CAF and the EnvironmentCAF and the Environment

Title:CAF Environmental Strategy

This document sets out the guiding axes, principles, lines of action, and strategic environment programs that guide CAF’s environmental management.

Edited by:Vice-Presidency of Social and EnvironmentalDevelopment (VDSA), Environment OfficeCorporación Andina de Fomento (CAF)medioambiente@caf.com

Published and produced by:Secretariat and Business Communications OfficeCAF Publicationspublicaciones@caf.com

Graphic Design: 72 dpi

Printed by: Gráficas LaukiCaracas, Venezuela–November 2008

A digital version of this book is available at:www.caf.com/publicaciones

© 2008 All rights reserved. Corporación Andina de Fomento.

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ForewordL. Enrique GarcíaPresident of CAF

This document seeks to collect and make public information about the long road oflearning, experience, and specialization CAF has followed in environmental matters.It also establishes the tactical lines of CAF’s environmental management in harmonywith its economic, financial, and social strategies. In this process, CAF has steered significant effort and resources toward the area of the environment through variousfinancing schemes, in an attempt to integrate the three cornerstones of sustainabledevelopment: economic, social, and environmental.

These efforts are intended to go on contributing to sustainable development and toboost competitiveness, reduce social gaps, check environmental deterioration, supporteconomic growth, and improve living conditions for the region’s inhabitants.

The principles defining the conceptual framework of CAF environmental managementcontained in this document have enabled the environmental dimension to be transversely incorporated into CAF-designed strategies and operations, positivelyimpacting its support for its shareholder countries’ development processes.

In this process of building solidly designed environmental management, CAF has developed its own instruments, systematized its processes, adapted its institutionalschemes, and specialized its interdisciplinary teams in the framework of continualimprovement. This has contributed to the environmental sustainability and socialresponsibility of its operations and, at the same time, has lent significant support tothe shareholder countries in their efforts and actions to conserve and sustainably yieldtheir natural resources and ecosystems.

The CAF Environmental Strategy set forth in this document is a further contribution bythe Corporation toward consolidating a regional environmental culture and fosteringcommitment to conservation and the sustainable use of the region’s natural heritageamong national and international organizations.

Contents

Foreword 3

Introduction 7

CAF Environmental Strategy 9

A. CAF’s conceptual framework in the environment 11A.1 Guiding axes 11A.2 Environmental principles 11

B. Scope 12

C. Objectives 13

D. Lines of action 13

E. Responsible institutional management 13E.1 Operations Environmental and Social Management System 16E.2 Institutional Environmental Management Plan 30

F. Support for the region’s environmental management 30F.1 Strategic environment programs 31F.2 Environmental sector financing 32

G. Implementation and follow-up of CAF Environmental Strategy 33

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Introduction

CAF has put its experience, knowledge, resources,and action strategies at the service of an Agendafor Representative Development for the regionwith a view to achieving high-quality, sustained,equitable, and inclusive growth that helps reducepoverty and unemployment, strengthen democra-cy in a framework of governance, and involve society at large by creating social and human capi-tal, while taking into account the sustainability ofits shareholder countries’ natural base.

The transverse approach to the issue of the environment is apparent in these momentousobjectives for the present and future of theregion, and CAF has therefore undertaken toconserve and sustainably use natural capital andthe environment as a basic support and sourcefor its development in a permanent and coordi-nated effort with its partner countries.

CAF has made the environmental and social dimen-sion a fundamental aspect of its administration.This Environmental Strategy document reassertsand strengthens CAF’s express commitment to theenvironmental sustainability of its shareholdercountries and the operations it finances.

The Environmental Strategy’s conception builds onthe experiences and lessons learned in the environ-mental sphere over more than 35 years of CAFhistory and particularly the progress made over thelast decade. It adopts a prospective view to drivethe environmental development challenges andopportunities of both CAF and its shareholdercountries.

It is worth remembering in this context that, in1994, CAF created the Sustainable DevelopmentCoordination Office (OCDS) responsible for theenvironmental assessment and follow-up of its operations. In 2000, the OCDS became theSustainable Development Office under the Vice-Presidency of Development Strategies. Later,in 2004, the area’s decision level was strength-ened with the creation of the Vice-Presidency ofSocial and Environmental Development (VDSA).Through the VDSA, environmental issues weregiven transverse status integral to the region’seconomic and social development on the onehand, while on the other, the environmental owntechnical and methodological development wasrecognized, setting high levels of specialization inthe CAF environmental area.

