The World Bank Group is covertly funding some of India’s largest and most reckless corporations, according to the results of an ongoing investigation by Inclusive Development International. The World Bank’s private-sector arm, the IFC, is bankrolling these companies through its support for six Indian commercial banks.
The end users of IFC funds in India are some of the country’s most notorious and abusive companies. Recipients of indirect IFC funds include Vedanta Resources, NHPC Limited and Jindal Steel & Power, which have well-documented records of complicity in grave human rights violations and environmental destruction.
These companies would have little chance of receiving direct assistance from the IFC. Yet by outsourcing its development funds to for-profit commercial banks, the IFC is financing these companies through back channels, concealing its support from public scrutiny. In doing so, the IFC is providing little oversight in how its funds are used.
“It’s a huge misconception that IFC funding should be regarded as a gold seal of approval for corporate environmental and social practices. When you take a look at the unscrupulous companies that are getting bankrolled by IFC’s intermediaries in India, its apparent that anything goes,” said David Pred, managing director of Inclusive Development International.
Inclusive Development International, in collaboration with its partners Bank Information Center, Accountability Counsel, Urgewald, and 11.11.11, has today released a report detailing these findings, Bankrolling India’s Dirty Dozen.
The report is the second installment of an investigative series, Outsourcing Development: Lifting the Veil on the World Bank’s Lending Through Financial Intermediaries, which follows the trail of IFC money globally and looks at how it impacts people on the ground in developing countries.
Between 2005 and 2014, the IFC invested $520 million in one Indian infrastructure bank, IDFC, and five Indian commercial banks: ICICI, HDFC, Kotak Mahindra, Yes and Axis. These banks are exposed to vast swathes of the Indian economy.
After receiving these funds, the banks went on to provide or arrange tens of billions of dollars in general corporate and project-specific financing for at least 12 of India’s most socially irresponsible corporations, including:
- NHPC Limited, which owns dams that have submerged the homes, forests and farmland of hundreds of thousands of people without restitution and damaged crucial waterways.
- Vedanta Resources, which attempted to displace and carve up the sacred land and forests of the Dongria Kondh tribe.
- Eveready Industries, formerly known as Union Carbide India, which was responsible for the Bhopal gas disaster, the worst industrial accident in history.
- Zuari Agri Sciences, a cottonseed company that has been implicated in the worst forms of child labor.
- Adani Power, whose Mundra coal plant, port and special economic zone has polluted the coast of Gujarat, destroyed mangroves and displaced local fishing families.
IFC’s intermediary, ICICI, even helped Adani acquire the controversial Carmichael coal mine in Australia. In 2010, ICICI and five other banks provided a $250 million loan to Adani Enterprises to acquire the Carmichael coal exploration rights from Linc Energy. The mine will be one of the world’s largest if it moves forward, despite deep opposition from the Australian public. It is expected to damage the Great Barrier Reef and create more annual carbon dioxide emissions than New York City, according to Australia Institute.
Altogether, IDI uncovered 68 Indian companies or projects implicated in serious harmful environmental impacts or abusive human rights practices that received funding from IFC intermediaries.
“These findings aren’t just a moral outrage. They are evidence that the IFC’s system for managing environmental and social risks in its $50 billion financial institutions portfolio is failing,” said Pred.
“We’re seeing a worrying trend – not just at the World Bank but other development banks too – of hands-off lending through third parties to projects they would never usually touch. At the same time, the Bank is washing its hands of the mounting human and environmental costs – to forests, rivers and communities,” said Kate Geary, Forests Campaign Manager at the Bank Information Center.
“Despite several disclosures having proved these scandalous IFC investments, big World Bank Group donors like USA, Great Britain and Germany did not step in. If they took their human rights mandates seriously, they should end such practices now,” adds Knud Vöcking, expert on multilateral development banks at the German NGO Urgewald.
The IFC’s investments in India’s financial sector are part of a global pattern. Over the past decade, the IFC has increasingly outsourced its development funds to third parties in the financial sector, such as banks, private equity funds and insurance firms. After years of providing loans mostly to companies and projects, this represents a sea change in how the World Bank Group member does business. Yet as this portfolio has grown, the IFC has been consistently unwilling to take responsibility for the negative impacts.
The IFC’s support for NHPC is particularly scandalous — and ironic. In 1993, the World Bank pulled funding for the Sardar Sarovar project, a massive dam that was projected to displace hundreds of thousands of people in the Narmada Valley. As a result of the fiasco, the World Bank established its Inspection Panel to prevent the bank from funding future development disasters, and it claimed to have learned its lesson.
Yet two decades later, the World Bank Group is once again back on the Narmada River and in the business of financing destructive dams in India. The IFC-supported commercial banks have arranged $3.19 billion in financing for NHPC, which has dispossessed and impoverished scores of farming communities along the Narmada and other Indian rivers.
“If the IFC really wants to serve the world, they must follow their own safeguards. If they did that, it would be more than enough to protect people. But sadly, they just aren’t doing it,” said Vimal Bhai, an activist who supports people affected by dams in the Himalayan region.
The groups are calling upon the IFC to stop investing in banks that fund destructive projects and start bringing its financial-sector investments into line with its Environmental and Social Performance Standards.
The Outsourcing Development series is available here.
A database of IFC Financial Intermediary sub-Investments with serious social, environmental and human rights risks and impacts is available here.