dfc.gov
ENVIRONMENTAL
AND SOCIAL POLICY
AND PROCEDURES
July 2020
TABLE OF CONTENTS
1. INT
RODUCTION .................................................................................................................. 2
2. SC
REENING AND CATEGORIZATION..................................................................................... 4
3. EN
VIRONMENTAL AND SOCIAL REVIEW .............................................................................. 8
4. EN
VIRONMENTAL AND SOCIAL STANDARDS ......................................................................16
5. PUBLIC CONSULTATION AND DISCLOSURE ..........................................................................18
6. CO
NDITIONS AND COMPLIANCE ........................................................................................22
7. MO
NITORING ....................................................................................................................25
8. CLIM
ATE CHANGE AND RENEWABLE ENERGY.....................................................................28
9. CO
UNTRY ELIGIBILITY - LABOR ...........................................................................................31
APPENDIX A – Illustrative List of Category A Projects ..............................................................34
APPENDIX B – Categorical Prohibitions ...................................................................................37
APPENDIX C – World Bank Group Environmental, Health and Safety (EHS) Guidelines ............40
APPENDIX D – Glossary...........................................................................................................42
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1. INTRODUCTION
DF
C Introduction
1.0 The U.S. International Development Finance Corporation (DFC), U.S. International
Development Finance Corporation (DFC) is America’s development bank. DFC partners
with the private sector to finance solutions to the most critical challenges facing the
developing world today. We invest across sectors including energy, healthcare, critical
infrastructure, and technology projects. DFC also provides financing for small businesses
and women entrepreneurs in order to create jobs in emerging markets. DFC investments
adhere to high standards and respect the environment, human rights, and worker rights.
Statement of Purpose and Scope
1.1 This Environmental and Social Policies and Procedures (“ESPP”) addresses DFC
’s
com
mitments regarding the environmental and social dimensions of sustainable
development and provides Applicants notice of the general environmental and social
requirements that are applied in evaluating prospective projects and monitoring on-
going supported projects. These environmental and social requirements apply to all
projects supported through insurance, reinsurance, direct loans, or investment
guaranties.
DFC Commitment
1.2 It is the policy of the DFC to facilitate market-based private sector development
and
in
clusive economic growth in less developed countries through the provision of credit,
capital, and other financial support—
• to mobilize private capital in support of sustainable, broad-based economic growth,
pover
ty reduction, and development through demand-driven partnerships with t
he
pr
ivate sector that further the foreign policy interests of the United Stat
es;
• to fin
ance development that builds and strengthens civic institutions, promote
s
competition, and provides for public accountability and transparency;
• to h
elp private sector actors overcome identifiable market gaps and inefficiencie
s
wi
thout distorting m
arkets;
• to achieve clearly defined economic and social development outcomes;
• to co
ordinate with institutions with purposes similar to the purposes of th
e
Co
rporation to leverage resources of those institutions to produce the greates
t
im
pac
t;
• to provide countries a robust alternative to state directed investments by
authori
tarian governments and United States strategic competitors using
best
pr
actices with respect to transparency and environmental and social safeguard
s,
wh
ich take into account the debt sustainability of partner countrie
s;
• to leverage private sector capabilities and innovative development tools to help
countri
es transition from recipients of bilateral development assistance tow
ard
in
creased self-reliance; an
d
• to co
mplement and be guided by overall United States foreign policy, development
,
and national security objectives, taking into account the priorities and needs of
countri
es receiving
support.
Environmental and Social Policy and Procedures
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1.3 This ESPP outlines how the DFC will put into practice its commitment to the
devel
opment goals through its environmental and social review and monitoring processes.
Specifically, the DFC will ensure through its processes that projects receiving support:
• Are environmentally and socially sustainable.
• Ar
e compatible with low and no-carbon economic development
.
• Av
oid prejudice and discrimination and respect Human Rights, including th
e
rights of Workers and the rights of Project Affected People.
• Av
oid adverse impacts and, if such impacts are unavoidable, properl
y
mi
tigate or compensate for the impacts
.
• Un
dertake Meaningful Consultation with Project Affected People regardin
g
project activities.
• Ar
e undertaken in countries that are taking steps to adopt and implement la
ws
th
at extend Internationally Recognized Worker Rights
.
1.4 DFC will implement best practices in environmental management and reporting in
accordance with the provisions of Executive Order 13834– Efficient Federal Operations
(
May 17, 2018).
Source of Policy
1.5 This ESPP implements applicable environmental and social requirements and
procedures contained in U.S. law and, the International Finance Corporation’s (“IFC,”)
Performance Standards on Social and Environmental Sustainability ("Performance
Standards,"), and Industry Sector Guidelines. Any subsequent revisions to those
standards are incorporated into this ESPP by reference.
Environmental and Social Policy and Procedures
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2. SCREENING AND CATEGORIZATION
2.
0 Objectives: (1) to define the Area of Influence of the Project for the purposes o
f
envi
ronmental and social review as well as public consultation; (2) to identify the nature
and magnitude of environmental and social risks and impacts, including those project
impacts that could preclude support; (3) to identify issues to be investigated in detail in
the environmental and social review process; and (4) to determine requirements for
documentation, consultation, disclosure, notification and third party audits.
2.1 Scope of Application: The requirements contained within this section apply to al
l
projects supported through DFC insurance, reinsurance, direct loans, or investment
guaranties.
DFC Roles and Responsibilities
2.2 Applications are screened to identify as early as possible the risk of adve
rse
envi
ronmental and social impacts of proposed projects and to identify project impacts that
could preclude support because a project is a Categorically Prohibited Project.
2.3 Projects listed in Appendix B Categorically Prohibited Projects will not b
e
supported.
2.
4 The DFC reviews the risks and impacts identified by the Applicant, the Applicant’s
def
ined Area of Influence, and information on Project Affected People to determine
whether the information is adequate, accurate, objective and appropriate to the size and
nature of project activities. Additional information may be required from the Applicant
and from knowledgeable third parties.
2.5 Projects are categorized based on a preliminary assessment of (1) the potential
envi
ronmental and social risks and impacts within a project’s Area of Influence in the
absence of any required mitigation, (2) the Applicant’s commitment and capacity to
effectively manage the environmental and social risks and impacts, including the ability to
implement any required mitigation and (3) the potential role of third parties in
achievement of successful outcomes. Below are aspects of projects that may lead to a
categorization of heightened environmental or social risk (i.e., Category A or Special
Consideration).
• Projects considered high risk are those that discharge high levels of contaminant
s
(in
cluding Greenhouse Gases) into the environment in the absence of adequa
te
pollution controls, as well as those projects that are considered high risk due to the
absence
of sound environmental and social management. Examples of
these
categori
es of projects are provided in Appendix
A.
• Large
-scale projects are generally considered to represent a high risk because
of
th
e greater potential to impact large geographic areas outside of a proje
ct
boundar
y or a large number of people living in nearby communities. Alt
hough
quantitative screening thresholds that define what is meant by “large-scale” are
not
available for all projects, several examples are provided in Appendix A
.
Environmental and Social Policy and Procedures
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• Projects that could result in the significant diminishment of priority ecosystem
servi
ces or social values at a particular site are considered high risk. Ecosyste
m
servi
ces are benefits that people obtain from ecosystems including
food,
fre
shwater, shelter, timber, surface water purification, carbon storage an
d
sequestrati
on, climate regulation, and protection from natural hazards. Exampl
es
of social values include site attributes important for ethnic or religious reasons or
attri
butes of cultural or historic significance. Examples of ecologically or sociall
y
sensi
tive locations are provided in Appendix
A.
• Projects that are in locations, industries, or sectors with historical issues related
to ad
verse impacts on Project Affected People are considered high risk. O
ther
ci
rcumstances that may be considered high risk include projects wi
th
dem
onstrated local opposition, environments of fragile security or history
of
securi
ty personnel abuses, legacy of gender or ethnic discrimination/violence, o
r
country contexts where national Human Rights laws do not meet international
standards.
• Pr
ojects that are in locations, industries, or sectors with a documented history
of
Labor Rights issues are considered high risk. Examples of such high-risk projects
ma
y involve significant construction activities, manual harvesting of agricultura
l
com
modities, Extractive Industries, and industries which may presen
t
ci
rcumstances that make it difficult for Workers to exercise trade union rights, o
r
have
a higher likelihood of using forced (including trafficked) or child labor
.
2.
6 All projects and Subprojects are categorized as Category A, B, C or D based
on
environmental and social factors. An additional classification of Special Consideration
may apply to projects that have heightened potential for adverse project-related social
risks related to the involvement of or impact on Project Affected People including
Workers.
• Category A projects may have significant adverse environmental and/or socia
l
im
pacts that are irreversible, sensitive, diverse, or unprecedented in the absenc
e
of adequate mitigation measures. Category A projects are considered high risk.
Ap
pendix A provides an illustrative list of sensitive sectors and project sitin
g
fa
ctors that may lead to a Category A categorizati
on.
• Category B projects are likely to have limited adverse environmental and/or
soci
al impacts that are few in number, generally site-specific, largely reversibl
e
and
readily addressed through mitigation measures. Category B projects
are
consi
dered medium risk. For these reasons, the scope of environmental
and
soci
al assessment fo
r
Category B projects is narrower than that required for Category A projects.
Exam
ples of Category B projects may include small to medium scale housi
ng
devel
opments in urban areas, restaurants, and light manufacturi
ng.
• Category C projects are likely to have minimal adverse environmental or social
im
pacts. Examples of Category C projects may include financial services
,
te
lecommunications projects not involving new physical infrastructure, bid bond
s
and
data processi
ng.
Environmental and Social Policy and Procedures
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• Category D is reserved for initial approval of guaranties to Financial
In
termediaries, which will make investments in or provide financing to projects o
r
ent
erprises (“Subprojects,”) engaged in activities within Categories A, B or C
.
Subpr
ojects, originated by the Financial Intermediaries screened as Category D
,
are
subsequently screened and subjected to the full scope of environmental
and
social assessment process including public disclosure and consultation,
Gr
eenhouse Gas emission accounting, and conditions and monitori
ng
req
uirements as warranted by the nature and scope of the Subproject and i
ts
envi
ronmental and social risks and impacts. See Financial Intermediari
es
Par
agraphs 3.28 to 3.33
.
• Spec
ial Consideration projects potentially have heightened adverse project-
related social risks associated with the involvement of or impact on Projec
t
Af
fected People including Workers. Projects may be classified as Speci
al
Consideration based on an assessment of the severity of possible social risks, and
th
eir relevance to a project. Key risk factors that are taken into consideration m
ay
in
clude
:
• In
dustry or sector: labor-intensive industries or sectors that are statistica
lly
mo
re likely to infringe upon Labor Rights
.
• Regional vulnerabilities: projects in countries (i) with a documented history of
La
bor Rights issues, (ii) having recently experienced conflict associated wit
h
Proj
ect Affected People, or (iii) with weak or compromised regulator
y
systems.
• Pr
esence of vulnerable groups: (i) utilization or reliance to a large degree
on
large pools of sub-contracted, unskilled, temporary, and/or migrant Workers,
in
cluding within the supply chain; (ii) project risks or impacts that fa
ll
di
sproportionately on Project Affected People who, because of thei
r
par
ticular circumstances, may be disadvantaged or vulnerable, or (iii) sector
s
in
which there is a high risk for the use of forced labor or child labor
.
• Significant adverse impacts: (i) projects anticipated to have adverse impacts
on
a significant numbers of Workers, or (ii) projects that by their nature o
r
fo
otprint could cause or be anticipated to cause (or be complicit i
n)
si
gnificant adverse Human Rights impacts
.
2.
