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IFC Funding of Dinant Project: Call for Overhaul of Risk Assessment for Sustainable Finance

Abstract

The case study is based on a dilemma faced by IFC, one of the financing arms of the World Bank Group, on whether it should release its next round of funding to Corporación Dinant (Dinant), a Hondurus-based vertically-integrated palm oil and food company, to enable it to develop young palm oil plantations. IFC, which proposed to invest US$30million of the total estimated project cost of US$75million, had disbursed US$15 million in November 2009.

Civil society groups had alleged that Dinant had been involved in gross human rights violations and accused it of forced eviction of farmers and inappropriate use of private and public security. The civil liberty groups alleged that IFC had not exercised due diligence in its review of the social risks attached to the project and that it had not responded adequately to the context of intensifying social and political conflict surrounding the project after its commitment to it. The World Bank’s own watchdog Compliance Adviser/Ombudsman (CAO) in its report found multiple failures by IFC in the handling of the Dinant project.

Having faced a backlash from civil liberties groups and having admitted to lapses, IFC now has to decide on whether to go ahead with its next round of US$15 million financing to Dinant. IFC is engaging with Dinant actively but the decision on funding the next round has to be taken. Backtracking on the funding would be seen as a serious blow to sustainable financing while releasing the next round of financing could only happen after Dinant gives a series of commitments to work closely with the community. All in all, the case study will definitely raise issues and call for discussion on appropriately assessing, forecasting, and pricing risks of sustainable finance projects, especially in conflict prone countries in the future.

Authors D. Satish and Manish Agarwal
Institution IBS Hyderabad, IFHE University, India
Competition Year 2016
Place Second Prize
Track Sustainable Finance
Key Words Sustainable finance framework, IFC, Honduras, Dinant, World Bank Group EHS guideline, Oxfam, ESAP Conditions, Compliance Advisor Ombudsman, Bajo Aguán, Stakeholders engagement, community development, Environmental social management
Courses Corporate Sustainability, Business Ethics
Target Audience Graduate level students
Permission rights This case will be published at the Case Centre shortly. You find an inspection copy for download below.
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