WHEN GOOD E&S PEOPLE MAKE BAD DECISIONS:
UNDERSTANDING ETHICAL BLINDNESS IN PROJECT FINANCE
Ana Maria Esteves, February 2026
The Paradox at the Heart of a Profession
Environmental and social (E&S) professionals in project finance are typically motivated by genuinely important values. They care deeply about human rights, equity, environmental protection, and creating opportunity in communities where they work. Yet somehow, looking back months or years later, they sometimes realise their organisation made a decision that troubles them—and we find themselves wondering: How did I contribute to this?
This paradox is not the result of moral failure or character flaws among well-intentioned professionals. It is, instead, a predictable response to how decisions get framed, how organisations function, and how practices become normalised over time. Understanding this phenomenon—what researchers call ethical blindness—is essential for anyone committed to upholding the principles that should guide E&S practice.
What Is Ethical Blindness?
Ethical blindness is not dishonesty or deliberate corruption. Rather, it is a temporary inability to see the ethical dimensions of a decision—despite having strong personal values and professional standards. This blindness occurs in specific organisational contexts and is largely unconscious. The person experiencing it genuinely does not recognise they are missing critical ethical dimensions in the moment. Most importantly, ethical blindness is reversible: when the context changes and we step back from the situation, we often experience shock at what we failed to see.
Understanding ethical blindness as a structural problem—rather than a character flaw—is essential. It helps us design systems and practices that enable us to notice what we might otherwise miss. This is where the Code of Ethics for Social Performance Professionals becomes a crucial anchor for our decision-making.
The Structure of Ethical Blindness: Three Converging Pressures
Research by Palazzo, Krings, and Hoffrage (2013) identifies that ethical blindness typically emerges at the intersection of three powerful forces:
Individual Sensemaking: How we interpret situations based on our training, mental models, and professional frameworks. An investment professional trained in financial analysis naturally thinks in terms of metrics and returns. A social professional trained in participatory approaches naturally thinks in terms of inclusion and voice. Each frame is valuable, but none is complete.
Organisational Pressures: The incentives, requirements, timelines, and career considerations within the institution. Investment committees expect speed. Portfolios need documented performance metrics. These institutional logics push us toward certain frames—the ones the organisation is equipped to measure and reward.
Institutional Forces: The broader industry norms, regulatory frameworks, and sector standards of what constitutes “acceptable practice.” In project finance, partial compliance is normalised. Land tenure ambiguity is worked around. Risk downgrading happens incrementally. These are the unwritten rules of how things get done in our sector.
When all three pressures align, they create conditions where problematic dimensions become invisible. The person is not being deliberately dishonest about their professional judgment. Rather, the combination of individual frame, organisational reward structure, and sector norms makes certain ethical concerns simply disappear from view.
The Problem of Rigid Framing
At the core of ethical blindness lies the problem of rigid framing—the unconscious narrowing of how we perceive a situation, focusing on certain dimensions while becoming blind to others. In project finance, we see three dominant frames that often crowd out ethical considerations:
Economic Framing reduces complex decisions to financial metrics: employment numbers, investment returns, portfolio performance, project viability. When a decision is understood exclusively through the economic frame, the ethical dimensions become invisible.
Technical Framing reduces decisions to compliance with standards and procedures. Documentation becomes a substitute for substantive judgment. The question shifts from “Is this actually protecting communities?” to “Does the written policy exist and is training documented?”
Compliance Framing understands decisions as “we followed the procedure.” Compliance with process masks whether the outcome is actually ethical or whether communities are genuinely protected.
In real organisations, the dominant frame often isn’t the most ethical one—it’s the frame that aligns with what the organisation is rewarded for measuring and reporting.
The Role of the Code of Ethics for Social Performance Professionals
The Code of Ethics for Social Performance Professionals developed by a Working Group of the Social Practice Forum provides exactly the kind of structured alternative framing that breaks through ethical blindness. The nine core principles—Respect for Human Rights and Dignity, Professional Independence and Integrity, Cultural Sensitivity, Community Ownership and Empowerment, Multi-Stakeholder Accountability, Providing Competent Professional Services, Informed Consent and Participation, Transparency and Information Access, and Confidentiality and Privacy—form a comprehensive framework that ensures we are asking the right questions.
These principles are not nice-to-have values. They are professional obligations that serve a critical function: they make visible what narrow frames render invisible. When we are tempted to accept a shortened consultation timeline, the principle of Community Ownership forces us to ask: Are communities genuinely participating or being managed? When we are tempted to rely on compliance with procedure, the principle of Providing Competent Professional Services forces us to ask: Is our methodology actually protecting people in practice?
The Code of Ethics is an institutional system that helps us notice blindness. It is most powerful when it is not simply a document but an active tool for deliberation, used by teams and institutions to surface what they might otherwise miss.
The Nine Ethical Scenarios: Where Blindness Happens
To ground these concepts in real practice, consider these nine scenarios that E&S professionals in project finance regularly face. Each reveals how ethical blindness emerges and how the Code of Ethics principles can guide us toward better decision-making.