7 In categorizing projects, direct, indirect, induced, supply-chain related, regional, trans-
boundary and cumulative environmental and social impacts are considered. Risks are
assessed at key stages in the project life cycle including pre-construction, construction,
operations, decommissioning and closure.
2.8 In categorizing investments in existing projects, including privatizations,
envi
ronmental and social impacts and risks associated with (1) current operations and
(2)
a
ny risks and impacts from planned expansions or modifications are assessed
.
Appl
icant Roles and Responsibilities
2.9 Applicants must meet the requirements of the Performance Standards. Include
d
wi
thin this requirement are the risk and impact identification requirements of
Performance Standard 1, which requires (1) Identification of all relevant environmental
Environmental and Social Policy and Procedures
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and social risks of the Project including issues identified in Performance Standards 2
through 8; (2) Identification of allfactors that define the Project’s Area of Influence; and
(3)
Id
entification of groups and communities that may be directly or indirectly affected b
y
th
e Project (i.e., Project Affected People), including groups and communities that may b
e
di
fferentially or disproportionately affected by the project because of their disadvantage
d
or vulnerable status. The process of identifying risks, impacts, Area of Influence and
Proj
ect Affected People shall be adequate, accurate, objective and appropriate to
the
severi
ty of Project risks and significance of Project impacts
.
2.
10 Consistent with the requirements of Performance Standard 1, Applicants are
required to provide an overarching policy statement of the environmental and social
objectives and principles that will be used to guide the Project and achieve sound and
sustainable environmental and social performance. The policy statement should identify
the individual who will be responsible for execution of the policy statement and the means
of communicating the policy statement within the Applicant’s organization. The policy
statement shall be appropriate to the size and nature of the Applicant’s organization.
2.11 Consistent with the requirements of Performance Standard 1, Applicants are
required to identify whether the environmentally and socially sound and sustainable
outcome of the Project is dependent on the performance of a third party. A third party
may be a government agency (e.g., acting as a regulator or implementer of a relocation or
compensation program), a contractor or subcontractor, or a supplier.
Environmental and Social Policy and Procedures
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3. ENVIRONMENTAL AND SOCIAL REVIEW
3.
0 Objectives: (1) to determine whether projects seeking support can be implemented i
n
accordance
with this ESPP and the Performance Standards; (2) to identify opportunities to
avoid adverse impacts and, if impacts are unavoidable, to identify required mitigation and
compensation; (3) to identify opportunities to improve environmental and social
performance of projects seeking support; and (4) to establish specific performance
requirements for certain project sectors.
3.1 Scope of Application: The requirements contained within Paragraphs 3.2 – 3.15
of
this section apply to all projects supported through insurance, reinsurance, direct loans,
or investment guaranties. The requirements in Paragraphs 3.16 – 3.33 of this section
only apply to those projects in the relevant project sector.
DFC Roles and Responsibilities
3.2 A review of an Applicant’s Environmental and Social Management System (“ESMS,
”
See Glossary) is performed to determine whether the ESMS meets the requirements of
Performance Standard 1 and whether environmental, health, safety and social aspects of
a project can be effectively managed by an Applicant. The review will consider direct,
indirect, induced, supply-chain related, regional, trans-boundary and cumulative
environmental and social risks and impacts.
3.3 DFC reviews the Applicant’s evidence of Meaningful Consultation with Project
Affected People within the defined Area of Influence.
3.4 The identified set of policies and objectives for environmental and social performanc
e
mu
st be adequate to address identified environmental and social risks and impacts and
are appropriate to the size and nature of the project activity. As necessary, supplemental
actions that are required to meet the Performance Standards will be identified to avoid
adverse impacts or enhance environmental and social performance. DFC will incorporate
the Performance Standards that the project is required to meet, including project specific
conditions and actions, in DFC Agreements.
3.5 For consistency across U.S. Government agencies, DFC relies on guidance
pr
ovided by the U.S. Department of State, the lead U.S. agency on Human Rights
matters and determinations.
3.6 Support for a project will be declined when (1) a project is a Categorically
Prohibited Project; (2) a project fails to address environmental and social issues in a
satisfactory manner and cannot be expected to meet the requirements of the
Performance Standards over a time frame considered reasonable and feasible; (3)
residual impacts after mitigation are
unacceptable; (4) a project does not comply with the host country’s environmental and
social laws or regulations; or (5) a project does not respect Human rights including Labor
Rights.
Environmental and Social Policy and Procedures
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Applicant Roles and Responsibilities
3.7 Applicants must meet the requirements of the Performance Standards. Applicants
are
req
uired to establish an ESMS that meets the requirements in Performance Standard 1.
The level of detail and complexity of the ESMS should be risk-based, extend across a
project’s Area of Influence, and be commensurate with the significance of potential
impacts or the severity of the risks of the project. Key areas of an ESMS are human
resources management, environmental management, occupational health and safety
management and effective management of community impacts and relations, including
mechanisms and frequency for reporting to Project Affected People on project
performance. An acceptable framework for an ESMS is one that provides for the effective
management of the environmental and social risks and impacts associated with a project,
including risks related to Labor Rights and Human Rights (See Paragraph 3.15).
3.8 Applicants are required to undertake Meaningful Consultation with Project Affected
People within the defined Area of Influence. For all projects Applicants are required to
meet the requirements related to Stakeholder engagement, Stakeholder analysis and
engagement planning, access to information, consultation, reporting to Stakeholders and
the establishment of a grievance mechanism. The form and scope of the consultation
should be commensurate with the project risks and the nature and scope of the project.
3.9 The requirement to establish an ESMS extends to Subprojects undertaken by
supported Fi
nancial Intermediaries. Financial Intermediaries shall have a mechanism in
place to assess the environmental and social impact of their DFC supported investments
and operations and take action to ensure compliance of subprojects with DFC policies.
3.10 Environmental and social impact assessment is the process used to identify poten
tial
environmental and social impacts and risks associated with the Project. The assessment
process also identifies any mitigation, in accordance with a Mitigation Hierarchy, or
corrective measures that will enable the Project to meet the applicable requirements in
Performance Standards 2 through 8, any applicable host country laws and regulations,
and DFC requirements. Applicants seeking support for Category A and B projects, and
Special Consideration projects, must conduct some form of environmental and social
assessment. Depending on the type of project and the nature and magnitude of the risks
and impacts, the assessment could involve an Environmental and Social Impact
Assessment (“ESIA,” See Glossary), a limited or focused environmental and social review,
or a straightforward application of environmental siting, pollution standards, design
criteria or construction standards. The types of issues, risks tobe examined, impacts to be
assessed and Meaningful Consultation to be undertaken can also vary considerably,
depending on the nature of the Project and its size, location, stage of development,
severity of risks and impacts, geographical extent of impact and ability to mitigate. For
those projects with heightened social risks (See Paragraph 2.6, Special Consideration),
DFC will review the process by which the Project has incorporated Social Risk Due
Diligence into its assessment and operations. The following general topics, when
applicable, are examined during the environmental and social assessment review:
• Environmental issues, including site description, existing land use, description
of
ma
nufacturing or commercial process, materials used and stored on-site, land us
e
impacts resulting from the Project, impacts to any aquatic or terrestrial resources,
Environmental and Social Policy and Procedures
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biological diversity, including rare and endangered plants and animals and their
habitat, air emissions, including emissions of Greenhouse Gases, energy efficiency,
water use, liquid effluents and solid wastes, pollution controls or other mitigation
measures employed, identification of project alternatives and opportunities to
minimize adverse impacts and maximize benefits, occupational and community health
and safety protections, impact on the source of raw materials if derived from areas
including ecologically sensitive areas and supply chains identified in Performance
Standard 2. Category A projects are required to include a Climate- related
Vulnerability assessment as part of the ESIA.
• Project-related social issues, including affected populations, housing, incom
e,
em
ployment and working conditions, land use, visual impacts, noise and lighti
ng
im
pacts, as well as any fiscal, cultural, ethnic, religious, and Human Rights impacts
.
In
formation should also be provided on impacts to Project Affected People includin
g
any Economic or Physical Displacement, individuals and groups that may be
par
ticularly vulnerable because of gender, poverty or other factors, and the potenti
al
fo
r increased transmission of communicable diseases. Where conditions exist fo
r
di
scrimination or community conflict, details should be provided, as well
as
ma
nagement plans to mitigate impacts of the project on such conflicts. Project-
related social impacts should be quantified to the extentfeasible.
3.
11 Greenfield Category A projects and significant expansions or modifications of
existing projects that are screened as Category A require the submission of a full-scale
ESIA. Depending on potential environmental and social risks DFC also may require the
submission of a Baseline Audit of existing Category A or B facilities. The purpose of a
Baseline Audit is to identify past and present concerns, current status of regulatory
compliance, management systems and performance as well as potential risks and
liabilities of the Project. Additional guidance on the format and content requirements for
ESIAs and Baseline Audits may be found in Guidance Note 1 – Social and Environmental
Assessment and Management Systems at:
https://www.ifc.org/wps/wcm/connect/ab6cffa1-e357-42e3-a27b-
c759ffa561a1/2007%2BUpdated%2BGuidance%2BNote_1.pdf?MOD=AJPERES&CVID
=jqeu0U7
3.12 For Category B projects DFC requires submission of sufficient information and
documentation on which to base the review of the ESMS. The level of detail required will vary
depending on the type and size of the Project, but, at a minimum, Applicants should submit one
or more documents or analyses that describe:
• The Project and its environmental and social
aspects.
• Ma
ps, drawings or schematics of the Project and Area of Influence
.
• Co
mpliance with the legal and regulatory framework of the host country an
d
appl
icable international environmental, health and safety, and social, includi
ng
la
bor, performance requirements (See Section 4.0)
.
• Ke
y potential impacts and risks, including identification of any Project Affect
ed
People and estimated Direct Emissions of Greenhouse Gases.
• Pl
anned mitigation measures and any residual risks or impacts
.
• Pl
anned monitoring and reporting of environmental and social perform
ance.
• A
description of the process of Meaningful Consultation
.
Environmental and Social Policy and Procedures
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3.13 Projects that have been screened as Category C (i.e., projects with minimal environmental
or social impacts) are not required to establish a formal ESMS, but are required to establish
policies and procedures that will be used to guide the project (See Paragraph 2.10), submission
of sufficient information necessary to confirm the absence of potential adverse environmental
and social risks, and a worker and community grievance mechanism (See Paragraph 3.9).
3.14 When specific mitigation measures or actions are required for a project to comply
with the Performance Standards, host country laws and regulations, or DFC’s
environmental and social requirements, Applicants are required to prepare and
implement an Environmental and Social Action Plan (“ESAP”). The level of detail required
will depend on the nature and magnitude of the risks and adverse impacts of the Project
or Subproject and may range from a brief description to a series of specific plans. ESAPs
are required for all Category A projects and for Category B projects that are dependent
on mitigation and monitoring measures to avoid or reduce potentially significant
environmental and social impacts. Draft ESAPs for Category A projects must be prepared
as part of the required ESIA and made public in accordance with
DFC’s disclosure requirements. The ESAPs shall:
• Describe the actions necessary to implement mitigation measures or correctiv
e
acti
ons to be undert
aken.
• Pr
ioritize these actions
.
• In
clude a timeline for their implementation
.
• Be
disclosed to Project Affected People and Stakeholders in a timely manner
.
• De
scribe the schedule and mechanism for external reporting on the implementation of th
e
ESAP.
3.
