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Guiding more than $4.5trn (£3.3trn) in emerging market investments, the International Finance Corporation (IFC) Performance Standards (PS) have been instrumental in shaping environmental and social (E&S) risk management for over a decade.
Established in 2006 and revised through a global consultation process from 2009 to 2011, an updated framework was approved by all 185 IFC member countries in 2011 and became effective in January 2012.
These eight standards were developed to address the potential adverse impacts of projects financed by multilateral development banks, and have since become the de facto global norm for E&S risk management in private-sector projects.
The eight IFC PS are:
The IFC PS require project sponsors to conduct thorough E&S risk assessments that go beyond immediate project impacts, factoring in broader contextual risks, including those arising from operations in conflict zones, fragile regions or areas with vulnerable populations.
This comprehensive approach to identifying and mitigating risks has contributed to the widespread adoption of the PS among both IFC clients and other financial institutions, now spanning public and private sectors.
In parallel, the IFC’s General and Sectoral Environmental, Health and Safety (EHS) Guidelines, first issued in 2007, serve as a critical complement to the PS. These guidelines provide technical reference documents covering cross-cutting E&S issues, applicable across all sectors, and specific sectoral risks in areas such as agriculture, manufacturing, infrastructure, and more.
While they have similarly shaped global E&S risk management practices, the EHS Guidelines have not been updated since their adoption, which makes them increasingly outdated as new environmental challenges and technological advancements emerge.
In response to the evolving global landscape, the IFC launched an update of the PS in April 2025[1], with the aim of addressing the new and emerging challenges that have arisen since their last revision in 2012. With the update process set to conclude by 2028, this presents a vital opportunity to ensure the PS remain relevant and fit for purpose in an increasingly dynamic and complex world.
As the IFC PS undergo their first update in over a decade, it is crucial to examine how these standards, while foundational, are no longer fully aligned with the pressing challenges we face today. The world has changed and so too must the tools we use to assess and manage E&S risks across global projects.
Currently, only PS4 briefly touches on conflict, mainly in relation to security personnel – but what about the full spectrum of risks in conflict-affected areas? In places like Ukraine, Afghanistan and Yemen, projects face a complex web of challenges – from politically sensitive stakeholder engagement to difficulties in monitoring and securing grievances. The existing standards offer little to guide developers in these settings.
So what should we do? How about integrating conflict-sensitive due diligence across the entire framework? We need realistic, adaptive approaches to free, prior and informed consent, and monitoring in areas where access is restricted.
The PS should also include more comprehensive guidance on how to engage security actors within a human rights framework to ensure that the principles of safety and security are in line with international human rights standards.
One key recommendation would be to define FCA more clearly while recognising that fragility can exist not only at the national level but also sub-nationally, in regions that face different degrees of conflict or instability. Instead of a fixed list, referencing established benchmarks such as the World Bank’s FCS List and the OECD’s Fragility Framework could provide a practical and flexible approach. These frameworks would help guide project sponsors in identifying FCA risks and managing them appropriately. This would require a more integrated approach across PS1, PS4, PS5 and PS7.
Legacy pollution is an issue that affects projects from mining sites in West Africa to abandoned industrial land in Central Asia and elsewhere, where developers often inherit contaminated land without knowing the full extent of the risks. While the IFC General EHS Guidelines acknowledge contaminated land, they provide generic, dated guidance that falls short of addressing the complex challenges associated with brownfield redevelopment. The guidelines also fail to consider emerging pollutants such as PFAS, which have recently been identified as a global health threat but are not covered by the current standards.
An updated PS could provide a tiered approach to contaminated land, including specific guidance for emerging pollutants. Brownfield redevelopment should not just be seen as a liability but as an opportunity for sustainable regeneration. Clearer, harmonised standards would benefit developers, financiers and, most importantly, the communities affected.
We can no longer ignore digital infrastructure. With hyperscale data centres, fibre networks and AI computing clusters powering everything from healthcare to finance, the need for sector-specific guidance is critical. Digital infrastructure has become foundational to global development. The current IFC standards address telecom towers briefly under the sectoral EHS Guidelines for Telecommunications, but provide no relevant technical content for data centres or their associated impacts – from high energy consumption and water use to labour risks and e-waste. Digital infrastructure is here to stay, and the PS must catch up.
Similarly, green hydrogen also warrants its own sector-specific guidelines. While often grouped with renewable energy, green hydrogen adds layers of risk not captured by existing standards. Electrolyser operations introduce high-pressure gas handling and chemical exposure, while massive water demand, especially in arid regions like Central Asia, exacerbates resource stress. Moreover, ammonia and derivative production introduces chemical hazards similar to the fertiliser and explosives industries.
Hydrogen projects often require vast land take for solar or wind farms, pipelines and export infrastructure, triggering displacement risks under PS5. Water use presents significant governance challenges in the green hydrogen sector, with no universally established benchmarks for acceptable consumption per kilogram of hydrogen. There is also a lack of comprehensive frameworks for water neutrality and shared basin governance, especially in regions where water resources are already under stress. The current EHS Guidelines for thermal or wind energy fail to address these challenges, leaving significant gaps in how green hydrogen is assessed. Sector-specific guidance is urgently needed to ensure consistent, transparent and sustainable project assessments.