Scenario 1: The Displacement Consultation Shortcut
A large infrastructure project requires displacing 2,000 households. The resettlement plan meets international standards on paper: it identifies affected persons, calculates compensation at replacement cost, and proposes livelihood restoration. However, implementation begins in three months while consultations are just starting. Internal staff worry the timeline is inadequate for genuine participation, but the company argues project viability depends on the schedule.
Primary Principle Tested: Principle 4 – Community Ownership and Empowerment
The economic frame (project viability depends on timeline) becomes the dominant way the situation is understood. The assumption unconsciously shifts from “we need adequate consultation” to “we need to manage consultation within project constraints.” Meanwhile, communities’ ability to meaningfully participate and to shape decisions affecting their lives becomes invisible as an ethical concern.
Scenario 2: The Local Content Performance Gap
A facility promised 60% local employment and 40% local procurement. Three years in, actual figures are 35% local employment and 20% local procurement. The company attributes this to “labour market realities” and “supplier limitations.” The facility is profitable. Communities complain. The investment committee argues partial compliance is better than nothing, and enforcement would threaten viability and remaining jobs.
Primary Principle Tested: Principle 5 – Multi-Stakeholder Accountability
The technical frame about labour and supply constraints displaces the accountability frame: a commitment was made to communities and should be fulfilled. Technical language helps the institution avoid the harder conversation about whether the company has genuinely tried to meet commitments or is using constraints as convenient rationalisation.
Scenario 3: The Worker Rights Assessment Categorisation
Due diligence for a processing facility identifies worker injuries with inadequate compensation, arrests during peaceful protests, and alleged union interference. The company has a comprehensive HR policy and training records. Your team classifies it as “medium risk with potential concerns.” Investment approved. Two years later, journalism exposes systematic labour exploitation.
Primary Principle Tested: Principle 6 – Providing Competent Professional Services
The compliance frame substitutes for the actual implementation question. Does a good policy exist? Is training documented? These become the focus, while the question “Is the policy actually protecting workers in practice?” recedes. Ticking the box on policy documentation creates an illusion of due diligence that masks inadequate investigation into actual conditions.
Scenario 4: The Land Rights Ambiguity
A renewable energy project has significant climate benefits but overlaps with Indigenous ancestral lands where tenure rights are disputed. The government says the land is state-owned; Indigenous groups claim traditional rights. Your environmental team emphasises climate urgency. Indigenous groups haven’t formally objected but also haven’t formally consented. Proceeding with environmental safeguards would address the primary risk but sidestep the tenure question.
Primary Principle Tested: Principle 4 – Community Ownership and Empowerment
The economic/environmental frame (climate urgency and project necessity) becomes so dominant that indigenous decision-making authority becomes invisible. The institution unconsciously shifts from “Do Indigenous groups consent?” to “Do Indigenous groups object?”—reversing the burden of proof away from informed consent toward assumed consent.
Scenario 5: The Data Methodology Creep
A social development program reports 15,000 beneficiaries, 82% satisfaction, and 78% completion. Staff have been meticulous about data collection. A field visit reveals that satisfaction surveys were conducted in group settings (suppressing negative feedback), “beneficiaries” counts any single activity attendance (same people counted multiple times), and “completion” measures final activity attendance, not outcomes. The program has reported these metrics consistently for five years.
Primary Principle Tested: Principle 8 – Transparency and Information Access
Methodological choices that bias results upward become invisible through repetition and lack of external scrutiny. The organisation is technically following its established procedures, which creates an illusion of acceptable practice even though the procedures systematically overstate impact. Communities and donors cannot make informed decisions if they are not seeing accurate information.
Scenario 6: Marginalising Traditional Knowledge in Health Programs
Your institution funds a community health program in a rural region with diverse religious and cultural practices. The program aims to improve maternal and child health through hygiene and nutrition education and was initially endorsed by community representatives. In year one, training materials portray local birth, postpartum, and food practices—valued by healers and religious leaders—as “unscientific” and obstacles to health. This framing has made communities feel dismissed and some are resisting the program. Your health team insists on non-negotiable evidence-based practices, while others worry this emphasis on scientific authority risks losing community trust.
Primary Principle Tested: Principle 3 – Cultural Sensitivity
The technical frame—that evidence-based practices are objective truth and cultural practices are obstacles—becomes so dominant that the institution becomes blind to how its implementation approach is experienced as cultural dismissal. The team shifts from “How do we integrate health knowledge with cultural values?” to “How do we convince communities that science is correct?” This rigid framing renders invisible the difference between adapting delivery to respect cultural practices and compromising on health outcomes. It also makes invisible how dismissive messaging actually undermines community trust essential to long-term health outcomes.