15 Applicants are required to establish, maintain, update and strengthen as necessary, an
ESMS is required for effective project implementation, including any actions required under the
ESAP. Management systems must have organizational structures with clearly defined roles,
responsibilities and authorities, appropriate human and financial resources allocated for
implementation and adequate training for employees and contractors. If there are material
weaknesses in the management system, DFC will require strengthening of the management
system as a condition of DFC support. Additional guidance on the establishment of an ESMS
may be found in Guidance Note 1 –Assessment and Management of Environmental and Social
Risks and Impacts:
https://www.ifc.org/wps/wcm/connect/ab6cffa1-e357-42e3-a27b-
c759ffa561a1/2007%2BUpdated%2BGuidance%2BNote_1.pdf?MOD=AJPERES&CVID=jqeu0U7
Tailored Reviews
3.16 DFC undertakes detailed, tailored environmental and social reviews (See
Paragraphs 3.16 to 3.33) for certain sectors and types of projects in response to DFC
policies and practices and new DFC products or initiatives, which are based on emerging
trends in international best practices related to environmental and social safeguards.
Environmental and Social Policy and Procedures
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Investments in Large, Diverse Enterprises
3.17 Applicants seeking DFC support for investments in large, diverse enterprises are
required to define the scope of the intended use of proceeds from the investment in
terms of specific projects for which the environmental and social impacts can be readily
assessed.
Project Development Activities
3.18 Project development activities including non-invasive, non-construction activities
are often required in response to competitive bidding announcements or to raise capital.
These activities include the posting of bid bonds and preparing environmental impact
assessments, feasibility studies, and design documents. Projects involving these types of
activities are screened as Category C provided:
• The projects do not involve invasive or construction activiti
es;
• The project under development is not subject to a categorical prohibition (See
Ap
pendix B); an
d
• DF
C support for the development investment does not obligate DFC to suppo
rt
fu
ture project implementation
.
Construction and Operations of Dams
3.19 For projects involving the construction and operation of dams that are not otherwise
categorically prohibited (See Appendix B), DFC applies screening and environmental and social
assessment criteria consistent with international best practice. ESIAs prepared for
hydroelectric projects should, at a minimum, address issues cited in the International Finance
Corporation’s Good Practice Note: Environmental, Health and Safety Approaches for
Hydropower Projects. https://www.ifc.org/wps/wcm/connect/79ad4356-6f18-4955-bf35-
adcd6d072897/GPN_EHSHydropower.pdf?MOD=AJPERES&CVID=mR5BwAV
Forestry Projects
3.20 All projects involving timber extraction from Natural Forests, including all boreal,
temperate, and plantation Forests must be, and remain, certified by an independent non-
governmental organization.
3.21 Certifiers must be accredited by an international accreditation body (such as the
Forest Stewardship Council (https://us.fsc.org/en-us) that can hold the certifier
accountable to a common set of environmental and social principles and procedural
protocols, including periodic review and re-accreditation. The purpose of certification is
to demonstrate that timber extraction activities are managed sustainably.
3.22 Any forest product labeling associated with a certified Forest must be guaranteed by
a credible independent certification body that connects the labeled product to its certified
forest- of-origin.
Environmental and Social Policy and Procedures
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Health Care
3.23 All projects providing patient care must obtain satisfactory accreditation based on a
quality evaluation of the technical competence of the institution’s resources and organization
by an internationally recognized accreditation organization (such as those accredited by ISQua
https://www.isqua.org/) or in the case of a health care service provider for which accreditation
standards are not available, certification or similar high quality rating by a third-party expert in
the health care field satisfactory to DFC. All projects must maintain this accreditation,
certification or high-quality rating throughout the term of DFC support. The cost of this
accreditation or certification is the responsibility of the Applicant.
3.24 DFC may consider support for health care projects that include elements of
traditional medicine where there is an established national policy that regulates
traditional treatments; establishes the role of traditional medicine within the national
health care system; and clarifies the relationship between traditional medicine and the
official health service system.
3.25 All hospitals, medical centers, and other projects that purchase pharmaceuticals
for the purpose of providing them, directly or indirectly, to patients shall restrict drug
purchasing to pharmaceuticals registered for use in the host country and to drug
suppliers that comply with the World Health Organization’s Good Manufacturing
Practices for both imported and locally produced goods.
https://www.who.int/medicines/areas/quality_safety/quality_assurance/TRS986annex
2.pdf?
ua=1
3.
26 Projects involving the manufacturing of pharmaceuticals or medical equipment are
reviewed closely. Prior to supporting such projects, evidence that the safety and
effectiveness of such products are certified by the U.S. Food and Drug Administration or
an equivalent foreign public health authority must be received. DFC also requires
evidence that the products have not been withdrawn from the U.S. market for reasons of
safety or lack ofeffectiveness.
Renewable Fuels Projects
3.27 For the purposes of this policy Renewable Fuels are defined as fuels that meet all of the
following criteria:
1
(1) fuels that are produced only from Renewable Biomass; (2) fuels that are
used to replace or reduce the quantity of fossil fuel present in transportation fuel, heating oil or
jet fuel; and (3) fuels that meet lifecycle Greenhouse Gas emissions reduction thresholds when
compared to the 2005 baseline average gasoline and diesel that they replace. Emissions
reduction thresholds are as follows: Renewable Fuel – 20 %; Advanced Biofuel – 50%;
Biomass-based Diesel – 50%; and Cellulosic Biofuel – 60%. Renewable Fuels projects that
meet these criteria are considered “clean technology” projects for the purposes of Section 8.7
of this policy provided the Applicant annually demonstrates compliance with the criteria in this
section through an annual independent third-party audit. Direct Greenhouse Gas Emissions
associated with fossil fuel combustion in Renewable Fuel projects are subject to DFC
1
For additional information on eligibility criteria, lifecycle analyses and third-party audit requirements
see 40 CFR Part 80 – Regulation of Fuels and Fuel Additives. U.S. Environmental Protection Agency.
Environmental and Social Policy and Procedures
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Greenhouse Gas policy requirements (Section 8), including annual cap allocation (Sections 8.4)
and Category A screening thresholds (See Appendix A).
Financial Intermediaries
3.28 No Financial Intermediary may use DFC support for the purpose of investing in,
lending to, or providing services to an entity engaged in a Categorically Prohibited
Project.
3.29 Review of Subprojects involves screening, assessment, disclosure, compliance and
monitoring procedures as all other direct Applicants, including Category A disclosure and
Greenhouse Gas policy requirements (See Section 8). Subprojects may be provided prior
written consent on the basis of potential environmental and social risks. Environmental
and social review of Subprojects of Financial Intermediaries are not delegated unless
consent is provided in advance based on criteria in Paragraph 3.31.
3.30 A Financial Intermediary’s proposed investment or lending strategy is taken into
account in DFC’s assessment of the risk of adverse environmental and social impacts
associated with the Financial Intermediary’s Subprojects at the time the Financial
Intermediary’s structure is approved by DFC. Factors taken into consideration include the
size and nature of the prospective investments, the prospective use of proceeds from the
investment, the term of the investment, the targeted investment sectors and the capacity
of the Financial Intermediary to identify and mitigate the risk of adverse environmental
and social impacts associated with their Subprojects. All prospective investments may be
provided a consent, provided that the DFC Agreement contains exclusion lists prohibiting
investments in entities engaged in categorically prohibited activities or activities likely to
have significant adverse environmental or social impacts.
3.31 Financial Intermediaries are required to maintain at all times an ESMS to ensure
compliance with DFC policies (See Paragraph 3.10).
3.32 If a Financial Intermediary’s lending or investment strategy indicates the potential for
significant adverse environmental, health, safety or social impacts associated with
prospective investments, additional mitigation to reduce risk and potential liabilities may
be required. Examples of additional mitigation include:
• Additional capacity building including retention of an environmental and socia
l
coordinator to provide full time supervision and implementation of DFC
req
uirements with respect to environmental, health, safety and social
concerns;
• Us
e of binding restrictions on the use of proceeds;
and/or
• More frequent reporting to the DFC on the environmental and social performance of
Subpr
ojects
.
3.
33Where Financial Intermediary operations and related investments could have
significant adverse environmental or social impacts, the Financial Intermediary shall cause,
or in the case of non-controlling minority positions use commercially reasonable efforts to
cause, such investments to (a) identify potential environmental and social risks and
mitigants through an environmental/social impact assessment, and (b) require appropriate
actions to ensure Subproject’ operations are in compliance with DFC policies . In cases
Environmental and Social Policy and Procedures
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where the relevant IFC Performance Standards are more stringent than host country law,
the FI shall apply the relevant IFC Performance Standards to their operations and
investment activities with specific targeted actions to be implemented over an appropriate
timetable. For the avoidance of doubt, in cases where Financial Intermediaries are
providing debt, Financial Intermediaries shall cause or use commercially reasonable
efforts to cause (as applicable) compliance with (a) and (b) above by contractually
requiring such compliance and enforcing such contractual rights.
Environmental and Social Policy and Procedures
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4. ENVIRONMENTAL AND SOCIAL STANDARDS
4.0 Objectives: (1) to specify standards of performance necessary to achieve
environmentally and socially sustainable outcomes; and (2) to identify project-specific
international best practices.
4.1 Scope of Application: The requirements in this section apply to all projects
supported through DFC insurance, reinsurance, direct loans and loan guaranties.
DFC Roles and Responsibilities
4.2 All projects must meet the Performance Standards, applicable Industry Sector
Guidelines, including any revisions issued by IFC, Internationally Recognized Worker
Rights, and host country laws, regulations and standards related to environmental and
social performance, including host country obligations under international law. In
addition, where DFC has developed sector-specific approaches (See Paragraphs 3.17 –
3.33), DFC requires projects to meet those requirements, when applicable. In accordance
with the provisions of Performance Standard 3, alternative pollution prevention and
control technologies may be approved, provided that (1) the alternative performance
levels are consistent with the overall requirements of Performance Standard 3; and (2)
the alternative performance levels are protective of the environment and Project
Affected People within the Area of Influence.
4.3 DFC is responsible for identification of supplemental standards (over and above those
standards identified in Paragraph 4.2) when additional preventative or protective
measures are necessary to adequately mitigate specific project-related environmental
and social risks and impacts. Supplemental standards include (1) standards issued by
other international organizations relating to public health, safety and the environment
such as the World Health Organization, the International Maritime Organization, the
Food and Agriculture Organization and the International Civil Aviation Organization; (2)
relevant and applicable U.S. federal standards; and (3) standards of best practice
developed by governments, industry associations, and non-governmental organizations.
4.4 DFC is responsible for ensuring that all DFC Agreements include the specific
performance requirements that a project is required to meet throughout the life of DFC
support.
4.5 DFC is responsible for disclosing project-specific performance requirements in project
summaries that are posted on the DFC web site. Any approved alternative pollution
prevention and control technologies will be identified in project summaries.
4.6 For those projects in which a Multilateral Development Bank (MDB) such as the
European Bank for Reconstruction and Development, the African Development Bank, the
Asian Development Bank, or the Inter-American Development Bank is involved, DFC may
apply the policies, in whole or in part, of the respective MDB (other than the Performance
Standards) to a project to facilitate DFC in the transaction.
Environmental and Social Policy and Procedures
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Applicant Roles and Responsibilities
4.7 Applicants are required to meet the Performance Standards, Industry Sector
Guidelines, Internationally Recognized Worker Rights, and host country laws,
regulations and standards related to environmental and social performance, including
host country obligations under international law. Applicants are also required to meet
any sector-specific requirements (See Paragraphs 3.17 – 3.33), when applicable, and
supplemental performance requirements as identified by DFC (See Paragraph 4.3).
4.8 The requirement to meet the project-specific performance requirements extends to
on-site contractors and sub-contractors of the Project that work for a substantial
duration of time on the Project or are material to the primary operations of the Project.
Applicants are responsible for ensuring that on-site contractors and sub-contractors
meet the performancerequirements.
4.9 Projects that involve new facilities or business activities are required to meet the
project- specific performance requirements from the outset.
