Leveraging IFC’s Influence to Enhance Environmental and Social (E&S) Outcomes - Advisory Note

Jul 19, 2026

Leveraging IFC’s Influence to Enhance Environmental and Social (E&S) Outcomes analyzes patterns from CAO cases on how IFC handles leverage to improve environmental and social results. The advisory note identifies key steps across four priority areas: strengthening leverage foundations in due diligence, closing gaps in current leverage practice, expanding the toolbox for applying and maintaining leverage, and formalizing a unified leverage strategy across investments.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages85

Reading Time3 h 34 min

Executive Summary

About this Advisory Note

What is Leverage?

The Link Between Leverage and Remedy

Circumstances Where Insufficient Leverage Contributes to Problems: Lessons from CAO Cases

The Foundations of IFC’s Leverage

Thorough Upfront E&S Risk and Impact Assessment

Adaptive Management, Built on Robust Due Diligence

Thorough Assessments of Client Capacity and Commitment

High-quality E&S Action Plans (ESAPs) for Effective Leverage

Maintaining Leverage Through to the Time of Responsible Exit

IFC’s Current Core Instruments for Increasing Leverage

Relationship-based Leverage and Repeat Business

Contractual Provisions

Leverage Gaps

Not Employing Available Leverage

Disbursing Investments in a Single Tranche

Granting Waivers or Extensions Without Reconfirming E&S Commitments to Pending Actions

Enhancing IFC’s Approach to Leverage: Expanding the Toolbox

Financial Incentives—Positive and Negative

Syndication and Co-financing Leverage

Board Representation and Governance Leverage

Designing and Implementing a Unified Leverage Strategy

Summary of Recommendations and Conclusion

Leverage Enables Risk-taking

Recommendations to Increase IFC’s Leverage for E&S Outcomes

Conclusion

Appendix A. Methodology

Appendix B. Details of CAO Cases Presented in Table 2

Public Disclosure Authorized Public Disclosure Authorized April 9th, 2026 Advisory Note Leveraging IFC’s Influence to Enhance Environmental and Social (E&S) Outcomes Attached, for public distribution, is CAO’s final Advisory Note on Leveraging IFC’s Influence to Enhance Environmental and Social (E&S) Outcomes. CAO presented key findings from this Note during the CODE discussion on IFC Leverage for E&S Outcomes on Friday, February 27th, 2026, where it was agreed that CAO will share the final Advisory Note within a week. CAO submitted the PDF version of the Note to BOS on March 9th, 2026, for information and internal distribution. This is the fully designed and laid-out version of the same Note for public distribution. This Advisory Note examines patterns observed in CAO cases, regarding IFC’s handling of leverage in pursuit of improved E&S outcomes. This Note outlines key steps for IFC to consider in four areas to strengthen its use of leverage: 1/Strengthening the foundations of IFC’s leverage in due diligence, 2/ Closing the gaps in IFC’s current leverage practice, 3/ Expanding IFC’s toolbox for applying and maintaining its leverage, and 4/ Formalizing and unifying IFC’s strategy for leverage across all its investments. CAO looks forward to further discussions with IFC and CODE on this matter. Yours sincerely, Janine Ferretti CAO Director General Leveraging IFC’s Influence to Enhance Environmental and Social (E&S) Outcomes CAO Advisory Insight Series: Strategic E&S Topics Advisory Note © 2026 Compliance Advisor Ombudsman (CAO) All rights reserved. The Office of the Compliance Advisor Ombudsman (CAO) 2121 Pennsylvania Avenue NW Washington, DC 20433 USA Telephone: + 1 202 458 1973 [Website: ](Website: www.cao-ombudsman.org)[www.cao-ombudsman.org](Website: www.cao-ombudsman.org) [e-mail: ](e-mail: cao@worldbankgroup.org)[cao@worldbankgroup.org](e-mail: cao@worldbankgroup.org) Acknowledgments This Advisory Note was written by Julia Gallu and Carly Turner (CAO) under the direction of Janine Ferretti, CAO Director General. CAO acknowledges research inputs from Adriana Palacios Corrales, Natalya Coyle, and Agustina Palencia. This work benefited from guidance and peer review from an advisory group of legal, financial, and operational experts: Glen Armstrong, David Harris, David Hunter, and Ramanie Kunanayagam. Additional peer review was conducted by Rasmus Heltberg, Jonathan Richart, and Margaret Wachenfeld. Expert input was provided by Seynabou Ba, Mark Eckstein, and Daniel Siddy. Thanks to CAO colleagues Irum Ahsan, Patrick Flanagan, Raquel Gomez Fernandez, Reiko Ishihara-Brito, Sontia Sophie Nkenkeu Keck, and Gabriela Stocks for their contributions, and to IFC/MIGA staff who gave us their valuable time and insights. Editors: Polly Ghazi, Nancy Morrison (the Morrison Group, Inc.), and Nick Moschovakis (Communications Development Inc.) Design: Owen Design Company, Virginia, USA Leveraging IFC’s Influence to Enhance Environmental and Social (E&S) Outcomes CAO Advisory Insight Series: Strategic E&S Topics Contents Executive Summary 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 6 About this Advisory Note 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 14 1􀀮 What is Leverage? 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 16 1.1 The Link Between Leverage and Remedy .............................. 18 1.2 Circumstances Where Insufficient Leverage Contributes to Problems: Lessons from CAO Cases .............................................. 18 2. The Foundations of IFC’s Leverage 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 􀀮 22 2.1 Thorough Upfront E&S Risk and Impact Assessment ....................... 23 2.2 Adaptive Management, Built on Robust Due Diligence...................... 25 2.3 Thorough Assessments of Client Capacity and Commitment .....

FAQs

What purpose does the advisory note serve?

It examines how IFC’s use of leverage in CAO cases affects progress toward better environmental and social (E&S) outcomes, and it sets out actions IFC can take to strengthen leverage.

How does the note propose strengthening IFC’s leverage in due diligence?

It emphasizes reinforcing upfront E&S risk and impact assessment, using robust due diligence to support adaptive management, and assessing client capacity and commitment thoroughly.

What are the key areas where IFC should improve its leverage practice?

The note organizes recommendations into four areas: strengthening leverage foundations, closing gaps in current practice, expanding the toolbox for applying and maintaining leverage, and formalizing a unified leverage strategy across investments.

Jul 19, 2026

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