International Financial Flows and the Environment (IFFE)

Successful solutions to serious global challenges, such as combating climate change and protecting human rights, cannot be divorced from the issue of financing. International Financial Institutions (IFIs) are in a unique position; they can continue to drive investments in a conventional “business as usual” manner or they can take an alternative approach and raise environmental and social standards through their lending practices.

• Resources on Climate Finance
• Resources on Emerging Actors in Development Finance

The role of public and private IFIs in development finance has greatly evolved over the past two decades. In 1992, public financial flows were greater than private financial flows; however, by 1996, private financial flows were more than 5 times larger (Ganzi et. al, 1998). As this trend continued through the late 1990’s and into the 2000’s, a fundamental need arose for greater transparency and public participation in policy surrounding IFI investments. Since 1997, IFFE, the World Resources Institute’s Sustainable Finance Initiative, has been leveraging WRI expertise in biodiversity, climate change, energy, and governance to shape the environmental and social policies of IFIs.

In this new era of financial turmoil, IFFE continues to be a cornerstone of WRI’s work to improve the social and environmental performance of public and private IFIs. The recent collapse of the financial markets has raised serious concerns about the transparency, accountability and regulation of these financial institutions. Global climate change has also come to the fore, spurning global action. The international community is formulating a coordinated response to the conjoined crises facing the global financial system and the global climate system. In this context, the public IFIs, including the International Monetary Fund and the Multilateral Development Banks, are emerging with renewed relevance. With private capital stalled, the world’s major economies are preparing to inject trillions of dollars of public money into the global economy through increased funding for public IFIs and support for trade finance. The IFFE project has adapted to this new reality and remains engaged on issues around reforms in the governance of IFIs.

Strategy

IFFE seeks to integrate environmental and social considerations into the operations of public and private IFIs as they extend support to their developing country and private sector clients in key sectors, such as energy and extractives.

Our strategy is twofold: we target our research and analysis at IFI decision makers to influence and improve environmental and social policies, while providing tools to implement these policies on the ground. At the same time, we partner with civil society organizations from around the world to support communities who are affected by international investments and project development. Finally, we share our research and analysis with our partners to inform action on the ground and to ensure that their voices are heard.

We focus our efforts on banks that shape international environmental and social policies and norms for public and private sector investment. Our current research, analysis, and engagement strategies target a subset of IFIs including:

• Multilateral Development Banks (MDBs)
• Private “Equator Principle” Financial Institutions (EPFIs) that have agreed to apply environmental and social safeguards to project finance
• Export Credit Agencies (ECAs).