Transparency gaps make it difficult to hold DFIs to account

The transparency practices of development finance institutions (DFIs) rarely match up to their policies on the disclosure of environmental, social and governance (ESG) risks and accountability, according to new research from our DFI Transparency Initiative. The research examined the transparency of 20 bilateral and multilateral DFIs and found that:

• DFIs do not systematically provide assurance that community disclosure has taken place for their projects.
• DFIs do not directly communicate to affected communities that options for recourse such as independent accountability mechanisms (IAMs) are available, and they do not require their clients to do this. In general, however, they do provide details of IAMs on their websites.

• Global disclosure of project information is mixed – there is greater transparency among multilateral development banks, and for projects categorised as high risk. Many bilateral DFIs do not disclose any meaningful environmental or social information at the project level.

DFIs are intended to have positive development impacts but in many cases their projects pose significant environmental and social risks, and so it is critical that they be fully transparent about these risks and share plans to minimise or mitigate them. In the event that DFIs fail to follow such policies, it is also important that stakeholders know their options for recourse – such as IAMs.

This research is part of a broad programme that Publish What You Fund is undertaking, to examine and ultimately improve the transparency of DFIs. The DFI Transparency Initiative will release its detailed recommendations in September. CEO Gary Forster said:

“As more and more development aid is channelled through private institutions, we need transparency in order to assess the development impact of DFI investments, to learn from different investment approaches, make more informed decisions and allocate resources more effectively.”

“Our latest research highlights a worrying lack of assurance that community disclosure has taken place. There is a notable gap in evidence of community engagement after the early stages of project development, and very limited communication about recourse or grievance options to project affected communities. The failure to systematically confirm that meaningful community disclosure has occurred makes it difficult to assess any gaps between policy and practice or to hold DFIs to account.”

“In fact, evidence from IAMs shows that being transparent with respect to ESG and accountability is in the interest of DFIs, and can help to avoid costly complaints.

You can download the research paper, which presents the findings from our third work stream, below:

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