Grounding itself in this view, the VDSA set upnew offices of the Environment and Social Development. In addition, in an effort to boostpromotion and specialization in the social sphere,CAF created other parties to reinforce the areasof community and cultural development, andpromote governance and leadership in theregion.

From this perspective, CAF’s institutional organi-zation has been adapting dynamically and flexiblyto achieve the objectives collected in this Environ-mental Strategy document. The VDSA and its Environment Office thus specialize in steering andsupporting the issue’s development with a highlyspecialized team and external consultants work-ing at the Headquarters and at each of the Coun-try Offices.

Organized into multidisciplinary teams, this groupof professionals works together with the businessareas and CAF support to tackle environmentaland social management from an integratedperspective that guarantees its incorporation inthe CAF’s various consultation, decision-making,and execution authorities.

This integrating transverse approach to environ-mental and social management has been growingstronger with its coordination and inclusion in allCAF-financed operations in both the public andprivate sectors, being those of infrastructure,social services, industry, corporations, financialinstitutions and promotion of the microenterprisesector, among others.

Accordingly, part of the operations’ financing isallocated to guarantee that any environmentaland social impacts and risks identified are dealtwith in a timely and efficient fashion, whiledeveloping the participation of civil society asindispensable to this process and in the pursuitof opportunities for environmental and socialdevelopment associated with these operations.

CAF Environmental Strategy has progressedfrom the initial work of assessment and follow-up to broad-based, decisive, committed supportfor the region and its shareholder countries. The

Corporation contributes to this effect with envi-ronmental policy-making and designing regula-tory frameworks, strengthening environment-focused government and non-governmentinstitutions, developing civil society as a keyactor in consolidating a healthy environment,supporting and creating environmentallysustainable markets, and developing conserva-tion projects and restoring ecosystems.

CAF has also incorporated actions geared to theadministration and sustainable yield of naturalresources in order to guarantee, among otherthings, sustained productivity, efficient energy use,and the promotion of renewable, clean, and alter-native energy sources, support for a sustainabilityculture in the financial sector, and the promotionof responsible environmental and social manage-ment practices in the various production and serv-ice sectors.

In summary, it is important to remember thatboth the Corporation’s responsibility activities,and those to do with support for the region’scountries have created the need for a suitableinstitutional organization and for the design ofmethodologies and instruments of its own tosupport internal management. This has enabledacross-the-board internalization of the environ-mental and social aspects of CAF’s actions.

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CAF Environmental StrategyCAF Environmental Strategy

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CAF also recognizes the environmental compo-nent as being decisive in the transformation ofproduction in the region. Firstly, fully aware ofthe importance of integration into the worldeconomy for the region, the Corporationpromotes and accompanies international agree-ments on the environment signed by its share-holder countries.

Secondly, CAF promotes and supports the creationand growth of the production value of naturalcapital, as well as the development of emergingenvironmental markets, and the streamlining ofenterprise and production sectors environmentalmanagement so that, overall, strengthening willstreamline countries’ sustainable integration ininternational markets in an ecoefficient fashion.

A.2 Environmental principles

In line with the Environmental Strategy’s guidingaxes, CAF has established a set of fundamentalprinciples as a conceptual framework for thesteering of its environmental management. TheCorporation therefore:

I. Views the environment as a transverse, coordi-nating component of social, economic, andcultural development.

II. Recognizes the environmental issue as a nexusintegrating international, regional, national,and local actors, and in which the interest,concern, the attention of public, private, andcivil society sectors converge.

III.Respects, cooperates, and coordinates withthe national policies, strategies, and standardsof its shareholder countries as decisiveelements steering its institutional environ-mental management.

A. CAF’s conceptual framework in the environment

Sustainable development and regional integra-tion are the cornerstones of CAF’s institutionalmission and are defined as the guiding axes ofthe Corporation’s Environmental Strategy.

