Page 2 - Project Finance and Conflict Responsibility

PF’S SOCIAL RESPONSIBILITY

the initiative to avoid conflict with NGOs and standards to projects that are financed and
indigenous peoples by taking care to be inclusive in insured in the private sector, the type of due
the planning, construction, and operation of mines. diligence that is now applied by most private
Some mining companies, for example, have sector institutions has achieved a remarkable
spent a great deal of time establishing strong degree of similarity with those of the MDBs.
relationships with tribal leaders, understanding While public sector insurers have, for example,
the concerns of local inhabitants, and negotiating addressed a host of developmental and social
a sensible agreement with governments. responsibility issues in the natural course of
It is in all parties’ interest to collaborate in conducting their project risk analyses, many
achieving mutually satisfactory guidelines for private banks and insurance companies now
the construction and operation of infrastructure routinely address the same issues during their
projects in the developing world. It is only due diligence process. In determining whether a
through cooperation and collaboration that the project is worth supporting, for example, it is now
objectives of all parties can be reached. common to assess the degree to which substantial
tax revenues are generated, local workers are
Public/private sector collaboration hired, and technology transfer is present.
Multilateral development banks (MDBs), such as the Banks and insurance companies face a host
Asian Development Bank and the World Bank, have a of performance, reputation and ethics issues
unique role to play in this regard. Since their work is when engaging in project finance, particularly
by nature oriented toward promotion of development now that there is such emphasis on the whole
and the alleviation of poverty, the concept of social concept of corporate governance. PRI providers,
responsibility strikes a familiar chord. in particular, have moved from making
MDBs have strict covenants governing all traditional assessments of country risk based
aspects of their participation in project finance. largely on the social context in which a project
From a no child labor policy to a requirement for operates to better understanding the degree to
total transparency to no tolerance for bribery and which infrastructure projects impact the wider
corruption, MDBs have played a pivotal role in geographical area and contribute to indigenous
ensuring that social responsibility is a common and cross-border conflict.
theme in the projects they become engaged in. This is particularly important because so much
Many private sector banks and insurers have foreign direct investment in the developing world
attained a surprising degree of convergence with exists in areas that are inherently politically
the MDBs in the general area of social responsibility. unstable. Promoting corporate social responsibility
In addition to the commonality that has been is therefore an underlying, albeit indirect,
achieved in applying World Bank environmental objective of PRI providers.

Trucks operate in the open-pit mine of PT Freeport’s Grasberg copper and gold mine complex near Timika, in the eastern region of Papua, Indonesia on
September 19, 2015 in this photo taken by Antara Foto. REUTERS/Muhammad Adimaja/Antara

Project Finance International May 4 2017 47

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