performance standards approach 9 november 2015
TRANSCRIPT
PERFORMANCE STANDARDS APPROACHwww.ifc.org/mekonghydro
9 November 2015
We aim to increase the share of new private sector investments in the hydropower sector that adhere to
good international industry practice on environmental and social standards by 2020
Since 2012, IFC’s Hydro E&S Advisory Program has been working in the Mekong Region
Supported by Australian and
Japan Governments
www.ifc.org/mekonghydro
Our Services
Improve Policies and Regulations
Build capacity on cumulative
impacts from
hydropower cascades
Engage and advise
hydropower companies
www.ifc.org/mekonghydro
Support financial
institutions adopt E&S standards
SUSTAINABILITY:ONE OF IFC’S STRATEGIC PRIORITIES
1. Strengthening the focus on frontier markets – IDA countries, fragile and conflict-affected situations, and frontier regions of middle-income countries
2. Addressing climate change and ensuring Environmental and Social sustainability and good corporate governance
3. Addressing constraints to private sector growth in infrastructure, health, education, and the food supply chain
4. Developing local financial markets
5. Building long-term client relationships in emerging markets
IFC’s Private Sector Clients
• 88% of clients believe the IFC standards in E&S risk management are helpful
• Return on equity (ROE) and return on assets (ROA) improve with better environmental performance
• Clients value our expertise in E&S Risk Management over competitors
Our Development Mandate
• Successful companies are important for long term growth, jobs, development—impacting the poor
• Good risk management has a positive impact on the environment, society, and business
• There is a positive correlation between good E&S risk management and our financial performance
WHY ENVIRONMENTAL AND SOCIAL RISK MANAGEMENT IS IMPORTANT TO IFC?
The integration of sustainability into management systems and practices
brings tangible benefits, including new lines of business, new clients,
greater access to financing, greater shareholder value, and improved
reputation and goodwill.
• 75% of the commercial banks reported a reduction in risk as a result of
considering environmental and social issues.
• Another 48% noted improved access to international capital
• 39% percent benefited from improved brand value and reputation
• 35% developed new business
• 26% benefited from improved community relations.
IFC’s 2007 report Banking on Sustainability
THE BOTTOM LINE
IFC’S SUSTAINABILITY FRAMEWORK
IFC
Investment CLIENT
Responsibilities Implementation Tools
Sustainability Policy
Access to Information
Policy
8 Performance Standards on Environmental and Social
Sustainability
Guidance NotesEnvironmental, Health &
Safety Guidelines
Good Practice Materials
Environmental and Social Review Procedure
DISCUSSES AND DEFINES:
• Roles, responsibilities of IFC & clients
• Categorization
• Broad Community Support
• Role of the CAO
SUSTAINABILITY POLICY
A BALANCED APPROACHPERFECTION
MINIMALISM
PRINCIPLESPRESCRIPTIONS
RealismClarity
Flexibility
• A principles-based approach, not a licensing approach Less front loaded and prescriptive than legal
tradition in many countries Agreement on core principles: client commitment
and capacity Environmental and Social Action Plans to fill gaps Engagement and implementation support
throughout project cycle
• Progressive realization of Performance Standards objectives
PRINCIPLES AND PERFORMANCE
• CLIMATE CHANGE
• ECOSYSTEM SERVICES
• HUMAN RIGHTS
• GENDER
• WATER
CROSS CUTTING ISSUES
REAL SECTOR
EXAMPLES FIS EXAMPLES
A: -Potential, significant adverse risks and impacts
• Large hydro projects w potential cumulative impacts
• Large Agri projects
FI-1: High risk
• Universal banks with significant exposure to project finance and long-term corporate loans
• Private equity funds w high risk portfolios, i.e., infra
B: Potential limited adverse risks and impacts
• Agri projects, small hydros, hotels, hospitals
FI-2: Medium risk
• Private equity and investment funds where the fund invests in low- and medium-risk sub-projects
C: Minimal or no adverse impacts
• Telecom, IT companies
FI-3: Low risk
• Microfinance; Retail, consumer finance; Student loans
IFC’S CATEGORIZATION OF E&S RISK
• Performed by IFC, when clients engage in Informed Consultation Participation
• BCS is a collection of expressions in support of the activity
• Is not a veto right
• BCS may wax and wane during life of activity
BROAD COMMUNITY SUPPORT