A.1 Guiding axes

CAF believes that the main contribution of theenvironmental dimension to sustainable develop-ment is directed toward recognition of theconservation and sustainable use of the region’snature and environment as a basis for improvingsocieties’ quality of life, overcoming poverty, andpromoting long-term economic developmentand spiritual wellbeing.

In the framework of regional integration, CAFbrings the environmental perspective into playand focuses it on:

The responsible management of ecosystems and shared natural resources of regional andinternational importance, and the harmoniza-tion of the region’s environment policies.

The capitalization of opportunities and themanagement of risks and impacts broughtabout by physical integration.

The conservation of the natural heritage andthe continued survival of the functional rela-tionships of the ecosystems that guarantee life.

The raising of environmental awareness in theregion so as to encourage the strategic appreciation of its natural capital.

IV. Promotes respect for cultural diversity andgender equity, and does not discriminateaccording to creed, ideology, or race, considering full participation indispensablein achieving a healthy environment.

V. Recognizes and supports the identity,culture, and interests of Native populationsand other ethnic communities, and promotestheir participation in achieving sustainabledevelopment in the view that these commu-nities play a fundamental part in environmen-tal sustainability by virtue of their ancestralknowledge and practices.

VI. Takes a cautious approach to its activitiesand, on foreseeing any danger of serious orirreversible damage, promotes the adoptionof cost-effective measures to prevent thedeterioration of the environment.

VII. Encourages the incorporation of environ-mental costs in its activities for the prevention,correction, and restoration of environmentaldeterioration, and for the conservation ofecosystems and renewable natural resources.

VIII.Promotes the exchange of scientific kno-wedge and environment-related transfer andtechnological innovation.

IX. Views the participation and information ofpublic, private, and civil society actors as deci-sive to the success of its mission, and conse-quently promotes and facilitates extensivediscussion spaces and appropriate dissemina-tion mechanisms relating to its activities inview of the policies and strategies establishedfor CAF by its shareholder countries in thisarea.

X. Is committed in creating the spaces andproviding the necessary technical, logistical,and human resources to continue consoli-dating its position as a regionally, environ-mentally, and socially responsible institution.

XI. Supports, through the public, private, and civilsociety sectors, the strengthening of environ-mental management, and the conservationand sustainable use of natural resources andecosystems by its shareholder countries.

B. Scope

CAF Environmental Strategy is in line with theconcept of sustainable development and there-fore places special emphasis on:

Operations financed by the Corporation in thepublic and private sectors including industrialprojects, infrastructure projects, social and environmental development projects, and business operations.

Programs and activities put forward by CAF to support member countries’ environmentaldevelopment.

Activities of institutional environmental management developed on CAF facilities, at itsHeadquarters or Country Offices.

In the framework of this Strategy, the environ-ment is understood as the set of elementscomprised by geospheric, hydric, atmospheric,biotic, social, demographic, anthropological,ethnic, economic, cultural, archeological, partici-pative, and institutional components.

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This Strategy also takes into account the territo-rial nature of the environment, where differentforms of pressure on and use of ecosystems, natu-ral resources, and the environment are generat-ed, leading to specialized environmental mana-gement for urban, rural, and natural areasdepending on the different levels of humanintervention and settlement.

It is important to highlight that, the socialcomponent mentioned in this Strategy documentrelates exclusively to the identification ofimpacts, risks, or opportunities associated withCAF-financed operations.

It should be stressed here that, through its fouroffices specializing in social issues, CAF hasundertaken a series of programs, projects, andactivities focused specifically on the region’ssocial development and not mentioned in thepresent Environmental Strategy document.

C. Objectives

The CAF Environmental Strategy seeks:

To permanently create and improve frame-works, spaces, and processes to guaranteeresponsible environmental and social manage-ment by CAF.

To support shareholder countries in the conservation and sustainable use of naturalresources and ecosystems, and the develop-ment of the environmental sector, incor-porating long-term sustainability criteria andprinciples.

D. Lines of action

This Environmental Strategy document sets outthe following courses of action in accordancewith the established objectives:

In line with the first objective, CAF hasdesigned an Operations Environmental andSocial Management System that comprises theset of safeguard guidelines, methodologicalapproaches, procedures, instruments, andresources, in order to incorporate responsibleenvironmental and social management atevery phase of the CAF credit process.

