Photo: Lotte Ærsøe

Yesterday Oxfam revealed new research on the IFC's investments in Sub-Saharan Africa. In 2015 alone, 51 out of 68 IFC investments went to companies that use tax havens. Thus, there is a significant risk that the IFC is supporting companies that engage in tax planning, and as far as we are aware, does not have tools or policies in place to ensure that this is done in a responsible manner.

These findings come after DFI's and NGO's met in Brussels in February, for a working seminar on responsible corporate tax behavior and the role of development finance institutions. At this occasion, several DFI's constructively engaged in the dialogue on how they are engaging in screening for responsible tax practices beyond legal compliance among their clients. The IFC played a crucial convening role at this seminar, but yesterday’s report shows that their practices are still incomplete.

Given the attention and importance which the new financing for development framework places on the role of DFIs, as well as the necessity for developing countries to be able to raise domestic resources from taxes, it is clear that much more need to be done.

Among private investors this agenda seems to be moving even faster. Most recently, the UN PRI, a sister organisation to the UN Global Compact, released a guidance on how to engage with clients on responsible tax practices, where they among other things recommend public country-by-country reporting. Similarly, the FTSE4Good index has from 2015 included a tax indicator, and already in 2014 did Nordea Asset Management devote a report to the issue with the mission of creating returns with responsibility, which stands in starch contrast to the practices entailed in Nordea International Private Banking which was recently exposed by the Panama Leaks. 

Investors and DFIs are very important actors in the development landscape. They channel investments and funds to private sector actors to encourage economic activity that should contribute to sustainable development. However, a particular responsibility falls on DFI's as they are publically backed actors with a development mandate.

The Addis Action Agenda and the discussions on the implementation of the SDGs revolve, for a large part, around how to mobilize the private sector to support sustainable development. Estimates put the financing gap at 2.5 trillion USD to achieve the SDGs, so private finance will be crucial. DFI's are crucial in bridging private sector activity with global public goods and sustainable development. Their adherence to the highest ESG standards, and being at the forefront of encouraging responsible corporate behavior is therefor at the center of the focus for NGO's, like IBIS, that monitor their investments and development impacts.