4.10 For existing projects (e.g., privatizations), the performance requirements must be
attained within a reasonable period of time following the receipt of DFC support, with the
exception of Labor Rights requirements, which must be met from the outset. If material
compliance has not been demonstrated at the time of DFC approval, Applicants are
required to prepare and implement a corrective action or Remediation Plan
demonstrating how compliance with the Project-specific requirements will be achieved
within the specified time period. Remediation Plans for Category A projects are subject
to public disclosure and third- party audits.
4.11 Applicants seeking DFC support must demonstrate compliance with host country
environmental, health, safety and social requirements. Where host country requirements
differ from the Performance Standards, Industry Sector Guidelines, and Internationally
Recognized Worker Rights, the project is expected to meet whichever are more
stringent.
Revision of Standards
4.12 International organizations, the United States Government and industry groups
periodically revise guidelines and standards to reflect technological advances and
improved understanding of environmental, health, safety and social risks. Complete
applications that are received after the effective date of a new guideline or standard will
be assessed against that new guideline or standard.
4.13 Complete applications that are received before the effective date of a new guideline
or standard will be assessed against the guideline or standard in effect on the date of
application provided that DFC commitment to provide support is achieved within one
year of the effective date of the new guideline or standard. If commitment is not achieved
within one year after the effective date of the new guideline, the project will be subject to
the new guideline.
Environmental and Social Policy and Procedures
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5. PUBLIC CONSULTATION AND DISCLOSURE
5.0 Objectives: (1) to ensure that Project Affected People are informed and consulted
during project preparation and implementation; and (2) to enhance transparency and
accountability related to DFC’s environmental and social management.
5.1 Scope of Application: The requirements contained within this section apply to all
projects supported through DFC insurance, reinsurance, direct loans, or investment
guaranties, including support through Financial Intermediaries.
DFC Roles and Responsibilities
5.2 DFC makes information available concerning its activities to enable Applicants
and Stakeholders, including Project Affected People and members of the interested
public. Institutional information that is made available on DFC’s web site includes
annual reports, audited financial statements, program handbooks, Board resolutions,
claims determinations, arbitral awards, bilateral agreements and annual Greenhouse
Gas accounting for DFC's portfolio.
5.3 Although disclosure of project-related information is primarily the responsibility of
Applicants, DFC is committed to making non-confidential project-specific information
available to enhance transparency and accountability and to foster good governance.
Project-related information that is posted on the DFC web site includes project
summaries, summaries of DFC environmental and social site-monitoring reports, DFC’s
active portfolio list and portfolio company investments of DFC-supported investment
funds. Notwithstanding this commitment, DFC may withhold records or portions of
records that are exempted from public disclosure under the Freedom of Information Act
(FOIA). Additional information on DFC’s FOIA implementing regulation is available at
https://www.dfc.gov/who-we-are/transparency-and-accountability
5.4 DFC provides advance notice and information about potential projects to be voted
on by DFC’s Board of Directors. Information summaries on projects to be voted on by
the DFC Board are made public at least 15 days in advance of the Board meeting. The
summaries include the following environmental and social information as appropriate
to the nature and scale of a project and commensurate with the potential
environmental and social risks and impacts:
• Rationale for screening category;
• Environmental and social standards used in the project assessment;
• Description of the major environmental and social risks and impacts of the Project;
• Key measures required to mitigate environmental and social risks to acceptable levels;
• Description of action(s) required to achieve conformance with the
environmental and social standards used in project assessment;
• Information related to DFC environmental and social site monitoring visits; and
• Description of the Applicant’s consultation with Project Affected People.
Environmental and Social Policy and Procedures
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5.5 DFC provides advance notice and information on Category A projects, whether subject to
Board approval or not, to ensure that interested parties have sufficient information to
meaningfully contribute to the DFC decision-making process. ESIAs and Baseline Audits
required for Category A projects are made public on DFC’s web site for a designated comment
period of not less than 60 days before DFC makes a decision on whether to support a project.
Acceptance of a document for disclosure does not imply project approval. Public comment on
the projects are invited and considered by DFC in advance of any decision on a project. No
application for a Category A project may be approved without this public disclosure and
opportunity for comment. At the same time the Applicant’s ESIA or Baseline Audit is released
for public comment, DFC posts on its web site an initial project summary. The initial project
summaries identify the rationale for designating the project as Category A, environmental and
social standards to be used in project assessment and the location for local access to
environmental and social project information.
5.6 Comments received on projects, including any comments received during public
hearings,as well as DFC management’s response to those comments, will be posted on
DFC’s web site at least 7 days prior to presenting a project for approval.
5.7 For those projects with the potential for significant adverse impacts on Project
Affected People, DFC will confirm prior to project approval that: (1) the Applicant has
engaged the affected groups and communities as required under Performance
Standard 1 and (2) there is Broad Community Support for the Project.
5.8 DFC also prepares and discloses project summaries which contain environmental and
social information related to non-Category A, non-Board projects. These project
summaries are posted on DFC’s web site for a period of not less than 30 days prior to
execution of the DFC Agreement.
5.9 An Applicant’s ESIA or Baseline Audit submitted for disclosure often does not
contain all of the final negotiated commitments made by an Applicant to mitigate or
remediate environmental and social risks and impacts. The final ESAP or final
Remediation Plan for Category A projects is made public on DFC’s web site following
DFC acceptance.
5.10 DFC requires Applicants to conduct and certify that they have conducted third-
party audits for all Category A projects. Third-party auditors must supply
certifications that the audit has been completed and that the Category A projects are
in compliance with allenvironmental and social conditions contained within the DFC
Agreement. The auditor certification and a publicly releasable summary of audit
findings is made public on the DFC web site.
5.11 DFC is required to notify host country governments of any environmentally sensitive
investment considered for support. This notification is required to identify guidelines and
other standards of international organizations relating to public health, safety or the
environment that are applicable to the Project and, to the maximum extent practicable,
any restriction related to public health or safety that would apply to the project if it were
undertaken in the United States. This requirement applies to all proposed investment
support screened as Category A. All Host Country Notifications are made public on
DFC’s website.
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5.12 DFC is committed to disseminating information that meets its standards for objectivity,
integrity and utility in accordance with its Information Quality Guidelines.
5.13 DFC has established an Office of Accountability to assess and review complaints
about DFC-supported projects. The Office of Accountability gives local communities,
which may be materially, directly and adversely affected by DFC-supported projects, a
means through which complaints may be raised. The Office of Accountability’s
mandate is to deliver problem-solving and compliance review services in a manner that
is fair, objective and transparent, thereby enhancing DFC's mission effectiveness.
Requests for assistance should be directed to:
Director, Office of Accountability
1100 New York Ave., NW
Washington DC 20527
Tel. 1-202-357-3910
Fax 1-202-408-5133
E-mail: accountability@DFC.gov
Applicant Roles and Responsibilities
5.14 Applicants must meet the requirements of the Performance Standards, and host
country laws, regulations and standards related to public consultation and disclosure of
information. In order to more effectively manage risks and impacts of projects, all
Applicants are required to engage Project Affected People through (1) disclosure of
information, (2) Meaningful Consultation and (3) the development and implementation of
systems for responding to complaints and grievances commensurate to the level of social
risk. The nature, frequency and level of effort of this engagement will be commensurate
with the project’s risks and impacts and the project’s phase of development. Costs
associated with translation, dissemination of information and consultation are the
responsibility of the Applicant.
5.15 Applicants are required to disclose to Project Affected People DFC’s
potential participation in a proposed investment.
5.16 For projects with the potential for significant adverse impacts on Project Affected
People, Applicants are required to (1) engage the affected groups and communities as
required under Performance Standard 1 and (2) demonstrate that there is Broad
Community Support for the Project. For projects involving impacts to Indigenous People
or Cultural Heritage, Applicants are required to comply with the additional consultation
and disclosure requirements identified in Performance Standards 5, 7 and 8.
5.17 If the Project is screened as Category A, Applicants are required to submit an ESIA
(and for existing projects a Baseline Audit) for public disclosure on the DFC web site.
ESIAs and Baseline Audits submitted for public disclosure must be in English or
accompanied by an English- language translation. The ESIAs and Baseline Audits must
adequately describe potential risks and proposed mitigation measures and include a draft
ESAP, draft Remediation Plan (if required) and Stakeholder engagement plan (See
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paragraph 5.19). At a minimum, the Applicant is required to provide a local language
translation of the executive summary of the
ESIA (and Baseline Audit) and make the summary available to Project Affected People in
a format that is readily understandable and tailored to meet the information needs of
Project Affected People. The translated summary should be distributed by means that
take into account the ability of Project Affected People to receive, address and effectively
comment on the content. DFC also discloses this summary on its web site.
5.18 Projects are required to develop and implement a Stakeholder engagement plan
tailored to project risks and impacts in accordance with the requirements of
Performance Standard 1. The Stakeholder engagement plan is required to be included
as part of the document(s) submitted to DFC for disclosure under Paragraph 5.5 of this
policy.
5.19 Applicants are required to provide periodic reports (at least annually) to Project
Affected People concerning (1) implementation of any ESAP and Remediation Plan and
(2) issues that have been identified as of concern to those Project Affected People. Any
material changes to the project design, management systems or mitigation measures will
also be communicated to Project Affected People. All reports must be in a language and
format accessible to the Project Affected People.
5.20 Prior to DFC’s issuance of approval for a project that significantly involves an
Extractive Industry and where DFC’s support to the project is valued at $10 million or
more (including contingent liability) (1) Applicants must agree to implement Extractive
Industry Transparency Initiative (EITI) principles and criteria, or substantially similar
principles and criteria related to the Project; and (2) the host country where the project is
to be carried out must have committed to EITI principles and criteria or substantially
similar principles and criteria or be taking the necessary steps to establish functioning
systems. DFC may approve an Extractive Industry project if the host country does not
meet the requirements of this paragraph only if DFC determines that it is in the foreign
policy interest of the United States to provide support to the Project and the host country
does not prevent the Applicant from meeting the disclosure requirements of (1) above.
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6. CONDITIONS AND COMPLIANCE
6.0 Objectives: (1) to establish specific requirements for environmental and social
performance in DFC Agreements; (2) to define remedies in the event performance
requirements are not met.
6.1 Scope of Application: The requirements contained within this section apply to all
projects supported through DFC insurance, reinsurance, direct loans, or investment
guaranties, including support through Financial Intermediaries.
DFC Roles and Responsibilities
6.2 DFC reviews information provided by the Applicant with respect to baseline
environmental and social conditions, technical design, operating performance, mitigation
measures and residual impacts of projects. Based on this information, DFC develops
appropriate undertakings (covenants) required of the Applicant, which are included in the
DFC Agreement. The terms of the covenants take into account, among other things, the
level of project control which the Applicant will have regarding compliance with DFC
standards and the Applicant’s role in the Project. The covenants remain in effect during
the term of the DFC Agreement. The coverage of the covenants includes (1) compliance
with all applicable Performance Standards, Industry Sector Guidelines, Internationally
Recognized Worker Rights, host country laws, regulations, and standards, including host
country obligations under international law, and any supplemental standards identified by
DFC; (2) mitigation commitments, including those contained within any required ESAP or
Remediation Plan; (3) notification and reporting requirements, including the format for
annual reports based on DFC-approved monitoring methodology; and (4) on-going
Stakeholder engagement and reporting requirements.
6.3 All DFC Agreements include contractual language that addresses Internationally
Recognized Worker Rights in substantially the following form (as outlined in Section
1451(d)(2) of the Build Act of 2018. ):
‘‘The person receiving support agrees not to take actions to prevent employees of the
foreign enterprise from lawfully exercising their right of association and their right to
organize and bargain collectively. The person further agrees to observe applicable laws
relating to a minimum age for employment of children, acceptable conditions of work with
respect to minimum wages, hours of work, and occupational health and safety, and not to
use forced labor or the worst forms of child labor (as defined in section 507 of the Trade
Act of 1974 (19 U.S.C. 2467)). The person is not responsible under this paragraph for the
actions of a foreign government.’’
