‘Humanizing’ Investments in the Extractive Industries in Africa through the IFC’s Sustainability Policies

Abstract

International financial institutions face enormous challenges in Emerging
Markets and Developing Economies (EMDEs). They finance infrastructure
projects, manage vast investment portfolios, offer advisory services, and
contribute to economic development in EMDEs. In the process, they are
exposed to huge risks and face reputational damage if they act recklessly
or have little or no regard for their projects’ adverse impacts on third
parties. In the context of natural resource exploitation in Africa, the
weak governance of environmental and social risks often results in
devastating consequences for communities proximate to investment
projects. Promises of infrastructure and social services, job opportunities
and economic boom have only often delivered land grabs, forced
displacement, cultural infringements, environmental pollution, conflicts,
health disasters, misery and sometimes deaths. As calls for greater
corporate scrutiny increase, investment project facilitators in the extractive
industries like the International Finance Corporation (IFC) must respond
appropriately. To preserve its reputation and long-term market access,
the IFC needs to apply a higher degree of due diligence and sustainable
business conduct that proactively treat risks and limit its exposure. With
the rising number of complaints against IFC policy compliance, including
projects tainted by scandals and the debarment of companies from
accessing international finance, this article demonstrates that merely promoting sustainable investment policies on paper is inadequate. Using
a human rights-centred approach to development project financing, the
article critically assesses the extent to which the implementation of the
IFC’s sustainability framework can practicably protect resource-rich
communities, safeguard human rights and ensure sustainable development outcomes in Africa.