Over the past 10 years, the World Bank’s private investment arm has sunk more than $1.8 billion into major livestock and factory farming companies across the world.
World Bank’s IFC pumped $1.8b into factory farming operations since 2010
BY ASHOKA MUKPO
The World Bank’s private investment arm has channeled more than $1.8 billion into major livestock and factory farming operations across the world over the past decade, despite calls for the global reduction of meat and dairy consumption due to its environmental and health impacts.
International Finance Corporation (IFC) data reviewed by Mongabay and the Bureau of Investigative Journalism show that since 2010 the corporation has financed the expansion of major multinational meat and dairy firms across Asia, Africa, Eastern Europe, Latin America and the Middle East.
While the World Bank primarily lends directly to governments, the IFC provides funds for private companies in the form of loans, direct equity investments and other financial vehicles. The IFC says by providing capital to the livestock industry, it is stimulating job growth and reducing poverty while meeting greater demand for meat and dairy products in countries where incomes are rising.
“IFC has made agribusiness a priority because of its potential for broad development impact and especially strong role in poverty reduction,” the IFC said in an email to Mongabay.
But Mongabay’s analysis of the data shows most of the beneficiaries of its livestock investments were large multinational corporations with plans to ramp up industrial-scale animal farming in their countries of operation, and in some cases expand into new markets.
Among the projects approved by the IFC is an $85 million loan and equity investment for Brazilian cattle giant Minerva, which has been dogged for years by alleged links to deforestation and associated greenhouse gas emissions in the Amazon and Cerrado.
Other major beneficiaries of IFC funding include Ukrainian billionaire Yuriy Kosyuk; Saudi businessmen Prince Sultan bin Mohammed bin Saud Al Kabeer and Abdullah bin Mohammed Noor Rahimi; Chinese venture capital firm CDH Investments; Scandinavian multinational Arla Foods; and New Hope Group, the biggest animal feed producer in China.
Livestock production is associated with a litany of environmental and biosecurity risks, including the pollution of waterways, rainforest destruction, and the emergence of new diseases. While according to some estimates global food production capacity must increase by more than half to meet demand by 2050, critics argue that expanding the megafarm model of food production will deepen inequality and damage the environment.
“What they’re mainly trying to do is replace the production that’s done by small-scale producers and food systems, and transform or almost steal that market share and impose a corporate industrial system,” said Devlin Kuyek, a researcher with the farmers’ advocacy group GRAIN.
Of the $1.8 billion of IFC investments reviewed by Mongabay, the largest share went to dairy companies ($686 million), followed by producers of pork ($563 million) and poultry products ($353 million). The remainder was lent to or invested in companies specializing in cattle production, fisheries, and livestock feed.
Campaigners say that by helping large corporations consolidate their control over food supply chains, the IFC is advocating an unsustainable model that contributes to climate change while hurting smaller producers.
“They don’t seem to be considering that they have a role in shaping the food system,” said Daniel Jones, senior campaign manager at Feedback, a U.K.-based organization that promotes reform in food production.
Reducing poverty or building a better balance sheet?
Since its inception in 1956, the IFC has provided financing for private companies to expand their operations around the world. As a member of the World Bank Group, it played a crucial role in pushing for global deregulation and enabling venture capitalists to enter “emerging markets,” a phrase coined by one of its economists in 1981. The IFC was also instrumental in establishing stock exchanges around the world, and it has provided seed money for burgeoning industrial titans such as the South Korean conglomerate LG.
The IFC is owned by its 185 member-state shareholders, with the U.S. accounting for the largest share, at 22%. Unlike other development banks in the World Bank Group, the IFC is a profit-making enterprise. This profit motive, critics say, has led to a blind spot when it comes to the way it judges impact. Until recently, the IFC didn’t evaluate the role of its investments in meeting development goals in the countries where they were located.
“Investment officers at the IFC don’t get an end-of-year bonus like bankers do, but what’s really prized in career progression there is closing the deal, making a lot of money, and getting money out the door,” said Luiz Viera, coordinator of the Bretton Woods Project, a watchdog organization that monitors international financial institutions.
The IFC’s largest investment into the livestock industry was $150 million in financing for a Dutch conglomerate to take a controlling share in a Pakistani dairy producer. Many others were made in middle- and upper-middle-income countries, including $350 million for nine companies in China.
Only three countries where the IFC has invested in livestock over the past decade — Uganda, Madagascar and Ethiopia — are classified by the World Bank as low-income.
Viera said this reflects a troubling pattern of the IFC investing primarily in companies that have a low risk of failure and which are more likely to bring higher returns.
“I personally believe in the role of public banks,” Viera said. “But the role of those banks is theoretically to take risks and provide capital for projects that provide a public good or have a developmental purpose where normal capital markets would be unwilling to invest.”
