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Development Finance Institutions failing on sustainable investment policies.

Friday, June 5, 2020

According to newly released report - Financing Fairly – from the Centre for Environmental Rights (CER) and Fair Finance International, the investment policies of two prominent South African Development Finance Institutions (DFIs) fail to meet international Environmental , Social and Governance (ESG) standards.  

DFI's crucial for sustainable growth

Development Finance Institutes play a critical role in promoting sustainable economic growth as they fund large scale infrastructure development and projects. In South Africa where almost half (49,2%) of the adult population lives below the poverty line[1], DFI investment policies are pivotal to securing sustainable economic growth. DFI investment programs often attract funding from the private financial sector because these investments are assumed to meet ESG standards. However it has been shown that DFIs do not consistently adhere to or apply ESG criteria, and can fund controversial projects such as coal fired power plants to the detriment of communities and the environment.

Fair Finance International partnered with CER to conduct the study assessing the sustainable development and corporate social responsibility commitments of the African Development Bank (AfDB), the Development Bank of Southern Africa (DBSA), the European Investment Bank (EIB), the Netherlands Finance Development Company (FMO), the Industrial Development Corporation (IDC) and New Development Bank (NDB), using the Fair Finance methodology developed in cooperation with Profundo. These DFIs were assessed under 7 themes - transparency and accountability; climate change; corruption; human rights; gender equality; health; and nature – in both the financial and power generation sectors. 

Further study reveals 6 DFIs disappoint

Aside from the Financing Fairly report which focuses on the results of DBSA and IDC, Fair Finance International commissioned Profundo to use the FFI Methodology to research and analyze six DFIs. The results are published in the report Applying the Fair Finance Guide Methodology to DFIs. This report show that whilst EIB and AfDB have moderate scores on their policies, both NDB and IDC scored zero on policies for engagement with the financial sector, which includes the role of private financial institutions as intermediaries. IDC also scored zero on policies for climate change, health, human rights and nature. (A zero score can mean that policies are non-existent or that they are not publicly available.) This is extremely concerning given the scope and scale of the development programs these DFI's invest in.

Next steps

Fair Finance International together with CER, Profundo and 350.org held a webinar to share the report results with CSO’s and other interested organizations, and to discuss the assessment of global DFIs’ investment policies, sustainable development in South Africa, and how to constructively influence the investment policies of finance institutions to meet ESG standards.

Building on the outcome of this report, Fair Finance International aims to expand its network to South Africa. If your organization is interested and would like for more information please email Fair Finance International coordinator, Kees Kodde: kees.kodde@oxfamnovib.nl

[1] Department of Statistics, South Africa: http://www.statssa.gov.za/?p=12075

 

 

 

 

 

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