Environmental and Social Policy and Procedures
Since transforming into DFC, the agency’s Environmental and Social Policy and Procedures (ESPP) have been modeled off of its predecessor, the Overseas Private Investment Corporation’s policy statement. In keeping with best practice, DFC has initiated a review of its current ESPP—the first major revision effort since 2016.
The purpose of the current review is to update DFC’s policies and procedures to align more closely with DFC’s specific mandate and products and to keep up with evolving best practice and the standards of its peer Development Finance Institutions.
As part of this process, DFC will hold five external consultation sessions to gather ideas from its stakeholders in the fall of 2022. DFC will consult with representatives from international non-governmental organizations, think tanks, the private sector as well as local civil society in countries where DFC operates and other stakeholders. After analyzing feedback received during these sessions, a preliminary draft of the updated policy will be made available for public comment. The 60-day public comment period will begin in early 2023 with the final policy posted in the summer of 2023.
DFC will provide updates on the process on this webpage.
The guiding environmental and social policies and procedures are based in large part on environmental and social impact assessment procedures applied by organizations such as the World Bank Group, the European Bank for Reconstruction and Development, the Inter-American Development Bank, and the U.S. Export Import Bank, among others.
Projects that are likely to have significant adverse environmental or social impacts that are sensitive, diverse, or unprecedented in the absence of mitigation measures are disclosed to the public for a comment period of 60 days. The environmental and social impact assessments are disclosed to the public on DFC's website. DFC works in consultation with the U.S. Department of State as part of DFC’s consideration for human rights risks.
DFC’s business lines work closely with the Office of Development Policy to determine a project’s eligibility for DFC support. Each potential project is subject to a full policy review. Thorough, accurate, and complete information in the application and supplemental materials, such as a business plan, help expedite DFC’s project review.
If additional project information is needed from potential clients to clarify issues or fill information gaps to support a project review, the Office of Development Policy works with the DFC business lines to obtain the necessary information. DFC support of a project may be conditioned upon specific contractual covenants, to ensure that the project will operate in compliance with the DFC policy requirements.
DFC evaluates every project using its performance measurement tool, Impact Quotient (IQ) to measure, monitor, and evaluate its developmental impact around the world across three main areas:
- Growth includes contribution to GDP through improved infrastructure and the generation of local income, fiscal benefits to the local economy, and support for direct and indirect job creation
- Innovation includes the strengthening of markets, innovation in financial structures and business models that mobilize private capital, and knowledge or technology transfer
- Inclusion includes benefits to marginalized populations such as women or people living in rural areas, small and medium enterprises, and underdeveloped geographies
Support provided by DFC must be additional to private sector resources by mobilizing private capital that would otherwise not deploy without such support. For every project that it supports, DFC seeks to ensure that private-sector support is not available on terms that would make the project economically viable bearing in mind the long-term development goals of the project. DFC considers the following to be important indicators of additionality:
- DFC’s support supplements and encourages but does not compete with private sector support;
- DFC’s support alleviates a credit market imperfection;
- The private market is unable or unwilling to provide support to the project on terms that make it economically viable;
- DFC’s support is necessary for a project to achieve the appropriate scale required to obtain the returns required by private market participants; and
- DFC’s support mobilizes private capital that would be unwilling to participate without the Corporation’s support
When assessing and documenting the additionality of a project, DFC also considers the indicators of additionality articulated in the “Multilateral Development Banks’ Harmonized Framework for Additionality in Private Sector Operations.”