6.4 In addition to the environmental and social performance requirements that are
included in all covenants contained in DFC Agreements, in the case of all Category A
projects DFC Agreements include, at a minimum, the following requirements:
• Develop and implement an ESAP;
• Prepare and submit to DFC an annual environmental and social report
summarizingthe environmental and social performance based on monitoring of
the Project over the preceding year to demonstrate compliance with DFC
Agreement covenants and conditions;
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• Timely notification to DFC of the occurrence of any accident that has resulted in a
disability or loss of human life, or that has, or that could be foreseen to have, a
material adverse impact on the environment or local communities; and
• Conduct at least one third-party audit. The timing of the third-party audit is
specified in the DFC Agreement covenants and is reflective of the nature and
magnitude of the risks in the Project lifecycle (e.g., if the major risks are expected
to occur during construction, the audit is required to take place during
construction).
6.5 In addition to the environmental and social performance requirements that are
included in all covenants contained in DFC Agreements, in the case of all Special
Consideration projects DFC Agreements include, at a minimum, the following
requirements:
• Prepare and submit to DFC an annual report summarizing the project’s
performance over the preceding year, based on monitoring of identified social
risks and impacts, to demonstrate compliance with DFC Agreement; and
• Conduct at least one third-party audit. The timing of the third-party audit is
specified in the DFC Agreement covenants and is reflective of the nature and
magnitude of the risks in the Project lifecycle (e.g., if the major risks are expected
to occur during construction, the audit is required to take place during
construction).
6.6 For all projects, material misrepresentations or material non-compliance with
contractual environmental and social provisions, including reporting requirements, may
constitute an event of default under the terms of the applicable DFC Agreement. DFC
determines what is material and whether a default is curable or incurable. DFC makes
determinations as to materiality based, for example, on the severity of the environmental,
health, safety or social, including labor, impacts or other result caused by the non-
compliance and the nature and degree of such non-compliance by the Applicant.
6.7 In the case of a curable default, remediation generally is required by DFC to cure the
default. In the case of an incurable default, DFC may exercise contractual remedies
including insurance contract termination, acceleration of loan repayment, or divestiture
of an investment of a DFC-supported investment fund.
Applicant Roles and Responsibilities
6.8 Applicants are required to comply with all contractual conditions, covenants, and
representations whether or not the Applicant has a controlling interest in the Project. The
terms of the applicable covenants, as well as DFC’s remedies for breach thereof, will
appropriately reflect the nature of the Applicant’s role and interest in the project.
6.9 Applicants investing in Category A projects or Special Consideration projects are
required to conduct additional certified third-party audits if: (1) the Applicant fails to
submit contractually required annual self-monitoring reports in a timely manner, (2) DFC
monitoring or other information indicates a need for additional independent audits, or (3)
when project risks are expected to change over time.
6.10 If DFC requires the preparation of a Remediation Plan for a Subproject, Financial
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Intermediaries are required to enter into an agreement with the applicable Subproject to
adopt and to implement the required plan to the satisfaction of DFC. DFC will work with
Financial Intermediaries to review and modify the plan as required. Following acceptance
of the plan, the Financial Intermediary shall use all reasonable efforts, including the
enforcement of related rights, to cause the Subproject to implement the plan as promptly
as possible. Final Remediation Plans for Category A projects are made public on the DFC
web site.
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7. MONITORING
7.0 Objectives: (1) to review and evaluate DFC-supported projects’ compliance with
the environmental and social performance requirements; (2) to evaluate the
effectiveness of mitigation measures, action plans, and corrective actions.
7.1 Scope of Application: The requirements contained within this section apply to all
projects supported through DFC insurance, reinsurance, direct loans, or investment
guaranties, including support through Financial Intermediaries.
DFC Roles and Responsibilities
7.2 DFC monitors project compliance with all environmental and social requirements
(and underlying representations) that are reflected in conditions and covenants in DFC
Agreements throughout the term of the contract. DFC monitors changes in projects and
local context that may affect the environmental and social profile of projects.
7.3 DFC or its consultants conduct periodic site visits to DFC-supported projects to review
their environmental and social performance and to ensure that they meet the
environmental and social requirements in the DFC Agreements. DFC site visits are
determined through a risk- based prioritization process. The scope, timing and periodicity
of the visits are commensurate with the significance and severity of environmental and
social risks and impacts of a project. DFC endeavors to conduct at least one site visit to all
Category A projects and Special Consideration projects within three years of execution of
the DFC Agreement. A summary of the site visit findings will be made public on DFC’s web
site.
7.4 DFC reviews periodic monitoring reports submitted by Applicants to ensure that
adverse risks and impacts are mitigated as required in DFC Agreements.
7.5 DFC works with Applicants to rectify any failures to comply with the
environmental and social requirements in the DFC Agreements and exercises
remedies to either reestablish compliance or pursue termination of DFC support.
Applicant Roles and Responsibilities
7.6 All DFC-supported projects that have been operational for at least 12 months are
required to submit an annual Development Outcomes Survey. The survey is one of the
tools used by DFC to indicate compliance with DFC’s policy requirements, including
environmental and social requirements.
7.7 Annual environmental and social reports are required for all Category A projects and
some Category B projects. Annual environmental and social reports enable DFC to
monitor the performance of the project with respect to environmental, occupational and
community health, safety and social issues. At a minimum, the reports include information
on the following:
• Results of environmental and social monitoring or sampling activity.
• Compliance with all conditions and covenants in DFC Agreements.
• Project-related accidents impacting the environment or Project Affected People or
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resulting in a disability or loss of life.
• Summary of training provided on environment, health, and safety issues.
• Environmental and safety deficiencies identified by the local regulatory authorities as
well as any remedial actions taken.
• Community engagement activities.
• Complaints or grievances received from Project Affected People or
Stakeholders and actions taken to resolve the issues.
7.8 Annual reports are required for all Special Consideration projects. Annual reports
enable DFC to monitor the performance of the project with respect to heightened social
risks. The annual report for Special Consideration projects will summarize the social
performance based on monitoring of the Project over the preceding year to demonstrate
compliance with DFC Agreement covenants and conditions. At a minimum, the reports
should contain thefollowing:
• Results of social impact monitoring and/or stakeholder engagement activities pertaining to
Special Consideration status.
• Compliance with all conditions and covenants in DFC Agreements pertaining to
Special Consideration status.
• Summary of compliance issues identified by regulatory authorities pertaining to
Special Consideration status and any remedial actions taken.
• Summary of complaints or grievances received from Project Affected People, including
Workers, or Stakeholders and actions taken in response to complaints or grievances.
7.9 Applicants are required to conduct and certify that third-party audits for all Category
A projects and Special Consideration projects have been completed. DFC may require
third-party audits of some Category B projects. The purpose of the audit is to (1) evaluate
a project’s compliance with all environmental and social requirements (and underlying
representations) that are reflected in DFC Agreements; and (2) validate the methodology
used in Annual Environmental and Social Reports required under DFC Agreements.
7.10 At least one third-party audit is required for all Category A projects and Special
Consideration projects. The audit should be performed at a time specified in the DFC
agreement, and usually within the first three years of receiving DFC support. For
certain projects, third-party audits may be required during the construction phase.
Applicants are required to obtain DFC approval of the audit scope of work and the
selection of third-party auditors. The Applicant is responsible for all costs associated
with conducting the audit(s).
7.11 DFC requires submission of certification from the third- party auditor that the audit
has been conducted in accordance with the agreed scope of work and that the Project is in
compliance with all environmental and social conditions and covenants (and underlying
representations) contained within the DFC Agreement. The auditor certification for
Category A projects and Special Consideration projects is made public on the DFC web
site. The third-party audit certification for Category A projects and Special Consideration
projects also must include a summary of the audit findings which can be made public on
DFC’s web site.
7.12 Applicants are required to retain the rights afforded under each investment
structure, to ensure that DFC has the rights to (1) visit and inspect projects and
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Subprojects; (2) access project and Subproject environmental and social performance
monitoring records, including human resources records; and (3) meet with project and
Subproject management and Project Affected People.
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8. CLIMATE CHANGE AND RENEWABLE ENERGY
8.0 Objectives: (1) to support the reduction of Greenhouse Gas emissions associated
with projects; (2) to promote energy efficiency and conservation; (3) to promote low and
no-carbon fuels and technologies; and (4) to encourage carbon sequestration in land use
and forestry practices.
8.1 Scope of Application. The requirements contained within this section apply to all
projects supported through DFC insurance, reinsurance, direct loans, or investment
guaranties, including support through Financial Intermediaries.
DFC Roles and Responsibilities
8.2 New investments are screened for Climate-related Risks and Climate-related
Vulnerability.
2
A desk-based climate vulnerability/impact assessment will utilize
publicly available tools and databases such as the World Bank Climate Change
Knowledge Portal.
8.3 DFC is continuing OPIC’s commitment to reduce the Direct Greenhouse Gas
Emissions associated with projects in OPIC’s active portfolio by 50 percent over a
fifteen-year period (June 30, 2008 – September 30, 2023). “Active portfolio” is defined
as all insurance contracts in force and all guaranty and direct loans with an outstanding
principal balance.
8.4 The baseline that is used to assess progress toward the commitment identified in
Paragraph 8.2 is the sum of Direct Emissions from projects with Greenhouse Gas
emissions exceeding 25,000 metric tonnes of CO
2eq
per year to which OPIC provided a
commitment between 1974 and 2008 and which were in OPIC’s active portfolio on June
30, 2008.
8.5 In order to achieve the 50 percent reduction goals (Paragraph 8.2) DFC establishes
an annual transactional cap for all new projects with significant Direct Greenhouse
Gas Emissions.
3
For the purposes of allocation of the annual cap, new projects are
defined as those projects that receive DFC support within a given year. In cases where
an Applicant requests DFC support for a portfolio of projects, DFC will allocate cap
individually, as necessary, to each Project within the Applicant’s portfolio. For years in
which the annual emissions associated with DFC committed projects are less than the
annual cap for that year, the remaining capacity may be allocated to subsequent years.
Allocation of the annual transactional cap is at DFC’s discretion. With respect to
projects that involve the construction of coal-fired power plants, DFC will give strong
preference to projects that capture and sequester 85 percent of Greenhouse Gas
2
Executive Order 13677 (September 23, 2014) requires the integration of climate-resilience
considerations into all United States international development work.
3
Projects that are exempt from this requirement are any coal-fired or other power generation project the purpose of
which is to (i) provide affordable electricity in International Development Association (IDA)-eligible countries; and (ii)
increase exports of goods and services from the United States or prevent the loss of jobs from the United States.
Page! 28
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emissions.
8.6 Extension of financing, insurance and reinsurance terms shall be treated as
new commitments for the purpose of this policy.
8.7 Projects involving Renewable Energy are assigned a Greenhouse Gas emission
level of zero (provided there are no fossil fuel components of the Project) for the
purpose of this policy.
8.8 Recognizing that meaningful reductions in Greenhouse Gas emissions can be achieved
either through: (a) modest percent energy efficiency improvements in large projects; (b)
large percent energy efficiency improvements in small projects; or (c) significant reduction
in direct Greenhouse Gas emissions in any project. Projects that achieve either energy
efficiency improvement of 15 percent or more or significant Direct Greenhouse Gas
Emissions reductions
of greater than 100,000 tons CO
2e
/year are assigned a Greenhouse
Gas emission level of zero
for the purposes of this policy, provided Life Cycle Accounting
demonstrates that the project will not result in a net increase in emissions over the
projected life of the project when compared to the “no project” alternative. Projects that
fail to meet either the 15 percent efficiency threshold or the absolute aggregate emissions
reduction target will have their entire net emissions counted.
