Development Finance Institutions and Digital Risks

Digital transformations in developing regions bring both opportunities and significant human rights, environmental, and digital risks. Analysis of 3,450 projects reveals serious gaps in risk management practices, urging the adoption of clear, enforceable standards and capacity-building for responsible project design.

Multilateral and bilateral development finance institutions (DFIs) provide financing and play numerous vital roles in supporting digital transformations in developing countries. The economic and other benefits of digitalization have been widely noted; however, the use of digital products and services can also create potentially serious risks for people and the environment, including human rights risks. Between 2023 and 2024, the Office of the United Nations High Commissioner for Human Rights (OHCHR) carried out a mapping of digital risks in 3,450 projects supported by nine major multilateral development banks (MDBs). The mapping exercise, part of a larger mixed-methods research programme, suggests that MDBs have significant, and growing, digital risk exposure in their portfolios that is not systematically being identified and factored into project design and supervision, on the basis of the application of clear, transparent and enforceable standards. Drawing from this research, the OHCHR publication Development Finance Institutions and Digital Risks analyses DFI operational policies and practices in connection with digitalization and digital transformations, highlights progress and apparent gaps in digital risk management, and provides recommendations for improvement. The central recommendation in the study is that DFIs adopt transparent, systematic and enforceable standards to govern the identification and management of digital risks and impacts in DFI-supported projects, supported by expertise, awareness-raising and capacity-building among staff, clients and partners.