CAF has also drawn up an Institutional Environ-mental Management Plan to promote respon-sible environmental business action in regardto administrative activities and its facilities atCAF Headquarters and the Country Offices.

To advance the second objective, CAF hasdesigned and implemented a series of pro-grams specializing in the environment thatpromote and support the national and re-gional initiatives for nature conservation and the sustainable use of the region’s natural capi-tal, as well as strengthening the environmen-tal sector in each shareholder country.

E. Responsible institutionalmanagement

Within this first line of action, the institutionalmanagement responsible for the environment,CAF has established two areas of work: the

Actions geared to improving the quality of life for present and future generations.

Operations Environmental and Social Manage-ment System and the Institutional Environmen-tal Management Plan.

E.1 Operations Environmental and Social Management System

An Environmental and Social ManagementSystem has been designed and implemented toensure responsible environmental and socialmanagement for CAF-financed operations. TheSystem consists of a set of environmental andsocial safeguards, methodological approaches,procedures, instruments, and resources. These

coordinate and incorporate environmental andsocial management at every phase of the CAFcredit process.

Compliance with environmental and socialsafeguards in CAF operations

The set of environmental and social safeguards isapplicable to all operations financed by theCorporation. These safeguards set basic bench-marks for the development of sustainable andresponsible environmental and social manage-ment for operations (see Box Nº 1).

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Environmental and social safeguards applicableto CAF operations

I. National legislation. All CAF-financed projectsare in line with the environmental legislation of the country where the project is executed, and with any international agreements and commitments signed by the shareholder countries.

CAF nevertheless calls for the application ofadditional precautions or selects interna-tionally accepted technical standards wherenecessary.

II. Environmental and social impact, risk, and opportunity assessment. Right from the start of its cycle of operations, CAF carries out a review and complementation of the environmental and social assessment, and ensures that the management measures and opportunities for

environmental and social development associated with the operation are designed,identified, and implemented.

On the principle of precaution, when any major environmental and social impacts not foreseen in the assessment process occur during operations, CAF seeks the incorpora-tion of the management measures requiredfor the appropriate administration of these impacts. Likewise, when it sees a need, it callsfor further assessments, studies, and environ-mental analysis to be presented. These include Strategic Environmental Assessments,Watershed Management Planning, Land Planning, and so on.

III. Environmental and social management and budget measures. As a result of the review of the environmental and social assessment for operations, CAF is seeking to internalize in its

(Continued in the following page)

Box Nº 1

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operations’ budgets any environmental and social management costs needed to tackle environmental and social development impacts and opportunities. It is down to the client to adopt the necessary measures toavoid, control, mitigate, and offset anyenvironmental and social impacts and risks.

IV. Institutional strengthening, human resources training, and information. CAF supports the strengthening of governance through the operations it finances, as well as the creationof capabilities among the institutions, esta-blishments, and social groups linked to these operations. It places special importance on the exchange and timely dissemination of relevantinformation for the environmental and socialmanagement of government organizations, the private sector, and communities, bearing in mind the policies and strategies defined in this respect for CAF by its shareholder countries through the Corporation’s Board of Directors.

V. Water conservation. CAF stimulates projects geared to the conservation and sustainable use of hydric and other associated resources(soils and vegetation), and promotes compre-hensive management of watersheds.

VI.Nature reserves and protected natural areas. It is CAF policy to sponsor the preservation of national parks and other protected natural areas as public assets through the operations it finances. Therefore, in compliance with therelevant legislation of the country where theoperation is carried out, CAF finances projects in protected areas providing the operationcontributes to the fulfillment of the objectives for which the protected area has been created.

VII. Disaster risk prevention. When CAF sees aneed to do so, it assesses operations in termsof their vulnerability to natural dangers and of the likelihood of operations to precipi-tate them and so consider reducing the risks to the projects entailed by natural disasters. Where appropriate, it also considers institu-tional strengthening of disaster risk mana-gement and vulnerability analysis manage-ment capabilities as part of the financing.

VIII. Pollution prevention. CAF operations pro-mote the introduction of measures geared to preventing pollution. In industrial operations, the Corporation makes reducing pollution and the consumption of natural resources an integral part of the production process, encourages the use of clean or renewableenergy, and contributes to cutting gree house gas (GHG) emissions in a framework of cleaner production.