Social risks continue to be underemphasised in E&S frameworks. Issues such as gender-based violence and harassment (GBVH), labour informality and community health often receive insufficient attention. In large-scale infrastructure projects, GBVH can escalate, particularly where vulnerable community-workforce dynamics exist. Similarly, labour informality (a widespread issue across much of the Global South) remains inadequately addressed in impact assessments, with little consideration for how informal work impacts workers’ rights and project outcomes.
Moreover, community health assessments often focus narrowly on communicable diseases and overlook broader factors such as access to healthcare, mental health stressors from displacement and social determinants of health like food and water security. Issues such as voluntary land donations also require clearer guidance, as they can mask displacement impacts and bypass necessary safeguards. Human rights due diligence is becoming mandatory under emerging EU regulations but remains underrepresented in PS1 and PS2.
Similarly, contractor and supply chain labour risks are insufficiently addressed, particularly in informal labour settings. The updated PS must bring social risks to the forefront, integrating these issues consistently into scoping, impact prediction and mitigation frameworks. These considerations are becoming essential to project success and long-term sustainability.
The current PS fall short when it comes to assessing climate risk. While PS3 mentions climate risks and GHG emissions, there is no clear methodology for assessing physical climate risks such as flooding, drought or extreme weather events – the risks that are increasingly relevant to projects worldwide. The mismatch between the impressive evolution of climate disclosure frameworks (like TCFD, TNFD and IFRS S2) and the more limited treatment of climate risks in E&S assessments is glaring.
At the project level, the approach to climate risk remains inconsistent, often left to improvised methods. For example, PS1 requires identification of “potential risks and impacts”, but whether climate risks are included depends on the scope set by the project developer. PS3 touches on climate-related risks but provides no practical guidance on how to assess physical risks, define thresholds or incorporate adaptation into project design.
This leaves projects exposed to climate impacts without sufficient preparation. While the 2023 Equator Principles Guidance Note on Climate Change Risk Assessment introduces a useful scenario-based methodology, this should be formally integrated into the updated PS3 to ensure consistency and relevance. As the climate crisis accelerates, the IFC PS must close the gap between climate disclosure frameworks and E&S practice, ensuring that both physical and transition risks are robustly addressed in project impact assessments.
The revision of the IFC PS presents an invaluable opportunity to future-proof these guidelines, ensuring they remain relevant in the face of evolving global risks. The update should go beyond simply addressing today’s issues and create a framework capable of adapting to emerging challenges. This includes climate resilience, where we need a structured approach to assessing physical climate risks and integrating them into project design.
Furthermore, as digital infrastructure continues to expand, the standards should provide sector-specific guidance to assess its environmental and social impacts comprehensively. The rise of circular economy models, just transition frameworks, and issues like data governance and digital rights must also be integrated into the standards. By adopting a more modular, flexible structure, IFC PS can remain dynamic, allowing for regular updates to address new risks as they arise. This forward-looking approach will enable the PS to remain a robust and adaptive tool for assessing and mitigating global E&S risks.
The IFC has initiated the process of updating its PS to better align with the evolving landscape of global development. While this commitment is commendable, the depth and scope of these updates remain critical. Emerging challenges such as the impacts of climate change, the rise of digital infrastructure and pressing social issues demand a comprehensive and forward-thinking approach. The IFC's Approach Paper for the Update of IFC’s Sustainability Framework[2] highlights the necessity of a fit-for-purpose E&S policy framework that addresses these complex risks.
However, the question persists: will the forthcoming updates adequately address these pressing issues? The risk lies not in the acknowledgment of the need for change but in the potential inadequacy of the measures implemented. Without a robust and inclusive revision of the PS, projects may continue to face significant environmental, social and reputational risks. Moreover, the IFC's leadership in global E&S risk management could be undermined, leading to gaps in compliance and diminishing investor confidence.
The ongoing update of the IFC PS represents a pivotal opportunity to tackle some of the most urgent and complex challenges facing global development. While the IFC has committed to revising the PS, the question remains whether these updates will be sufficiently comprehensive to address the full scope of evolving risks.
By integrating emerging sectors such as digital infrastructure and green hydrogen, the PS can align more closely with the realities of modern, technology-driven projects. This will ensure that such projects not only minimise their environmental impacts but also foster innovation in an increasingly interconnected world.
Equally important is addressing long-overlooked social risks, including GBVH and labour informality, as these, often sidelined, issues can significantly affect the social sustainability of projects. By strengthening the PS to better address these risks, the IFC can help ensure that projects are not only more socially inclusive but also more resilient in today’s global economy.
Incorporating climate risk assessments more systematically into the PS is also crucial. This would allow developers to proactively plan for the environmental challenges they will face over the long term. Climate-related risks must be adequately reflected to ensure that the PS remain relevant and effective in mitigating today’s and tomorrow’s environmental uncertainties. These updates will enhance the integrity and relevance of the IFC PS, equipping project developers and financiers with the tools they need to navigate a rapidly evolving global landscape.
Val Votrin PISEP is director for environmental, social risk and sustainability at Abbey Green Consulting
[1] https://www.ifc.org/en/what-we-do/sector-expertise/sustainability/policies-and-standards/update-of-ifc-s-sustainability-framework
[2] https://www.ifc.org/content/dam/ifc/doc/2025/approach-paper-updated.pdf
