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Through its Policy on Environmental and Social Sustainability, IFC puts into practice its commitment to environmental and social sustainability. This commitment is based on IFC’s mission and mandate, which is to promote sustainable private sector development in developing countries, helping to reduce poverty and improve people’s lives. IFC believes that sound economic growth, grounded in sustainable private investment, is crucial to poverty reduction. Translating this commitment into successful outcomes depends on the efforts of IFC and its clients.

IFC is committed to supporting sustainable capital market development and has a significant program of investment that is implemented through financial institutions. Through this program, IFC helps strengthen domestic capital markets that support economic development at a scale of enterprise that is smaller than would be possible through direct IFC investments. IFC’s financial institution clients are engaged in a diverse range of activities including corporate finance; project finance; lending to small and medium enterprises; microfinance; trade finance; and housing finance, each with its own environmental and social risk profile.

Through IFC’s Environmental and Social Review Procedure, IFC reviews the business activities of financial institution clients to identify areas where the financial institution could be exposed to potential environmental and social risks as a result of its transactions. IFC also reviews the financial institution’s capacity to manage these risks. The outcomes of IFC’s review are an important factor in IFC’s decision to finance a client or not. As a result of the review, IFC determines the scope of the environmental and social performance requirements, which are conditions of IFC financing. Proportional to the level of potential risk, the financial institution is required to:

Also during the review process, IFC identifies potential opportunities to help financial institution clients enhance positive environmental and social outcomes, including access to IFC’s Financial Markets Sustainability products and IFC’s advisory services. This will depend on the client having expressed an interest and having an adequate ESMS in place to take the initiative forward.

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