What are the benefits for sponsors in complying with sustainable development principles

Mekong Forum, Cambodia December 2011

Proparco – Support Sustainable Development Principles

� Private sector arm of the French Development

Agency (AFD), rated AAA

� Founded in Paris in 1977

� Combines long-term developmental objectives

and private sector returns

� Covers developing and emerging countries

(Africa, Middle-East, Asia, Latin America and

Caribbean)

� Present in South-East Asia since 2004

� Offers a wide range of long term financial

instruments (debt / mezzanine / equity)

� Not tied to French Interests

Proparco’s Shareholding Structure

Aga Khan Fund For Economic Development

PROPARCO – At a glance

French Financial

Institutions 26%

AFD 59%

Investors 4%

Ethical Funds & Foundations 1%

International Financial

Institutions 11%

Commitments – Proparco

• Proparco adopted the Environmental and Social Policies of the AFD Group in June 2008.

• Proparco, also in 2008, committed to apply for co-financing, the E & S procedures common toEDFI as defined in the "Rome Consensus"

• Proparco signed, in May 2009, «Principles of ResponsibleFinancing », common to EDFI– E&S Risk management for projects financed,– Contribution to the improvement of project quality and E & S performance of

client companies,– Measurement of project’s development positive impacts

�Promote responsible financing�E & S integrated throughout project life cycle – Pre and

Post financing

Why Do We Have to Manage Project’s E & S Risks?

1. Manage technical and natural risks : natural hazards, risks relatedto human activities, public health risks

2. Control financial, legal, and reputational risks: pollution, social unrest, social acceptances of the projects

3. Improve performance and quality of projectoperations : E & S management, natural resourcesconsumption, profitability

4. Identify the costs of E & S compliance : to finance the projects properly!

From Sponsor’s Perspective – Costs and Benefits of Complying with Sustainable Development Principles

From sponsor’s point of view – E & S Compliance

1. Additional costs : pre and post financing,

2. Time consuming

3. No apparent benefits : local laws vs international standards

Is it worth it ?

From sponsor’s point of view – Risk from E & S Non-Compliance

• Financial risks : project performance, profitability

• Reputation risks : immediate / long-term impact on the sponsors’reputation

• Legal risks : local laws vs international standards

There is often a correlationbetween E & S Management

and operational performance !

In Public’s Eyes – What we see in the news?

MAE MOH POWER PLANTPower Plant loses

Lampang pollution caseBy Ekkapong Praditpong

The NationPublished on March 5, 2009

In the News

Court awarded THB 3.0 billion (US$100 million) to the villagers for pollution caused by the plant

Bo Nok coal power plant project was suspendeddue to communities’ concerns over health andenvironmental impacts

In the News

Coal-fired power plant suspended

Workers from the Philippines and Thailandstaged protest at an international garment manufacturer ’sHeadquarters in Hong Kong. The workers submitted a joint appeal denouncing and resistingthe anti-worker and unjust retrenchment of workers

Mon, 17/08/2009 - 19:45 | by prachatai

In the News

Sustainable Development Principles – Proparco’s Approach

Based on international good practices

• Declaration of human rights (United Nations)

• IFC Performance Standards and associated EHS guidelines,www.ifc.org/ifcext/enviro.nsf/Content/EnvSocStandards

• Fundamental conventions of the ILO, www.ilolex.org

IFC “Performances Standards”

• PS1 : Social and Environmental Assessment and Management Systems

• PS2 : Labor and Working Conditions

• PS3 : Pollution Prevention and Abatement

• PS4 : Community Health, Safety, and Security

• PS5 : Land Acquisition and Involuntary Settlement

• PS6 : Biodiversity Conservation and Sustainable Natural ResourceManagement

• PS7 : Indigenous Peoples

• PS8 : Cultural Heritage

New version applicable in January 2012 :=> Supply Chain, Energy Efficiency, Biodiversity,

Carbon Footprint, Consent of Indigenous People (FPIC)

Sustainable Development Principles In Practice – A Case Study

Case Study : A Palm Mill – Ivory Coast

• Oil palm mills and plantation

• Project Category A : High environmental risks (polluti ons, biodiversity…) and social (safety risks, employmentconditions…)

• E&S Audit per IFC standards for E & S project monito ring and a potential new loan

- Visits to mills, plantations and villages,

- Meeting with the managers, employees, communities around the site

Case Study : A Palm Mill – Ivory Coast

• Safety problems : frequentand serious accidents => lackof workers protection and training, machinery’smaintenance and protection

Case Study : A Palm Mill – Ivory Coast

• Environmental Issues

- Waste management

- Emissions to air

- Waste water from palm mills

- Biodiversity

Case Study : A Palm Mill – Ivory Coast

Implementation of E & S Action Plan :

• Improvement of E & S management at HQ and site levels(définition of responsabilities, training…)

• Development of Environmental and Social Management Plan (ESMP) to ensure compliance with applicable local regulations and IFC E & S standards

• Appointment of an experienced Safety Manager

• Identification of risk areas and development of an action plan for risk reduction with immediate actions for key risks

• Development of E & S Policy and Procedures

• Monitoring : Annual Audit (3 years) by an independent E&S expert on the progress of the E&S Action Plan

Case Study : A Palm Mill – Ivory Coast

• Accidents record of client in 2009 :

Thank you

Nancy CHOOPHUNGARTProparco South East Asiachoophungartn@proparco.fr