SustainableBusiness AssistanceProgram

CORPORATE CITIZENSHIP FACILITY

SUSTAINABLE FINANCIAL MARKETS FACILITY

ENVIRONMENTAL OPPORTUNITIES FACILITY

REPORT TO DONORS

November 2003

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

The International Finance Corporation (IFC), an affiliate of the World Bank, promotes the economicdevelopment of its member countries through investment in the private sector. It is the world's largestmultilateral organization providing financial assistance directly in the form of loans and equity to privateenterprises in developing countries.

The material in this publication is copyrighted. Please contact the Copyright Clearance Center, Inc., Suite910. 222 Rosewood Drive, Danvers, Massachusetts 01923, U.S.A., for permission to reprint or reproduceportions of this work.

Copyright © 2003International Finance Corporation2121 Pennsylvania Avenue, NWWashington, DC 20433, U.S.A.

Telephone: 202-473-3800Facsimile: 202-974-4384

www.ifc.orgwww.ifc.org/enviro

All rights reservedManufactured in the United States of America

First printing November 2003

For further details and information, contact:Bayo Oyewole

Tel. 1.202.458.2116Email. BOyewole@ifc.org

Prepared by:

Bayo Oyewole

Natalie Magradze

Contributors:

Merunisha Ahmid

Imoni Akpofure

Louis Boorstin

Zenaida Chavez

Tim Collins

Mark Eckstein

Maria Gallegos

Isabel Garcia

Brigid Holleran

Alexandre Leite

Jeffrey Liebert

Vanessa Manuel

Clive Mason

Gavin Murray

Sarah Ruck

Dan Siddy

Design:

Maria P. Cabardo,

Smolhaus Design & Assoc.

Printing:

CLB Printing Company

Photography:

Ulrich Helberg (Front cover)

G. Maggio (Inside front cover)

M. Hedinger (Table of contents page)

J. Fiege (Page 2)

D. Baird (Page 4)

J. Zevallos (Page 5)

S. Edelmann (Page 7)

A. Leite (Page 9)

Z. Chavez (Pages 10, 28, & 29)

A. Leite (Pages 14, 16-18)

R. Lord (Pages 20, 22)

IFC Stock Photo (Page 21)

R. English (Page 26)

K. Merckens (Page 27)

E. Briggs (Page 30)

Sustainable BusinessAssistance Program

IFC ENVIRONMENT AND SOCIAL DEVELOPMENT DEPARTMENT

promoting sustainable private investment in emerging economies

CORPORATE CITIZENSHIP FACILITY

SUSTAINABLE FINANCIAL MARKETS FACILITY

ENVIRONMENTAL OPPORTUNITIES FACILITY

REPORT TO DONORS

November 2003

The International Finance Corporation (IFC) is committed to sustainable economicdevelopment and this is incorporated in all of our investment and capacity-building work.In keeping with this commitment, and with the key support of you, our donors, IFCrecently established the Sustainable Business Assistance Program (SBAP) to provide aplatform for making highly selective, strategic interventions in key sectors of the market –the real sector, capital markets and environmental sustainability – where the demonstrationof sustainable business practices offers potential significant benefits. The SBAP consists ofthree social and environmental facilities: the Corporate Citizenship Facility (CCF), the

Sustainable Financial Markets Facility (SFMF), and the Environmental Opportunities Facility (EOF). Theactivities of these are all driven by demand and are designed to promote sustainable private sector investmentin developing countries through technical assistance, capacity building, and direct investment.

During their first year of operation, the facilities not only reacted innovatively to the evolving needs of theprivate sector in developing countries, but also explored new ways of doing business. In India, for example, theCCF worked with local nongovernmental organizations (NGOs) to support enterprise development amongthe rural poor, paying special attention to women’s employment and natural resources management. In Kenya,the EOF provided support for the production and distribution of inexpensive and environmentally friendlyfoot-operated water irrigation pumps.The SFMF has delivered sustainability training courses and workshopsto hundreds in emerging market financial institutions in Africa, Asia, Europe, and Latin America while makingthe business case for sustainable finance and socially responsible investment. Although these examples representonly a portion of the many activities funded through the facilities, they demonstrate IFC’s commitment toensuring long-term business success while contributing to economic and social development, a healthy globalenvironment, and a stable society.

Again, you, our donor partners, share our vision of the private sector as a driver of sustainable development inemerging markets and have been generous in supporting the establishment and operation of these facilities.We are grateful to you all. This report highlights the activities of the SBAP facilities after their first year ofoperation and confirms that their efforts are working toward helping developing countries meet the growingdemand for more environmentally and socially responsible – yet profitable – investment in the private sector.However, we do not have all of the answers and much more work needs to be done.We thank you, our donors,for joining us in effective partnership in trying to accomplish this ambitious objective.We hope and trust thatwe can continue to count on your support in this endeavor.

FOREWORD

Farida KhambataVice President, IFC

FOREWORD

1. INTRODUCTION2

2. CORPORATE CITIZENSHIP FACILITY5

3. SUSTAINABLE FINANCIAL MARKETS FACILITY 10

4. ENVIRONMENTAL OPPORTUNITIES FACILITY14

5. OVERSIGHT, MONITORING,AND EVALUATION20

6. FINANCIAL INFORMATION22

7. STRATEGIC DIRECTIONS26

ANNEX: PROJECT PORTFOLIOAS OF OCTOBER 2003

31

TABLE OF CONTENTS

In July 2002, IFC created three new donor-fundedfacilities around the theme of environmentally and socially

sustainable business. This is the first report to current andprospective donors concerning these facilities. It covers activities

carried out since the establishment of the facilities, as well as plannedactivities for FY04 and beyond.

The three facilities are the Corporate Citizenship Facility, the Sustainable FinancialMarkets Facility, and the Environmental Opportunities Facility.All three are multiyear,

donor-funded operations located in, and managed by, IFC’s Environment and SocialDevelopment Department. Together, they represent a key instrument used by IFC to ensure

that the commercial, environmental, and social benefits of sustainable corporate behavior andinnovation reach deep into the private sector of emerging market economies.

IFC’s mission is to promote sustainable private sector investment in developing countries and economies intransition. For IFC, “sustainable investment” means financing or advising on projects that are financially andcommercially viable, economically beneficial, and environmentally sound and socially responsible.

2

CORPORATE CITIZENSHIPFACILITY (CCF)

Objective: to promote corporatesocial responsibility in IFC clientcompaniesTarget Audience: industry, SMEs Products: Diagnostic tools, busi-ness development tools, capacitybuilding

SUSTAINABLE FINANCIALMARKETS FACILITY (SFMF)

Objective: to enhance theenvironmental and social impactof financial intermediariesTarget Audience: banking andinvestment communityProducts: training, market research,feasibility studies, networking,advisory services

ENVIRONMENTALOPPORTUNITIES FACILITY (EOF)

Objective: to finance innovativeprojects that promote local environmental benefitsTarget Audience: environmentalentrepreneurs, industry Products: investment capital, TA forbusiness plans/feasibility studies

SUSTAINABLE BUSINESS ASSISTANCE PROGRAMObjective: to reduce poverty and improve governance through

environmentally and socially sustainable private sector development

1. INTRODUCTION

3

This “triple bottom line” is consistent with the generally accepted definition ofsustainability – namely,“meeting the needs of the present without compromisingthe ability of future generations to meet their needs” – while recognizing IFC’srole in working with the profit-oriented private sector. We also recognizethat the private sector itself can be a leading force for change in developingcountries. IFC’s guidance and leadership in shaping sustainable outcomes fromprivate sector activities is a major part of this role. Sustainability can be increasedin large measure by building on IFC’s “do no harm” environmental and socialrequirements in order to identify and implement “do more good” componentsof projects. IFC has already provided significant environmental and social valueadded to its clients, in forms ranging from improvements in the efficiencyof energy and material use to the establishment of community outreachprograms. Many IFC clients now face considerable opportunities or risks in theenvironmental and social performance of their products or operations, and thedemand for assistance in these areas has risen steadily over the past five years.In 2002, it was acknowledged that this demand merited the development ofdedicated services to IFC clients. CCF,SFMF,and EOF were established to addressthis demand. Each facility has a distinct focus that is related to three core areas ofIFC’s work:

Industry: CCF works with “real sector” IFC clients who see businessopportunities in enhanced environmental and social performance (such asvalue added markets for sustainably harvested products and improved accessto international supply chains). In essence, CCF is a source of technicalassistance designed to clarify and demonstrate the role the private sector canplay in supporting sustainable development and reducing poverty. CCFsupport helps pay some of the costs of testing markets, defining approaches,and sharing information about good practices across the environmental,social, and labor spectrum of private sector operations.

Capital markets: SFMF works with IFC’s financial intermediaries and the broaderfinancial sector in developing countries and transitional countries: to maximizethe impact of IFC’s financial market investments on sustainable development;to help create sound, efficient, and responsive financial institutions and services;and to promote increased private sector investment in the emerging countries.

The International Finance Corporation(IFC), a member of the World Bank Group,promotes sustainable private sector invest-ment in developing countries in order toreduce poverty and improve people's lives.

Since its founding in 1956, IFC has com-mitted more than $37 billion of its ownfunds and has arranged $22 billion insyndications and underwriting for 2,990companies in 140 developing countries.

IFC coordinates its activities with otherinstitutions in the World Bank Group –the International Bank for Reconstructionand Development, the InternationalDevelopment Association, the MultilateralInvestment Guarantee Agency, and theInternational Centre for Settlement ofInvestment Disputes – but is legally andfinancially independent. Its 175 membercountries provide its share capital andcollectively determine its policies.

All projects in which IFC invests mustcomply with IFC’s environmental andsocial safeguard policies and applicableEHS guidelines.

IFC has made sustainability a corporatepriority and we are helping our clients gobeyond compliance with minimumenvironmental and social standards andseek to deliver more beneficial governance,economic, environmental and socialimpact without compromising theirfinancial objectives.

Innovations for the future: EOF supports private sector ventures with a strong potential to increase environmentalsustainability but must overcome the uncertainty associated with new markets, new technologies, and new ways ofdoing business.This facility focuses on innovative solutions to environmental issues such as clean water supply or airpollution, which are considered local problems and therefore do not obtain funding from the Global EnvironmentFacility (GEF).

Together, the three facilities provide a comprehensive platform for making highly selective, strategic interventions inkey parts of the market, where sustainable business practices offer potentially significant benefits.

Section 2 of this report examines the facilities’ objectives and modus operandi and presents some highlights of FY03activities and the FY04 pipeline.A comprehensive list of FY03 projects (organized by region) appears in the annex.

All three facilities are outcome-focused rather than activity-led.As explained in section 3, the facilities rely on IFC’smonitoring and evaluation approach, which has had considerable impact to date. Section 3 also summarizes IFC’sarrangements for overseeing the facilities.

