1 Presentation title - edit in the Master slide

IEMA GESA Launch Event

Exploring Future Challenges to Effective International Project Environmental and Social Assessment

Lender Panel - Perspectives of ESIA Challenges

Max Griffin, Principal Environmental & Social Adviser

Thursday 25th May 2017

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• Export Credit Agencies (ECAs) exist to support business operating in their countries by providing government backed guarantees, insurance and (in some cases) direct lending which buy their goods and services.

• UKEF was the first official ECA, being established in 1919.

• All OECD ECAs have agreed policies which aim to apply the same standards to transactions they support in order to avoid trade distortion.

• From 2003 this has included environmental, social and human rights issues and has been documented in the ‘OECD Common Approaches’

Background and Context

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OECD ‘Common Approaches’ 2012 (revised 2016)

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• Applies to all 34 OECD member ECAs

• Relevant export transactions only; for

example only those with a repayment

term of 2 years or more

• Requires environmental and social due

diligence and, where applicable, post-

issue monitoring to ensure these

projects are aligned with international

standards; most commonly IFC’s

Performance Standards on

Environmental and Social Sustainability

2012

http://www.oecd.org/tad/xcred/oecd-recommendations.htm

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Applicability of ESIAs to projects seeking ECA

support

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Para.4 ii) Adherents should undertake appropriate environmental and social

reviews...as part of their due diligence

Para. 18 For a Category A project, Adherents should require an ESIA to be

undertaken...to address the issues set out in the international standards

applied to the project

Para. 19 For a Category B project... Adherents should require appropriate

information.. that addresses the relevant environmental and social

impacts of the project...may be contained in an ESIA or in project-

related assessment reports, planning and concept documents,

environmental and social studies and plans, technical documentation

of pollution control plans and criteria, applicable legal and regulatory

frameworks, community engagement activities..and information

collected during discussions with applicants

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The role of ESIAs for OECD ECAs

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• Environmental and Social Impact Assessment against International Standards is one of the foundational steps used to determine whether OECD ECA financial support can be applied to relevant projects

• ECA review of ESIA information will contribute to a go/no go decision to provide support

• The quality and completeness of the ESIA may significantly effect the speed that the financing, and hence project development, can take place

• Ongoing adherence to international standards of environmental and social management are included in affirmative covenants in order to retain the conditions of financial support

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How do ESIAs affect projects which seek ECA support?

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• The ESIA and subsequent ECA review lead to impact and risk mitigation measures being included within environmental and social management plans for project design, construction, operation and decommissioning; these can be covenanted into the financing.

• It is the implementation of these plans that helps to reduce the scale and magnitude of project-related negative impacts to the environment and people, and helps maximise the benefits of the project.

• In summary, through the use of ESIA, the financing (and enabling) of more sustainable and resilient projects can occur, and over time this contributes to sustainable development.

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Feedback from UKEF experience

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1. Early engagement with the project developer is essential to confirm the scale, scope, and timing for an appropriate ESIA in order for it to meet international financing requirements

2. Most challenges result from incomplete scoping studies

3. Baseline data collection can hold up financing (e.g. need for seasonal data and/or adequate stakeholder engagement)

4. Use of practitioner and other professional guidance is very helpful e.g. IAIA Social Impact Assessment Guidance (2015)

5. OECD ECAs publically disclose project ESIA information for Category A projects at least 30 days prior to providing support – this results in an additional level of public scrutiny; it is helpful for authors of ESIAs to know this (language, NTS, etc.)

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Stakeholder engagement meeting, north west Russia.

Post-construction transfer of ownership of access road.

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Rural bridge design, Sri Lanka.

Design for maximum river height and erosion control measures.

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Gas pipeline route, Oman.

Mitigation for climate change induced increase in flash flood erosion.

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Exploring Future Challenges to Effective International

Project Environmental and Social Assessment

May 2017

IEMA Workshop

Commercially confidential

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Lender Perspectives of ESIA challenges

Robert Adamczyk, Senior Environmental Adviser,

EBRD, London

PUBLIC

What is EBRD?

