performance standards approach ifc/mekonghydro

1. performance standards approachwww.ifc.org/mekonghydro

2. Since 2012, IFC’s Hydro E&S Advisory Program has been working in the Mekong Region We aim to increase the share of new private sector investments in the hydropower sector that adhere to good international industry practice on environmental and social standards by 2020 Supported by Australian and Japan Governments www.ifc.org/mekonghydro

3. Support financial institutions adopt E&S standards Improve Policies and Regulations Our Services Build capacity on cumulative impacts from hydropower cascades Engage and advise hydropower companies www.ifc.org/mekonghydro

4. Sustainability:One of IFC’s Strategic priorities • Strengthening the focus on frontier markets – IDA countries, fragile and conflict-affected situations, and frontier regions of middle-income countries • Addressing climate change and ensuring Environmental and Social sustainability and good corporate governance • Addressing constraints to private sector growth in infrastructure, health, education, and the food supply chain • Developing local financial markets • Building long-term client relationships in emerging markets

5. Why environmental and social risk Management is important to IFC? • IFC’s Private Sector Clients • 88% of clients believe the IFC standards in E&S risk management are helpful • Return on equity (ROE) and return on assets (ROA) improve with better environmental performance • Clients value our expertise in E&S Risk Management over competitors • Our Development Mandate • Successful companies are important for long term growth, jobs, development—impacting the poor • Good risk management has a positive impact on the environment, society, and business • There is a positive correlation between good E&S risk management and our financial performance

6. The bottom line • The integration of sustainability into management systems and practices brings tangible benefits, including new lines of business, new clients, greater access to financing, greater shareholder value, and improved reputation and goodwill. • 75% of the commercial banks reported a reduction in risk as a result of considering environmental and social issues. • Another 48% noted improved access to international capital • 39% percent benefited from improved brand value and reputation • 35% developed new business • 26% benefited from improved community relations. • IFC’s 2007 report Banking on Sustainability

7. IFC’s Sustainability Framework Responsibilities Implementation Tools Sustainability Policy Access to Information Policy Environmental and Social Review Procedure IFC 8 Performance Standards on Environmental and Social Sustainability Guidance Notes Environmental, Health & Safety Guidelines Good Practice Materials Investment CLIENT

8. Sustainability Policy Discusses and Defines: • Roles, responsibilities of IFC & clients • Categorization • Broad Community Support • Role of the CAO

9. A Balanced Approach PERFECTION Realism Clarity Flexibility PRESCRIPTIONS PRINCIPLES MINIMALISM

10. Principles and Performance • A principles-based approach, not a licensing approach • Less front loaded and prescriptive than legal tradition in many countries • Agreement on core principles: client commitment and capacity • Environmental and Social Action Plans to fill gaps • Engagement and implementation support throughout project cycle • Progressive realization of Performance Standards objectives

11. Cross Cutting Issues Climate Change Ecosystem Services Human Rights Gender Water

12. IFC’s Categorization of E&S Risk

13. Broad Community Support • Performed by IFC, when clients engage in Informed Consultation Participation • BCS is a collection of expressions in support of the activity • Is not a veto right • BCS may wax and wane during life of activity

14. Compliance Advisor/Ombudsman • Independent grievance mechanism for project affected people including a dispute resolution mechanism • Project-level audits of IFC environmental and social performance

15. Access To Information Policy

16. IFC Disclosure Portal www.ifc.org/disclosure

17. IFC Ps standard setter • CG Development Framework – 31 Institutions • Based on IFC's system of evaluating corporate governance risks and opportunities • CGFIs have combined assets of $852 billion • Equator Principles • – 78 Institutions • Based on IFC’s Performance Standards • EPFIs cover > 70 percent of international Project Finance debt in emerging markets

18. Performance standards overview PS1: Assessment and Management of E&S Risks and Impacts PS4: Community Health, Safety and Security PS2: Labor and Working Conditions PS3: Resource Efficiency and Pollution Prevention PS5: Land Acquisition and Involuntary Resettlement PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources PS8: Cultural Heritage PS7: Indigenous Peoples

19. The Performance Standards PS2 Labour and Working Conditions Resource Efficiency and Pollution prevention Community, Health, Safety and Security Land Acquisition and Involuntary Resettlement Biodiversity Conservation and Sustainable Management of Living Natural Resources Indigenous Peoples Cultural Heritage PS3 PS4 PS 1 PS5 PS6 PS7 PS8

20. PS7-5% PS2-100% PS1-100% PS3-95% Are all 8 Standards triggered in every Investment project? PS5-44% PS4-87% PS8-16% PS6-27% • Do clients need to achieve 100% compliance with • triggered Performance Standards before we do business with them?

21. PS1: Assessment and Management of Environmental and Social Risks and Impacts

22. Why PS 1? The “umbrella” PS A documented, systematic approach to identifying and managing environmental and social risks … … and for maximizing value addition Applies to 100% of our investment projects

23. The “Must Haves” of PS1 • Analysis:Identification of issues A Management System • Policy • Identification of risks &impacts • Management programs • Organizational capacity &competency • Emergency preparedness and response • Stakeholder engagement, transparency, and grievance redress • Monitoring and review • Managementsystem:Integration into decision-making • Stakeholderengagement

25. Creation of Hydropower Developers’ Working Group (HDWG) Providing hydropower companies the tools, skills and expertise to develop and implement E&S management systems for their operations. • Established by IFC and the Lao National Chamber of Commerce and Industry in December 2013 • A platform to for the private sector to have a collective voice on policies that impact the sustainable development of hydropower in Lao PDR; to help companies channel their concerns to the government, tackle business challenges, and gain exposure to good international industry practices and network with other companies operating in the country. • 100 members • Representing 10+ different countries

26. Business meetings and seminars

27. The ISSUES • Standard Environmental and Social Obligations, Annex to Concession Agreement • Small Hydro Decree • Sub-committees formed • High-level meetings with Vice Ministers • Inter-ministerial meetings with line agencies • Presentation at Lao Business Forum • Consultation workshops, inputs into drafts • Representation at workshops/forums/conferences

28. What the members say • “In our region, access to information is limited: Networks are life-support” • “The working group gives us a chance every few months to catch up on what others are doing. It’s a valuable social enterprise.” • “This is a working group that offers something new and addresses its members’ interests,” • “We present to the government what we feel is feasible and what areas of the policy need improvement,” • “We hope our input will encourage dialogue between developers and the government, leading to improved policy.” • Next Steps: Moving to develop an association

29. For more information: • www.ifc.org/mekonghydro