IFC has committed $10 million to operating the facilities for the first five years.To date, it has received funding fromthe governments of the Netherlands, Switzerland, and Norway and continues to seek support from other donors.Further financial details appear in Section 4.

Although the facilities were launched in July 2002, they did not become operational until September 2002, whenthe first allocation of funding from the Netherlands was released.

Following a strategic review of the facilities at the end of FY03, IFC is now refining its management approach toensure their continued success.The lessons learned during the facilities’ first year of operation have prompted threemain changes designed in particular, to enhance the efficiency and impact of the overall initiative.

First, although the facilities will continue to exist as three separate donor-funded operations, each with its owndistinct focus, consideration is now being given to unifying them under IFC’s Sustainable Business AssistanceProgram. Second, regional delivery will receive special attention. Consistent with the IFC’s frontier strategy,Sub-Saharan Africa will become a regional priority for the facilities. Third, the SBAP will seek greater synergiesamong all facilities and will put more emphasis on mainstreaming its activities within IFC’s regular investmentoperations. Future strategy is discussed in section 5.

4

Bayo OyewoleSr. Program Officer

Tel: 202.458.2116Email: boyewole@ifc.org

For further details and information on theSustainable Business Assistance Program contact:

Objectives and Services

This facility focuses on the environmental and socialimpacts of business, particularly in the real sector.Expectations

about environmental and social performance (variously defined ascorporate citizenship or corporate social responsibility) now affect most

sectors and scales of business activity, particularly those in emerging markets.Some primary concerns are the impacts of globalization, the scope and impact of

supply chains, and the availability and use of information about company activities.These issues are shaping core business concepts such as competitiveness, markets, and

brand equity. The CCF’s main objectives are to:• identify and define the business case for better environmental and social practices in individual

businesses and across sectors• disseminate and replicate successful findings more widely through the private sector

• help clients and the wider private sector recognize opportunities and reduce risks

5

BOX 1. BALKANS HERBAL DEVELOPMENT INITIATIVE (CCF Funding: $25,000)Building a socially equitable and environmentally sustainable herbal sector in the Balkans

CCF has collaborated with IFC’s Southern European Enterprise Development (SEED) SME project development facilityto explore how environmentally and socially sustainable herbal products might be promoted and marketed in theBalkan herbal industry. The Balkans are among the most important sources of culinary and medicinal plants inEurope, and the collection of plants has the potential to become a valuable source of income for ruralcommunities (including returning refugees).

At least 200,000 people are involved in the harvesting and trade of herbal products in the region, and results of this workdemonstrate that even though Serbia and Bosnia are at very different stages in the development of their respective herbalindustries, both could build a strong sector that would provide a major boost to rural incomes and significantly reducerural poverty.

Conclusions of the work were presented to the private sector, donors, government agencies, and NGOs at seminarsin Sarajevo and Belgrade in May 2003. Seminar participants formulated draft action plans that would support thedevelopment of a sustainable industry, and CCF/SEED is considering several possible steps to support theimplementation of the action plans, including assistance in the development of herbal associations, support for market-based measures for environmental protection, and more equitable distribution of profit, especially to herb collectors.

Further details are available at www.balkanherbs.org.

2. CORPORATECITIZENSHIP FACILITY

6

The CCF uses donor funding because its work has a significant public good component and in manysituations the costs of promoting and implementing better practices cannot be charged to individual projectsor sponsors. CCF will help pay some of the costs of testing markets, defining approaches, and acceleratinginnovation, dissemination, and replication of successful initiatives that promote better environmental and socialperformance and more competitive and efficient businesses. However, every project is required to meet certainconditions for cost sharing/recovery, which are discussed and agreed on a case-by-case basis.

FY03 Activities

IFC’s strategy for CCF in FY03 has been to• focus on key sectors in which demand was assumed to be high, such as the oil, gas, mining, and

agribusiness sectors• develop close working links to programs in the Small and Medium Enterprise (SME) Department

(particularly linkages work and the project development facilities) to enable CCF to deliver services to theSME sector efficiently

• focus regional efforts on Africa and East Asia• develop a robust and efficient delivery system

BOX 2. LABOR PRACTICES IN THE ECUADORIAN BANANA INDUSTRY (CCF Funding: $113,000)Reducing rural poverty and ensuring supply chains to increasingly discriminating markets

Favorita Fruit, an IFC client in Ecuador, is a pioneer in addressing environmental and social issues. In1999, itsbanana-exporting subsidiary, Agricola Bananera Reybancorp, had all the banana farms it owns certified by RainforestAlliance for environmental and labor practices. Through Fundacion Wong, named after the company’s founder,Favorita supports over 300 schools for children in the rural areas from which it obtains bananas. Supporting schoolscomplements Favorita’s leadership in efforts to eradicate child labor in the banana fields through the exporters’ tradeassociation, CORPEI.

In 2003, Favorita and IFC’s Corporate Citizenship Facility began to develop and implement a program of outreachand training for 400 independent banana suppliers, which account for over half the company’s exports. The programwill enhance environmental and labor practices that are becoming essential for Ecuadorian farmers to maintainaccess to markets in the European Union and United States. Training programs consist of sessions in each offour banana-growing regions and field visits to certified Favorita facilities. Farmers may attend these training sessionsfor free. The project has the potential to affect environmental and labor practices on 18,000 hectares of bananaplantations and to influence the lives of thousands of workers.

BOX 3. BIODIVERSITY GOOD-PRACTICE GUIDE (CCF Funding: $286,000)Helping businesses understand and manage biodiversity in their business activities

Many private sector activities have a significant impact on biodiversity. These impacts can be mitigated through abetter understanding of the relevant issues, capacity building, siting, and operations. IFC will follow other successful“good-practice guides” on resettlement and community development with a biodiversity manual to be developedjointly with the World Conservation Union (IUCN), Flora & Fauna International, and others. It will be available as apdf file via the CCF website and in book form.

IFC approved 12 CCF projects in FY03 with a total net value of $929,000.Total spending on the projects through theend of FY03 was $151,000. Cost recovery and ‘contribution in kind’ on these projects amount to a further $93,000.

CCF projects approved during FY03 are described in the annex. Following are some highlights:

• Support for the development of a socially equitable and environmentally sustainable herbal sector in the Balkans (box1), in conjunction with IFC’s local SME project development facility

• An effort to improve labor practices in the Ecuadorian banana industry (box 2)• Development of a Biodiversity Good-Practice Guide to help businesses understand and manage biodiversity issues

relevant to their operations (box 3)• Work with an Indian steel hawser company and NGOs to support enterprise development

among the rural poor, with an emphasis on women’s employment (box 4)• A project to promote the adoption of sustainability criteria in international

agricultural commodities (box 5)• Biodiversity and land-use planning around a cement plant

in Southern Vietnam• A “business-to-business” (B2B) workshop on

sustainable business for Latin Americancompanies (box 6)

BOX 4. SUPPORTING THE DEVELOPMENT OF WOMEN’S INFORMAL SECTOR ENTERPRISE(CCF Funding: $43,000)Supporting women’s informal sector enterprise among the rural poor in India

IFC has initiated a 15-month project in which CCF is working with Usha Martin (an IFC steel sector client) and IndianNGOs to support the spread of women’s informal sector enterprises among the rural poor in Jharkhand (a state inwhich an estimated 60 percent of the population lives below the poverty line). Two NGOs (SEWA and KGVK) areproviding training and technical support to promote enterprise development opportunities for rural women (in keyareas such as natural resources management) and will support the implementation of a number of pilot projects that,if successful, will be integrated into KGVK’s core developmental activities in the coming years.

B. K. Jhawar, chairman of Usha Martin, states that with this “long-term partnership with IFC, we look forward tomaintaining the best international standards of environmental and social responsibility.” Peter Woicke, Executive VicePresident of IFC adds, “We commend Usha Martin’s commitment to increasing employment and the diversificationof local economic opportunities for rural women. This agreement, and its anticipated outcome, will point the way forIndian companies which, like UML, seek to move beyond philanthropy and to provide sustainable economicopportunities for it neighbors and constituents.”

FY04 Work in Progress and Future Pipeline

To maximize their impact, CCF efforts will be directed at two key IFC investment departments, Global ManufacturingServices (GMS), and Oil, Gas, and Mining (OGM) and will align program objectives with the explicit needs andexpectations of IFC’s clients in these sectors. CCF projects will aim for high levels of scalability and replicability forsubsequent IFC investments.

Experience during FY03, emerging demands for CCF services, and IFC mainstreaming priorities have led CCF tofocus its FY04 activities on the following areas:• Supply chains (management and assurance, enhancing productivity, competitiveness and sustainability)• Community and local economic development opportunities associated with IFC investments• Biodiversity management (particularly for the extractive sector)• HIV/AIDS

These four areas align with emerging business drivers and interests in GMS and OGM. CCF will provide tailoredservices and support in these areas, will aggregate findings, and aim to work in particular with sponsors whereverscale/uptake can be achieved.The goal is to increase impact through wider adoption of “good” practices with clientsand across sectors.Work on HIV prevention efforts will be closely aligned to the IFC against AIDS program.The workon local economic development will be coordinated closely with IFC’s activities in the area of SMEs and linkages.

As awareness of the CCF spreads, IFC and its clients are calling for more access to CCF’s technical assistanceprogram. Hence the facility is developing useful information on how companies can derive value from enhanced

8

BOX 5. BETTER MANAGEMENT PRACTICES AND AGRIBUSINESS COMMODITIES,PART 1 (CCF Funding: $12,000)Supporting more sustainable agribusiness commodity production

CCF and the U.S. World Wildlife Foundation (WWF-US) joined forces to work on a major initiative promoting the useof “better management practices” (BMPs) in selected agribusiness commodities. The aim is to use multistakeholderpartnerships to collect and review information that demonstrates how BMPs that improve environmental management,social development, and labor practices can optimize efficiency in the use of resources, reduce conflict with otherstakeholders, and increase net profits for producers.

For investors, companies that use BMPs represent fewer risks and potentially higher returns on investment. For manybuyers, such companies tend to be good longer-term partners because they are more likely to have addressedenvironmental and social issues successfully and to turn out higher-quality and consistent products.

There has been a high level of interest in this proposal and CCF/WWF-US is currently working with banks, producergroups, and buyers to select two to three commodities that will form the focus of subsequent BMP work. Participantsare expected to provide financial or other forms of support to this initiative and CCF/WWF will coordinate researchand promote uptake more widely (via IFC investments, focused dissemination, and the like).

