A bipartisan group of senators and representatives introduced the Better Utilization of Investment Leading to Development (BUILD) Act, which, if enacted, would create a new agency called the United States International Development Finance Corporation. The IDFC would absorb the Overseas Private Investment Corporation — the U.S. development finance institution that encourages American businesses to invest in developing countries by providing businesses with loans or insurance — as well as several functions currently performed by the U.S. Agency for International Development. With this bill, its sponsors are seeking to modernize the U.S. approach to development finance by authorizing additional financial services that are already utilized by many other DFIs.
A key part of any such modernization should be policies that will protect the environments and communities that host development projects. Environmental and social policies, a common feature at DFIs, are crucial to ensuring that the proposed IDFC does not finance projects that cause environmental degradation, engage in illegal labor practices, or otherwise harm the local communities where the projects are located.
In addition to mandating strong environmental and social policies, Congress must include an independent accountability office that is readily accessible to those who feel they have been harmed by IDFC projects.
If Congress and the White House want a strong DFI that finances sustainable projects, protects the U.S. reputation abroad, and actually benefits vulnerable communities around the world, strong environmental and social policies and accountability must be the cornerstones. Any legislation for the IDFC that does not contain these measures is risking its failure even before it opens its doors.
These are selected extracts from the Op-Ed published in Devex “Opinion: What a new US development finance institution needs to succeed” by Kindra Mohr and Brian McWalters, from Accountability Counsel. To read the full Op-Ed, access here.
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