The World Bank’s Private lending arm, the International Finance Corporation (IFC), has committed to upholding the human rights of populations affected by its invest-
ment projects since at least 2012, with the launch of its updated Performance Standards. These eight standards mandate adequate assessment of project risks and management planning, as well as rigorous oversight of labor conditions, waste management, pollution prevention and biodiversity protection, community safety and security, indigenous and cultural rights, and protections against economic or physical displacement. The IFC is the private-sector part of the World Bank Group. While the other components of the World Bank Group (IBRD and IDA) can only lend directly to governments, the IFC is set-up differently, and can lend directly to companies.
As the research in this report reveals, IFC has several significant investments in the Xinjiang Uyghur Autonomous Region (XUAR or the Uyghur Region) of the People’s Republic of China (PRC), where indigenous peoples have been subjected to what international legislators, legal scholars, and advocates have determined to be a genocide.
Significant evidence suggests that several of IFC’s clients are active participants in the implementation of the PRC’s campaign of repression against the Uyghurs, including through forced labor, forced displacement, cultural erasure, and environmental destruction. IFC’s failure to adequately safeguard communities and the environment affected by its financing in the Uyghur Region makes the institution complicit in the repression of Uyghur, Kazakh, and other minoritized citizens.
IFC currently has approximately US$486 million in direct loans and equity investment in four companies operating in the Uyghur Region:
- Chenguang Biotech Group Co., Ltd. (晨光生物科技集团股份有限公司)
- Camel Group Co., Ltd. (骆驼集团股份有限公司)
- Century Sunshine Group Holdings, Ltd. (世纪阳光集团有限公司)
- Jointown Pharmaceutical Group Co., Ltd. (九州通医药集团股份有限公司)
Evidence drawn from corporate disclosures and publicity campaigns, government directives and state media, and other publicly accessible information reveals that these four companies have:
- directly participated in and benefited from state-sponsored forced labor programs
- directly participated in and benefited from state-sponsored compulsory land expropriation
- participated in programs that require minoritized citizens to take oaths to the Chinese Communist Party (CCP) and be subjected to indoctrination
- recruited workers through overtly racist/discriminatory hiring practices
- contributed to the environmental destruction of affected and indigenous communities
- recruited workers through overtly racist/discriminatory hiring practices
- assigned minoritized citizens to do hazardous work without safety equipment
- contributed to the destruction of cultural heritage
- and failed to fully implement IFC’s required monitoring and assessment of its Performance Standards
Although IFC carried out a monitoring trip to the region in 2019, two years into the PRC’s by then widely publicized system of mass atrocities, it continued to issue new financing to projects in the Uyghur Region in 2020. The continued willingness to maintain financing in the Uyghur Region, without any direct oversight, effectively supports the oppression in the region.
This report lays out these findings and proposes recommendations for IFC and other Development Finance Institutions (DFIs). Using Chinese state media and propaganda, satellite imagery of IFC’s client operations, IFC project documentation, public reports, and corporate disclosures, this report presents credible evidence that IFC financing is contributing to companies committing gross human rights abuses against Uyghur peoples in the XUAR and makes evidence-based recommendations to IFC and other parties. This report also emphasizes the way desk-based due diligence can expose the disinformation campaigns that the PRC uses to justify its campaign of repression and to reveal the companies that are intertwined with the oppression in the region. This may be of use to both companies investigating their suppliers and to investors for which environmental, social, and governance standards matter.
IFC’s Performance Standards are relevant beyond its own investments. The Performance Standards are foundational to the environmental and social standards adopted by private and public banks issuing development project finance worldwide (though some banks have created additional internal standards that strengthen the safeguards).
Conclusions and Recommendations
IFC and other development and infrastructure investment banks cannot conduct the on-the-ground due diligence necessary in the Uyghur Region to ensure that their clients are adhering to the Performance Standards. The United Nations has been denied access to the region. In the private sector, audit firms have ceased to certify products manufactured there, and the Fair Labor Association has banned all its members from sourcing from the region. Travel to the region is unsafe for researchers, journalists, corporate consultants, and others who might investigate state-sponsored atrocities, and asking minoritized citizens to report grievances about their working conditions is unacceptably dangerous so long as the PRC’s campaign of repression remains in effect. For this reason, there is no feasible way for IFC to ensure its standards are met with regard to its investments in the XUAR.
As of March 2021, IFC closed its investments in three Chinese companies engaged in or sourcing from the Uyghur Region.2 However, if IFC is to uphold its own Performance Standards and serve as a model for responsible development finance, it must divest from any companies that have proven to be complicit in the PRC’s program of repression in the Uyghur Region.
These findings are specific to IFC’s portfolio, but they are applicable to development and infrastructure finance organizations worldwide. Other DFIs have significant investments in the Uyghur Region that are potentially similarly engaged in state-sponsored repression. Financial institutions with commitments to environmental and social performance standards are heavily exposed in their current portfolios; application of IFC’s Performance Standards is needed for investments in the Uyghur Region across the financial sector.
More broadly, this report reveals the challenges in applying the Performance Standards in situations of state-sponsored violence against ethnic minorities.
For these reasons, our recommendations include the following:
- IFC and other DFIs should divest from all corporate investments in the Uyghur Region.
- IFC and other DFIs should presume that all companies operating in the Uyghur Region are engaged in forced labor and carry risk of complicity in the ongoing genocide.
- IFC and other DFIs should review and adjust their direct and indirect investment portfolios to move sub-investments, sub-contracts, and supply chains out of the Uyghur Region. IFC should conduct a full review of its portfolio, including financial intermediary investments, using the methods employed in this report.
- IFC should create protocols for both responsible entry into fragile and conflict-affected regions, as well as protocols and triggers for responsible exit.
- All tenders put out for bidding by IFC and other DFIs should include a restriction on the purchase of forced-labor-made goods and require full supply chain transparency from all contractors and their suppliers.
- IFC should extend its zero-tolerance policy for reprisals against human rights defenders to the initial project appraisal phase and explicitly prohibit investments in any location where dissent is punishable by extrajudicial internment or incarceration.
- IFC should reinstate its policy of publishing the names of the loan officer and lead environmental and social specialist tasked with projects. This will enable human rights defenders, activists, and advocates to more directly engage with the decision makers who interact with project proponents.
Governments should take note of the complicity of DFI investments in the PRC’s repression of minoritized citizens. Individual government DFIs may be complicit, just as their investments in IFC may be. The United States in particular—with its 21 percent share—has an opportunity to take a leadership role in enhancing oversight of IFC’s investments.
Read full report here.