The IFC points to job creation and increased incomes for farmers as a primary benefit of its investments in the sector. Many of the livestock corporations receiving funds from the IFC rely on medium- and small-sized farms to supply them with animals, entering into production contracts with the operators of those farms.
“Our investments span different sizes of types of agriculture companies, and often include components to strengthen smallholder farmers and improve their capabilities and output, while promoting resource efficiency and savings for the farmers,” the IFC said.
But Shefali Sharma, director of the European branch of the Institute for Agriculture and Trade Policy, says the power dynamics between big companies and smaller contract farmers often don’t favor the farmers. In the U.S., many have razor-thin profit margins and have been forced to shoulder hefty debts.
Sharma said the same dynamic is likely playing out with the IFC’s investments.
“There’s evidence that the more concentrated these markets become, the producers lose in that situation. It’s clear that farmer indebtedness is going up, and that’s because the price paid to producers is below their cost of production,” she said.
“You’re actually catering to the upper-middle class that’s over-consuming dairy products rather than looking at how you can help small and marginalized producers be able to diversify and have a sustainable future,” she added.
Kuyek of GRAIN said that the companies the IFC is investing in will encourage increased consumption of meat and dairy products, but that the resulting profits will be directed away from smaller farmers.
“What this model really excels at is shifting agriculture towards a system where all that natural wealth can be concentrated and redistributed at the top,” he said.
An industry known for environmental degradation
Production of meat and dairy products is one of the primary drivers of climate change, causing nearly 15% of man-made greenhouse gas emissions. Large-scale factory farming has also been associated with air pollution and toxic runoff into rivers.
Experts say that overuse of antibiotics in factory farming reduces their effectiveness in treating human illnesses. In 2016, a review found that Suguna Foods, an Indian poultry producer that received more than $200 million from the IFC between 2007 and 2010, was using antibiotics that are typically prescribed to people suffering from pneumonia and other infections. Suguna was approved for an additional $67.2 million loan by the IFC in late March this year.
To reduce the environmental and social damage caused by companies they invest in, the IFC requires that they release an environmental and social action plan prior to receiving funds. In addition, they must comply with a set of “performance standards.”
“All IFC clients have an obligation to adhere to IFC’s Performance Standards, which we monitor regularly,” the IFC said.
Philippe Le Houérou, the IFC’s chief executive, has also written that the corporation should be more responsive to communities impacted by its investments and “do much better at meaningfully engaging with them.”
But advocates say that while the IFC’s performance standards look strong on paper, its record of enforcement is poor.
“The performance standards have been very effective if you are looking at it from the standpoint of how widely they’ve been adopted and how much they’ve permeated the discussions on corporate accountability,” Kristen Genovese, senior researcher at SOMO, a Netherlands-based organization that monitors corporate conduct, told Mongabay. “But I don’t think that they have been very successful at doing what they’re meant to do, which is protecting communities and the environment.”
The IFC has a semi-independent internal watchdog body called the Compliance Advisor Ombudsman, but even when it finds wrongdoing by IFC clients, its authority is narrowly limited to making private recommendations to the president of the World Bank. If it finds that a company has violated the IFC’s performance standards, it can’t withhold funds or order it to pay compensation.
There is also no obligation for the IFC or the companies it funds to inform communities and workers that the CAO exists. Without the assistance of civil society groups, most are unlikely to know a complaint process is available, let alone how to navigate it.
“The clients are meant to disclose to project affected communities what the adverse impacts of their projects are, so why wouldn’t they then also be able to communicate to those people the availability of the CAO?” Genovese said. “Why have a CAO if you can’t tell anybody about it?”
For those living under authoritarian governments, this means that the CAO is effectively toothless. In China, for example, restrictions on internet use along with fears of retaliation by state officials or corporate executives would likely be significant barriers to whistleblowers looking to raise the alarm over pollution or abuse of workers.
Even in countries with more open access to information and fewer legal restrictions on civil society groups, engaging with the CAO can be dangerous. A 2015 report by Human Rights Watch documented numerous examples of intimidation and reprisals against community members and activists who brought complaints about IFC investments to the CAO.
The requirement for the IFC’s clients to implement their environmental and social action plans also appears to be spottily enforced. Some of the livestock companies funded by the IFC have implementation deadlines that are years old, with no information about whether or not the required actions were successfully completed.
Sharma said that given the poor track record of the livestock industry in protecting workers and the environment, there is reason for concern.
“I think companies use the performance standards as a fundraising exercise. If you say, ‘we conform to the IFC standards,’ it’s easier for you to get money and lowers your risk profile. But as far as making sure companies are accountable to them? It’s very low.”