Explained: Exclusion Lists

A 5 minute quick read

An exclusion list defines the types of projects that a financial institution does not finance. Take for example the International Finance Corporation (IFC) which offers financial services to encourage private-sector development in less developed countries. IFC provides an exclusion list of activities that it will not finance.¹ This list includes amongst others the following exclusions:

• Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international bans, such as ozone depleting substances or wildlife or products regulated under Convention on International Trade in Endangered Species of Wild Fauna and Flora
• Production or trade in weapons and munitions

IFC also requires that its financial intermediaries apply additional exclusions when engaged in certain types of activities. For example, financial intermediaries investing in microfinance activities must apply the following additional exclusions: This list includes amongst others the following exclusions:

• Production or activities involving harmful or exploitative forms of forced labor / harmful child labor
• Production, trade, storage, or transport of significant volumes of hazardous chemicals, or commercial scale usage of hazardous chemicals. Hazardous chemicals include gasoline, kerosene, and other petroleum products.
• Production or activities that impinge on the lands owned, or claimed under adjudication, by Indigenous Peoples, without full documented consent of such peoples.

Financial institutions may also have qualifiers to their exclusion list. In the IFC’s case for instance, a reasonableness test is applied when the activities of the project company would have a significant development impact but circumstances of the country require adjustment to the IFC’s exclusion list.²

All three local banks in Singapore have exclusion lists,³ but the details of their lists are not publicly available.

footnotes

¹ International Finance Corporation (2007), IFC Exclusion List, World Bank Group, ifc.org/exclusionlist

² ibid.

³ Kate Philp, Jeanne Stampe and Naomin Tan, Lee Shiau Ping, Lawrence Loh & Roderica Wynne (2018), Sustainable Banking in ASEAN, World Wide Fund for Nature (Singapore), https://bschool.nus.edu.sg/cgio/wp-content/uploads/sites/7/2018/10/CGIO-WWF-Sustainable-Banking-in-ASEAN-Report-2018.pdf