Target IFC's downstream investments and MIGA's support towards firms that can have a catalytic effect on generating greater demand for and supply of sustainable forest products. Make traceability a priority in IFC Forest Product Sector Investments, and associated MIGA guarantees both up and downstream.
IFC Forest Product Sector (FPS) investments have helped forest companies produce higher value-added products, increase productivity and production capacity, and foster outgrower markets and job creation for rural poor communities. These investments have been targeted mainly downstream. Investment in downstream processing of forest and wood products are highly relevant for sustainable forest management when targeted to create demand for certified supplies upstream. IFC has stepped up efforts at supporting sustainability along the supply chain, but the record indicates continued challenges in achieving certification and ensuring sustainable forest management.
Original Response: Agreed: IFC will look for opportunities to invest in catalytic downstream projects which favor traceability and a sustainable value chain.
IFC Action 5A : All forest products investment projects, where traceability is feasible, include wood input traceability
Indicator: All projects beginning in FY14 include traceability
Baseline: IEG sampling of 24 downstream projects showed partial chain of custody information (1 of 6 pulp + paper projects as an example) included chain of custody
Target: 100% of new forest products projects include traceability
Timeline: Verified by June 2014
IFC Action 5B : Generate catalytic downstream investments that increase demand for and supply of sustainable forest products.
Indicator Dollar volume of downstream and vertically integrated IFC forestry investments
Baseline: FY 13 program results
Target: $350 million per year of new forest products investments resulting in increased demand or supply of sustainable forest products
Timeline: Verified by June 2016
Last year, IEG asked for IFC to verify that (1) 100% of new forest products projects include traceability and that (2) $350 million per year have been made available, and that this funding increased demand for new forest product investments resulting in increased demand or supply of sustainable forest products. IEG did not receive a response, including data, as part of the MAR process. IFC rated progress Substantial in 2014, and has not entered ratings since. In 2017, it marked the recommendation "to be made inactive." IEG maintains an active and substantial rating, retaining the request for the IFC data.
This is an active recommendation.
Can IFC please verify that (1) 100% of new forest products projects include traceability and that (2) $350 million per year have been made available for new forest products investments resulting in increased demand or supply of sustainable forest products?
IEG requests an update from management.
In its Action Plan, IFC Management committed to "Generate catalytic downstream investments that increase demand for and supply of sustainable forest products" which would be measured by the indicator: "Dollar volume of downstream and vertically integrated IFC forestry investments" with a target of $350 million per year of new forest products investments resulting in increased demand or supply of sustainable forest products to be achieved by June 2016.
IFC Management also made a commitment that all forest products investment projects, where traceability is feasible, include wood input traceability â so that â by the beginning of FY14 â all such projects include traceability. Set against the IEG baseline of a sample of 24 projects that showed partial chain of custody information, IEG set a target of having 100% of all new forest products projects include traceability by June 2014.
IEG recognizes evidence that 100% of new investments (Stora Enso, Klabin, Klabin, Hans Merensky II and Fenglin II) have included demonstration of wood supply traceability as disbursement requirements that IFC is working with two portfolio companies to improve their supply chain traceabilty systems. The uptake is considered substantial and active to allow for verification of the functioning of these systems as the investments get underway.
With regard to the action planned to generate catalytic downstream investments that increase demand for and supply of sustainable forest products, IEG recognizes that management closed four transactions amounting to over $350 million. IEG looks forward to evidence next year that these investments have resulted in âincreased demand or supply of sustainable forest products.â
5A:(recommendation completed) 100% of new investments in FY14 (Stora Enso, Klabin, Klabin, Hans Merensky II and Fenglin II) have included demonstration of wood supply traceability as disbursement requirement.
IFC is also working with two portfolio companies to improve their supply chain traceability systems.
5B: IFC closed four transactions in 2014 amounting to more than $350 million.