8.9 DFC tracks and annually reports direct and indirect Greenhouse Gas emissions
associated with DFC office operations in accordance with accounting and reporting
methods of the Greenhouse Gas Protocol (http://www.ghgprotocol.org) and Executive
Order 13514.
8.10 DFC tracks and reports on an individual project basis the annual Greenhouse Gas
emissions associated with projects within DFC’s active portfolio with Direct Emissions
that
exceed 25,000 metric tonnes CO
2eq
per year. DFC calculates Greenhouse Gas
emissions using
internationally accepted GHG accounting protocols, including those from
the U.S. Environmental Protection Agency and methodologies approved by the Climate
Registry http://www.theclimateregistry.org.
8.11 DFC reports on an annual basis the projected Greenhouse Gas emissions associated
with
each newly committed project with Direct Emissions that exceed 25,000 metric
tonnes of CO
2eq per year. Annual Greenhouse Gas emission estimates are subject to third
partyverification.
Applicant Roles and Responsibilities
8.12 For new projects, Applicants must meet the requirements of the Performance
Standards, including resource efficiency requirements of Performance Standard 3, which
require identification and implementation of technically and financially feasible and cost-
effective measures for improving efficiencies in consumption of energy, water and other
resources and material inputs. Rehabilitation and other modifications of existing projects
should plan to meet the requirements of the Performance Standards, including resource
efficiency requirements of Performance Standard 3, within a feasible period of time.
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8.13 Consistent with the requirements of Performance Standard 3, Applicants must
demonstrate that measures to reduce significant, Project-related Greenhouse Gas
emissions were evaluated and that technically and financially feasible and cost-
effective measures were incorporated into the final design of their Project.
8.14 As a condition of DFC support, all projects that are expected to produce or currently
produce Direct Emissions exceeding 25,000 metric tonnes of CO
2eq
per year must
quantify and
annually report to DFC the Direct Emissions from their Project. As a
condition of DFC support and consistent with the requirements of Performance Standard
3, Applicants also shall quantify the significant indirect emissions associated with off-site
production of electricity used by the Project.
8.15 As a condition of DFC support, projects in Energy Intensive Sectors must meet
energy efficiency guidelines and benchmarks established by international organizations, or
develop and implement an energy management program to achieve these guidelines and
benchmarks within a feasible period of time. Energy management programs should be
appropriate to the nature and scale of project operations. The project shall document
methods to reduce overall energy usage patterns through reduction in energy losses and
improvements in energy conversion efficiency. In some projects, process modifications will
be required to achieve guidelines and benchmarks. Industry specific resources on energy
efficiency may be obtained from the Energy Star program
https://www.energystar.gov/buildings/facility-owners-and-managers/industrial-
plants/measure-track-and-benchmark/energy-star-energy-0 .
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9. COUNTRY ELIGIBILITY - LABOR
U.S. Law Requirements
9.0 Section 1451(d) of the Build Act of 2018 contains the following provision:
The Corporation should support projects under title II in countries that are taking steps to
adopt and implement laws that extend internationally recognized worker rights (as
defined in section 507 of the Trade Act of 1974 (19 U.S.C. 2467)) to workers in that
country, including any designated zone in that country.
Determining Country Eligibility: The USTR Process
9.1 The statute establishing the Generalized System of Preferences (“GSP,” See Glossary )
program provides that the President of the United States shall not designate a country as a
GSP beneficiary if it “has not or is not taking steps to afford Internationally Recognized
Worker Rights to workers in that country” (See 19 U.S.C. 2462). In addition, the President
must consider “whether or not such country has taken or is taking steps to afford . . .
Internationally Recognized Worker Rights” in determining whether to designate a
country as a beneficiary. For consistency of worker rights country-level determinations
across the U.S. Government, DFC accepts the determinations made by the President for
the purpose of the GSP program.
9.2 Through the Office of the U.S. Trade Representative (“USTR,”), the Trade
Policy Staff Committee (“TPSC”), chaired by the USTR and made up of representatives from the
U.S. Department of State, U.S. Department of Labor, and other U.S. Government
agencies, advises the President as to which countries should be designated as GSP
beneficiaries.
Any person may request to have the GSP status of any beneficiary country reviewed with
respect to any of the eligibility criteria, including the “taking steps” country standard for
worker rights.
9.3 If a petition is accepted for review, the TPSC review typically includes examination of
the issues raised in the petition and encouragement of the foreign government to
implement worker rights reforms. USTR also solicits comments through the Federal
Register and holds a public hearing.
9.4 Upon completion of a country review, a country’s eligibility status may remain
unchanged, or be withdrawn, suspended, or limited. Based on the country review, should
the President
determine that a country’s GSP beneficiary status be withdrawn, suspended, or limited, DFC
implements the determination with respect to its own programs. If a country’s GSP
beneficiary status is withdrawn for failure to meet the statutory worker rights standard,
the country becomes ineligible for DFC programs from the effective date of that country’s
ineligibility under the GSP program. However, if a country becomes ineligible for GSP
benefits on grounds other than worker rights, that country remains eligible for DFC
programs.
9.5 Modifications to countries’ GSP eligibility are implemented by Executive Order or
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!
Presidential Proclamation, and are published in the Federal Register. If a country’s GSP
beneficiary status is withdrawn or suspended for failure to meet the worker rights
standard, the country list on DFC’s website is updated to remove the country as of the
effective date of the withdrawal or suspension of GSP benefits, and DFC staff are notified
of the change of country status. If the determination is that GSP eligibility should be
limited, DFC staff are instructed to follow the same limitations in the conduct of DFC’s
programs
Reviewing Country Eligibility: The DFC Process
9.6 In making its determinations as to whether non-GSP-eligible countries where DFC
programs are being offered are taking steps to afford workers Internationally Recognized
Worker Rights, DFC utilizes a similar petition and review process. Petitions can be
submitted to DFC at its annual public hearing to reexamine whether the status of any such
country should be changed on worker rights grounds.
9.7 Upon an initial petition review, if DFC makes the determination that the petition
merits a formal review, DFC will consult with, at a minimum, the U.S. Department of
State, U.S. Department of Labor, and the USTR to carry out such a review. DFC may use
multiple instruments to inform its country practices review, including:
• The U.S. Department of State’s Annual Country Reports on Human Rights
Practices;
• Reports, observations and recommendations of the International Labor Organization
(See Glossary, “ILO”)
• Independent consultants’ country practice reviews;
• Information received through DFC’s public hearings; and
• Consultations with labor organizations.
9.8 The “taking steps” standard is a purposely flexible standard to reflect the varying levels
of economic and social development in developing countries. In its country reviews, DFC
takes into account the totality of circumstances and facts available relevant to
Internationally Recognized Worker Rights, and uses certain general criteria to assess
whether countries meet the statutory standard, including:
Progress towards ratification of the relevant ILO eight fundamental conventions; and
The progress the country has taken or is taking to adopt and implement laws and practices
that extend Internationally Recognized Workers Rights in areas where national law and
practice have not met the international standard.
Granting Country Eligibility on Worker Rights Grounds
9.9 For non-GSP-eligible countries that are deemed particularly sensitive on worker rights
grounds due to a documented history of issues relating to Internationally Recognized
Worker Rights, and where DFC seeks to implement its programs for the first time or to lift
suspension of DFC programs due to foreign policy or other priorities, DFC will consult
with, at a minimum, the U.S. Department of State, U.S. Department of Labor, and the USTR
in making its “taking steps” determination.
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Country Status Effect on DFC-Supported Projects
9.10 If a country becomes ineligible for DFC support on worker rights grounds, the change of
status does not affect projects to which DFC made a legally binding commitment prior to the
date on which the country status changed. All other projects that have not been formally
committed to by DFC prior to the official ineligibility date will not be eligible for DFC support
during the term of the country’s ineligibility. If a country is under a formal review on worker
rights grounds (by either the TPSC or DFC), projects that are in the application process are
subject to a review that is sensitive to the labor issues highlighted in the GSP or DFC petition.
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!
APPENDIX A – Illustrative List of Category A Projects
Although decisions on categorization are made on a case-by-case basis, the following list is
indicative of the types of projects that are screened by DFC as Category A.
1. Large-scale industrial plants.
2. Large-scale industrial estates.
3. Crude oil refineries and installations for the gasification and liquefaction of 500 tonnes
or more of coal or bituminous shale per day.
4. Major Greenhouse Gas emitting projects, defined as projects with Direct
Greenhouse Gas
Emissions of more than 100,000 (short) tons (91,000 metric
tonnes) of CO
2eq
per year.
5. Cement manufacturing with an annual production rate of greater than one million dry
weight tons.
6. Integrated works for the initial smelting of cast iron and steel; installations for the
production of non-ferrous crude metals from ore, concentrates, or secondary raw
materials by metallurgical, chemical or electrolytic processes.
7. Installations for the extraction of asbestos and for the processing and transformation of
asbestos and products containing asbestos; for asbestos-cement products with an annual
production of more than 20,000 tonnes of finished product; for friction material with an
annual production of more than 50 tonnes of finished product; and for other asbestos
utilization of more than 200 tonnes per year.
8. Integrated chemical installations, i.e. those installations that manufacture, on an industrial
scale, substances using chemical conversion processes in which several units are
juxtaposed and are functionally linked to one another and which produce: basic organic
chemicals; basic inorganic chemicals; phosphorous, nitrogen or potassium based fertilizers
(simple or compound fertilizers); basic plant health products and biocides; basic
pharmaceutical products using a chemical or biological process; explosives.
9. Projects that manufacture, store, transport or dispose hazardous or toxicmaterials.
10. All projects that pose potentially serious occupational or health risks.
11. Construction of motorways, express roads, lines for long-distance railway traffic, and
airports with a basic runway length of 2,100 meters or more. Construction of new roads
with four or more lanes or realignment and/or widening of an existing road so as to
provide four or more lanes where such new road, or realigned and/or widened section of
road, would be 10 km or more in a continuous length.
Environmental and Social Policy and Procedures
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12. Pipelines, terminals, and associated facilities for the large-scale transport of gas,
oil, and chemicals.
13. Large-scale seaports and also inland waterways and ports for inland waterway traffic;
trading ports, piers for loading and unloading connected to land and outside ports
(excluding ferry piers).
14. Waste-processing and disposal installations for the incineration, chemical treatment or
landfill of hazardous, toxic or dangerous wastes.
15. Construction or significant expansion of large dams and reservoirs not otherwise
prohibited.
16. Groundwater abstraction activities or artificial groundwater recharge schemes in cases
where the annual volume of water to be abstracted or recharged amounts to 10 million
cubic meters or more.
17. Industrial plants for the (a) production of pulp from timber or similar fibrous materials; or
(b) production of paper and board with a production capacity exceeding 200 air-dried
metric tonnes per day.
18. Large-scale peat extraction.
19. Large-scale quarries, mining, or processing of metal ores or coal.
20. Major exploration and development of onshore oil and gas reserves.
21. Exploration and development of offshore oil and gas reserves.
22. Installations for storage of petroleum, petrochemical, or chemical products with a
capacity of 200,000 tonnes or more.
23. Large-scale logging.
24. Large-scale power transmission.
25. Municipal wastewater treatment plants servicing more than 150,000 people.
26. Municipal solid waste-processing and disposal facilities.
27. Large-scale tourism and retail development.
28. Large-scale land reclamation.
29. Large-scale primary agriculture/plantations involving intensification or conversion of
previously undisturbed land.
30. Plants for the tanning of hides and skins where the treatment capacity exceeds 12
tonnes of finished products per day.