The project is designed to run for several years.

environmental and social performance and can deliver significant and lasting development impacts.The followingare among the projects under consideration for FY04:• Haiti: Promoting superior labor practices and environmental performance in the textile sector and helping to ensure

that the effects of expansion in the sector can be managed so as to maximize social and economic benefits• Madagascar:Working with a shrimp aquaculture client to establish community development and rural livelihood

programs around a new shrimp farm• Botswana: Coordinating efforts with a mining sector client and indigenous communities to identify ways in which

local people can maximize benefits from mining operations • Indonesia and India:Working with oil palm and sugar sector clients to promote environmentally and

socially sustainable outgrower programs

For further details and information on theCorporate Citizenship Facility contact:

Mark EcksteinProgram Leader Tel: 44.131.313.6162Email: MEckstein@ifc.org

Sarah Ruck Tel: 1.202.473.0841Email: Sruck@ifc.org

BOX 6.LATIN AMERICA B2B SUSTAINABILITY WORKSHOP (CCF Funding: $26,000)Enhancing sustainable business through enterprise networks

There is considerable interest in the business case for sustainability in Latin America, and many firms have alreadybegun to adopt practices that give them competitive advantages because of their environmental or social performance.

To capitalize on the growing interest that project sponsors are showing in this aspect of their operations, IFC organized athree-day workshop in Brazil for its general manufacturing clients throughout Central and South America. A key elementof the forum was the mentoring provided by IFC sponsors who are already implementing advanced environmental andsocial practices with those who are enthusiastic but uncertain about how to proceed.

At the end of the meeting, all participants made a commitment to further developing and implementing enhancedpractices with business benefits. A number of case studies will be featured in a final report to be distributed toparticipants and made available on IFC websites and in other media. IFC used CCF to cover the costs of trainingmaterials and some venue costs, as well as to develop case studies. Participants paid to attend the workshop andhandled their own travel costs plus the remaining costs of the venue.

Objectives and Services

Investments in the financial sector nowrepresent about 35 percent of IFC’s portfolio and

about 40 percent of annual approvals by volume.Such financial intermediary (FI) projects present a unique

opportunity to promote development. Ensuring the sustainabilityof financial markets is, therefore, an integral part of IFC’s development

goals. Using the Sustainable Financial Markets Facility, IFC works withfinancial intermediaries and the broader financial sector in developing countries

and transitional economies to• enhance the environmental and social development impact of IFC’s investments

in and via financial intermediaries• help the financial sector use sustainability as a tool to build better businesses and increase

long-term competitiveness• increase the quality and amount of environmentally and socially responsible investment in

developing countries

Technical assistance provided by SFMF is organized in three distinct programs:• The Responsible Institutions Program focuses on banking, leasing, insurance, and microfinance companies.

Under this program, IFC promotes sustainable and responsible lending practices and encourages financial interme-diaries to develop products and services that respond to their customers’ environmental and social business drivers

• Through the Sustainable Inward Investment Program, IFC helps private equity fund managers usesustainability as a tool for creating shareholder value and promotes venture capital investment in commerciabusinesses with strong environmental or sustainability benefits. IFC also uses this SFMF program to enhance

framework conditions for socially responsible investment (SRI) in listed companies in the emerging markets

10

3. SUSTAINABLE FINANCIALMARKETS FACILITY

BOX 7. SUSTAINABLE BANKING IN AFRICA (SFMF Funding: $39,000)Promoting socially and environmentally responsible lending in the African banking sector

IFC has used SFMF to provide sponsorship for research by the African Institute of Corporate Citizenship (AICC) inconjunction with United Nations Environment Programme (UNEP) Finance Initiative’s Africa Task Force. The researchassesses current practice in the African banking sector with respect to environmental and social issues and willidentify drivers for change and future needs/opportunities. Case study research has been undertaken in South Africa,Nigeria, Kenya, Tanzania, and Senegal. The final report will be publicly available and disseminated via follow-upregional events/initiatives and at UNEP’s FI Annual Roundtable in Tokyo, in October 2003. This project will helpguide the design of future SFMF interventions in Africa.

• SFMF’s Strategic Market Development Program provides IFC with a window to create incentives andknow-how within the broader operating framework of the financial sector. Potential interventions include workwith rating agencies, central banks, stock exchanges, industry initiatives, and voluntary codes of practice

SFMF’s products and services under these programs include• training courses and workshops• business advisory and support services• technical assistance for project development and implementation• market intelligence and information resources• strategic partnerships and business networks• support for, and input to, voluntary industry initiatives and codes of practice

FY03 Activities

IFC’s strategy for SFMF in FY03 has focused on the following priorities:• Identify nonprofit and other local organizations in each IFC region with the potential to become strategic

partners in the development and implementation of training programs and other SFMF-funded projects• Review IFC’s FI portfolio to assess current levels of sustainability performance and future capacity building needs,

together with discussions with IFC’s Global Financial Markets and Funds Departments to identify future corebusiness priorities

• Conduct preliminary research into the potential for SRI in emerging markets and identify opportunities,obstacles, and priorities for high-impact interventions

• Generate a strong and diversified pipeline of potential SFMF projects for implementation in FY04

11

BOX 8. STRATEGIC REVIEW OF SOCIALLY RESPONSIBLE INVESTMENT IN THE EMERGING MARKETS(SFMF Funding: $70,000)Analyzing the market for listed equity investment in environmentally and socially responsible companies indeveloping countries

The socially responsible investment industry represents approximately $2.3 trillion of assets under management, butto date this industry has gained very little traction in emerging markets. IFC has used SFMF to commissionindependent research into the current market and future potential for SRI in developing country listed equities. Thestudy assesses investor appetite and existing SRI research infrastructure in the emerging markets and analyzes futuremarket potential and key barriers/necessary incentives. Recommendations include guidance on how the SFMF canbest work in partnership with others to play a catalytic role in building up this industry and maximizing developmentalbenefits. The final report is currently undergoing peer review and will be published in October 2003 and launchedat the UNEP FI Annual Roundtable in Tokyo.

IFC approved 18 SFMF projects in FY03 with a total net value of $477,000. Total spending on the projects throughthe end of FY03 was $156,000. Cost recovery and ‘contribution in kind’ on these projects amounted to a further$69,000.

Full information on SFMF projects during FY03 is provided in the annex. Highlights include the following:• Identification of the African Institute of Corporate Citizenship (AICC), the Association of Sustainable and

Responsible Investment (ASrIA), and the INCAE Business School, Costa Rica, as “cornerstone” strategic partnersin Africa,Asia, and Latin America, respectively

• Participation in a research project by AICC to review current sustainability practices in the African banking sector,together with FI training courses in Lagos and Johannesburg

• Additional FI training courses in Miami, Istanbul, and Moscow for Latin American, Central European, and RussianFIs, respectively

• Development of a strong project pipeline around emerging market SRI

Descriptions of selected key projects are provided in boxes 7 to 11, and all SFMF-funded projects in FY03 aresummarized in the annex

FY04 Work in Progress and Future Pipeline

SFMF’s work in FY04 will be based on the following strategy, building on the momentum created during thefacility’s first year:• Consolidate strategic regional partnerships established with INCAE,AICC,AsrIA, and others during FY03, including

customized capacity building where required• Develop institution-specific and country-specific technical assistance (TA) projects in addition to continuing the

“global,” strategic projects initiated during FY03

12

BOX 9. ASSOCIATION FOR SUSTAINABLE AND RESPONSIBLE INVESTMENT IN ASIA (SFMF Funding: $81,000)Developing the SRI market in Asia

IFC sponsorsed the 2002 annual conference in Tokyo of the Association for Sustainable and Responsible Investment inAsia (ASrIA), a not-for-profit membership organization dedicated to promoting SRI in Asian emerging markets. Conferencesponsorship will be repeated and increased for ASrIA’s 2004 conference in Singapore, and the event will be used todisseminate IFC’s work and best-practice guidance in the field of sustainable financial markets. Through SFMF, IFC hasalso provided grant funding for ASrlA research into current and potential future markets for SRI in China, India, Indonesia,Malaysia, the Philippines, South Korea, and Thailand. This report will be publicly available from IFC’s and ASrIA’s websites after being launched at an IFC/FT conference in Hong Kong in September 2003, with further dissemination vianational seminars, the UNEP FI Annual Roundtable in Tokyo in October 2003, and other conferences.

BOX 10. SUSTAINABILITY TRAINING IN THE FINANCIAL SECTOR (SFMF Funding: $40,000)Building local capacity for sustainable lending and investment in the emerging markets

During FY03, IFC delivered sustainability training workshops in Johannesburg, Lagos, Istanbul, Moscow, London, andMiami for emerging market FIs from Africa, Central and Eastern Europe, and Latin America. Some 100 institutionsparticipated in this training course, which typically takes the form of a three-day interactive workshop based on casestudies and site visits to industrial facilities. The program is usually oversubscribed and receives excellent clientsatisfaction feedback. Each regional course is held in partnership with local organizations. In FY03 this hasincluded AICC, the Inter-American Investment Corporation, African Development Bank, Development Bank of SouthAfrica, CDC Capital Partners, Aureos, the Lagos Business School, and IFC’s Private Enterprise Partnership (PEP).Fees make it possible to recover costs for most workshops other than those in less developed regions.

• Seek closer involvement with IFC’s Global Financial Markets and Private Equity and Investment FundsDepartments, as well as IFC’s local field offices, in SFMF project identification, development, and implementation

Key regional priorities are Africa, China, India, and Russia.Thematic priorities include the following:• Strengthening and expanding the existing sustainability training program for FIs,delivering the courses more frequently

and on a more local level in association with key partners, and developing “advanced” courses on key topics.• Developing best-practice guidelines, user-friendly tools, and business case evidence for sustainability management

in the banking, leasing, microfinance, and private equity investment sectors• Further market development in the field of emerging market SRI, including linkages to the potential establishment

of an IFC-backed global emerging market SRI fund• Greater emphasis on demonstration projects with individual IFC clients, for example, in the field of environmental

financing and sustainability reporting

IFC has already approved a number of significant SFMF projects in the first quarter of FY04 and has a strong pipelineof potential new projects for further development. Recent or imminent approvals include the following support:• Two-year grant funding to AICC to establish a Centre for Sustainability Investing in Africa (SFMF contribution:

$200,000)• A comprehensive case study report on examples of value-creating sustainable investment practices in IFC’s private

equity funds portfolio (SFMF contribution: $200,000)• Actuarial research into the correlation between superior sustainability performance and reduced insurance risk in

emerging market corporates (SFMF contribution: $45,250)• Research into the sustainability business drivers affecting industry and the financial sector in 10 EU accession

countries.The project will probably be replicated in China, India, Russia, and Turkey (SFMF contribution: $72,317)• Collaboration with AICC to assist Africa Bank on its next two annual sustainability reports in order to use

the reporting process to achieve measurable business benefits and provide a case study for dissemination andreplication by other emerging market banks (SFMF contribution: $105,000)

For further details and information on the Sustainable Financial Markets Facility contact:

13

BOX 11. MARKET INTELLIGENCE ON SUSTAINABLE FINANCE (SFMF Funding: $155,000)Explaining the business case for sustainable finance in emerging markets

IFC has launched an SFMF-funded project to provide a series of monthly newsletters targeted at senior decision-makers in emerging market financial institutions. Each newsletter will analyze a different sustainability topic relevantto emerging market lending and investment, explaining the commercial risks and opportunities and the business casefor proactive engagement. Topics may include supply chain and human rights issues in China, opportunities in car-bon emissions trading, and the importance of HIV/AIDS management strategies to financial services companies.Newsletters will be e-mailed free of charge to subscribers and placed on the IFC website during FY04. Subject todemand, cost recovery and restricted publication may be introduced if and when the project is replenished for FY05.

