The responsible finance standards of multilateral institutions: state of play

Eurodad’s report The state of finance for developing countries 2014 showed that developing countries continue to lose significantly more financial resources than they gain due to failings in the international economic and monetary system. In addition, as Eurodad’s report setting out key challenges for policy makers in advance of last year’s UN summit on Financing for Development in Addis Ababa argued, the quality of the financing that developing countries receive also needs improvement.

To assess and improve development finance, a responsible finance framework is needed. In 2008, Eurodad released its first Responsible Finance Charter. The Charter outlined which standards are needed to ensure that public lending to developing countries actively delivers positive development outcomes. It was revised in 2011, and its scope broadened to include publicly-backed private lending and investment with a development purpose.

Most of the standard-setting institutions that were mentioned in Eurodad’s Charter still set the tone today at the national, regional and global levels, including the Organisation for Economic Co-operation and Development’s (OECD) Guidelines for Multinational Enterprises, the United Nations’ Guiding Principles on Business and Human Rights and the Equator Principles.

However, since 2011 a significant number of old standards have been revised or are currently under review. For example, the Financial Action Task Force (FATF) revised its standards on anti-money laundering in 2012, while the World Bank and International Monetary Fund (IMF) are currently revising the debt sustainability framework for low income countries (LICs).

Several new standards have also arrived on the global stage, including the OECD’s High-Level Principles of Longterm Investment Financing by Institutional Investors, and the United Nations Conference on Trade and Development (UNCTAD) Roadmap on Sovereign Debt Workouts and Principles on Promoting Responsible Lending and Borrowing.

Five years after the last revision of Eurodad’s Charter, this briefing gives a timely overview of responsible finance standards promoted by various official multilateral or international organisations.