The International Finance Corporation (IFC) still has a fossil fuel addiction. In the year when the Multilateral Development Banks (MDBs) are finally aligning their portfolios with the Paris Agreement, over seven years after the Agreement itself was made, it is time for change.
This new report from Recourse and partners, on the IFC’s investments made via financial intermediaries (FIs – who receive over half of IFC’s investments), finds that:
- Despite previous pledges to end direct financing of coal, and attempts to reduce indirect coal exposure under the Green Equity Approach (GEA), recent years have seen some of the IFC’s FI clients continue to invest in new coal power projects.
- This includes PVI Holdings, an IFC client who insured the new Vung Ang 2 coal project in Vietnam less than six months after the IFC investment.
- Numerous other FI clients have significant exposure to oil and gas power. Early signs of the IFC’s methodology for Paris alignment of indirect finance suggests that these will not be automatically excluded from future investments.
- While a 2023 update to the GEA update to exclude new coal support is welcome, it is long overdue. Now the IFC must extend this exclusion to oil and gas.
- There is also a lack of transparency and accountability surrounding the IFC’s investments in FIs. While improvements have been made to disclosure, some high-risk investments are not disclosed until after IFC Board approval, while remedy for affected communities is still lacking.
If the IFC gets its Paris alignment plans right, it could have an exponential effect, not just in shifting billions of dollars of IFC support away from coal, oil and gas, but also in sending a signal to the wider investment community that it is time to stop funding fossils.
“While we laud any attempts to end coal power, climate-vulnerable communities wanted the World Bank Group to go further by excluding all financing of climate-busting projects, including oil and fossil gas. This will keep the rise in global temperatures below 1.5oC and ensure the survival of vulnerable communities already suffering from these climate impacts.” Ian Rivera, Philippine Movement for Climate Justice
“Fossil gas is not Paris aligned – it is bad for the climate, bad for human rights, and bad for the environment. The World Bank and IFC should use public funds to support equitable access to green energy which will improve the lives of women, men, and children who are currently suffering the impacts of catastrophic climate change.” Fiza Qureshi, Indus Consortium, Pakistan
Our recommendations to the IFC are:
- Stop funding fossil fuels: extend the GEA from coal to oil and gas; ensure the GEA rules out support to all new fossil fuel projects; and support debt and equity FI clients to exit fossil fuel exposures.
- Close loopholes for underwriting of bonds and share issues.
- Ensure Paris alignment applies to all the IFC’s FIs.
- Ensure transparency and full, prior public disclosure of any investments exposed to fossil fuels.
- Allow for a regular, evidence-based, public review of the Paris alignment methodology for indirect finance.
- Prioritise a gender-just approach to Paris alignment.
- Address past harms and support the right to remedy and reparations.
- Support clients to scale up finance in renewable energy.
Media contact: For press inquiries / interview requests / further info please contact: Daniel Willis, Recourse, +447595054391 (Phone/Whatsapp/Signal)