Each year, international financial institutions (IFIs) provide governments and companies billions of dollars to undertake development projects. Ostensibly, the projects are aimed at improving the welfare of community members through better education and roads, improved health care and governance, and greater access to water and energy. Some projects are also responsible for severe environmental degradation and egregious human rights violations. Many of the largest institutions—the World Bank, the International Finance Corporation, the Inter-American, Asian and Africa Development Banks, and the United States’ Overseas Private Investment Corporation—have created accountability mechanisms to ensure that the projects are developed and implemented in accordance with environmental, labor, and human rights policy. The clinic has worked with partners in a variety of contexts to hold corporations to account when their activities threaten the human rights of local communities.
Study on Accountability & International Financial Institutions.
In March 2017, the Clinic published Accountability & International Financial Institutions: Community Perspectives on the Compliance Advisor Ombudsman (CAO). CAO was created by the World Bank in 1999 to ensure that its private-sector development projects are environmentally and socially sound. The report uses statistical analysis and case studies to examine how CAO works, what factors influence its approach and outcomes, and when communities believe it is effective and fair.
The report finds that during its first decade of operation (2000-2011), CAO had some success facilitating agreements between affected communities and World Bank-financed companies, but produce an agreement or conduct an audit. Study data also suggests that several factors—such as the wealth of the company, the involvement of international NGOs, and the size of the World Bank’s loan—may have influenced CAO’s process and outcomes.
In CAO, the World Bank has created the expectation of accountability, but seldom the reality. The study recommends that the World Bank strengthen CAO’s accountability mandate. CAO currently does not have the authority to hold the bank or the private companies its finances accountable for breaches of bank social and environment policies. Nor does CAO have the authority to provide a remedy for harms caused by development projects. The report also suggest ways CAO should address power imbalances between parties and create opportunities for meaningful participation by affected communities throughout its complaint process.
Today, every major International Financial Institution (IFI), including the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, and the Inter-American Development Bank, has established an accountability mechanism similar to CAO. These IFI accountability mechanisms are often the only form of recourse available to affected communities. This report contributes to on-going discussions about how to strengthen the accountability mandate of these mechanisms.