IX. The region’s cultural heritage. CAF subjects any projects in areas where there are archeological or historic treasures, or sacredNative sites, to the approval of the compe-tent scientific and/or cultural institutions,and the country’s relevant legislation.

X. Ethnic groups and cultural diversity. CAFstrives to preserve and strengthen theregion’s cultural diversity. In this respect, it makes sure operations have complied withthe participation process demanded by thecountry’s legal system and, where it sees a need, calls for additional step of public consultation. It also calls for the execution of management plans in order to meet any possible impacts on collective lands and

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Methodological approaches of operations environmental and social management

In assessing infrastructure operations, and socialand environmental development operations,which generally involve construction work andthe use of significant expanses of land, CAF takesa comprehensive and systemic approach as itsmethodological framework.

This approach draws on some of the ecosystemicprinciples adopted by the parties of the Conven-tion on Biological Diversity (CBD), and consultssome of the methodological developments andthe application of this concept in different coun-tries (see Box Nº 2).

For industrial operations and manufacturingprocesses, CAF adopts the methodological approachof clean production analysis, combined with tradi-tional clean-up processes depending on individualprojects’ requirements (see Box Nº 3, p. 20).

In operations that combine infrastructure projectsand industrial or manufacturing projects, themethodology involves both approaches, as withmining operations.

In Corporate Loan operations, CAF takes theanalysis of end users’ environmental and socialmanagement capability as a focus in its assess-ment (see Box Nº 4, p. 20).

To guarantee the environmental and social qual-ity of the operations as part of its methodologi-cal approach, CAF undertakes the follow-up,monitoring, and continuous control of compli-ance with environmental principles, safeguardguidelines, and especially any commitmentsacquired by the operation for environmental andsocial administration and management, andtheir corresponding budgetary execution.

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cultures of Native peoples, and other ethnic groups recognized in law.

XI. Community participation and development.It is a priority for CAF, through the operations it finances, to contribute to the strengtheing of the informed, active, and timely participa-tion of the inhabitants of the areas of influ-ence in the operations it supports. When itsees a need, CAF calls for public consultation in addition to those required by the country’s laws.

XII. Involuntary resettlement and/or relocation.In operations requiring resettlement and/or relocation of human groups, CAF calls for plans to be drawn up to compensate the

groups affected or offer them similar or better living conditions to those they had previously and for potential host communi-ties to be taken into consideration. CAF also seeks the creation of local community development capabilities and options, espe-cially in the case of Native peoples or local communities who, due to their vulnerability, may be directly affected by an operation’s execution.

XIII. Child protection. CAF finances no projectsinvolving the direct or indirect exploitationof minors.

XIV. Gender equity. CAF observes gender equity in the operations it finances.

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A comprehensive, systemic approach

This methodological approach is applied toinfrastructure operations, and social and envi-ronmental development operations involvingconstruction work and/or the significant expans-es of land. The main aspects of the approach are:

Understanding and analyzing natural and human systems such as the way geospheric,hydric, atmospheric, biotic, demographic, anthropological, ethnic, cultural, archeologi-cal, participative, economic, and institutionalelements interact.

Identifying levels of vulnerability and risk in each of the components of the above mentioned systems with an analysis based on the natural and/or social units that comprise them, and specializing environmental manage-ment according to urban, rural, or natural areas.

Considering mechanisms to foster the informa-tion and participation of any communities present in the areas of influence, taking into consideration their points of view in any courses of action decided upon for operations’social and environmental management. In addition, when it sees the need and dependingon how critical the project is and how

vulnerable the communities affected are, it considers carrying out additional public consul-tation to that required by a country’s legal system.

Considering existing levels of deterioration inecosystems before executing an operation, aswell as any risks and impacts that may be gene-rated later on. To this end, it identifies theecosystemic functions that could be disturbed as a result of the operation, as well as the effects of such a disturbance on the smooth running of the operation.

Identifying the critical factors to be managed in order to guarantee the functionality of ecosystems, human settlements, and the project itself. Among other things, it identifies anyopportunities for conservation, environmental market development, business development support for Small and Medium Enterprises (SMEs), and social investment.

