The 2012 IFC Performance Standard on Indigenous Peoples: What's the Fuss?

The new IFC Environmental and Social Performance Standards -- in particular, Performance Standard 7 on indigenous peoples -- present a range of management and operational challenges for certain companies. For the first time, the Performance Standard includes a requirement of free, prior, and informed consent (“FPIC”) from indigenous peoples.

The new Performance Standards went into effect in January 2012 and are applicable to a greater number of the IFC’s investments than the 2006 Performance Standards, which only applied to project finance. Notably, the new Standards only apply to the IFC’s new investments, while the the 2006 Performance Standards apply to existing investments. Notably, the Equator Banks will apply the 2012 Performance Standards to new investments, which will result in their application to much of the world’s project financing.

The 2006 Performance Standard on indigenous peoples required “free, prior, informed consultation.” The requirement of consent in the new Performance Standard 7 comes on top of arguably more rigorous and complex requirements in Performance Standard 1 that address engagement with all communities.

Performance Standard 7 requires IFC clients to identify adverse impacts on indigenous communities and develop action plans to address them with the informed consultation and participation of affected indigenous communities. In addition, companies are expected to seek the FPIC of communities when...

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