Through its Compliance function, CAO carries out reviews of IFC’s and MIGA’s compliance with their environmental and social policies, assesses related harm, and recommends remedial actions to address non-compliance and harm where appropriate.
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Of the 111 complaints that have been handled by CAO Compliance since 2008, 73 were referred from assessment, 30 were transferred from Dispute Resolution, and 8 were initiated by CAO.
Multiple complaints on the same IFC/MIGA project are frequently merged into one compliance process at the appraisal stage. This translates into a total of 90 merged compliance cases – with 58 referred from Assessment, 24 transferred from Dispute Resolution, and 8 triggered by CAO.
The number of cases handled in Compliance increased significantly when CAO changed its Operational Guidelines in 2013. Since then, the parties can choose whether they wish to pursue a dispute resolution or compliance process during CAO’s assessment of the complaint.
About half of cases that are handled in Compliance proceed to investigation, following a compliance appraisal that assesses whether:
1. There is evidence of potentially significant adverse environmental and/or social outcome(s), now or in the future.
2. There are indications that a policy or other appraisal criteria may not have been adhered to or properly applied by IFC/MIGA.
3. There is evidence that indicates that IFC’s/MIGA’s provisions, whether or not complied with, have failed to provide an adequate level of protection.
In CAO’s Policy, these criteria have been revised to create a more explicit link between possible non-compliance and the alleged harm.
Transparency is one of CAO’s core principles, and CAO’s Policy enables more opportunities for both the complainants and companies to review compliance investigation reports. The CAO Policy also allows CAO to defer a compliance process and provide IFC/MIGA and its clients an opportunity to address potential compliance issues early and proactively prior to an investigation being initiated.
Successful compliance cases may result in project-level corrections responding directly to the concerns identified by complainants. They may also generate systemic changes and learning at IFC/MIGA in relation to how investments are carried out to prevent similar issues from occurring in other projects.
Successful compliance cases may result in project-level corrections responding directly to the concerns identified by complainants. They may also generate systemic changes and learning at IFC/MIGA in relation to how investments are carried out to prevent similar issues from occurring in other projects.
CAO’s Management Tracking Record (MATR) annually rates the adequacy of IFC’s and MIGA’s responsiveness to CAO compliance investigations. On average, responsiveness at the systems level is better rated than at the project level. Investigations have resulted in significant systemic changes at IFC/MIGA, including updated policies and guidance notes. In response to this experience, CAO’s Policy has a strengthened focus on options for early resolution of complaints throughout the complaint process.
Examples of systemic outcomes from compliance cases include CAO’s 2012 FI Audit, which brought about significant changes in how IFC engages with E&S risk in its financial intermediary lending. IFC reduced its exposure to high-risk FI clients, built internal capacity to manage high-risk labor issues, and increased E&S resources allocated to high-risk FI clients. Disclosure requirements and internal procedures were also refined, improving the transparency and traceability of IFC’s FI lending.
Similarly, CAO’s investigation of IFC in relation to Dinant in Honduras brought about institutional change. IFC responded by improving its guidance on the use of security forces and placing greater focus on contextual risk in its due diligence processes to better inform institutional decision making around risks that can be out of the client’s control.
An important outcome of CAO’s investigation of IFC regarding its FI client, CIFI, is what it means to exit from an investment responsibly in the presence of ongoing social and environmental risks and impacts to local communities. This has been raised in several CAO cases where IFC or the client may have exited the project during CAO’s process, IFC has committed to develop an approach to “responsible exit” in its investments. CAO’s Advisory function will issue a related advisory note on this topic in 2022.
