September 2006, International Finance Corporation (IFC)
Driven by heightened public concern, and the scrutiny of civil society organizations, the market is increasingly demanding that companies adopt responsible and accountable environmental and social practices. To assist in managing these risks, lenders and project sponsors pursuing complex projects in emerging markets may benefit from the use of an external monitor. The role of the external monitor is to provide an independent, impartial, and transparent record of the sponsor's compliance with the project's environmental and social commitments.
A number of challenging project investment conditions may signal the need to consider use of an external monitor, including, but not limited to, projects involving:
- multiple public and private sector partners
- highly visible sectors such as natural resource extraction
- significant population resettlement
- indigenous peoples
- biodiversity and sensitive habitats
- complex project benefit sharing, revenue management, and governance systems
- weak national regulatory regimes
This provides lenders and project sponsors with an understanding of the business case for employing an external monitor. The publication gives practical advice regarding the major steps and key issues for designing, implementing and operating an external monitoring mechanism for complex projects. The objectivity and technical expertise of the external monitor can add value to a project by increasing trust and accountability between the sponsor and key project stakeholders including lenders, projectaffected communities, civil society organizations, and government regulators.