Dan Siddy,Program Leader Tel: 1.202.458.9899Email: DSiddy@ifc.org

Zenaida ChavezTel: 1.202.473.8202Email: ZChavez@ifc.org

Objectives and Services

IFC regularly receives proposals for private-sector projectswith substantial environmental benefits. Some of these projects

are ready for consideration as mainstream IFC investments or canbe funded from other sources such as the Global Environmental Facility

(GEF) or the IFC-Netherlands Carbon Facility (INCaF). Many otherenvironmental projects, however, need further preparation to be considered for

IFC financing; or cannot meet IFC’s investment criteria because they involve high-er-than-acceptable costs and/or risks;or they do not meet the GEF/ INCaF criteria,which

focus on global environmental issues such as climate change mitigation and conservationof biodiversity.

The Environmental Opportunities Facility was established to support these types of projects, that is,to provide catalytic funding for innovative ventures that have a strong potential to increase environmental

sustainability but must overcome the uncertainty associated with new markets, new technologies, and new waysof doing business.

IFC uses EOF to provide two types of support: project preparation grants (averaging $120,000 per project) andflexible investment funding (averaging $600,000 per project). Projects must offer innovative private sector solutions tolocal environmental issues such as clean water supply or air pollution. Eligible projects can either produce goods or serv-ices with significant environmental benefits or increase the sustainability of resource use through eco-efficiency improve-ments. EOF’s technical assistance and investment funding are directed at two main themes:

14

4. ENVIRONMENTALOPPORTUNITIES FACILITY

BOX 13. CONOX CLEANER PRODUCTION PROJECTS, CHINA (EOF Proposed Investment: $500,000)Eliminating pollution from straw pulp mills

Conox Ltd. (Conox), a Finland-based company dedicated to the development of cleaner technologies in the paper andpulp industry, has created a new and innovative proprietary technology that is expected to eliminate the largest sourceof water pollution in mills that produce pulp from straw, called “black liquor.” Conox will initially test its technologyin two straw pulp mills in China, the world’s largest producer of straw pulp for papermaking.

Straw pulp mills discharging black liquor into rivers are the largest source of water pollution in China. The EOF willprovide risk capital to Conox for the development of the two pilot plants. The successful installation and operation ofConox’s technology will confirm its technical and commercial viability and make it available to numerous other strawpulp mills in China as well as in other developing countries.

15

• Projects that produce goods and services with environmental benefits. Priority sectors include environmental services(for example, clean drinking water, wastewater treatment, and solid waste recycling/disposal) and pollutioreduction/abatement (for example, industrial air or water emissions and indoor air pollution). Funding may also

be considered for sustainable resource use (for organic farming, certified sustainable forestry, aquaculture withindigenous species, and other activities) and sustainable energy, if such projects cannot be supported by INCaF,GEF, or other instruments

• Projects that lead to “eco-efficiency” improvements that reduce material and energy inputs, thereby generatingsavings in production and waste management costs. IFC can look both to new and existing projects foreco-efficiency opportunities

IFC works closely with selected partners to identify and implement EOF projects. Examples of potential partners include

• financial intermediaries and project development facilities serving small and medium enterprises• environmental facilities established by other multilateral and bilateral organizations• technical assistance programs that focus on environmental improvements• indigenous technical development institutes

BOX 14. WATERHEALTH INTERNATIONAL (EOF Funding: TA, $90,000; Proposed Investment, up to $1.2 million)Supporting community-based technology for safe water supply

WaterHealth International (WHI) was founded to develop and market distributed (noncentralized) water purification/disinfection systems based on an innovative ultraviolet disinfector (proprietary/patented technology) to providepotable water to small communities, institutions, and households, as well as for personal use in the developing world.As a result of its market development initiatives, WHI has already sold and placed more than 300 systems in pilotlocations, with a market value of $1.2 million, through its affiliate partners in several countries, including Mexicoand the Philippines.

IFC provided $90,000 of EOF TA funding to co-finance a $180,000 feasibility study on WHI’s market prospects inthe Philippines and Mexico. As a result of the EOF grant funding and additional market insight, WHI has changedits focus from that of a technology supplier to a service provider, and has decided to aggressively enter the decen-tralized distributed water purification business through the purchase of a majority share of a water store business inthe Philippines (Aquasure) from its largest water filter technology customer. IFC is currently in the final stages of nego-tiations to make an early-stage equity investment in WHI using EOF to play the catalytic and technology validating roleto attract further capital investment and credits from private sector capital markets.

BOX 15. APPROTEC, TANZANIA (EOF Funding: TA, $15,000; Loan, $20,000)Strengthening the supply chain for low-cost irrigation pumps in Tanzania

ApproTEC is an international nonprofit organization whose mission is to create new livelihoods and kick-start sustainableeconomic growth in developing countries. ApproTEC designs and promotes simple inexpensive technologies thaare bought by poor local entrepreneurs and used to establish highly profitable new small-scale businesses, primarily

in eastern Africa. ApproTEC approached IFC for EOF funding to address a sustainability gap in the supply chain for itsSME-scale, foot-powered irrigation pumps in Tanzania. The product that ApproTEC has focused on for the past seven yearsis a derivation of International Development Enterprise’s (IDE) treadle pump, a low-tech and low-cost, irrigation pumpcalled the “Money Maker.” ApproTEC has successfully developed a supply chain for the Money Maker irrigation pumpsfrom manufacturer to end consumer on a near sustainable basis, a market that has to date sold over 32,000 pumps.

The critical challenge for ApproTEC in Tanzania is to develop a supply chain for its pumps that is robust enough for eachparticipant (manufacturer, wholesaler, retailer) to provide sufficient credit to its downstream customer (at a minimumof 30 to 60 days, and in some instances a whole growing cycle) to effectively sell into a cash-and-credit constrainedmarket. To help the supply chain become completely sustainable, independent of subsidies, EOF has given ApproTEC a$20,000 loan to provide working capital credits to the manufacturer and short-term credits to the wholesaler. Inaddition, a $15,000 grant has been awarded to fund a 12-month technical assistance program to aid themanufacturer in that transition.

FY03 Activities

IFC’s strategy for the EOF in FY 03 was to• Focus on priority sectors such as environmental services (clean drinking water, wastewater

treatment, solid waste management), eco-efficiency improvements in IFC’s existing andnew clients’ operations, and pollution reduction/abatement

• Identify new environmental technologies and business models that demonstratea strong potential to become commercially viable and replicable in thelong term

• Develop strategic partnerships to help develop a strong project pipeline • Increase awareness of EOF’s financing activities within IFC and

among external stakeholders such as entrepreneurs, developmentagencies, and the financial community in general.

EOF has screened scores of early stage projects, most ofwhich were rejected as being ineligible (or referred toother funding sources) and some of which are stillunder development for potential EOF support.Through the end of FY03, seven EOF projects hadbeen funded or were at an advanced state ofpreparation. Four projects were approved for TAfunding totaling $255,000 (one of these alsoreceived a small loan of $20,000), of whichabout $58,000 was actually disbursed in FY03.Five projects (including one that has receivedTA) are under active consideration for up to$3.15 million in total investment funding.

Descriptions of these seven active projects are provided in boxes 13 to 19 and can be summarizedas follows (project titles appear in parentheses):

• Appraisal of start-up that has developed a new cleaner production technologyexpected to eliminate the largest source of pollution derived from the strawpulping production process; this is expected to have wide application inChina, where small pulp and paper plants using straw and other non-wood inputs are the largest source of water pollution in thecountry (Conox)

• Technical assistance for the preparation of a feasibility study andpote tial equity investment in a water purification/ disinfection systemto provide potable water to small communities, institutions, and householdsinitial target countries include the Philippines and Ghana (WHI)

• Technical assistance and soft loan to a manufacturer of environmentally friendly, low-cost, foot-operated water irrigation pumps in Kenya (ApproTEC)

17

BOX 16. CALIDRA ECO-EFFICIENCY PROJECT, MEXICO (EOF Funding: TA $120,000)Preserving scarce water resources in mineral lime production

IFC has identified an opportunity to assess the technical and commercial viability of a system designed to recoverwater vapor at Grupo Calidra’s (GC’s) industrial facilities. Grupo Calidra is an existing IFC client. This pilot initiativewill be carried out in one of GC’s 14 plants in Mexico and is being co-financed by GC and the EOF. The project isexpected to recover approximately 12 million liters of water a year by utilizing an innovative process developed by aBelgian company.

GC is Mexico’s largest producer of lime, a material used in the construction, steel-processing, and chemicalindustries. Some of GC’s industrial facilities are located in areas with desertlike conditions, where all water needs aremet with groundwater, an extremely scarce resource in the region. If GC’s pilot initiative is successful, the companywill replicate this sustainable approach in its other facilities, which will help reduce the pressure on the limited waterresources in the affected areas.

BOX 17. REVA ELECTRIC CAR PROJECT, INDIA (EOF Proposed Investment: $600,000)Innovative electric vehicles for domestic and export markets

REVA Electric Car Company (RECC) is a joint venture of the Bangalore-based Maini Group and AEV LLC in the UnitedStates. RECC is fully dedicated to the design, development, manufacturing, and marketing of battery-operatedelectric vehicles for city use. The project was conceived and conceptualized in July 1994 and is a unique combina-tion of engineering and technology expertise, leveraging on the use of innovative materials as well as manufacturingsystems. RECC produced its first prototype in 1996 and since 2002 has been producing and marketing electricvehicles on a commercial basis.

IFC is considering investment funding from EOF to RECC to help the company expand its domestic as well asinternational distribution network. RECC’s electric vehicles will provide important environmental benefits by usinga clean technology and therefore avoiding the release of pollutants that are typically produced by conventionalvehicles, thus helping reduce air pollution primarily in metropolitan areas.

