World Bank investments in commercial financial institutions is indirectly allowing land-grabs, evictions and pollution in South-East Asia, a watchdog group alleged in a report. By investing in banks and other so-called financial intermediaries, World Bank funds can increase poverty, social strife and promote projects which hasten climate change, according to a report by Inclusive Development International.
These investments by the World Bank’s private financing arm, the International Finance Corporation (IFC), violate its own guidelines on environmental and social conditions, the report alleges.
An IFC spokesman defended the practice of working with private financial firms, saying it was “essential” to poverty reduction and job creation.
The multiplier effect of FI investments enables us to support far more enterprises critical to development than we would be able to on our own. We work with our FI clients to improve their environment and social risk management practices.
In 2016, the IFC poured $5 billion into commercial banks, insurance companies, private equity firms and others, representing about half of its new annual long-term commitments, according to an internal IFC watchdog. The investments are aimed at boosting domestic capital and financial markets and supporting development.
The IFC compliance office said in a report that although supervision of these investments was improving, the corporation still lacked a means to assess whether clients met its standards. IFC disputed that report’s findings, saying they did not give an accurate view of its performance.
The report singled out IFC support for Raiffeisen Bank International of Austria, which the report said had financed the Thai mining firm Earth Energy, the main underwriter of a coal project in Myanmar’s Tanintharyi region that allegedly involved land-grabbing and mining on ancestral lands that could affect as many as 16,000 people.