Environmental and Social Policy and Procedures
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31. Installations for the intensive rearing of poultry or pigs with more than: 85,000 places for
broilers and 60,000 places for hens; 3,000 places for production pigs (over 30 kg); or 900
places for sows.
32. All projects with potentially major impacts on people or which pose serious socio-
economic risk, including Physical and Economic Displacement, impacts on Indigenous
Peoples and adverse impacts on Cultural Heritage.
33. Greenfield housing developments that contain more than 2,500 residential units.
34. Projects, not categorically prohibited, but located in or sufficiently near sensitive
locations of national or regional importance which may have apparent environmental
impacts on:
• Wetlands;
• Areas of archeological significance;
• Areas prone to erosion and/or desertification;
• Areas of importance to ethnic groups/indigenous peoples;
• Primary temperate/boreal Forests;
• Coral reefs;
• Mangrove swamps;
• Nationally designated seashore areas; and
• Managed resource protected areas, protected landscape/seascape (International
Union for the Conservation of Nature (IUCN) categories V and VI) as defined by
IUCN’s Guidelines for Protected Area Management Categories. Additionally, these
projects must meet IUCN’s management objectives and follow the spirit of IUCN
definitions.
Environmental and Social Policy and Procedures
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!
APPENDIX B – Categorical Prohibitions
1. Construction of dams that significantly and irreversibly: (a) disrupt natural ecosystems
upstream or downstream of the dam; or (b) alter natural hydrology; or (c) inundate large
land areas; or (d) impact biodiversity; or (e) displace large numbers of inhabitants (5,000
persons or more); or(f)
impact local inhabitants’ ability to earn a livelihood.
2. Production or trade in any product or activity deemed illegal under host country laws or
regulations or international conventions and agreements or subject to international phase-
outs or bans such as pharmaceuticals,
4
pesticides/herbicides,
5
ozone depleting
substances,
6
polychlorinated biphenyls
7
and other hazardous substances,
8
wildlife or
wildlife products regulated under the Convention on International Trade and Endangered
Species of Wild Fauna and Flora,
9
and trans-boundary trade in waste or waste products.
10
3. Resettlement of 5,000 or more persons.
4. Any impact on natural World Heritage Sites https://whc.unesco.org/en/list/ unless it can
be demonstrated through an environmental assessment that the project (i) will not result
in the degradation of the protected area and (ii) will produce positive environmental and
social benefits.
5. Any impact on areas on the United Nations List of National Parks and Protected Areas
https://www.protectedplanet.net/unless it can be demonstrated through an
environmental assessment that the project (i) will not result in the degradation of the
protected area and (ii) will produce positive environmental and social benefits.
6. Extraction or infrastructure in or impacting: protected area Categories I, II, III, and IV
(Strict Nature Reserve/Wilderness Areas and National Parks, Natural Monuments and
Habitat/ Species Management Areas), as defined by the International Union for the
Conservation of Nature (IUCN). Projects in IUCN Categories V (Protected
Landscape/Seascape) and VI (Managed Resource Protected Area) must be consistent with
IUCN management objectives https://www.protectedplanet.net/ unless it can be
demonstrated through an environmental assessment (i) there is no degradation of the
protected area and (ii) there are positive environmental and social benefits.
4
A list of pharmaceutical products subject to phase-outs or bans is available at
https://www.who.int/medicines/publications/restrictions/en/
5
A list of pesticides and herbicides subject to phase-outs or bans is available at http://www.pic.int
6
A list of the chemical compounds that react with and deplete stratospheric ozone together with target reduction and phase-out
dates is available at https://www.epa.gov/ozone-layer-protection/ozone-depleting-substances
7
Polychlorinated biphenyls are likely to be found in oil-filled electrical transformers, capacitors, and switchgear dating from 1950
to 1985.
8
A list of hazardous chemicals is available at http://www.pic.int
9
A list is of CITES species is available at http://www.cites.org
10 As defined by the Basel Convention; see http://www.basel.int
Environmental and Social Policy and Procedures
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7. Production of, trade in or use of un-bonded asbestos fibers.
12
8. Marine and coastal fishing practices, such as large-scale pelagic drift net fishing and fine
me
sh net fishing, harmful to vulnerable and protected species in large numbers an
d
dam
aging to biodiversity and habitat
s.
9.
Us
e of forced labor
13
or child labor.
14
10. Projects or companies known to be in violation of local applicable law related to
envi
ronment, health, safety, labor, and public disclosur
e.
11.
Pr
ojects or companies where the primary business activities are in the followi
ng
pr
ohibited sectors: gambling; media communications of an adult or political natur
e;
mi
litary production or sales; alcoholic beverages (if contrary to local religious or cul
tural
norms); or tobacco and related products.
12.
Pr
ojects or companies that replace U.S. production or are likely to cause a signific
ant
red
uction in the number of employees in the U.S. including “runaway plants”
and
out
sourcing the provision of goods and services (e.g., Business Process Outsourci
ng)
fro
m the U.S
.
13.
Projects or companies subject to performance requirements that are likely to
red
uce substantially the positive trade benefits to the U.S
.
14.
Pr
ojects or companies in which host country governments have majority ownership
or
ef
fective management control (except for investments in privatizing companies made i
n
accordance
with the Finance Agreement)
.
15.
Co
mpanies found by a court or administrative body of competent jurisdicti
on
engagi
ng in unlawful monopolistic practi
ces.
16.
Pr
ojects or companies that provide significant, direct support to a government t
hat
engages
in a consistent pattern of gross violations of internationally recognized
Human
Rights, as determined by the U.S. Department of State.
17.
Pr
ojects or companies that perform abortions as a method of family planning; motivate
or
coerce
any person to practice abortions; perform involuntary sterilizations as a method
of
fa
mily planning; coerce or provide any financial incentive to any person to underg
o
steri
lizations; or perform any biomedical research which relates in whole or in part,
to
me
thods of, or in the performance of, abortions or involuntary sterilization as a means
of
family planning.
12
This does not apply to the purchase and use of bonded asbestos cement sheeting where the asbestos content is less than 20%.
13
Forced labor means all work or service, not voluntarily performed, that is exacted from an individual under threat of force or
penalty, such as indentured labor, bonded labor, or similar labor-contracting arrangements.
14
Child labor means the employment of children (persons below the age of 18) that is economically exploitative, or is likely to be
hazardous to or interfere with the child’s education, or be harmful to the child’s health or physical, mental, spiritual, moral, or
social development.
Environmental and Social Policy and Procedures
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18. Companies which are treated as inverted corporations under 6 U.S.C. 395(b).
Environmental and Social Policy and Procedures
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APPENDIX C – World Bank Group Environmental, Health and Safety (EHS) Guidelines
https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/sustainab
ility-at-ifc/policies-standards/ehs-guidelines
General EHS Guidelines
Industry Sector Guidelines
Forestry
Board and Particle-based Products
Sawmilling and Wood-based
Products Forest Harvesting
Operations
Pulp and Paper Mills
Agribusiness/Food Production
Mammalian Livestock
Production Poultry Production
Perennial Crop
Production Annual Crop
Production Aquaculture
Sugar Manufacturing
Vegetable Oil
Processing Dairy
Processing
Fish Processing
Meat Processing
Poultry
Processing
Breweries
Food and Beverage Processing
General Manufacturing
Cement and Lime Manufacturing
Ceramic Tile and Sanitary Ware
Manufacturing Glass Manufacturing
Construction Materials
Extraction Textiles
Manufacturing
Tanning and Leather Finishing
Semiconductors and Electronics
Manufacturing Printing
Foundries
Integrated Steel Mills
Base Metal Smelting and Refining
Metal, Plastic, Rubber Products Manufacturing
Environmental and Social Policy and Procedures
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Oil and Gas
Offshore Oil and Gas Development
Onshore Oil and Gas Development
Liquefied Natural Gas (LNG) Facilities
Infrastructure
Tourism and Hospitality
Development Railways
Ports, Harbors and Terminals
Airports
Airlines
Shipping
Gas Distribution
Systems Toll Roads
Telecommunications
Crude Oil and Petroleum Product
Terminals Retail Petroleum Networks
Health Care Facilities
Waste Management
Facilities Water and
Sanitation
Chemic
als
Pharmaceuticals and Biotechnology Manufacturing
Coal Processing
Natural Gas Processing
Oleochemicals Manufacturing
Nitrogenous Fertilizer Manufacturing
Phosphate Fertilizer Manufacturing
Pesticides Formulation, Manufacturing and Packaging
Petroleum-based Polymer Manufacturing
Petroleum Refining
Large Volume Petroleum-based Organic Chemicals Manufacturing
Large Volume Inorganic Compounds Manufacturing and Coal Tar Distillation
Mining
Wind Energy
Geothermal Power Transmission and Distribution
Thermal Power
Environmental and Social Policy and Procedures
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Mining
Power
!
!
APPENDIX D – Glossary
Advanced Biofuel – means Renewable Fuel, other than ethanol derived from cornstarch, which
has lifecycle Greenhouse Gas emissions that are at least 50 percent less than baseline
Greenhouse Gas emissions.
Annual Country Reports on Human Rights Practices – Reports that are submitted annually by the U.S.
Department of State to the U.S. Congress in compliance with sections 116(d) and 502B(b) of the
Foreign
Assistance Act of 1961 (FAA), as amended, and section 504 of the Trade Act of 1974, as amended.
Applicants – Investors, lenders, insurers or projects sponsors seeking DFC support.
Area of Influence – Areas potentially affected by a project including (1) the primary project site(s)
and related facilities that the Applicant develops or controls, such as power transmission
corridors, pipelines, canals, tunnels, access roads, borrow and disposal areas and construction
camps; (2) associated facilities that are not funded as part of the project (funding may be provided
separately by the Applicant or by third parties including the government), and whose viability and
existence depend exclusively on the project and whose goods and services are essential for the
successful operation ofthe project; (3) areas and communities potentially affected by cumulative
impacts that result from the incremental impact on areas or resources used or directly impacted
by the project, and from any existing, planned or reasonably defined developments at the time the
risks and impacts identification process is conducted; and (4) areas and communities potentially
affected by impacts from unplanned but predictable developments caused by the project that may
occur later or at a different location. The Area of Influence does not include potential impacts
that might occur without the project or independently of the project. Any identifiable supply chain
expansion of materials or resource
development that is inherent to a project’s success should be included within a project’s
Area of Influence.
Baseline Audit - An assessment of environmental and social impacts of pre-existing or ongoing
activities that is required for all Category A projects that involve the acquisition of pre-existing
facilities or new construction on a site where prior industrial activities have occurred.
Broad Community Support – The collective expression by Project Affected People, through
individuals or their recognized representatives, in support of a project. Broad Community
Support may exist even if some individuals or groups object to a project.
Biomass-based Diesel –A Renewable Fuel that has lifecycle Greenhouse Gas emissions that are at
least 50 percent less than 2005 baseline lifecycle Greenhouse Gas emissions and (1) is a
transportation fuel, fuel additive, heating oil or jet fuel; (2) meets the definition of either biodiesel
or non-ester; and (3) is approved for use as a motor vehicle fuel or fuel additive. Renewable fuel
that is co-processed with petroleum is not Biomass-based Diesel.
Build Act of 2018 - Better Utilization of Investments Leading to Development Act of 2018, Division
F of Public Law 115-254
Categorically Prohibited Project – A project of the type listed in Appendix B where potential
adverse environmental or social impacts of the project preclude DFC support.
Environmental and Social Policy and Procedures
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Cellulosic Biofuel – A Renewable Fuel derived from any cellulose, hemi-cellulose or lignin that
has lifecycle Greenhouse Gas emissions that are 60 percent less than the 2005 baseline
lifecycle Greenhouse Gas emissions.