Identifying the administration and manage-ment measures needed to prevent, mitigate,and/or offset any risks and impacts identified,and promote opportunities, and estimating thecosts and budgets needed for their implemen-tation.

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Box Nº 2

Environmental and social management procedures and instruments in the credit cycle

The objective of CAF’s Operations Environmentaland Social Management System is to guaranteethe physical, environmental, and social sustain-ability of projects that make provision for thevarious operations financed by the Corporation.To do this, the System transversally integrates allavailable technical, technological, human, andfinancial resources at every phase of the creditprocess as stipulated by CAF.

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The cleaner production approach

For industrial or manufacturing operations, thisapproach envisages:

Identifying and assessing a project’s environ-mental management and industrial processes, and steering its recommendations to allow forthe fall in consumption of pollutant inputs, energy, and natural resources serving as raw materials, in order to soften the impact on the environment.

Identifying options for technology updating, process modification, recovery, recycling and reuse of raw materials and waste, and the introduction of best practices, among others, to reduce the pollutants produced by industry liquid discharges, atmospheric emissions, or solid or toxic waste disposal across all industrial processes. This approach is combined with theuse of traditional clean-up procedures and techniques tailored to business needs, current standards, and the economic viability of the projects being financed.

Involving mechanisms to guarantee the parti-cipation of actors related with the project’s environmental and social management, making allowances for the different human settlements and communities involved, workers and suppliers, and so on.

Considering the application of current standards to shareholder countries’ clients in order to guarantee industrial safety conditions and occupational health for workers.

Promoting compliance with standards on theuse of prenarcotic and other substancesrestricted by international agreements.

Identifying the administration and management measures needed to prevent, mitigate, and/or offset any risks and impacts identified, and promote opportunities, and estimating the costs and budgets needed for their implementation.

The Corporate Loans environmental and social management approach

The environmental and social managementapproach for Corporate Loans analyzes andpromotes the measures needed for clients toincorporate policies, strategies, programs, andinstruments, and to supply technical and humanresources, and so pay due attention to the envi-ronmental aspects of their operations andcompliance with their countries’ legislation.

Box Nº 4

Box Nº 3

Actions geared to promoting sustainable markets and financing sectors such as carbon,

clean and alternative energy, clean production, and urban environmental management.

The System also incorporates a series of technicaland report procedures and instruments tailoredto the needs of each phase of the credit cycle.These include origination, assessment, formaliza-tion, and disbursements and administration, (seeFigure Nº 2 on this page and Figure Nº 3 on p. 26).

OriginationCAF incorporates the preliminary environmentaland social risk assessment on the basis of identi-fication of potential credit operations (origina-tion). This assessment becomes a tool for deci-sion-making regarding:

The incorporation or otherwise of the operationin the CAF portfolio.

The establishment of the major risks and critical aspects in the event of incorporationwhich, from an environmental and socialperspective, will have to be examined more closely at the assessment phase (due diligence).

The preliminary identification of any environ-mental and social opportunities that can bebuilt on through the operation.

Operations Environmental and Social Manage-ment System has two instruments speciallydesigned for this assessment. The first is thePreliminary Environmental and Social Risk Analy-sis Matrix, specialized for the different types ofoperations financed by CAF. The second is theCondor Geographic Information System.

On the basis of the interaction of the results ofthe project type analysis and the sensitivi-ty/vulnerability of the environment, the Matrixenables the operation to be categorized accord-ing to the scale of the potential direct or indirectenvironmental and social impacts.

The Condor Geographic Information System tooenables sensitive or vulnerable areas to be iden-tified, as well as potential environmental impacts

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Condor Geographic Information System

This data processing tool developed in a webenvironment belongs to a Geographic Informa-tion System (SIG). This enables any sensitive orvulnerable areas to be established as a prelimi-nary step, as well as any potential environmentaland social impacts of the mainly linear projects(roads, transmission lines, pipelines, and so on) inmost of South America.

The system provides a regionally focused envi-ronmental and social analysis methodology,supported on a considerable wealth ofgeographic, environmental, social, economic,and political and administrative information,centralized in a database georeferenced ondifferent scales.

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on the geospheric, hydric, atmospheric, biotic,and social components of mainly the linear proj-ects (see Box Nº 5).

