5.1 Long-Term Development and Poverty Alleviation
IFC should contribute to the World Bank Group's mission to promote sustainable development and alleviate poverty. To foster economic growth that benefits the poor and decreases inequities, IFC should promote economic investment that directly responds to the needs of the most disadvantaged sectors of society. IFC should target investments that deliver economic benefits or services to the poor and the most marginalized. These can be investments that provide services to the poor, such as access to clean water or clean energy, expanding access to capital for local populations, or investments that provide a productive and environmentally sustainable economic generation for a local community, such as shade-grown coffee or organic agriculture.
One of the most effective ways for IFC to maximize poverty alleviation via private sector investments is to target small- and medium-sized enterprises (see section 5.3). IFC should also favor projects that generate local employment and ownership, that benefit women entrepreneurs, and that develop new and environmentally sustainable businesses. Friends of the Earth recommends that IFC adopt a "development screen" with clear social and environmental criteria for projects and companies. A development screen would provide better guidance about the types of projects that meet IFC's mission to support long-term sustainable development and poverty alleviation.
5.2 Invest in Environmental Sustainability
IFC should prioritize investments to promote environmental sustainability. Rather than respond to the private sectors' priorities, IFC should be challenging and directing private investment toward development of environmentally sustainable industries such as electric cars and electric bicycles in polluted cities like Mexico City or Shanghai; development and use of alternative wood products such as kenaff and industrial hemp; certified wood production to meet the growing demand for sustainably grown and harvested timber, mass transit systems, organic agriculture and manufacturing with zero pollution output.
Through its environmental projects unit, IFC finances some environmentally beneficial projects. For example, IFC supports the Conservera Amazonica heart of palm project in Peru. The project sponsor is organically certified for not using pesticides or fertilizers, and is being certified by the Forest Stewardship Council. The project will provide income for the local indigenous community, including employment for 500 people. It is an example of an innovative approach to protecting the environment, providing economic development for local people and encouraging the development of local businesses. IFC should learn from the environmental projects unit and work to make projects like Conservera Amazonica the rule, not the exception. It should catalyze private sector financing in the most environmentally and socially beneficial enterprises, making these investments more bankable and paving the way for a greener, more sustainable development path.
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Credit: AWEA |
| Eco-tourism Example in Tanzania
IFC financed an eco-tour lodge along the border of the Tarangire National Park that is an example of how an investment can benefit local people and the environment and provide economic development options for local economiesóin this case promoting eco-tourism. The Boundary Hill Lodge helped to spur the creation of a wildlife conservation area and will employ and be jointly owned by the local Lolkisale village where 4,000 Maasai reside.52 The lodge will provide safari experiences for visitors to Tanzania, helping to attract new visitors to the country. This eco-lodge differs from other luxury hotels IFC finances in that it is helping to support a small business, not an international hotel conglomerate like Marriott. While investments in five-star hotels may create jobs, IFC financing may not be needed. IFC should support opportunities for tourism development that work with local communities and help preserve natural resources and environmental attractions. |
| Seeds of Change: Solar Development Corporation and the Renewable Energy and Efficiency Fund
IFC has embarked upon some small but positive initiatives that promote good alternatives to fossil fuels and will help combat climate change. IFC should continue focusing on these types of investments and mainstream them into its overall portfolio. Solar Development Corporation (SDC) The SDC is a global off-grid PV investment fund. IFC launched it as a pre-commercial and eventually commercial development and financing fund with an emphasis on rural areas. Target initial capital is $50 million, $15 million of which will support market and business development and $35 million of which will support commercial financing.53 IFC has recognized the need to help develop the international solar energy market, especially in regions that do not have access to the electric grid. Renewable Energy & Efficiency Fund (REEF) IFC joined other private and public sector groups to invest in the Renewable Energy and Energy Efficiency Fund (REEF), the first global private equity fund devoted exclusively to investments in renewable energy and energy efficiency projects. The fund will invest up to US$100 million in these projects and "is intended to stimulate investment in environmentally friendly energy technologies in the developing world."54 The fund will target investments in grid-connected renewable energy technologies such as small-scale hydroelectric plants, geothermal power plants, biomass-fueled power plants or cogeneration units, and wind farms.55 REEF will also invest in off-grid renewable energy projects and energy efficiency projects. |
5.3 Supporting Small- and Medium-Sized Enterprises
The best way to maximize the benefit for the poor and disadvantaged in a country through private sector investments is by targeting small- and medium-sized enterprises, which IFC has emphasized more in the last couple of years. Part of the merger between the World Bank and IFC includes bringing together their lending for small and medium enterprises (SMEs). This new merger will focus on providing the technical skills needed by small business owners, such as how to market products and how to develop a business.
IFC has maintained a focus on SMEs over the years through facilities like the African Enterprise Fund and the South Pacific Enterprise Fund. Some of the projects managed by IFC's Environmental Projects Unit for SMEs include small-scale forestry and reforestation in Costa Rica, and photovoltaic solar lighting systems in Vietnam, Bangladesh and the Dominican Republic.56 These are examples of the kinds of projects Friends of the Earth and other NGOs would like to see the IFC emphasize even more. IFC should also favor projects that promote local employment and ownership, benefit women entrepreneurs and develop new businesses that are environmentally sustainable and in the long-term interest of a community.
5.4 Using Leverage Globally
IFC has significant leverage to change the behavior of corporations and to promote stronger environmental and social standards for other institutions such as commercial banks and Export Credit Agencies (bilateral government agencies that support corporations doing business abroad). Even without financing a project, IFC can still influence corporations and work with them to improve their overall corporate responsibility and practices. IFC can work with individual corporations, assisting them in the development and application of strong environmental and social standardsówhether they are financed by the World Bank Group or not. IFC can wield leverage and influence over the private sector simply because it is a leading international institution whose standards are, de facto, the international guidelines that companies often follow. According to an internal survey of private sector clients, IFC found that the one aspect its clients value the most in working with them is the environmental and social advice IFC provides.57
IFC can also help green private investment by assisting the commercial banking sector and Export Credit Agencies (ECAs) in establishing environmental and social policies and environmental management systems. Commercial banks and ECAsówhich have few environmental standardsóenable many environmentally harmful development projects to proceed without support from the World Bank Group. Many commercial banks and several of the ECAs are feeling pressured to develop standards, but they do not have much experience in this area. IFC can play a positive role in promoting the adoption of strong environmental and social standards that make both financial and environmental sense.