Scenario 7: The Risk Downgrading Pattern
Your institution has financed five projects in one country. The first two required significant remediation due to worker grievances, inadequate consultation, and environmental corner-cutting. Due diligence has become progressively streamlined. The most recent project receives a “low risk” rating despite patterns identical to earlier projects. When a colleague raises this concern, management responds that the team has “optimised the process.”
Primary Principle Tested: Principle 2 – Professional Independence and Integrity
Gradual normalisation of lower standards occurs through organisational learning framing. Each increment seems small and justified, but collectively the institution has shifted from rigorous assessment to box-checking while calling it improvement. This is the “slow slide” where ethical standards shift without a conscious decision.
Scenario 8: The Conflict of Interest Rationalisation
A senior investment officer has personal investments in a sector. The conflict is disclosed and the risk committee approves proceeding. The officer frames risks as “manageable” while emphasising financial strength. The officer is genuinely convinced of objectivity. An investment proceeds; two years later, a major social incident occurs. Colleagues’ earlier concerns were met with “technically addressed” or “within acceptable parameters.”
Primary Principle Tested: Principle 2 – Professional Independence and Integrity
Institutional procedure (disclosure) creates an illusion that the conflict has been addressed when unconscious bias remains. The officer is not deliberately unethical; they genuinely experience themselves as objective. The procedure protects the institution legally without protecting against the actual bias problem.
Scenario 9: The Just Transition Contradiction
In a post-conflict region, a project creates 1,500 jobs and supports reconstruction. However, facility location and key management overlap with conflict-involved entities; land was acquired during military control. The company argues development support is itself a form of just transition. Policy prohibits “problematic backgrounds” but language is vague. The government suggests exclusion damages relationships and reconstruction commitment.
Primary Principle Tested: Principle 1 – Respect for Human Rights and Dignity
Multiple legitimate frames create genuine ambiguity: forward-looking development versus backward-looking accountability. The institution becomes blind to the need to be transparent about the tradeoff it is making rather than pretending both frames can be honored simultaneously.
Warning Signs: When to Pause and Reconsider
These nine scenarios are not rare cases. They reflect predictable patterns that emerge across the sector. When we notice certain warning signs, that is the moment to pause, seek diverse perspectives, and deliberately ask questions the system is not prompting:
Gradual Normalisation: Concerns that used to be treated as serious become normalised as “acceptable limitations” or “necessary compromises.” Measurement shortcuts become standard practice. Incomplete consultations become justified by schedule.
Us vs. Them Mentality: The organisation becomes adversarial with external critics, narrow in perspective, and dismissive of outside concerns. Professional judgment is set against community voice rather than integrated with it.
Strong Conformity Pressure: Disagreement with leadership decisions is treated as disloyalty. People self-censor doubts about decisions leadership has committed to. Dissenting voices are marginalised.
Technical or Economic Frames Only: The organisation relies exclusively on frames like “this meets the standard” or “the numbers work.” Other dimensions like community wellbeing, cultural impact, or long-term relationships become invisible.
Inadequate Institutional Systems: There are no processes for questioning assumptions, hearing dissenting voices, or updating practices based on learning. The institution doesn’t create space for the kind of deliberate reflection that breaks through blindness.
Breaking Free: A Deliberate Practice
Moving beyond ethical blindness requires deliberate practice at three levels:
Individual Practice: Notice the frame you are using. What dimensions are you focused on? What might be invisible from this frame? What would someone from a different background see that you are missing? Make this questioning a personal habit.
Team Practice: Actively invite different perspectives. Explicitly name the frame you are thinking about: “I’m thinking about this as an economic issue. What am I missing if I think about it as a rights issue?” Make diversity of framing a team strength, not a threat.
Institutional Practice: Build structures that surface what individuals might miss. Mandate consideration of alternative frames before major decisions. Include voices from outside the organisation and sector. Systematically ask after projects: “What did we miss? What were we blind to?” and update practice based on learning.
The key shift is moving from trying to arrive at the “right” frame to deliberately maintaining multiple frames in tension. This is more complex and less comfortable than defaulting to the dominant frame, but it is the foundation of genuine ethical practice.
Professional Maturity as Ongoing Practice
Ethical maturity in project finance is not about being perfect. It is about developing habits and systems that help you notice when your framing has become too rigid and when you need to step back. It is about having the courage to name uncomfortable questions: Is this decision actually serving the communities affected? Are we being honest about the tradeoffs we are making? What are we not seeing?
This matters profoundly because communities and future generations depend on your professional judgment. The integrity of project finance as a tool for genuine development depends on practitioners who maintain ethical clarity and who are willing to interrupt the normalising pressures that can make good people make problematic decisions.
The ongoing challenge is to maintain community with others who share this commitment—to regularly discuss ethical challenges with colleagues, to build organisations that support rather than undermine ethical reflection, and to see professional maturity as a collective practice rather than an individual virtue.
| The Code of Ethics for Social Performance Professionals provides comprehensive guidance for social practitioners. It is a collaborative framework designed to support professional judgment, institutional integrity, and genuine accountability to communities. For more information about the Social Practice Forum, visit the website here. |
