A/79/317 30. A recent worrying trend has emerged whereby Governments clear informal settlements before applying for funding from development finance institutions. This appears to be a strategy to have past forced evictions deemed as “legacy” issues by the institutions, thus excluding them from consideration under current standards. 31. Commercial partners. IFC performance standard 1 on environmental and social risk assessment does not require commercial partners to align with the Guiding Principles on Business and Human Rights or to conduct human rights due diligence. This lack of alignment can create confusion among staff and clients regarding development finance institutions’ standards and their compatibility with emerging legal requirements and responsible business norms. In addition to domestic legislation, private sector clients of such institutions must follow the institutions’ performance standards. For instance, under IFC performance standard 5, clients must consider alternative project designs to minimize physical and economic displacement, offer compensation and benefits for displaced persons, engage with affected communities, establish grievance mechanisms and plan resettlement and livelihood restoration support. 32. The new European Union directive on corporate sustainability due diligence introduces obligations for large companies to address adverse impacts on human rights, including engaging meaningfully with stakeholders and implementing risk based due diligence and corrective action plans. 21 It provides for civil remedies to be lodged for human rights breaches, including damages for failure to prevent or mitigate adverse impacts, as well as for remedial actions and fines of at least 5 per cent of the company’s net worldwide annual turnover to be imposed by supervisory authorities. 22 33. Financial intermediaries. There is a growing trend of channelling development finance institution project financing through intermediaries such as hedge funds and commercial banks, which diffuses responsibility and increases the risk that the institutions’ standards on resettlement are not adhered to. Intermediaries may be employed deliberately to avoid direct responsibility for sensitive projects, including those involving resettlement. Many institutions lack specific safeguards for managing lending or investments to private sector financial intermediaries. 23 Some, such as the Inter-American Development Bank, offer limited intermediary-specific guidance. 24 For example, the Dutch entrepreneurial development bank FMO and IFC provided funding worth $38.2 billion over four years to 318 financial intermediary clients, including for high-risk projects. 25 34. The lack of transparency about these investments makes it difficult to monitor compliance with environmental and social standards. Many projects involved involuntary resettlement with inadequate community consultation and information access. Development finance institutions argue that such information is commercially confidential and that meeting transparency demands from civil society and affected communities is challenging. Such arguments treat human rights obligations as essentially discretionary. It is therefore essential that enforceable safeguards apply to __________________ 21 22 23 24 25 24-15075 The directive applies to large companies incorporated in a State member of the European Union and certain non-European Union companies depending on the size of the workforce and turnover. See https://commission.europa.eu/business -economy-euro/doing-business-eu/sustainability-duediligence-responsible-business/corporate-sustainability-due-diligence_en#which-companies-willthe-new-eu-rules-apply-to. See www.europarl.europa.eu/news/en/press-room/20240419IPR20585/due-diligence-meps-adoptrules-for-firms-on-human-rights-and-environment. OHCHR, Benchmarking Study of Development Finance Institutions’ Safeguard Policies . OHCHR, Remedy in Development Finance: Guidance and Practice , 2022. Oxfam, “New database addresses lack of transparency about financial intermediary investments of IFC, FMO”, December 2021. Available at www.oxfam.org/en/press-releases/new-databaseaddresses-lack-transparency-about-financial-intermediary-investments. 9/24