Rizal Commercial Banking Corporation (RCBC or “the client”) is a large universal bank in the Philippines, providing a wide range of banking and other financial products and services, including commercial and retail banking, credit cards, asset management, and treasury and investment banking products and services. IFC has made multiple equity and loan investments to support RCBC. IFC states that its investments aim at supporting RCBC’s growth in the areas of microfinance, small and medium-sized enterprises, and retail banking, as part of IFC’s strategy to support the Philippine financial markets through investments in local financial institutions that play a key role in providing access to finance to underserved sectors.

In October 2017, the national NGO Philippine Movement for Climate Justice (PMCJ), in collaboration with Inclusive Development International (IDI) and Bank Information Center Europe (BIC Europe), submitted a complaint on behalf of several communities living in the proximity of 19 active or proposed coal-fired power plants, located in different parts of the country. The complaint alleges that RCBC has provided financial support to the plants, either directly or through companies that own or operate them. The complaint raises several concerns related to the development and operation of the plants in the form of localized environmental and social issues, such as impacts on biodiversity, health harms caused by air pollution, inadequate compensation for physical displacement, loss of livelihoods, and violation of indigenous peoples’ rights. Further, the complaint raises issues about climate change impacts on the Philippines and its residents, including the complaint signatories, as well as issues related to RCBC’s environmental and social risk management system, lack of consultation and information about the projects and their impacts, and absence of grievance mechanisms for the affected communities. Finally, the complaint raises issues about IFC, asserting a lack of transparency regarding IFC’s financial intermediary portfolio and IFC’s monitoring and supervision of RCBC’s environmental and social performance.

CAO completed a compliance appraisal of the complaint in October 2019. Based on a preliminary review of IFC’s documentation, CAO decided to trigger an investigation. On November 19, 2021, CAO finalized its compliance investigation report regarding IFC’s investments in RCBC. CAO’s investigation reviewed how IFC applied its environmental and social requirements to its investments in RCBC, particularly about 10 coal-fired power plants financed by RCBC in the Philippines and one power plant it committed to financing.  

CAO’s investigation identified non-compliance by IFC in its appraisal and supervision of the environmental and social risks emerging from its investment in RCBC’s banking business. It found that many of the alleged adverse impacts of the coal-fired power plants funded by RCBC on communities and the environment were likely to have occurred. It further found that IFC’s review and supervision shortcomings contributed to RCBC supporting the development and expansion of the coal-fired power plants without assurance that the plants would operate following IFC’s Performance Standards. This includes requirements to quantify and reduce greenhouse gas (GHG) emissions.

According to CAO’s policy, IFC had 50 business days to prepare a management report in response to the compliance investigation. On February 10, 2022, IFC submitted a management report to the board, which includes a Management Action Plan (MAP). Both CAO and the complainants also submitted separate comments on IFC’s proposed action plan to the Board.

IFC’s management action plan contains four areas of improvement in response to CAO’s recommendations, namely:

1. Further strengthening the implementation of RCBC’s Environmental and Social Management System (ESMS), including enhancing its environmental and social capacity and systematically incorporating Performance Standards requirements in high-risk projects financed by RCBC.
2. Assessing and addressing environmental and social impacts associated with the 10 power plants RCBC financed and the status of their compliance with IFC’s Performance Standards.
3. Addressing complaint sub-project GHG emissions related to the power plants and enhancing RCBC’s climate-related disclosures. 
4. Addressing opportunities to improve the environmental and social risk management of IFC’s broader financial intermediary investments.

The Board approved IFC’s Management Action Plan on April 7, 2022. IFC management committed to supervise the implementation of the Management Action Plan and return to the Board for a meeting within 9 months to provide an update on progress and, if needed, propose adjustments. IFC and CAO issued a joint press release summarizing these outcomes on April 8, 2022. CAO commenced monitoring the implementation of the actions set out in the Management Action Plan.

IFC’s first Management Progress Report on the implementation of the Management Action Plan was published by CAO on February 15, 2023. The IFC Board met to discuss the progress report on March 7, 2023. IFC will provide an update to the Board on implementation progress by the end of the calendar year.

On May 9, 2023, CAO completed a monitoring exercise in relation to this case. The report acknowledges the significant efforts that IFC has made to date. However, the delays in the progress are concerning, particularly regarding RCBC’s incorporation of Performance Standard requirements in binding agreements for its high-risk sub-projects. An omnibus monitoring report is available in the “Case Document” section below, detailing more information about the project-level actions taken by IFC.

In December 2023, IFC submitted a second Management Progress Report to the Board. CAO published this report on February 2, 2024.