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June 24, 2024

IFC Board approves action plan resulting from inquiry into its RCBC investments

The International Finance Corporation’s (IFC) Board of Executive Directors in Washington DC has approved a plan correcting the IFC failure to observe strict standards when it puts its money in the local lender, the Rizal Commercial Banking Corporation (RCBC).

The corrective action is contained in the IFC Management Action Plan which is the result of a performance audit conducted by its Compliance Advisor Ombudsman.

The audit has to do with RCBC’s alleged failure to observe strict environmental and social norms when the local lender financed 10 coal-fired power plants and a commitment to finance one other power project.

According to the IFC, the performance audit was prompted by complaints from communities living in the vicinity of the projects and from non-governmental organizations (NGOs) alleging that the private investment arm of the World Bank provided support to the projects “without applying the IFC’s performance standards, leading to potentially serious environmental and social harms to local communities and contributing to global climate change.”

“CAO’s investigation identified non-compliance by IFC in its appraisal and supervision of environmental and social risks emerging from its investment in RCBC’s banking business. It found that many of the alleged adverse impacts of the RCBC-financed coal-fired power plants on communities and the environment were likely to have occurred.

“It further found that shortcomings in IFC’s review and supervision contributed to RCBC supporting the development and expansion of the power plants without assurance that the plants would operate in accordance with IFC’s Performance Standards. This includes requirements to quantify and reduce greenhouse gas (GHG) emissions,” the IFC said.

“We acknowledge the CAO’s observations and the concerns of the communities reflected in the report. We are committed to addressing these and will work to support RCBC to make the improvements outlined in the action plan,” said Makhtar Diop, IFC Managing Director.

The Board-approved management action plan include the following:

Further strengthening the implementation of RCBC’s Environmental and Social Management System (ESMS) including enhancing its E&S capacity and systematically incorporating Performance Standards requirements in high-risk projects financed by RCBC.
Assessing and addressing environmental and social impacts associated with the power plants financed by RCBC and the status of their compliance with IFC’s Performance Standards.
Addressing GHG emissions related to the power plants and enhancing RCBC’s climate-related disclosures.
Addressing opportunities to improve the E&S risk management of IFC’s broader financial intermediary investments.
The IFC acquired 6.7 percent of RCBC worth an estimated P2 billion first disclosed in 2010.