EuropeanEuropeanEuropeanEuropean BankBankBankBank forforforfor ReconstructionReconstructionReconstructionReconstruction andandandand DevelopmentDevelopmentDevelopmentDevelopment (EBRD)(EBRD)(EBRD)(EBRD) is an international financial

institution, promotes transition to market economies in 35 countries from central Europe to

central Asia and SEMED

Together with our donors, we promote private sector competition underpinned by the rule of

law, a sustainable approach to modernising infrastructure, the efficient use of resources, and

an environment that is conducive to growth.

• Founded in 1991

• Owned by 65 countries and two inter-governmental institutions (EU and EIB)

• Capital base of €30 billion

• A+++ rated bank (from all 3 main rating agencies)

PUBLIC

The GET aims to further scale up green business volume, and to expand to new areas of activity,

such as environmental protection and technology transfer.

Green Economy Transition (GET)

initiative

1994 2006 2013 2015

Sustainable Energy

Initiative (SEI)

Sustainable Resources

Initiative (SRI)

Green Economy

Transition (GET)

Energy

Efficiency

banking team

• Energy efficiency

• Renewable energy

• Water efficiency

• Material efficiency

• Adaptation to climate change

• Environmental

protection

• Technology transfer

PUBLIC

Why does EBRD place emphasis on environment and social issues?

The Agreement Establishing the EBRD commits

the Bank:

“to promote in the full range of its activities environmentally sound and sustainable

development.”

PUBLIC

Why do Environmental and Social Issues Matter

PUBLIC

Why does ESIA mater to Lenders

19 September, 2016 22

• The Business impact:The Business impact:The Business impact:The Business impact:

• Delays or decline of permit applications

• Construction delays due to permitting

• Additional expenditure on environmental abatement,

new technologies or remedial needs

• Social dialogue

• Reputational impact Reputational impact Reputational impact Reputational impact

PUBLIC

Environmental and social due diligence

• Environmental and (increasingly) social issues pose

substantial reputational risk

• EBRD designs tailored environmental and social due

diligence on all projects

• Due diligence designed proportional to risk

• Projects ultimately required to meet National standards

and EBRD Performance Requirements, notably EU

standards such as IED and BAT requirements.

• Results of due diligence and E&S compliance considered

by Bank management and Board of Directors during project

approval process

PUBLIC

Environmental and Social Policy (2014)

• E&S Policy applies to Bank

‒Categorization of Project based on risk and EU EIA requirements

(Annex 1 projects A category).

• 10 Performance Requirements (PRs) apply to all clients and

projects

• EBRD PRs have same titles and are broadly equivalent to

IFC Performance Standards

• Also broadly equivalent to Equator Principles

• Reference to EU environmental standardsReference to EU environmental standardsReference to EU environmental standardsReference to EU environmental standards

Policy and PRs have been updated and a new E&S Policy 2014

(applicable from November 2014)

PUBLIC

• Always important

• All projects are disclosed for meaningful engagement, prior to

Bank approval: A vs B, public vs private

• Development of a Stakeholder Engagement Plan (SEP)

available in local language

• May require more than National EIA process in terms of

stakeholder engagement as well as content

• Category A projects require participatory engagement (meetings)

plus of disclosure of a fit for purposes Environmental and Social

Impact Assessment in local language (s)

• Engagement with local stakeholders needed, including NGOs

• This needs to be continuous.

Stakeholder engagement and consultation

PUBLIC

How do we compare with our peers?

IFCIFCIFCIFC• very close match, but global vs. European (EU) approach

Equator Bank’ sEquator Bank’ sEquator Bank’ sEquator Bank’ s

• Like IFC but practical implementation varies and mainly

restricted to project finance

• Environmental and Social Due Diligence required

EIBEIBEIBEIB• Similar policy vs European Principles for Environment‒ EIA and Natura 2000 of high importance

• More decentralised approach

PUBLIC

EBRD approach to due diligence

PUBLIC

EBRD due diligence

• Each project is different

• Project categorization; this defined scope of due diligence and disclosure.

• Assessment of site sensitivity and full project, including associated operations and facilities.

