Policy Statement and Operational Safeguards, 2014: https://www.afdb.org/en/documents/document/afdbs-integrated-safeguards-system-policy-statement-and-operational-safeguards-34993/