Climate-related Risks – Combination of the magnitude of the potential consequence(s) of
climate change impacts) and the likelihood that the consequence(s) will occur.
Climate-related Vulnerability – The degree to which a system is susceptible to, or unable to
cope with, adverse effects of climate change, including variability and extremes. Vulnerability is
a function of the character, magnitude and rate of climate variation to which a system is exposed,
its sensitivity and its adaptive capacity.
CO
2eq
– Carbon Dioxide Equivalents are a metric measure used to compare the emissions from
various
Greenhouse Gases based upon their global warming potential (GWP) over a given
timeframe. The carbon dioxide equivalent for a gas is derived by multiplying the tonnes of the gas
by the associated
GWP. For example, the 100-year GWP for methane (CH
4
) is 28 and for nitrous
oxide (N
2
O) 265. This
means that the emissions of 1 million metric tonnes of methane and nitrous
oxide respectively are equivalent to emissions of 28 and million metric tonnes of carbon
dioxide.
15
Cultural Heritage – Tangible property or sites having archaeological (prehistoric), paleontological,
historical, cultural, artistic and religious value, as well as unique environmental features that
embody cultural values, such as sacred groves. Cultural Heritage also includes intangible forms
of culture, such as cultural knowledge, innovations and practices of communities embodying
traditional lifestyles.
DFC Agreement – A DFC loan agreement, guaranty agreement, project consent or insurance
contract.
Direct Emissions – Emissions from sources that are owned or controlled by a project,
including stationary combustion emissions, mobile combustion emissions, process
emissions and fugitive emissions.
Economic Displacement – Loss of assets or access to assets that leads to loss of income
sources or means of livelihood.
Energy Intensive Sectors – Projects in the following sectors: aluminum, brewing, cement, mining,
corn refining, forest products, glass, metal casting, motor vehicle manufacturing, oil and natural
gas production, petroleum refining, pharmaceuticals, pulp and paper, steel and iron, and thermal
power.
Environmental and Social Action Plan (ESAP) – A systematic program designed to prevent, mitigate
and monitor anticipated environmental and social impacts of prospective and ongoing activities.
Required on all Category A projects. The ESAP provides an implementation schedule for measures
that must be carried out as part of the project showing phasing and coordination with overall
15
GWP values from the IPCC Fifth Assessment Report, 2014.
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implementation plans and the capital and recurrent costs estimates and sources of funds for
implementing the ESAP.
Environmental and Social Impact Assessment (ESIA) – A comprehensive analytical body of work
designed to evaluate environmental and social impacts of major projects having the potential to
have significant, diverse and irreversible impacts on the natural environment and on humans
dependent on that environment. Required for all Category A projects involving new (greenfield)
developments or significant expansion of existing facilities.
Environmental and Social Management System (ESMS) – Part of a project’s overall management
system that includes the organizational structure, responsibilities, practices and resources
necessary for implementing the project-specific management program developed through the
environmental and social assessment of the project.
Executive Order – An order issued by the President, the head of the executive branch of the
federal government.
Extractive Industry – An enterprise engaged in the exploration, development, or extraction of oil
and gas reserves, metal ores, gemstones, industrial minerals (except rock used for construction
purposes), or coal.
Federal Register – The official daily publication for rules, proposed rules, and notices of Federal
agencies and organizations, as well as Executive Orders and other presidential documents.
Financial Intermediary –Investment funds, banks or other financial institutions, or other
entities or vehicles that receive financing, guaranties or insurance.
Forest - An area of land not less than 1.0 hectare with a tree crown cover (or equivalent stocking
level) of more than 10 percent that has trees with the potential to reach a minimum height of 2
meters at maturity in situ. A Forest may consist of either closed forest formations, where trees of
various stories and undergrowth cover a high proportion of the ground, or open Forest. Young
natural stands and all plantations that have yet to reach a crown density of 10 percent or tree
height of 2 meters are included under Forest, as are areas normally forming part of the forest
area that are temporarily unstocked as a result of human intervention such as harvesting or
natural causes but that are expected to revert to Forest. The definition includes Forests
dedicated to forest production, protection, multiple uses, or conservation, whether formally
recognized or not. The definition excludes areas where other land uses not dependent on tree
cover predominate, such as agriculture, grazing or settlements. In countries with low forest
cover, the definition may be expanded to include areas covered by trees that fall below the 10
percent threshold for canopy density, but are considered Forest under local conditions.
Generalized System of Preferences (GSP) – A trade preferences program, overseen by the USTR
that provides preferential duty-free entry for products from designated beneficiary countries
and territories with the purpose of promoting economic growth in the developing world.
Greenhouse Gases – The following six gases or class of gases: carbon dioxide (CO
2
), nitrous oxide
(N
2
O), methane (CH
4
), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur
hexafluoride (SF
6
).
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Host Country Notification – A notification to government officials in the country where a
Category A project is located that identifies international guidelines and standards and
restrictions under U.S. law that would be applicable to the project.
Human Rights – Those rights expressed in the International Bill of Rights and the principles
concerning fundamental rights set out in the International Labour Organization’s Declaration on
Fundamental Principles and Rights at Work.
Industry Sector Guidelines – Technical reference documents issued by the International
Finance Corporation with general and industry specific performance levels and measures.
International Finance Corporation (IFC) – An affiliate of the World Bank group that makes loans to
and investments in, private sector projects in developing countries and emerging markets.
International Labour Organization (ILO) – The tripartite United Nations agency that brings
together governments, employers and workers of its member states in common action to
promote decent work throughout the world.
Internationally Recognized Worker Rights – The term, as specified in the Trade Act of 1974 (as
amended), includes: (1) the right of association; (2) the right to organize and collective
bargaining; (3) prohibition on forced labor and the worst forms of child labor; (4) a minimum age
for the employment of children; and (5) acceptable conditions of work with respect to minimum
wages, hours of work, and occupational health and safety.
Labor Rights – Rights of Workers, which includes Internationally Recognized Worker Rights,
and protection from discrimination with respect to employment and occupation on the basis
of personal characteristics that are unrelated to inherent job requirements.
Life Cycle Accounting– An analytical method used for evaluating and comparing the climate
change implications of a product or system. For the purposes of this policy, the boundary
definition of the analysis for both the project and the “no project” alternative includes raw
material input acquisition, raw material transport, energy conversion and product transport
to consumers.
Mitigation Hierarchy – A system used to anticipate and avoid, or where avoidance is not
possible, minimize, and, where residual impacts remain, compensate/offset risks and
impacts to the environment.
Meaningful Consultation – A process that (1) begins early in the project preparation stage and is
carried out on an on-going basis throughout the project life cycle; (2) provides timely disclosure of
relevant and adequate information that is understandable and readily accessible to Project
Affected People; (3) is undertaken in an atmosphere free of intimidation or coercion; (4) is gender
inclusive and responsive, and tailored to the needs of disadvantaged and vulnerable groups; and
(5)
e
nables the incorporation of all relevant views of affected people and other Stakeholders in
to
decision making, such as project design, mitigation measures, the sharing of development benefits
and
opportunities, and implementation i
ssues.
Of
fice of the U.S. Trade Representative (USTR) – An agency of the U.S. Government that is
responsible for developing and coordinating U.S. international trade, commodity, and direct
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investment policy, and overseeing negotiations with other countries.
Performance Standards – Technical reference documents issued by the International
Finance Corporation with environmental and social impact management performance
criteria.
Physical Displacement – Relocation or loss of shelter.
Presidential Proclamation – An instrument that states a condition, declares a law and
requires obedience, recognizes an event or triggers the implementation of a law (by
recognizing that the circumstances in law have been realized).
Project – All facilities owned or controlled within a physical project boundary that
constitute a commercially viable business unit e
ligible for DFC support.
Project Affected People – Individuals, workers, groups or local communities, including within the
supply chain, which are or could be affected by the project's Area of Influence, directly or
indirectly, including as a result of cumulative impacts. Emphasis should be placed on those who
are directly and adversely affected, disadvantaged or vulnerable.
Remediation Plan – A systematic program designed to reverse adverse environmental and social
impacts of previous activities at a site. The Remediation Plan will provide an implementation
schedule for the measures that must be carried out as part of the project, and capital and
recurrent costs estimates and sources of funds for implementing the Remediation Plan.
Renewable Biomass – Each of the following (including any incidental de minimis contaminants that
are impractical to remove and are related to customary feedstock production and transport): (1)
planted crops and crop residue harvested from existing agricultural land cleared or cultivated
prior to December 19, 2007 and that was non-forested and either actively managed or fallow on
December 19, 2007; (2) planted trees and tree residue from a tree plantation that was cleared at
any time prior to December 19, 2007 and actively managed on December 19, 2007; (3) animal
waste material and animal byproducts; (4) slash and pre-commercial thinning from forestland that
is not ecologically sensitive; (5) biomass (organic matter that is available on a renewable or
recurring basis) obtained from the immediate vicinity of buildings and other areas regularly
occupied by people or public infrastructure, in an area at risk for wildfire; (6) algae; and (7)
separated yard waste and food waste, including recycled cooking and trap grease and separated
municipal solid waste.
Renewable Energy Resources – Energy resources that are naturally replenishing but flow-
limited. They are virtually inexhaustible in duration but limited in the amount of energy that is
available per unit of time. Renewable energy resources include biomass, hydro, geothermal, solar,
wind, ocean thermal, wave action, and tidal action.
Re
newable Fuel – A fuel that meets the following criteria: (1) a fuel produced from Renewable
Biomass;
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(2) a fuel that is used to replace or reduce the quantity of fossil fuel present in a transportation
fuel, heating oil or jet fuel; and (3) a fuel that has lifecycle Greenhouse Gas emissions that are
at least 20 percent less than 2005 baseline lifecycle Greenhouse Gas emissions.
Retrenchment - The elimination of a significant number of Workers or the dismissal or layoff of a
significant number of Workers, generally by reason of project closing or for cost savings.
Retrenchment does not include isolated cases of termination of employment for cause or
voluntary departure.
Social Risk Due Diligence – Process through which the Applicant identifies and manages
heightened risks pertaining to Project Affected People, including communities and Workers,
and related to socioeconomic status, vulnerability, gender, Human Rights, Cultural Heritage,
Labor Rights and working conditions, health and safety, security, and participation in decision
making. Includes risk identification, consultation with Project Affected People and Workers,
and resulting management and monitoring programs. Process can be integrated into the
Applicant’s Environmental and Social
Management System provided it identifies, manages, and communicates risks to Project
Affected People and Workers.
Special Consideration – A screening classification that is applied to a project when there are
heightened social risks within a project. The decision to designate a project as Special
Consideration will take into consideration the significance of the social risk, as determined by the
scale and severity of the potential impacts and vulnerability of the affected people. The Special
Consideration classification of a project
indicates (1) a project’s heightened potential for Labor Rights or Human Rights risks or impacts;
and (2) a higher risk to Workers or Project Affected People.
Stakeholder – Stakeholders are persons or groups who are directly or indirectly affected by a
project, as well as those who may have interests in a project and/or the ability to influence its
outcome, either positively or negatively. Stakeholders may include Project Affected People and
their formal and informal representatives, national or local government authorities, politicians,
religious leaders, civil society organizations and groups with special interests, the academic
community, or other businesses.
Subproject – A project or enterprise that receives financing or investment from a DFC-supported
Financial Intermediary.
U.S. Department of Labor – An agency of the U.S. Government that is responsible for
administering labor laws on working conditions, unemployment insurance benefits and re-
employment services, and tracks national economic measurements.
U.S. Department of State – An agency of the U.S. Government that is responsible for the
international relations of the United States.
Workers – Individuals who are employed directly by the project or under a project contract, and
who perform on-site work for a substantial duration of time on a project or are material to the
primary operations of a project. Workers can be temporary or permanent.
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