• Assistance for an existing IFC client to assess the technical and commercial viability of an innovative waterrecovery system that is expected to reduce the depletion of underground water reserves in Mexico (Calidra)

• Appraisal of an Indian company that has developed, and is currently manufacturing and marketing, the firstelectric motor vehicle in the country (Reva)

• Working with one of IFC’s SME development facilities to develop an arsenic water treatment technology forhouseholds in Bangladesh (Shapla)

• Technical assistance for the development of conch mariculture technology with implications for enhancing biodiversity in the Latin American and Caribbean region (TWI Conch)

FY04 Work in Progress and Future Pipeline

EOF’s work in FY04 will be based on the following strategy:

• Support projects with innovative technologies that have a strong replication potential and can expectcommercial sustainability

• Build a well-diversified project pipeline by region and sector, following the strategic focusadopted in FY03

• Pursue project-by-project “syndications” of investment funding in order to recycle corefunding into new projects

• Establish partnerships that will help reach a larger number of markets and raiseadditional funding for EOF projects

• Establish linkages with other IFC industry departments, such as SME andGMS, to leverage IFC’s overall sustainability impact

BOX 18. SHAPLA ARSENIC FILTER, BANGLADESH (EOF proposed investment: up to $350,000)Low-cost arsenic filters for safe water supply

Shapla has developed a low-cost household water filter to address the arsenic water contamination problem in Bangladesh.The product retails at less than $7 and can process up to 45 liters of water a day. The filter is designed to provide a house-hold-level solution to the arsenic-contaminated ground water, which endangers the health of up to 40 million people inBangladesh. Its technology, invented by a Bangladeshi chemistry professor at Rajshahi University, is currently in its finalstages of patent registration and certification by local government agencies.

EOF has leveraged its relationship with IFC’s project development facility in Bangladesh, the Southeast Asia DevelopmentFacility (SEDF), to assist Shapla in developing a business plan, gaining technology approval, and designing a productionsite. Meanwhile, EOF is poised to make an initial equity investment in Shapla together with a local partner, InternationalDevelopment Enterprises, the incubator for this start-up company. A SEDF contribution of $30,000 could lead to a$350,000 EOF equity stake in the firm in 2004, which in turn could help attract additional equity investments fromstrategic investors and credits from local banks to enable the company to rapidly scale up its business.

18

19

A key step for FY04 is to approve and begin funding EOF’s first investment projects, including three of the fiveinvestments under preparation in FY03 (see previous section).New projects being brought into the near-term pipelinein FY04 include a potential cleaner production technical assistance engagement to help the Pakistani textile industryreduce water and energy consumption and a wastewater optimization project for sugar mills in Colombia.

For further details and information on theEnvironmental Opportunities Facility contact:

BOX 19. TRADE WIND INDUSTRIES CONCH, BAHAMAS(EOF Funding: TA, $30,000; Proposed Investment, $500,000)Enhancing biodiversity in the Caribbean by developing mariculture technology

Trade Wind Industries (TWI) Conch is a Turks and Caicos – based mariculture company that is raising conch and sellingits meat into U.S., Asian, and select Caribbean markets. Conch is a large marine mollusk found in the wild in thetropical waters of the Caribbean. TWI Conch is now considering a rapid expansion and grow-out farm model, toramp-up to sufficient scale to become a valued supplier to a distributor in one of the key Asian markets: Japan, Taiwan,or China.

The EOF believes TWI’s conch mariculture technology has the potential to evolve into a commercially viable business,while playing an important sustainable development role in the Latin America and Caribbean region (LAC). Conch isan endangered species, with important commercial value and a critical link in the tropical marine food web. Theintent of the project is to reduce pressure on wild stocks by developing a commercially viable aquaculture alternative, whileaffording renewable sources of income, protein, and employment to people living in the Caribbean. strategic investors andcredits from local banks to enable the company to rapidly scale up its business.

Alexandre Leite, Program Leader Tel: 1.202.473.2559Email: Aleite@ifc.org

Jeff LiebertTel: 1.202.458.7885Email: Jliebert@ifc.org

Management Structureand Steering Committee

The three SBAP facilities are managed by IFC’s Environment andSocial Development Department (CES). The facilities are based in

Washington, D.C., and utilize IFC’s field offices and SME project developmentfacilities as needed to help implement their activities. Several IFC staff members have

been seconded to the facilities on a full-time basis.

The facilities are overseen by a Steering Committee made up of senior IFC managers. TheSteering Committee meets quarterly to review activities and provide guidance on future

operations and strategy. The committee also approves the annual budgets of the facilities andcommissions independent evaluations. Its current members are Gavin Murray (director, Environmental and

Social Development Department),Allen Shapiro (director,Controller’s and Budgeting Department), and UdayWagle (director,Trust Funds Department).

Core staff of the CCF includes a program leader, an environmental/social specialist, and administrative support(information systems specialist and part-time budget controller to be shared with SFMF and EOF). Individualprojects are promoted by IFC project teams, and management of engagements is vested in an IFC staff member whois accountable to the program leader for the development and management of the CCF engagement. IFC staff costsfor developing and managing CCF engagements are not covered by the CCF. On occasion, however, CES staff maybe used as resource experts, providing skills on a part-time or short-term basis for specific project deliverables.

Core SFMF staff consists of a program leader, a training and professional development specialist, and a programassistant (all full-time), plus an information systems specialist (shared with CCF) and part-time accounting/contractsand administrative support.These staff are seconded IFC personnel paid for by SFMF. IFC capitalizes on the expertiseavailable from in-house resources and maximizes synergy with other “best-practice” activities in IFC. Accordingly,SFMF also relies on consultant support and other IFC staff resources acquired on a part-time or short-term basis.Resource experts who provide skills on a part-time or short-term basis for specific project deliverables includespecialists working in IFC’s Environment and Social Development Department, World Bank Group financialmarkets experts, consultants, and selected personnel from partner international financial institutions and NGOs.

EOF staffing includes (a) a core team in the Environmental Finance Group that identifies new projects, conductsinitial project reviews, prepares funding requests, supervises existing projects, and administers the EOF; and (b)specialized IFC staff or consultants as needed for project reviews. Consultants to conduct sector and/or countrystudies to identify new project opportunities may also be used. IFC’s investment departments are encouraged toidentify projects for EOF support, but EOF assistance is provided only to those projects that cannot be developedusing regular IFC resources.

20

5. OVERSIGHT, MONITORING,AND EVALUATION

Monitoring andEvaluation Framework

All three facilities are subject to a rigorous monitoring and evaluation (M&E) process.At inception, each facility wasrequired to develop a framework which sets out clear objectives, performance indicators, and specifics on howoutcomes will be monitored and evaluated. Project selection criteria are built into each facility’s project cycle, andeach TA project is evaluated on completion against inputs/outputs/outcomes identified at inception.

The facilities provide donors with regular activity reports, subject to donor requirements, and annual reports on thefacilities’ project development and investment activities, as well as budgetary and other operating information.Thisis the first such report.An independent reviewer will conduct an interim evaluation of the facilities during their third year ofoperation, and a final independent evaluation will be conducted in the fifth year. Bothevaluations will be commissioned by the Steering Committee.

Although it is too early to measure the aggregate impact of thefacilities’ activities in any meaningful way, a great deal ofthought is already being given to effective means ofassessing their impact on development. IFC iscurrently recruiting a full-time M&E officerto coordinate M&E for the facilities.

The SBAP facilities rely on donor funding fortheir technical assistance and investment (in the

case of EOF)1 activities as well as for their operatingbudgets, including staffing. Many donors have expressed an

interest in partnering with IFC in this endeavor to complementtheir own efforts at addressing environmental and social concerns in

developing countries through the private sector. The facilities’ combinedestimated funding requirements for the five-year pilot period is $55 million (see

table 1). IFC has provided an initial commitment of $10 million, leaving a totalfunding target of $45 million.

As of Nov. 30, 2003, commitments totaling more than $11 million have already been receivedby the facilities from the Netherlands, Switzerland, and Norway (see table 2). Other donors are

expected to provide funding commitments in the coming months, and SBAP anticipates ultimatelymeeting its current resource gap of approximately $35 million.

22

1. EOF investments are made on terms as commercial as possible, depending on the nature of the venture. However, due to the high riskinvolved in these investments, IFC felt it was not appropriate to raise commercial funding and/or promise any type of return. For thatreason, EOF’s investment activities are funded by donors. Notwithstanding the high risks, EOF expects to receive returns from some ofits investments, and these returns will be recycled by EOF to fund operations and/or further investments.

FIVE-YEAR FUNDING REQUIREMENTS (millions of U.S. dollars)

Table 1. Funding Targets at Board Approval

FACILITY IFC FUNDING DONOR FUNDING TOTAL

Corporate Citizenship Facility 2.5 12.5 15.0

Sustainable Financial Markets Facility 2.5 12.5 15.0

Environmental Opportunities Facility 5.0 20.0 25.0

Total 10.0 45.0 55.0

6. FINANCIAL INFORMATION

In recognition of the diversity of thematic and regional priorities among donors, and the different budget and fundingmodalities through which they operate, SBAP accepts funding in various ways. Donors may provide funding to all threefacilities (as in the case of the Netherlands and Norway) or to one or more facility (as in the case of Switzerland).To offermore opportunities for donors to contribute to the program, the facilities also accept donor funding earmarked forspecific regions in accordance with donor priorities.We are currently looking into other ways of accommodating donorfunding preferences, such as limited “syndication” of a selective number of large projects, without unduly complicatingthe administration of the facilities. For a detailed breakdown of SBAP present fund-raising status, see tables 3, 4 and 5.

Much of the program’s attention in FY03, the first year of operation, focused on building a healthy pipeline ofactivities, approving and funding initial activities, and establishing the management and budgetary systems needed tomeet IFC’s and the other donors’ requirements.Total expenditure in FY03 was approximately $1.6 million (see table

23

Table 2. Donor Fund-Raising Status as of Nov. 30, 2003: Consolidated

TARGET COMMITTED/RECEIVED GAP

Other donors 45,000,000 11,002,577 33,997,423IFC 10,000,000 10,000,000 –

Total 55,000,000 21,002,577 33,997,423

DONOR RECEIPTS FY03 FY04 FY05 FY06 FY07 CYCLE

Netherlands 2,656,411 1,527,504 – – – 4,183,915 Norway 400,000 – – – – 400,000 Switzerland 750,000 – – – – 750,000 IFC 1,786,291 – – – – 1,786,291

Total 5,592,702 1,527,504 – – – 7,120,206

DONOR COMMITMENTS FY03 FY04 FY05 FY06 FY07 CYCLE

Netherlands 2,656,411 2,948,083 2,948,083 – – 8,552,577Norway 400,000 550,000 – – – 950,000 Switzerland 750,000 – 750,000 – – 1,500,000 IFC 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 10,000,000

Total 5,806,411 5,498,083 5,698,083 2,000,000 2,000,000 21,002,577

24

Table 3. Donor Fund-Raising Status as of Nov. 30,2003: C C F

EXPECTED COMMITTED/RECEIVED GAP

Other donors 12,500,000 2,734,763 9,765,237IFC 2,500,000 2,500,000 –

Total 15,000,000 5,234,763 9,765,237

DONOR RECEIPTS FY03 FY04 FY05 FY06 FY07 CYCLE

Netherlands 774,875 442,976 – – – 1,217,851 Norway 100,000 – – – – 100,000 IFC matching 286,291 – – – – 286,291

