The World Bank’s private sector finance arm the International Finance Corporation (IFC) has become what it says is the first development finance institution to require a systematic corporate governance analysis of every investment transaction as part of its due diligence process.
“As of today, all new IFC investments will be subject to a focused corporate-governance analysis during the appraisal process,” the IFC said in an announcement.
For some clients, a simple review will be appropriate while others will require a more comprehensive assessment conducted by IFC’s Corporate Governance Unit.
The IFC supported 33 investment operations with full corporate-governance assessments, totalling over $1.8bn in new debt and equity investments, in the 2011 fiscal year.The IFC says sound corporate governance helps businesses operate “more efficiently, better manage risks, and attract investment on better terms” – as well as making clients more accountable and transparent to investors.
“Mainstreaming our corporate-governance methodology is expected to help our clients make better decisions and manage their businesses and their risks more strategically,” said William Bulmer, IFC Director for Environment, Social, and Governance.
In March, the IFC became the first multilateral development bank to sign the United Nations Principles for Responsible Investment. And in an interview with the Financial Times last month, IFC Chief Executive Lars Thunell said there was a link emerging between social and environmental and financial performance. IFC home page