Albania: Investigation Regarding IFC-Supported Hydropower Project in National Park

In September 2018, we released a compliance investigation of IFC’s investment in the construction and operation of a run-of-river hydropower project on Albania’s Lengarica River, operated by Enso Hydro.

The project sits within the largest National Park in Albania, Fir of Hotovë-Dangelli, known for its mountainous terrain, dense forests, and numerous river gorges. The investigation responds to a complaint from community representatives and local civil society organizations about project impacts on biodiversity and tourism, as the area is popular for thermal springs, rafting, and outdoor activities.

CAO’s investigation found shortcomings in IFC’s review related to endangered and endemic species; cumulative impacts emerging from the boom of hydropower projects on the Lengarica river system; and proposed metrics for sustaining the freshwater ecosystem and human livelihoods.  However, many of these shortcomings were addressed during project implementation as additional biodiversity studies were commissioned and a biodiversity monitoring program was established.  Outstanding issues relate to IFC’s assessment and mitigation of project impacts on tourism, the alignment of the project with the National Park’s management plan, and IFC’s disclosure of the project’s Environmental and Social Impact Assessment (ESIA).

IFC’s response includes a project-level action plan designed to address these outstanding issues. This includes engaging the tourism community to enable use of the canyon for recreational activities; aligning the client’s actions with the National Park’s management plan; and disclosing the ESIA.  CAO is now monitoring the case.

India: Compliance Monitoring of Labor Issues on IFC-Supported Tea Plantations

CAO released a compliance monitoring report in January 2019 regarding IFC’s project with Amalgamated Plantations Private Limited (APPL), the second largest producer and supplier of tea in India.

APPL employs over 30,000 permanent workers across its 25 tea estates in Assam and West Bengal and is required by Indian law to provide accommodations and other basic services to its employees and their dependents — over 155,000 people in all.  Our monitoring report assesses actions taken by IFC in response to a 2016 CAO investigation, which was triggered following reports of labor incidents on two APPL plantations and a complaint from workers in 2013 concerning labor and working conditions.

The IFC project is designed to help implement a worker-shareholder plantation model on the company’s tea estates.  Tea workers in northeastern India represent a vulnerable group as many are descendants of tribal communities from other Indian states who were brought to the tea estates as bonded or forced labor during India’s colonial period.  While noting the potential for significant development impact, CAO’s investigation found that IFC’s pre-investment review was not commensurate to the risks presented by the worker’s vulnerable status and dependency on APPL.  Shortcomings in this review led to the development of mitigation measures that were also insufficiently detailed and did not address key risk areas. 

In response the investigation, IFC noted that APPL was implementing an Action Plan to address shortcomings and legacy issues in key areas such as human health, worker health and safety, housing, and sanitation infrastructure. Since the release of CAO’s investigation report, APPL has reported progress in implementing some of the Action Plan commitments. However, the complainants assert that workers were not consulted on the Action Plan and raise concerns with the progress and quality of its implementation.

CAO’s monitoring report concluded that IFC has completed only limited environmental and social supervision of the investment and has not satisfactorily addressed CAO’s findings. IFC has now agreed to organize and fund a neutral, independent facilitator to facilitate a stakeholder consultation to help build trust and find common ground on various aspects going forward. IFC also proposes to facilitate an approach to engage stakeholders on a sector-wide study.  We will continue to monitor this case and expect to issue another monitoring report in the next year.

Honduras: CAO Closes Dinant Cases after Monitoring IFC Actions Related to Security and Conflict

In November 2018, CAO released a final monitoring report and closed the investigation of IFC’s investment in Corporación Dinant, a palm oil producer with operations across Honduras.

The case addressed serious concerns arising from the violent land conflict in and around Dinant plantations in the Aguán Valley.

Beginning in 2010, the World Bank received several complaints from communities in the Aguán region alleging violent evictions of farmers by private and public security forces connected to Dinant, and IFC’s failure to address these security issues appropriately. In response, CAO initiated a compliance review. The resulting investigation published in 2014 found serious shortcomings in IFC’s review and supervision of the project. IFC responded with an “Enhanced Action Plan”, which committed Dinant to Good International Industry Practice in the use of its security forces, as well as a third-party investigation of past incidents of violence by Dinant security forces.

Our final monitoring report acknowledges steps taken by IFC to enhance Dinant’s approach to private security management reflecting IFC’s Performance Standard 4 on Community Health, Safety, and Security. The report also recognized IFC’s efforts to incorporate lessons from the Dinant audit related to contextual risk assessment, adopting higher standards for use of security forces, and enhanced monitoring of company adherence to IFC’s environmental and social standards. We noted, however, that IFC has only partially addressed project-level findings. A third-party inquiry of past incidents has not yet been delivered to IFC, and depending on the outcomes of this inquiry, remedies including compensation may be required under the requirements of Performance Standard 1 and the Enhanced Action Plan.

Since Dinant fully repaid its loan to IFC in April 2017 and IFC has not proposed any further project-level actions, CAO concluded its involvement in the project in November 2018.