Total 1,161,166 442,976 – – – 1,604,142

DONOR COMMITMENTS FY03 FY04 FY05 FY06 FY07 CYCLE

Netherlands 774,875 854,944 854,944 2,484,763 Norway 100,000 150,000 – – – 250,000 IFC matching 500,000 500,000 500,000 500,000 500,000 2,500,000

Total 1,374,875 1,504,944 1,354,944 500,000 500,000 5,234,763

EXPECTED COMMITTED/RECEIVED GAP

Other donors 12,500,000 4,384,763 8,115,237 IFC 2,500,000 2,500,000 –

Total 15,000,000 6,884,763 8,115,237

DONOR RECEIPTS FY03 FY04 FY05 FY06 FY07 CYCLE

Netherlands 774,875 442,976 – – – 1,217,851Norway 200,000 – – – – 200,000 Switzerland 750,000 – – – – 750,000 IFC 500,000 – – – – 500,000

Total 2,224,875 442,976 – – – 2,667,851

DONOR COMMITMENTS FY03 FY04 FY05 FY06 FY07 CYCLE

Netherlands 774,875 854,944 854,944 2,484,763Norway 200,000 200,000 – – – 400,000 Switzerland 750,000 – 750,000 – – 1,500,000 IFC 500,000 500,000 500,000 500,000 500,000 2,500,000

Total 2,224,875 1,554,944 2,104,944 500,000 500,000 6,884,763

Table 4. Donor Fund-Raising Status as of Nov. 30, 2003: S F M F

25

6), of which $476,000 was spent on implementation work for 38 projects, and another $400,000 on developingproject pipelines for future support.The remaining expenditure during the fiscal year was largely made up of costsassociated with start-up activities, including staff recruitment, establishing business processes, defining roles andresponsibilities, developing policies and procedures, and implementing an effective budgeting and reporting system.

Budgeted expenses for all the facilities in FY04 total $10.6 million owing to a strong pipeline of projects. Up to 90percent of FY04 budgeted expenses are expected to relate to costs directly associated with project implementation, andadministrative expenses to be about 10 percent. A large part of these expenses will probably be funded throughcommitments already received from existing donors. To meet FY04 budget targets, however, an additional $1.012million will need to be raised in donor funding. SBAP recently launched a special fund-raising and promotional effortdesigned to ensure that the facilities meet their funding targets for FY04 and remain fully funded throughout thefive-year pilot period.

25

EXPECTED COMMITTED/RECEIVED GAP

Other donors 20,000,000 3,883,051 16,116,949 IFC 5,000,000 5,000,000 –

Total 25,000,000 8,883,051 16,116,949

DONOR RECEIPTS FY03 FY04 FY05 FY06 FY07 CYCLE

Netherlands 1,106,661 641,552 – – – 1,748,213Norway 100,000 – – – – 100,000 IFC 1,000,000 – – – – 1,000,000

Total 2,206,661 – – – – 2,848,213

DONOR COMMITMENTS FY03 FY04 FY05 FY06 FY07 CYCLE

Netherlands 1,106,661 1,238,195 1,238,195 – – 3,583,051Norway 100,000 200,000 – – – 300,000 IFC 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 5,000,000

Total 2,206,661 2,438,195 2,238,195 1,000,000 1,000,000 8,883,051

Table 5. Donor Fund-Raising Status as of Nov. 30,2003 : E O F

Table 6. Actual Funding and Expenditure in FY03

FUNDING AND EXPENDITURE CCF SFMF EOF TOTAL

Donor receipts 1,161,166 2,224,875 2,206,661 5,592,702

Donor commitments 1,374,875 2,224,875 2,206,661 5,806,411

Trust fund investment income 19,190 32,402 47,458 99,050

Fee income 7,437 43,520 - 50,957

Total expenses (477,272) (673,134) (472,445) (1,622,851)

Funding carried forward to FY04 710,521 1,627,663 1,781,674 4,119,858

26

Guiding Principles forFY04 and Beyond

IFC’s strategy for the facilities for FY04 has been refined on thebasis of lessons from the first year of operation, which have provided

a better understanding of demand, priorities, and the best approaches forsuccessful marketing and implementation of the facilities’ services.

Alignment with core business: The SBAP will place more emphasis on main-streaming its activities within IFC’s regular investment operations. Program activities will

reflect IFC’s core business and sustainability strategy, consistent with IFC’s commitment tomainstream environmental and social services in investment operations.

Regional focus: To ensure a broader geographical reach for the facilities, special attention will begiven to regional delivery. Consistent with IFC’s frontier strategy, Sub-Saharan Africa will be a regional

priority for the facilities. Besides offering a broader reach, this focus on regional delivery provides greaterflexibility to donors with specific regional interests.Therefore, donors are now able to earmark their funds for

specific regions according to their priorities.

Regional Priorities

As project activity increases, a greater attempt will be made in FY04 to ensure that SBAP operations becomemore broadly diversified regionally.While recognizing the market-driven nature of some of the work carried outby the facilities, in particular by the EOF, all the facilities will make a more concerted effort to seek out projectopportunities in all regions. In the future, reporting of SBAP’s operations will be done on a regional basis to helpkeep track of progress in its implementation of the regionalization strategy, and to enable potential donors toprovide funding earmarked to specific regions if preferred. Key regional priorities are summarized below.

Sub-Saharan Africa: In keeping with the priority given to frontier markets in IFC’s strategic directions, the SBAPplans to give special attention to the sustainable development needs of the Sub-Saharan Africa region, takingadvantage of new initiatives that promise to bring improved governance and economic development to the regionin the coming years.The IFC’s Strategic Initiative for Sub-Saharan Africa calls for an increased focus on capacitybuilding and SME development, and the SBAP will work with IFC’s SME facilities to ensure sustainable outcomesfrom their interventions. IFC perceives a significant demand for the SBAP’s services in Africa in connection withkey issues such as HIV/AIDS, community development, and the informal economy.A cornerstone of IFC’s work inAfrica using the SBAP will be the continuing relationship with the African Institute of Corporate Citizenship

7. STRATEGIC DIRECTIONS

(AICC) and the establishment of a Center for Sustainability Investment under its auspices.This will enable IFC toexpand its grass-roots technical assistance on sustainability to the productive sector (via CCF) and the financialsector (via SFMF).

Committed CCF projects for FY04 include working with a Kenyan honey cooperative to access fair trade marketsin Europe; community and economic development work for a shrimp aquaculture project in Madagascar; andsupport to indigenous people who stand to benefit from diamond mining in Botswana. IFC is also examining howit can use CCF to facilitate the delivery of HIV support to IFC clients and the wider private sector in Kenya.

Specific projects expected to receive SFMF support in FY04 include seed funding to establish a Center forSustainable Investment in South Africa, which would act as a focal point for research, awareness-raising, andnetworking on sustainability and finance issues throughout Africa; help in establishing a regional SRI researchbusiness that would provide investors with information and ratings on the sustainability performance of Africancorporations (building on the Johannesburg Stock Exchange’s planned sustainability index in conjunctionwith FTSE4Good); and an initiative to assist Nigerian financial institutions to establish a nationalassociation and work program to mainstream sustainable development priorities into domesticlending and investment.

The potential for investment in the environmental technologies sector in Africa viaEOF remains a medium-to-long-term proposition, although as described in section2, IFC has a pipeline of projects with potentially replicable technologies relevantto Africa, one example being an innovative commercial venture for the supplyof drinking water.

Middle East and North Africa: The recent turmoil in the Middle Eastand North Africa has reduced economic prospects in much of the region,limiting SBAP opportunities in the countries closest to the conflicts.Even so, several countries in this diverse region still attract investment,and IFC has remained active in the region. Sustainability will be anoverriding theme in the Middle East and North Africa as IFC seeksto broaden the development impact of its activities.

To this end, IFC intends to use CCF to analyze how businessesin the region address environmental and social competitivenessand market access issues. Such issues are emerging as potentialnon-trade tariff barriers through supply chain pressures andexpectations. IFC is also exploring ways in which the SBAP

27

can support SME activities of the North Africa Enterprise Development Facility (NAED). It is likely that suchSBAP/NAED activities would focus on community development and supply chain management, using CCF.

In response to a growing need in the region for training in sustainable banking and environmental risk management,IFC plans to use SFMF to deliver a local program of training workshops to financial intermediaries.This will beundertaken with partner organizations active in the region (such as the Netherlands Development Finance Company(FMO) and the African Development Bank), and in collaboration with the NAED.

The harsh climatic conditions in much of the region present strong potential opportunities for IFC to use EOF todevelop or replicate technologies that promote clean water supply and maximize resource use, especially water.Technical assistance could be deployed to IFC’s existing clients in the manufacturing sector to improve eco-efficiencyin their production processes as a demonstration effect. IFC’s eco-efficiency work via EOF in similar climaticconditions in Mexico could be replicated in manufacturing facilities in the Middle East and North Africa.

Latin America and the Caribbean: In spite of its vulnerability to external shocks, the Latin America andCaribbean region offers a promising business environment for potential SBAP activity.The financial sector is welldeveloped in key IFC client countries and Brazil, Mexico, Chile, and Argentina have a significant industrial base.

IFC’s sustainability “Business-to-Business” project, funded in FY03 via CCF, demonstrated client interest in the strongbusiness benefits that can be delivered through improved labor standards, cleaner production, and communitydevelopment adjacent to projects. IFC proposes to build on this interest in FY04 (for example, through mentoringprograms for IFC client companies), as well as to initiate additional work in the area of rural livelihood andbiodiversity, mainly with the extractive sector. IFC has already indicated support in principle to a communitydevelopment program with a major textile company in Haiti and is likely to work with rural farmers in the Peruviandairy sector to improve sustainability of production and build supply chain fidelity with an IFC sponsor.

Through SFMF, IFC intends to strengthen its relationships with INCAE Business School’s Latin American Centerfor Competitiveness and Sustainable Development (in Costa Rica) and the Fundação Getúlio Vargas BusinessSchool’s Center for Sustainability Studies (in Brazil).These organizations would provide IFC’s key strategic partners

for financial sector sustainability training in the region, using SFMF. Such training would also continue to beoffered in conjunction with other development banks such as CAF, Brazilian Development Bank, and the

Inter-American Development Bank.

With a sophisticated local investor base in the region, IFC’s environmental financing activities viaEOF will be more aggressive in partnering with development and commercial financing

institutions to identify and support early-stage projects. In spite of relatively large flows ofprivate capital to the region in recent years, there is little venture capital available for new

environmental technologies. By partnering with local institutions, IFC will focus onsectors that have traditionally been neglected by the private sector, such as clean

water supply, waste management, and wastewater treatment. The region’s largeindustrial base may also lead to opportunities for EOF in the promotion of

efficient resource use.

Europe and Central Asia: In view of the diverse geographies andstates of economic development in this region, the SBAP is likely

to experience a range of demands. Fortunately, continued

28

implementation of economic reform means that the SBAPcan count on a business climate conducive to its activities inthe region.