• Independent grievance mechanism for project affected people including a dispute resolution mechanism
• Project-level audits of IFC environmental and social performance
COMPLIANCE ADVISOR/OMBUDSMAN
ACCESS TO INFORMATION POLICY
IFC PS STANDARD SETTER
CG Development Framework – 31 Institutions• Based on IFC's system of evaluating
corporate governance risks and opportunities
• CGFIs have combined assets of $852 billion
Equator Principles– 78 Institutions• Based on IFC’s Performance
Standards• EPFIs cover > 70 percent of
international Project Finance debt in emerging markets
PERFORMANCE STANDARDS OVERVIEW
PS1: Assessment and Management of E&S
Risks and Impacts
PS2: Labor and Working Conditions
PS3: Resource Efficiency and
Pollution Prevention
PS4: Community Health, Safety and Security
PS5: Land Acquisition and Involuntary Resettlement
PS6: Biodiversity Conservation and
Sustainable Management
of Living Natural Resources
PS7: Indigenous Peoples
PS8: Cultural Heritage
THE PERFORMANCE STANDARDS
PS2
PS3
PS4
PS6
PS5
PS7
PS8
PS
1
Labour and Working Conditions
Resource Efficiency and Pollution prevention
Community, Health, Safety and Security
Land Acquisition and Involuntary Resettlement
Biodiversity Conservation and Sustainable Management of Living Natural Resources
Indigenous Peoples
Cultural Heritage
ARE ALL 8 STANDARDS TRIGGERED IN EVERY INVESTMENT PROJECT?
Do clients need to achieve 100% compliance with triggered Performance Standards before we do business with them?
PS1-100%
PS2-100%
PS3-95%
PS6-27%
PS4-87%PS7-5%
PS5-44%
PS8-16%
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PS1:
ASSESSMENT AND MANAGEMENT OF ENVIRONMENTAL AND SOCIAL RISKS AND IMPACTS
WHY PS 1?
Applies to 100% of our investment
projects
A documented, systematic approach to identifying and managing environmental and social risks … … and for maximizing value addition
The “umbrella” PS
THE “MUST HAVES” OF PS1
A MANAGEMENT SYSTEMPolicy
Identification of risks &impacts
Management programs
Organizational capacity &competency
Emergency preparedness and response
Stakeholder engagement,
transparency, and grievance redress
Monitoring and review
Analysis:Identification of
issues
Stakeholderengagement
Managementsystem:
Integration into decision-making
CREATION OF HYDROPOWER DEVELOPERS’ WORKING GROUP
(HDWG)
Established by IFC and the Lao National Chamber of Commerce and Industry in December 2013
A platform to for the private sector to have a collective voice on policies that impact the sustainable development of hydropower in Lao PDR; to help companies channel their concerns to the government, tackle business challenges, and gain exposure to good international industry practices and network with other companies operating in the country.
100 members
Representing 10+ different countries
Providing hydropower companies the tools, skills and expertise to develop and implement E&S management systems for their operations.
BUSINESS MEETINGS AND SEMINARS
Business Meetings Seminars
December 2013 Launch/MOU signing
HDWG 1: Feb 2014 E&S Risk Management and Business Case for Sustainability, IFC
HDWG 2: May 2014 Hydropower Fiscal Policy Options, Ministry of Finance
HDWG 3: Sept 2014 Standard Environmental and Social Obligations in the CA
HDWG 4: Dec 2014 Dialogue with commercial banks operating in Lao PDR
HDWG 5: Feb 2015 ICEM: Catchments and Reservoir ManagementSYKE: Integrated modelling
HDWG 6: Sept 2015 Consultant presentations: DFDL, Hatfield, ESL/Accent, CNR, FishBio, GIZ/NUOL
HDWG 7: Dec 2015 Oxfam: Gender Impact Assessment Tool
THE ISSUES
1) Standard Environmental and Social Obligations, Annex to Concession Agreement
2) Small Hydro Decree
• Sub-committees formed
• High-level meetings with Vice Ministers
• Inter-ministerial meetings with line agencies
• Presentation at Lao Business Forum
• Consultation workshops, inputs into drafts
• Representation at workshops/forums/conferences
WHAT THE MEMBERS SAY
“In our region, access to information is limited: Networks are life-support”
“The working group gives us a chance every few months to catch up on what others are doing. It’s a valuable social enterprise.”
“This is a working group that offers something new and addresses its members’ interests,”
“We present to the government what we feel is feasible and what areas of the policy need improvement,”
“We hope our input will encourage dialogue between developers and the government, leading to improved policy.”
Next Steps: Moving to develop an association
For more information:
www.ifc.org/mekonghydro