Development projects funded by the private arm of the World Bank have caused human rights abuses, conflict and suffering for local communities, a new Oxfam report has found.
The report, The Suffering of Others, highlights the risk of channelling billions of dollars of development money through third parties such as banks, private equity and hedge funds without adequate checks and balances.
The report finds that the World Bank’s private sector lending arm – the International Finance Corporation – has spent US$36 billion in the four years to 2013 in a hands-off, unaccountable, approach to development, resulting in some projects causing human rights abuses around the world.
Oxfam Australia’s specialist on International Financial Institutions, Jessica Rosien, said there were real concerns around projects funded by the IFC that had caused conflict and suffering for local people, including rubber, sugarcane and palm oil plantations in Cambodia, Laos and Honduras, a dam in Guatemala and a power plant in India.
“The World Bank’s goals are to end extreme poverty within a generation and boost shared prosperity, and yet its private arm is investing in projects that in some instances are harming communities and leaving them worse off,” Ms Rosien said.
She said the new report found that in some instances, the IFC was failing to perform due diligence and to identify or effectively manage social or environmental risk in many of its investments in banks and other financial institutions – so-called financial intermediaries – which then finance projects that are meant to contribute to help extreme poverty and boost prosperity in developing countries.
“Because public information from the IFC is so meagre, we fear such projects are just the tip of the iceberg,” she said. “The painful truth is that the IFC does not know where much of its development money is ending up or even whether it’s helping or harming. There is no public information about a whopping 94 per cent of the IFC’s investments in companies carrying out ‘high risk’ projects.
“This lack of transparency is astounding – if the IFC identifies a project at high risk of causing social or environmental damage, it should closely monitor the project and make the information public if it were really serious about contributing to long-term, sustainable development.
“Until the World Bank Group proves these deals have a development impact and are doing no harm, the IFC must stop investing in deals that have a high risk of social or environmental damage.”
Oxfam is urging the Australian Government to use its influence as a donor to the World Bank and as a G20 member, to pressure the IFC to reform its lending to financial intermediaries, including by:
- Making fewer and better investments that stick to its own social and environmental standards;
- Not providing funding through financial institutions for new projects with high environmental and social risks;
- Publicly disclosing its clients and sub-projects on all of its investments done through financial intermediaries;
- Getting projects assessed by independent parties and suspending clients if they have breached the IFC’s requirements on social and environmental protections
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Read the report here