Guidance summary

The guidance highlights that corruption undermines environmental and social (E&S) outcomes, heightens financial and reputational risk, and can jeopardise development impact. Impact investors frequently operate in high-corruption-risk markets; therefore, coordinated business integrity (BI) and E&S due diligence is required. Corruption enables companies to bypass regulation, avoid scrutiny, and evade accountability for pollution, unsafe working conditions, and human rights abuses. Coordinated BI–E&S risk screening, coordinated due diligence, and shared action planning support more accurate assessment and mitigation of interconnected risks. Three thematic areas with high corruption and E&S exposure, land, labour and working conditions, and pollution—require particular focus.

Using this guidance

The guidance aims to help impact investors understand how corruption affects E&S outcomes and how coordination across BI and E&S functions can strengthen risk management. It responds to evidence that many investors overlook corruption risks or do not integrate BI into E&S assessment. The guidance also reflects expanding ESG disclosure requirements, including EU rules requiring companies to report on anti-bribery and anti-corruption matters. It is based on 31 interviews with investors, ESG consultants, and multilateral institutions, as well as a DFI workshop. It is intended for professionals working in impact investing, ESG, compliance, legal, governance, and risk.

How corruption undermines e&s outcomes

Corruption erodes trust, governance and equality, undermining development aims. It heightens E&S risks by enabling companies to bribe officials for permits, avoid inspections, hide violations, or secure contracts improperly. Investors reported that corruption can lead to cancelled public funding, reputational harm and project failure. Evidence shows corruption facilitates illegal logging, land grabs, pollution and human rights abuses. Interviewees emphasised that even small facilitation payments can indicate deeper risks, including unsafe working conditions or fraudulent licences.

Why coordinate bi and e&s workstreams

Corruption and E&S risks frequently interact. BI due diligence is often less developed than E&S due diligence, and both are frequently conducted in isolation. Coordinated processes support identification of linkages and improve investment decisions, action plans and monitoring. Investors use several models: joint due diligence meetings between BI, legal and E&S teams; integrated ESG due diligence with embedded BI; separate risk assessments but coordinated review; or unified action plans. Coordination supports proactive corruption risk management, enabling investors to anticipate risks rather than respond reactively.

Coordinating contextual risk screening

Country, sector and political context shape both corruption and E&S risks. Screening should incorporate tools such as Transparency International’s Corruption Perceptions Index and ESG country ratings, while recognising their methodological limits. Shared contextual analysis should consider rule of law, press freedom, inequality, civil society strength and security conditions. Thorough media searches, including local-language sources and social media, are essential to identify early red flags.

Focus areas for due diligence

Due diligence should prioritise risks where corruption and E&S issues intersect, such as labour practices, procurement, permits, land access and waste management. Investors should evaluate how policies operate in practice, as gaps between paper and implementation are common. Reviewing past incidents, whistleblowing data, internal controls, and management responses provides insight into effectiveness. Assessing resourcing and staff competencies is essential, as weak BI or E&S capacity elevates risk. Company culture—including management tone, incentives, and employee openness, shapes risk behaviour. Licences and permits present high corruption exposure, especially where third parties are used or where unusually fast approvals occur.

Coordinating action plans and monitoring

Investment proposals should articulate how BI and E&S risks interrelate and how they can be mitigated. Action plans should reflect material risks and avoid overly burdensome or generic requirements. Governance structures must ensure oversight across BI and E&S dimensions. Ongoing monitoring should be dynamic and responsive to new incidents or contextual changes.

Thematic focus area: Land

Land transactions combine high value, unclear ownership, local power imbalances and multiple stakeholders, resulting in high corruption and E&S risks. Corruption in land deals can lead to displacement, tenure insecurity, violence, environmental damage, and loss of livelihoods. Investors should conduct enhanced due diligence to verify ownership history, assess stakeholder claims, identify use of intermediaries, examine compensation processes, and evaluate community engagement and resettlement schemes. Weak documentation, rapid approvals, or involvement of politically exposed persons (PEPs) may indicate corruption.

Thematic focus area: Labour and working conditions

Exploitative labour practices, including unsafe conditions, withholding wages, forced labour and child labour—often rely on corruption, particularly bribery of labour inspectors. Human trafficking and migrant worker exploitation frequently involve corrupt practices during recruitment, transport and employment. Investors should investigate recruitment processes, worker documentation, grievance systems, and use of third-party labour agencies. Bribery risks should trigger targeted reviews of working conditions, and persistent E&S breaches may indicate systemic corruption.

Thematic focus area: Pollution

Pollution-related E&S risks can be increased by corruption when companies bribe regulators to overlook violations or falsify environmental reports. Cases show that corruption can permit harmful waste disposal, weak monitoring, and substandard construction. Investors should assess compliance with national and international pollution standards, evaluate interactions with environmental agencies, and scrutinise third-party waste management. Persistent pollution complaints or quick licence approvals in high-risk contexts warrant investigation.