Introduction

This chapter aims to set out the human rights standards that project finance (PF), as a species of foreign direct investment (FDI), must meet. The benchmarks set by such standards are largely the same as they are for FDI in general even though, as will be seen, there are particular pressures on such rights that PF can sometimes bring to bear. This chapter therefore fits PF into a wider context, looking at a range of sectors and examples of projects, some making use of this financing technique and some not. Later in the book, particular PF mechanisms and projects will be the focus.

Developed-country multinational enterprises (MNEs) are the leading sources of FDI, accounting for 84 per cent of global outflows. Hence, MNEs have become increasingly important, particularly in developing countries, and, in some cases, assume functions performed previously by the public sector. Furthermore, with economic globalization the developing world has assumed the role of manufacturer, while the developed world has moved into the production of services, whereby investors compensate the scarcity of capital in developing economies by borrowing money from lenders to realize projects, thereby frequently utilizing PF.