IFC will be highly selective in applying SBAP resources in Central Europe’sEU accession states. The primary focus will likely be on eco-efficiency andenvironmental financing (using EOF and SFMF) and competitiveness and marketaccess issues for exporters (using CCF). Examples include SFMF funding for financialsector training related to IFC’s energy efficiency financing projects in Central Europe.

In Southern Europe, IFC will use SBAP to continue CCF-funded work with the SoutheastEurope Enterprise Development facility in building sustainability and social equity into thevalue chain of the Balkans’ herbal sector. SBAP will also collaborate with SEED to develop acertified professional training program for local environmental consultants and banks, using SFMF.SBAP is also likely to have a particular interest in Turkey, which is experiencing a growing demandfor high-impact services in the field of eco-efficiency, corporate social responsibility and governance, andsustainable finance.

In Central Asia, the main focus of SBAP’s efforts is likely to be CCF-funded work in the mining sector to promotecommunity development and address biodiversity issues. Because of its limited basic infrastructure and environmentalservices, Central Asia will require a flexible approach to EOF project development, with potential opportunitieslikely to be in the renewable energy sector. IFC will support Central Asian financial institutions through its regionalsustainability training work under SFMF, although there may be opportunities to develop local environmental andsocial initiatives in the sector, for example, with the Bankers Training Institute of Azerbaijan.

Russia and Eastern Europe will be a major focus of SBAP activity in FY04. In the financial sector, IFC will useSFMF to provide preliminary environmental financing training to Russian banks in conjunction with IFC’s PEP andintends to commission a report on sustainability business drivers affecting industry and the financial sector in Russia.The study would evaluate legislative, policy, and market trends affecting corporate EHS performance and use thisdata to gain insights into investment risks and opportunities over the short to long term. IFC will also develop along-term sustainability training program in Russia, which is also likely to be a key target for corporate citizenshipprojects with medium and large Russian companies.

East and South Asia: Sustained strong economic performance in East and South Asia in FY03 has producedsignificant opportunities for IFC investment and advisory activity in the region. In recognition of the role SMEs canplay in stimulating employment and growth, all three SBAP facilities are in discussion with IFC’s five SMEdevelopment facilities in the region. They have a strong line of business development /support activities focusedon sustainable rural livelihoods, development of nontimber forest product markets, and access to capital throughmicro-credit and related work.

CCF support is being sought for tourism projects in the Maldives for coastal management programs that bring publicand private sectors together to protect coral reefs and in Bhutan for building supply chains that promote localeconomic activity and biodiversity work around ecotourism sites. IFC will continue CCF’s work with women in theinformal enterprise sector and will also undertake capacity building work with IFC clients and their outgrower programsin the sugar and oil palm sectors in India and Indonesia to encourage more sustainable production practices and improvedoccupational health and safety.

29

The FY04 pipeline for SFMF includes a sustainability trainingcourse for a China-based private equity fund; a high-level briefing on

sustainability issues to senior executives of Chinese commercial banks, inassociation with the Canadian Export Credit Agency and ASrIA; Competitive

Business Advantage training workshops for East Asian and South Asian banks; and astudy on the sustainability business drivers affecting industry and the financial sector in

India. IFC is working closely with partners such as ASrIA and India’s Centre for SocialMarkets in the region.

High population growth in some countries in the region puts pressure on basic infrastructureservices, which results in a growing demand for cleaner technologies. EOF can play an important role in

supporting cleaner water supply and waste treatment services to meet this demand, and to help countries suchas China implement new technologies to address existing pollution problems while meeting newly established

environmental requirements.To this end, and to help expand its reach, EOF plans to work in partnership with localfinancial intermediaries.

FY04 Management Priorities

Effective management of the facilities will be key to the successful implementation of SBAP’s FY04 strategy. Inrecognition of this, the strategy gives particular prominence to enhancing ownership of SBAP’s activities by key IFCinvestment departments and greater integration of the facilities into the regular operations of IFC’s Environment andSocial Development Department. In line with the ongoing efforts of CES to mainstream its operations into IFC’sregular activities, the SBAP facilities will be a core activity of CES and then IFC as a whole, within the context ofIFC’s overall sustainability objectives. This should raise awareness and build capacity in the area of sustainabilitywithin IFC. In many cases, the process will bring environmental and social specialists and investment officers to thesame location, with a closer operational link to IFC’s SME project development facilities in the field. Mainstreaming isexpected to result in joint sector strategies and joint action plans as synergies emerge from the integration exercise.

The FY04 strategy also calls for easing of the administrative burden borne by program leaders of the three facilities,particularly by relieving them of much of the work involved in fund-raising and donor relations. In view of theimportance of donor funding for the successful implementation of SBAP’s objectives, a dedicated team has beenassigned to lead an intensive fund-raising and promotional effort designed to help SBAP achieve its fund-raisingtargets. SBAP’s success in raising donor funding will ultimately depend on how well IFC can convince potentialcontributors of the value it adds in stimulating environmentally and socially sustainable private sector activity inemerging economies.

SBAP’s management will also implement efficiency measures such as the harmonization of paperwork and procedures,joint production of regional strategies and project pipelines, and, where practicable, joint business development missionsto potential clients in the field. Finally, consideration is being given to assigning dedicated SBAP staff to one or moreIFC field offices in Sub-Saharan Africa to help ensure that appropriate attention is paid to developing business in theregion, as envisioned in the strategy.

30

Global General 15,600 SFMF Completed Sponsorship of panel discussion on emerging market opportunities at leadingconference of North American “sociallyresponsible investment” investors and fund managers.

Global AUREOS n.a. SFMF Completed Fee-based sustainable investment (7,900 net training course for AUREOS and itsprofit) subsidiary private equity fund managers.

Global General 25,700 SFMF Ongoing Development of web-based information por-tal on sustainability issues and resources foremerging market FIs.

Global General 7,700 SFMF Completed Pilot phase for development of CD-ROM-based reference resource for emerging mar-ket FIs, centered around nontechnical EHSprofiles for up to 100 SME sector businessactivities plus glossary of environmentalterms and country-specific summaries ofkey EHS legislation and links to local andinternational sources of expertise and fur-ther information.

Global General 41,800 SFMF Completed Research into current market and futurepotential for SRI in developing-country list-ed equities, assessing investor appetite, keybarriers/incentives, existing research infra-structure. Recommendations include guid-ance on how IFC and the SFMF can bestwork in partnership with others to play acatalytic role in building this industry andmaximizing developmental benefits. Thefinal report is currently undergoing peerreview and will be published in October2003.

Global General 155,000 SFMF Ongoing A series of monthly newsletters targeted atsenior decisionmakers in emerging marketfinancial institutions. Each newsletter willanalyze a different sustainability topic rele-vant to emerging market lending and invest-ment, explaining the commercial risks andopportunities and the business case forproactive engagement. Topics may includesupply chain and human rights issues inChina, opportunities in carbon emissionstrading, and the importance of HIV/AIDSmanagement strategies to financial servicescompanies. Newsletters will be e-mailed freeof charge to subscribers and placed on IFC’swebsite during FY04. Subject to demand,cost recovery and restricted publication maybe introduced if and when the project isreplenished for FY05.

Global IISD 55,300 SFMF Ongoing Grant to International Institute for SustainableDevelopment to research the feasibility of newinternship program (for potential funding bySFMF) to provide young professionals fromdeveloping-country financial institutions withwork experience in the corporate environmen-tal management units of major private sectorbanks in Western Europe and North America.

AUREOS training, London

SFMF website development

CD-ROM resource (phase I)

“SRI in the Rockies” Conference 2002, Colorado Springs

SRI strategic review(phase I)

Market intelligencebriefs

Internship feasibilitystudy

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

ANNEX: PROJECT PORTFOLIO AS OF OCTOBER 2003Sustainable Business Assistance Program

31

Global Agribusiness 12,400 CCF Completed Working with agribusiness commodity buyers/ buyer/producers and banks that invest in retailers & commodities to develop better management

practices that can be used as investmentscreens. Stage 1 involves identificationof key banks and producer buyers andmeeting to discuss the proposal.

Global Agribusiness 80,000 for CCF Ongoing Phase II includes a scoping assessment buyers/ design; of 10 commodities, selection of up to 5 retailers implementation commodities with high potential for BMP & investors costs to be impact, and a workshop with interested

developed parties to agree structure/governance andway forward. It also involves implementa-tion of BMP work on selected commodities.The testing of commodity-specific BMP-based screens will allow investors to reducerisk/exposure from their investment andworking capital loans and institutionalpurchasers to use the same type of screens(in the absence of formal certification) toencourage environmental and socialsustainability through their supply chains.

Global IFC sponsors 285,500 CCF Ongoing The CCF is working with IFC clients and and wider an NGO consortium (IUCN and FFI) to private sector develop a practical guide for businesses in

emerging markets that wish to understandand incorporate biodiversity management intheir operations. This guide will be thefourth publication in the IFC “good-practice” series.

Global Bolivian 8,600 CCF Ongoing CCF sponsored the participation of a mining junior mining junior at the ICMM/IUCN meeting

on biodiversity-related best practices. TheIFC client prepared and delivered apresentation on its approach to biodiversitymanagement and its report will be availablefor dissemination and use in the upcomingbiodiversity good-practice guide.

Philippines, Peri-urban 90,000 TA EOF TA EOF financed WHI’s market feasibility Ghana and village 1,200,000 completed study, which effectively segmented the Multicountry communities investment market and provides an optimistic market

in pipeline outlook for the Philippines. Owing to theseresults, WHI has decided to aggressivelyenter the decentralized distributed waterpurification business through the purchase ofa majority share of a water store business(Aquasure) from its largest water-filtertechnology customer in the Philippines.The EOF is currently in the final stages ofnegotiations to make an early-stage equityinvestment in WHI (US$1.2 million), to playthe catalytic and technology-validating role toattract further capital investment and creditsfrom private sector capital markets. Theinvestment is targeted to disburse in thefourth quarter of 2003.

GLOBAL

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

32

Better managementpractices (phase I)

Better managementpractices (phase II)

Biodiversity good-practice guide

ICMM/IUCN forum

WaterHealthInternational distributed communitywater systems

investors

Asia ASrIA 14,600 SFMF Completed Sponsorship of annual conference ofAssociation for Sustainable and ResponsibleInvestment in Asia, a not-for-profit member-ship organization dedicated to promotingSRI in Asian emerging markets.

Asia AsrIA 30,000 SFMF Ongoing “Cornerstone” sponsorship of ASrIA’s spring2004 conference. Event will be used todisseminate SFMF’s work and best-practiceguidance.

China, AsrIA 36,500 SFMF Ongoing Sponsorship of research by ASrIA into India, current and potential future market for SRI Indonesia, in China, India, Indonesia, Malaysia, Malaysia, Philippines, South Korea, and Thailand. Philippines, Report will be publicly available from IFC South Korea, and ASrIA websites and launched at IFC/FTThailand conference in Hong Kong in September

2003 with further dissemination via national seminars, the UNEP FI Annual Roundtable in Tokyo (Octpber 2003), and other conferences.

