New CAO Advisory Report on Strengthening Greenhouse Gas Mitigation in IFC-Financed Projects

Washington, D.C., October 30, 2024 – The Office of the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for the International Finance Corporation (IFC), a member of the World Bank Group, has issued a new advisory report analyzing IFC’s approach to quantifying, mitigating, and reporting the greenhouse gas (GHG) emissions in its financed projects. The report is the first in a series of CAO advisory notes to inform the expected update of IFC’s Environmental and Social Sustainability Framework, including the Performance Standards. 

The report, Strengthening Greenhouse Gas Mitigation in IFC-Financed Projects, draws on an analysis of selected IFC-Financed projects, including relevant CAO cases, a review of global good practices, and experts’ advice. 

The report provides an overview of IFC’s responsibilities under its Sustainability Framework to reduce and report on GHG emissions from projects it finances and areas where IFC’s efforts could be strengthened. This is central to the World Bank Group’s commitment to align with the Paris Agreement and keep global warming below the critical threshold of 1.5 degrees Celsius. There is an opportunity for IFC to align its practices under the Sustainability Framework with good international practices. 

There are several areas that merit IFC’s consideration when reviewing its Sustainability Framework to enhance its effectiveness in addressing climate change mitigation. These include: 

Aligning client GHG reporting requirements with good practice by reducing the threshold required for clients to quantify and report emissions from 25,000 tCO2e/year to 10,000 tCO2e/year and including reporting on Scope 3 emissions, which cover all indirect emissions that occur in the upstream and downstream activities of a company’s value chain. 

Extending protection for carbon sinks to ensure that ecosystems that store or sequester carbon, such as wetlands, soils, and forests among others, are protected regardless of whether their loss may negatively impact local communities.  

Facilitating the adoption of innovative clean technologies by ensuring cost effectiveness is not a barrier for clients in adopting technologies that can significantly reduce GHG emissions. 

The report also identifies enhancements IFC could undertake in advance of its policy update. This includes aligning IFC’s portfolio GHG accounting and reporting practices with global standards. Currently, IFC reports net emission reductions whereas current market standards require organizations to report emissions at multiple levels. Disaggregation will provide greater transparency around IFC’s corporate GHG reporting and enhance IFC’s ability to contribute to achievement of World Bank Group climate goals.   

IFC’s approach to investing in Financial Intermediaries (FI)- which currently comprises more than 50% of IFC’s investments-should also be revised to reflect industry-accepted good practices in the accounting and mitigation of GHG emissions for FIs and their subprojects. 

 About CAO Advisory
Reporting to the Board, CAO is mandated to provide advice aimed at improving IFC’s systemic performance and reducing the risk of harm to people and the environment. CAO’s advisory work provides insights and recommendations on broader environmental and social issues drawing on CAO’s experience addressing complaints and good international practice. 

About CAO: 

The Compliance Advisor Ombudsman (CAO) is the independent accountability mechanism for the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), members of the World Bank Group. CAO’s mandate is to address complaints from people affected by IFC and MIGA projects in a manner that is fair, objective, and constructive, and to improve environmental and social outcomes on the ground. www.cao-ombudsman.org. 

More information about the report is available here.