• Benchmark against EU IED and relevant BAT Bref Notes (BAT Conclusions) and assess environmental performance and identify opportunities

• Need to develop Stakeholder Engagement Plan (SEP) and Non Technical Summary (NTS) to ensure meaningful public consultation on all projects

• EBRD will not finance projects that are in sensitive biodiversity areas (inclusive of Natura 2000 etc) where appropriate assessments conclude there are significant unavoidable adverse impacts

• Major projects: ESIA, SEP, NTS disclosed for at least 60 days.

• An Environment and Social Action Plan (ESAP) developed for projects to allow compliance with the relevant PRs.

PUBLIC

PR1: Appraisal (1)

• All EBRD projects are subject to appraisal of potential

environmental and social impacts

• A-Category projects undergo “special formalised and

participatory assessment processes”, generally a

“comprehensive environmental and/or social impact

assessment.”

• Greenfield and major expansions that can cause significant adverse

effects are Category A.

• A category requires the disclosure of an ESIA in line with EBRD/IFC guidance prior to consideration by Board of Directors for financing

• B-Category projects also undergo due diligence process to

identify and assess potential future impacts.

• ESAP develop and agreed to allow longer term compliance.PUBLIC

PR1: Appraisal (2)

Is it Category A or B?

• Decision generally based on consideration of size, location, and

associated facilities.

• Local authority may require an EIA, this does not have to trigger IFI

qualification

• Large Greenfield cement projects (plant, quarry, transmission line)

would trigger A category requirement for the Lenders

• Large expansions or modernizations due to the environmental and

social impacts (including perceived) may trigger A category impact

• New quarries above 25 ha size or in sensitive locations – A category

• Direct effect on protected areas, such as Natura 2000 triggers A-

categorization

PUBLIC

Experience to date in Countries of Operation

• Many projects developed locally, without reference to corporate or international standards.

• EIA process often done for ‘pure’ local permitting purposes, without any detailed baseline data or in-depth assessment of environmental and social impacts; alternatives and/or recommendations to use best practice.

• EIA often does not include associated facilities

• However, permitted projects are being marketed to international companies. The EIA could

‒ affect the future value of the asset, and permits can be withdraw or operators asked to reduce output.

‒ delay project financing.

• Non Technical Summary (NTS) and SEP is a requirement of all IFI’s and the EU EIA Directive

PUBLIC

Key issues

Lack of experienced biodiversity experts.

• In some countries there are only few biodiversity experts. This becomes a bottleneck in

some projects.

Use of local standards .

• Often projects focus on local standards for abatement – Nox, dust; without taking into

account international requirements or future changes in legislations.

• Convergence of standards world-wide and on-going tightening up of standards

Social Assessment, and inclusion of local populations

• Will the local community benefit- any local taxes to local community ?

• Is this a long term risk

Importance of team undertaking EIA

• Need for mix of experts that understand both local and international requirements.

The local EIA may be required for financing in the future and could affect project finance or The local EIA may be required for financing in the future and could affect project finance or The local EIA may be required for financing in the future and could affect project finance or The local EIA may be required for financing in the future and could affect project finance or

value of asset.value of asset.value of asset.value of asset.

PUBLIC

Summary

Financial Institutions will only invest in the best projects

• Environmental standing often reflects overall performance

Transparency and public consultation are a major focus of many international institutions and EU

• Poor consultation can result in major delay to projects

• B level projects may require full EIA, SEP (NTS etc).

Stronger international focus on social and labor issues

• All projects need a SEP

Take into account LenTake into account LenTake into account LenTake into account Lender requirements when doing an ESIA.der requirements when doing an ESIA.der requirements when doing an ESIA.der requirements when doing an ESIA.

PUBLIC

How to contact us

30 May, 2017 34

For all further enquiries, please

contact:

Robert Adamczyk

Senior Environmental Advisor

ESD

Tel: + 44 20 7338 7014

Email: adamczyk@ebrd.com

EBRD

One Exchange Square

London, EC2A 2JN

United Kingdom

www.ebrd.com

PUBLIC