Making the “right to remedy” a reality at development finance institutions

Jolie Schwarz and Christian Donaldson

The UN Human Rights Office just released a groundbreaking report on the state of play of “remedy” in development finance. The bottom line? Development finance institutions can and must do better to center the rights of people in their investments and facilitate the right to remedy.

When a development project arrives in a place, it impacts not just landscape, but people. The community should be able to participate in the decision making of such projects, and, if needed, they should be able to lodge complaints, and seek remedy for harm.

A new report from the UN Human Rights Office offers a comprehensive look at how development finance institutions (DFIs) respond to harms associated with their projects, and what they can do to improve their responses. Remedy in Development Finance: Guidance and Practice portrays a landscape where the rules exist, but are too rarely enforced.

On the one hand, DFIs should adhere to social and environmental safeguard standards that aim to prevent and mitigate harm; but at the same time, many people who experience negative impacts associated with DFI projects never obtain reparations. The report shows that DFIs have accountability mechanisms where people can file complaints; but they do not currently have predictable, systematic ways of contributing to remedy when their projects cause harm.

While preventing and mitigating harm is critical, there needs to be stronger recognition that harm can still occur, and that we need to build in a path to remedy alongside preventative safeguards.

Consider a recent International Finance Corporation (IFC) project in Santa Cruz Barillas, Guatemala.

The IFC invested in a hydropower project through a financial intermediary. The community objected to the project, leading to violent repression and retaliation by local authorities and project proponents. People turned to the IFC for help, filing a complaint with the IFC’s Compliance Advisor Ombudsman (CAO).

The CAO ultimately validated many of the allegations, including the IFC’s failure to conduct adequate due diligence on its client’s environmental and social management track record, as well as to adequately monitor the implementation of risk prevention or compensatory measures when serious harms occurred.

After the CAO complaint was filed, the client divested, severing the IFC’s ties to the dam project. The IFC responded to the complaint’s findings by denying the project had anything to do with the violence, and refused to take any remedial action. (Though it did commit to define its approach to “responsible exit.”) To this day, the community has not received compensation, title to disputed land, or other support that they sought from the IFC and its client.

Remedying harm is possible

The report provides examples where DFIs have been successful in contributing to holistic responses that include a combination of different forms of remedy. We need to hold up these examples and build on what’s working.

However, other changes need to be made to the ways DFIs invest to make the right to remedy a reality; this includes enhancing transparency of investments, and proactively informing communities of independent redress mechanisms they can use if—and when—things go wrong.

Many people who are harmed by development projects financed by DFIs don’t know that they can access an Independent Accountability Mechanism (IAM) or even that a DFI is involved in a project. Increasingly, the opaque funding structures of projects (such as those financed through intermediaries) make this more difficult.

In many places where civic space is closed or restricted, people face serious risks in even raising concerns about projects.

DFIs are development institutions. They can and must do better to center the rights of people in their investments and facilitate the right to remedy.

The IFC has an immediate opportunity to be a leader on remedy in development finance; it is in the process of developing a framework for remedy and “responsible exit.” Given their influence and position as a leader among DFIs, it is critically important that they adopt a framework that reflects best international practice (including the UN Guiding Principles on Business and Human Rights) and that works for people who are harmed by their projects.

The IFC has been on an important journey of reflection and reform over the last few years. It has taken some important steps to strengthen its accountability system, including adopting a new policy for its independent accountability mechanism that explicitly establishes “facilitating access to remedy for project affected people” as a key purpose of the CAO. The practice of contributing remedy, however, is still largely ad hoc, and many cases that go to the CAO do not ultimately result in remedy for the complainants—including the people of Santa Cruz Barillas.

The report reminds us that, while DFIs are not the only ones responsible for contributing to remedy, they are vitally important. In order to strengthen the “remedy ecosystem,” and ensure people can access justice when they are harmed, all DFIs need to strengthen their approach to remedy.