Philippines: Rizal Commercial Banking Corporation (RCBC)-01
Local community members (the complainants) supported by PMCJ, IDI and BIC (NGOs)
Climate change, inadequate compensation, health harms, loss of livelihoods, environmental and social management system
$30m C loan; $149m equity; $75m bond
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 that there is 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 in relation to 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 shortcomings in IFC’s review and supervision contributed to RCBC supporting the development and expansion of the coal-fired power plants without assurance that the plants would operate in accordance with 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, which includes a Management Action Plan (MAP), to the Board. 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:
- 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.
- 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.
- Addressing complaint sub-project GHG emissions related to the power plants and enhancing RCBC’s climate-related disclosures.
- 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. The action plan is available via the "Case Documents" section below this page.
IFC management will supervise the implementation of the action plan and report back to the Board with a meeting to be scheduled within 9 months to discuss progress. CAO will monitor the effective implementation of the actions set out in the management action plan and will publish annual monitoring reports and IFC’s progress reports on this website.
On April 7, 2022, the Board approved IFC’s management action plan to respond to the findings of CAO’s investigation report. The case has moved into the monitoring phase of the CAO process, which will monitor the effective implementation of the actions agreed upon in the plan.
Status as of April 8, 2022