IFC has an active project with Karot Power Company Limited (KPCL), a special-purpose vehicle incorporated in Pakistan and majority owned by China Three Gorges South Asia Investment Limited (CSAIL). The project involves providing a long-term corporate loan facility of up to US$100 million to support the construction, operation, and maintenance of a 720MW run-of-the-river hydropower plant being developed on the Jhelum River, in Pakistan.

The complaint was submitted to CAO by representatives of Building and Wood Workers International (BWI) and the Pakistan Federation of Building and Wood Workers (PFBWW), on behalf of Awami Labour Union, China Three Gorges Corporation Karot Power Company Limited. The complainants claimed adverse impacts on an estimated 3,000 project workers of KPCL, including violations of IFC Performance Standard 2 (PS2) on workers’ organizations, health and safety, working conditions, terms of employment, grievance mechanism, retrenchment, and concerns related to the use of security forces under IFC Performance Standard 4 (PS4).

In August, 2020, the complaint was found eligible for further assessment. During the assessment, the company indicated a willingness to engage in a dispute resolution process, while the complainants expressed their preference for undergoing a compliance process. 

In April 2021, the case was referred to the Compliance function for appraisal, in accordance with the 2013 Operational Guidelines.

In January 2022, CAO finalized the appraisal (available in English and Urdu) of the case under the 2013 Operational Guidelines, based on the transitional arrangements agreed upon in the adoption of the 2021 CAO Policy. 

In December 2024, CAO merged the Karot-04 case with the ongoing Karot-02 and Karot-03 investigation process in relation to issues of unfair dismissal practices and forced resignation. The Terms of Reference for the investigation are outlined in Annex C of the Karot-02/03 Appraisal Report (available in English and Urdu.)

In December 2025, CAO finalized its compliance investigation (available in English and Urdu) and submitted it to the IFC Board. The investigation, which was conducted for the Karot Hydro 02, 03, and 04 complaints, found that IFC failed to comply with provisions of its Sustainability Policy during both pre-investment due diligence and project supervision of the Karot Hydropower Project in Pakistan. CAO found that IFC did not adequately assess labor risks during due diligence and failed to adequately assure itself of compliance with Performance Standard 2 (PS2) on Labor and Working Conditions during supervision.

Specifically, CAO found shortcomings in IFC’s supervision of labor issues, including the treatment of Pakistani workers, freedom of association, and terms of employment and retrenchment. CAO found indications of harm related to unequal treatment of workers, limitations on workers’ ability to organize and bargain collectively, and adverse impacts associated with terms of employment and retrenchment. CAO found IFC compliant regarding occupational health and safety and supervision of the workers’ grievance mechanism.

On July 6, 2026, the IFC Board approved IFC's Management Report Management Action Plan (MAP) in response to CAO’s investigation. The MAP includes measures to strengthen worker accommodation and non-discrimination practices, improve termination and retrenchment procedures, and expand the project’s grievance mechanism to allow former workers to raise concerns related to severance, overtime, and benefits. IFC also committed to an independent review of MAP implementation 18 months after Board approval.

At the systemic level, IFC outlined actions to strengthen labor risk assessment, procedures linking supervision findings to accountability and the application of leverage, and a workshop in Pakistan to build client capacity on PS2 compliance. 

CAO and IFC issued a joint press release following Board approval of the MAP.  

CAO will monitor the implementation of the actions set out in IFC’s MAP and report on progress.