The International Finance Corporation’s financial intermediary investments, fossil fuels and the climate crisis
The World Bank’s private sector arm, the International Finance Corporation (IFC), plays a significant role in influencing private financial flows. As the “largest global development institution focused on the private sector”, the IFC aims to advance economic development by investing in the private sector. This role could be crucial in global efforts to shift finance away from fossil fuels and catalyse a just transition to renewable energy. The IFC is a standard-setter – where it goes, others follow. Its environmental and social standards – the Performance Standards (PS) – form the basis of safeguards used by over 140 private banks who are members of the Equator Principles while influencing the policies of export credit agencies and other development finance institutions (DFIs). Alongside investments in companies in over 100 countries around the world, through loans, equity investments, debt securities and guarantees, the IFC mobilises capital from other lenders and investors – both private and DFIs – through loan participations, parallel loans and other means. The IFC, therefore, has global influence, advising businesses and governments on how to encourage private investment and make the investment environment more attractive to investors.
With this power and influence comes a huge responsibility for the IFC, as part of the World Bank Group, to address the Bank’s twin goals of ending poverty and boosting shared prosperity. These goals, which are currently being reviewed as part of the World Bank Group’s new evolution roadmap, cannot be achieved in a world where climate change is fuelling inequality, especially among marginalised and vulnerable communities, and deepening poverty. The World Bank itself claims that unchecked climate change will push up to 130 million people into poverty over the next 10 years. And yet the IFC is still making climate-wrecking investments – including in oil, gas and coal projects.