Civil Society Outreach

While more people are aware of CAO, many still tell us that they do not have sufficient access to information about IFC and MIGA projects or options for recourse. Ensuring accessibility to CAO thus remains a core challenge.

To maximize the impact of our outreach to communities and civil society, we often conduct outreach in partnership with the independent accountability mechanisms (IAMs) of other development banks and include IFC country staff in these efforts where appropriate. Our approach varies from one-day workshops to outreach videoconferences (VCs), which allows us to expand our reach with limited resources.

Though cases from Africa account for a quarter of our current caseload, they represent just 9 out of 46 African countries where IFC and MIGA have investments. Outreach in the region therefore continues to be a focus. In Kenya this year, we organized an event in October 2018 in partnership with the Kenyan National Commission on Human Rights and Hakijamii, with participation from IFC’s Country Office in Nairobi. In addition to learning about CAO, the 30 participants met with IFC’s to learn about their portfolio in the country. In Ethiopia, we convened an outreach VC in May 2019 with 20 civil society and community leaders co-hosted with Transparency International Ethiopia and the World Bank’s Inspection Panel. IFC country office staff also presented their work. And in June 2019, we participated in a roundtable in Côte d'Ivoire at the African Development Bank hosted by the Independent Accountability Mechanisms Network (IAMnet) which brought together over 50 civil society representatives from across the African continent to discuss accountability around development projects.

In other regions, CAO co-hosted a one-day workshop with the Inspection Panel during the 2018 World Bank Group/IMF Annual Meetings in Bali, which convened participants from across the Indonesian archipelago. CAO also participated in an outreach VC with civil society in Haiti in April 2019 with the Inspection Panel and the Inter-American Development Bank’s accountability mechanism (MICI). The event was supported by Action Aid Haiti. In the coming year, we will turn our attention to events in South Asia and Latin America.

Engaging the Financial Sector

We regularly collaborate with the private sector to share insights from our work related to grievance response and accountability. We have found that there is growing interest in this field from companies, banks, investors, and regulatory agencies, among others.

In May 2019, CAO’s Vice President, Osvaldo L. Gratacós participated in a regional workshop in Shanghai, China, hosted by the Asian Development Bank and the China Banking and Insurance Regulatory Commission. The workshop was the third in a series held over the last two years around developing a compliance and accountability framework for investments supported by financial intermediaries (FIs) in the Asia-Pacific region. The event in Shanghai brought together 250 participants, including 30 state-owned banks and FIs from China and developing countries in the region, as well as large Chinese public sector entities, the independent accountability mechanisms of other multilateral development banks, civil society, and research institutes. Earlier in the year, CAO participated in a related workshop in New Delhi including representatives from government, banks and private sector in South Asia. In both events, we contributed to the discussions by sharing our experiences related the environmental and social risks in IFC FI investments. This is an issue CAO has looked at extensively both through our 2012 compliance audit of a sample of IFC’s FI investments, and complaints regarding the subprojects of IFC-supported FIs, which is now the third biggest sector of CAO’s caseload.

CAO’s Vice President was also invited to participate in a sustainable finance conference in Dublin, Ireland in May 2019, hosted by the Government of Ireland and Sustainable Nation Ireland. He shared insights from CAO’s work related to E&S performance in the financial sector with bond issuers, investors, and other key market participants. And in Galway, CAO participated in a business and human rights event hosted by the Irish Centre for Human Rights.

Dispute Resolution Knowledge Sharing

Sharing insights from our dispute resolution casework was another focus this year. We participated in multi-stakeholder discussions around the world and worked to develop mediation practice through guidance materials and training workshops.

In Tirana, Albania, CAO facilitated a panel discussion in September 2018 to explore the use of collaborative problem solving to address disputes about development projects. Participants included representatives from the community engaged in the CAO mediation process related to Bankers Petroleum (which closed this year), CAO’s mediation team, and representatives from IFC and the Extractive Industries Transparency Initiative (EITI). The public event was attended by government, private sector, and civil society organizations.

In January 2019, Rio Tinto, one of the world’s largest metals and mining companies, invited CAO to lead a practice session at the company’s headquarters in London on communities and social performance for senior managers. CAO shared lessons from its mediation process in Mongolia related to the Oyu Tolgoi mine, which is managed by Rio Tinto and financed by IFC and MIGA. While in London, CAO was also invited to share learning from its work in Mongolia with the management and staff of the European Bank for Reconstruction and Development (EBRD), which is also an investor in the Oyu Tolgoi project. In February, we were invited by IFC to share tools, principles, and experience from our dispute resolution work at a roundtable on Environment, Health, and Safety (EHS) in Agribusiness for IFC clients in Ukraine. CAO facilitated a discussion with IFC staff and clients about strategies for preventing and managing potential conflicts with local communities. In June, CAO also delivered a master class in mediation for women business leaders at IFC’s flagship Sustainability Exchange in Dakar, Senegal.

We have been working to transform these insights into good practice materials, and released the first two publications in our “Reflections from Practice” series this year. The series is based on CAO’s 20 years’ experience in the dispute resolution field and aims to benefit staff and mediators while meeting the growing external demand for CAO’s dispute resolution knowledge.