Vietnam Cement 32,800 CCF Completed Working with an IFC sponsor and other sector client stakeholders to assess conservation priori-

ties, land-use planning and economicdevelopment opportunities adjacent to thesponsor’s operations in South Vietnam

China Conox 500,000 EOF Pipeline The EOF will provide risk capital to Conoxfor the development of two pilot plants inChina to confirm its technical commercialviability. Conox has created an innovativetechnology that will eliminate the largestsource of pollution in mills that producepulp from straw, which is a major cause ofwater pollution in China.

EAST ASIA AND PACIFIC

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

33

ASrIA annual conference 2002,Tokyo

ASrIA annualconference 2004

SRI country marketresearch

Ha Tien wetlands andland use

Conox

India Women’s 42,900 CCF Ongoing CCF is supporting community development enterprise and capacity building among the rural poor groups and through Usha Martin’s private foundation rural near the cities of Ranchi and Jamshedpur. communities Emphasis will be on the development of

economic activities with a natural resourcesmanagement focus and efforts will concentrate on female employment and economic opportunities. Training services will be provided to foundation staff by the Indian NGO Self-Employed Women Association.

India REVA 600,000 EOF Pipeline The EOF will provide funding to REVA forexpansion of its domestic and internationaldistribution network. REVA’s electric vehi-cles will provide important environmentalbenefits by using a clean technology and bynot releasing pollutants that are typicallyproduced by conventional vehicles, thushelping reduce air pollution primarily inmetropolitan areas.

SOUTH ASIA

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

Women’s enterprisedevelopment

REVA electric carproject

(South Asia continues)

Bangladesh Shapla 350,000 EOF Pipeline EOF has leveraged its relationship withIFC’s Southeast Asia Development Facilityto assist Shapla in developing a low-costhousehold water filter to address thearsenic water-contamination problem inBangladesh. A SEDF contribution ofUS$30,000 could lead to a US$350,000EOF equity stake in the firm in 2004.

SOUTH ASIA, cont’d

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

Shapla arsenic filter

LAC LAC FIs 650 SFMF Completed Fee-based environmental risk manage-ment/sustainable investment trainingcourse for 25 LAC FIs in partnership withInterAmerican Investment Corporation.

LAC LAC General 26,000 CCF Completed The CCF financed a workshop for IFC’s Manufacturing general manufacturing clients in Latin and clients Central America. The partnering of

“enthusiastic” sponsors with those who have already adopted some sustainable practices in their operations has proved a significant and powerful agent for change in IFC’s client base.

Colombia A Colombian 9,700 SFMF Completed IFC and the INCAE business school financial and provided a two-day strategic workshop for industrial the senior management team of Grupe group Empresasrial Antioqueno (GEA). The

workshop covered sustainable business drivers and opportunities in the field of carbon emissions trading, eco-finance, and SRI, among others, and was designed to help GEA develop a successful strategy for sustainability-related products, services, and competitive positioning.

Ecuador Favorita and 112,600 CCF Ongoing CCF is working with an IFC client in farmers in Ecuador to improve labor practices and supply chain environmental sustainability throughout the

company’s supply chains. It is helping to reduce poverty and ensure continued access to international markets for many rural communities.

Mexico Tlalnepantla 66,000 CCF Ongoing CCF funds are being used to strengthen themunicipal environmental and social development water components of a wastewater management conservation program for a Mexican municipality.

Particular attention will be paid to the development of a sustainable wastewater management plan for the region.

Mexico Grupo Calidra 120,000 EOF Ongoing The EOF has provided funding to GrupoCalidra, to assess the technical and commer-cial viability of an innovative system designedto recover water vapor, which amounts to 12million liters of water a year. The pilot will becarried out in a lime- producing facility,where water is very scarce, and will helpreduce the pressure on the limited waterresources in the affected areas. This technol-ogy is replicable in other parts of the world.

LATIN AMERICA AND CARIBBEAN

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

Competitive environ-menal advantageworkshop, Miami

LAC business-to-businesssustainability workshop

Sustainable strategyworkshop

Environmental andlabor aspects ofsupply chains in thebanana industry

Enhancingenvironmental performance in theMexican waste sector

Grupo Calidra

34

Bahamas TWI Conch 30,000 TA EOF Ongoing TWI Conch, a Turks and Caicos—based 500,000 mariculture company is considering a rapid Investment expansion and grow-out farm model, to

ramp-up to sufficient scale to become a valued supplier to a distributor in key Asianmarkets. The EOF will help TWI’s conch mariculture technology evolve into a commercially viable business, while playing an important sustainable development role in the Latin America and Caribbean region.

LATIN AMERICA AND CARIBBEAN

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

35

Trade WindIndustries Conch

Russia Russian 12,700 SFMF Completed Subsidized environmental risk management leasing training course (in Russian) for five Russiancompanies leasing companies, plus train-the-trainer

component for IFC’s Private Enterprise Partnership.

Caucasus BTC 77,000 CCF Ongoing CCF (and others) are supporting a series of stakeholders meetings that will address macro develop-

ment issues (revenue managementeconomic development, regional protectedareas, among others) for the BTC pipeline.These meetings will discuss issues that falloutside the remit of project specificenvironmental/social due diligence and playto IFC’s wider developmental agenda.

CENTRAL AND EASTERN EUROPE

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

Environmental training for leasingcompanies, Moscow

BTC multistakeholderforum (MSF)

SECA Regional FIs n.a. SFMF Completed Fee-based environmental risk (3,000 management/sustainable investment net profit) training course for 30 European and

Central Asian FIs.

Balkans Herbal 25,400 CCF Completed CCF worked with IFC’s Southeast Europe sector Enterprise Development office to explore

opportunities for the development of an environmentally and socially sustainable herbal sector in the Balkans. The SEED office is now considering how best to implement the recommendations of this work – which has important potential benefits to many thousands of the region’s rural poor (including internally displaced people)

SOUTHERN AND CENTRAL ASIA

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

Competitive environ-mental advantageworkshop, Istanbul

Herbal DevelopmentInitiative

Africa AICC 38,500 SFMF Ongoing Partial sponsorship of case study-basedresearch study managed by AfricanInstitute of Corporate Citizenship inconjunction with UNEP Finance Initiative’sAfrica Task Force, to assess current practiceof African banking sector with respect toenvironmental and social issues, identify-drivers for change and future needs/opportu-nities. Final report will be publicly availableand disseminated via follow-up regionalevents/initiatives and at UNEP FI AnnualRoundtable in Tokyo, Oct 03

Southern Sub-Saharan 8,800 SFMF Completed Fee-based environmental risk Africa African FIs management/sustainable investment

training course for up to 25 Southern African FIs, jointly organized and delivered by IFC and AIIC and in partnership with African Development Bank, Development Bank of South Africa, and others.

Africa African 80,000 CCF Ongoing CCF will partner with a large telecom telecom operation that works in 13 countries to client develop an HIV/AIDS workplace program

with extension into surrounding communities.It will finance an assessment of costbenefits of ARV treatment options foremployees.

Nigeria Nigerian FIs 24,200 SFMF Completed Fee-based environmental risk and management/sustainable investment consultants training course for up to 20 Nigerian FIs

plus parallel training for Nigerian environmental consultants, in partnership with FSB International Bank and the Lagos Business School.

Kenya Honeycare 59,600 CCF Ongoing CCF will work with a Kenyan honey and suppliers cooperative to access fair trade markets for

honey. The cooperative has already been recognized for its efforts to enhance biodiversity in its operations. Access to price premium fair trade markets in Europe will help to reinforce the business benefits of sustainable production and will bring assured price premia to hundreds of Kenyan farmers.

Kenya KTDA 19,900 CCF Completed CCF funds have been used to develop anHIV policy and action plan for the KenyaTea Development Agency.

Tanzania Karam 15,000 TA EOF Ongoing EOF’s funding in ApproTEC is addressing a Engineering, 20,000 sustainability gap in the supply chain for small investment its SME-scale, foot-operated irrigation machine tool pumps in Tanzania. The loan will assist manufacturer ApproTEC Tanzania (an affiliate) in

providing working capital credits to the manufacturer to enable it to provide short-term credits to the wholesaler. The TA grant funding is designed to aid themanufacturer in that transition.

SUB-SAHARAN AFRICA

PROJECT NAME COUNTRY BENEFICIARY NET FUNDING FACILITY STATUS SUMMARY DESCRIPTION(USD)

36

‘Sustainable Bankingin Africa’ research

Competitive environmental advantage workshop,Johannesburg

HIV/AIDS workplaceand outreach program

Competitive environmental advantage workshop, Lagos

Fair trade certification forhoney production

Labor and HIV issues inthe Kenyan tea sector

ApproTEC

37

SBAP PORTFOLIO BY REGION

18%Sub-Saharan Africa 33%

Global

5%Southern Europe &

Central Asia

5%East Asia& Pacific

18%Latin America& Caribbean

8%South Asia

13%East Asia & Pacific

CCF PORTFOLIO BY REGION

21%Latin American

& Caribbean

7%Central &

Eastern Europe7%

Southern Europe& Central Asia

21%Sub-Saharan

Africa

30%Global

7%East Asia& Pacific

7%South Asia

18%Sub-Saharan Africa 40%

Global

18%East Asia & Pacific

12%Latin America& Caribbean

6%Central &

Eastern Europe

6%Southern Europe &

Central Asia

SFMF PORTFOLIO BY REGION

EOF PORTFOLIO BY REGION

29%Latin America& Caribbean

14%East Asia& Pacific

14%Global

14%East Asia& Pacific

29%South Asia

38

ACRONYMS

AfDB African Development BankAICC African Institute of Corporate CitizenshipASrIA Association of Sustainable and Responsible InvestmentBMPs better management practicesCCF Corporate Citizenship FacilityCES IFC’s Environment and Social Development DepartmentEOF Environmental Opportunities FacilityEU European UnionFI financial intermediaryGC Grupo CalidraGEF Global Environment FacilityGMS General Manufacturing ServicesIFC International Finance CorporationIISD International Institute for Sustainable DevelopmentINCaF IFC-Netherlands Carbon FacilityIUCN The World Conservation UnionLAC Latin America and Caribbean regionM&E Monitoring & EvaluationNAED North Africa Enterprise Development FacilityNGO nongovernmental organizationOGM Oil, Gas, and MiningPEP Private Enterprise PartnershipRECC REVA Electric Car CompanySBAP Sustainable Business Assistance ProgramSEDF Southeast Asia Development FacilitySEED Southeast Europe Enterprise Development SFMF Sustainable Financial Markets FacilitySME small and medium enterpriseSRI socially responsible investmentTA technical assistanceUNEP United Nations Environment ProgrammeWHI Water Health InternationalWWF World Wildlife Fund