Safeguard Policies for Financial Intermediaries? Stephanie Fried ` Ulu Foundation [email protected] London, November 2010. OPIC and ADB Standards. Focus on OPIC & ADB safeguards for Financial Intermediaries Context: New OPIC rules August 2010 ADB rules January 2010
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Fifty First Dates?
Over the past two decades, project-affected peoples, environmentalists and human rights advocates have used a “follow the money” strategy to influence public multilateral financial institutions, such as the World Bank, and bilateral financial institutions, including Export Credit Agencies (ECAs) of OECD member countries as well as private sector banks.
Improvements in environmental and social safeguard policies at multilateral development banks and ECAs as a result of interventions on specific projects have led to improvements in human rights and environmental impacts in a range of countries and projects, primarily for project finance.
Advocates have also worked to ensure the upward harmonization of environmental and social standards of private sector banks through the development of the Equator Principles.
This is not to say, however, that the improved policies are necessarily routinely implemented by public or private financial institutions.
Perhaps in response, Multilateral Development Banks with poverty alleviation mandates, bilateral export credit agencies and other public financial institutions have increasingly been investing in financial intermediaries, including private equity funds domiciled in secrecy jurisdictions.
Apparent lack of meaningful environmental/ social due diligence
The European Bank for Reconstruction and Development has investments in over 70 private equity funds, potentially involving over 700 companies.
The ADB has targeted private equity funds as a key component of its private sector development strategy.
Approximately 40 ADB private equity funds, domiciled for the most part in secrecy jurisdictions such as the Cayman Islands, invest in an average of 10 companies each, yielding a potential total of some 400 companies, all overseen by two relatively junior staff.
Approximately 50% of ADB-held funds have been approved since 2003.
For example, both the Asian Development Bank (ADB) and the IFC have had equity investments in the Asian Infrastructure Fund (AIF), a private equity venture domiciled in the Cayman Islands, managed by a firm in Hong Kong and capitalized at close to $1 billion.
“OPIC screens, reviews and provides prior written consent to all Subprojects on the basis of potential environmental and social risks.”
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