IFC Approves Action Plan After Pakistan Hydropower Review

The Karot Hydropower Project, located on the Jhelum River, is a 720-megawatt renewable energy facility that began commercial operations in June 2022.

The International Finance Corporation (IFC) has approved a Management Action Plan following an independent investigation into its investment in Pakistan's Karot Hydropower Project, responding to findings by the Compliance Advisor Ombudsman (CAO) on labour-related issues during the project's construction.

The Karot Hydropower Project, located on the Jhelum River, is a 720-megawatt renewable energy facility that began commercial operations in June 2022. It supplies clean electricity to an estimated 3.8 million residential customers, strengthening Pakistan's energy security.

IFC supported the project through a US$125 million equity investment approved in 2014 and a US$100 million loan approved in 2016. While IFC exited its equity stake in 2023 after construction was completed, its loan remains active, and the organization continues to oversee the project's environmental and social performance.

Labour Concerns Led to Independent Review

The CAO investigation was launched after three complaints submitted between 2019 and 2022 by workers, union representatives and local community members. The complaints raised concerns about discrimination against Pakistani construction workers, restrictions on freedom of association, employment conditions, occupational health and safety, dismissals, resignations and the effectiveness of grievance mechanisms.

The investigation concluded that IFC did not fully assess labour-related risks before investing in the project and did not adequately evaluate the client's labour policies against its own Performance Standards. It also found shortcomings in IFC's supervision during construction, particularly in resolving issues related to discrimination, freedom of association and employment terms.

The CAO found evidence of harm linked to these areas but did not identify harm related to occupational health and safety or the supervision of worker grievance mechanisms.

New Measures Focus on Worker Rights

In response, IFC has introduced a series of measures to strengthen labour standards at the Karot project. The Management Action Plan includes a new Worker Accommodation Plan, stronger grievance mechanisms and updated employment procedures to promote fair and transparent treatment of workers.

Former workers will also be able to raise concerns about previous employment matters, including severance pay and benefits, through an expanded grievance process that will remain open for 12 months. The plan also includes training programmes on non-discrimination, freedom of association and workers' rights, while an independent review will assess progress after 18 months.

Beyond the Karot project, IFC said it has strengthened its internal systems by introducing new labour risk assessment tools, expanding staff training and hiring labour specialists to improve oversight of future investments. The CAO will continue monitoring implementation of the action plan and publish regular progress reports to track the measures being put into practice.