The classifications of “high” and “medium envi-ronmental and social risk” of necessity imply fullenvironmental and social assessment. This assess-ment includes both the review of the assessmentby the client and the due diligence by CAF. Theoperations classed as “low” or “zero environ-mental and social risk” require only certain basicreviews to guarantee the operation’s viabilityand meet any Environmental and Social Safe-guards applicable to the operations.

From the environmental and social viewpoint,the risk definition phase culminates in the classi-fication of operations into high, medium, low, orzero risk.

AssessmentThe review process for the environmental andsocial assessment of operations classed as high ormedium risk seeks to identify any vulnerableareas, critical aspects, or environmental andsocial management measures needed to prevent,control, mitigate, and offset the impacts identi-fied. It is thereby sought to incorporate thebudgets needed to implement these within theproject’s cost structure and, consequently, toanalyze any conditions or recommendationsbinding the operation so as to guarantee theirenvironmental, physical, and social viability. Inaccordance with the methodological approachesdescribed, Box Nº 6 (see p.24) highlights some ofthe minimum environmental aspects at the oper-ation’s assessment phase.

The assessment process also seeks to build onopportunities for social and environmentaldevelopment for the communities and ecosys-tems present in the areas of influence in order toenhance the populations’ quality of life.

The environmental and social assessment ofoperations relies specifically on three purpose-built tools:

The Guide to the Environmental and SocialAssessment of Infrastructure, Social and Environmental Development Operations.

The Guide to the Environmental and SocialManagement Assessment of Industry andManufacturing Processes Operations.

The Guide to the Environmental and SocialManagement Assessment of Corporate Loans.

Box Nº 5

The results of the assessment, as well as theestablishment of the conditions and environmen-tal and social recommendations binding theoperation, are recorded in an Environmental andSocial Report, which is among the documentssubmitted to the CAF Loans and InvestmentsCommittee (CPI). The environmental and socialassessment then becomes a decision-making toolfor the viability or conditions of financing.

FormalizationRooted in the assessment process, this phase ofthe CAF credit cycle incorporates the conditionsand environmental, social, and labor recommen-

dations to which the operation will be subject inthe relevant credit contract. The budgets toexecute these management measures are alsoincorporated. These may be part of the creditgranted by the Corporation, taken from thenational coffers, or financed with a combinationof these sources.

Disbursements and AdministrationAt the disbursements and administration phase,CAF strives to carry out any relevant control andfollow-up, comprehensively monitoring theenvironmental and social conduct of operationsby verifying compliance with safeguards and,

Environmental and social aspects in the operations assessment process

In accordance with the features of these opera-tions and of the environment in which they arecarried out, aspects of operations assessmentinclude:

Assessment and analysis of the environmental and social studies advanced by the client in compliance with a country’s environmental legislation.

Any additional environmental impact studies, strategic environmental assessments or accumu-lative impact assessments, vulnerability and disaster prevention analyses, or other studies oranalyses to deepen knowledge of any elements of special interest that may be affected by theproject.

Prior review by specialist teams of any detailed information and cartography available, inter-

views with experts, researchers, and research centers, contact with the relevant environmen-tal and social authorities at national, regional, local, and international levels where applicable.

Analysis and interviews with the consultants and companies carrying out the project’s technical studies.

Field trips to intervention areas by these teams.

Consultation and interviews with communities present in the project’s areas of influence and with local authorities.

Any legislation and requirements by the country’s environmental and social authoritiesapplicable to the project.

The application of international environmental and social standards, or those defined by othermultilateral organizations, when the need arise.

Box Nº 6

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Actions geared to the generation and dissemination of environmental

information as an essential decision-making tool.

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especially, with the social and environmentalconditions and recommendations laid out in therespective credit contracts.

Generally speaking, the management of opera-tions –especially the most environmentally andsocially critical ones– is assessed annually. This isdone in tandem with routine environmental andsocial monitoring prior to approval of an opera-tion’s disbursements.

Environmental and social monitoring of opera-tions enables CAF to identify aspects inadequate-ly complied with, impacts and risks unforeseen inthe environmental studies or project assessments,and the physical and budgetary execution levelsof the management conditions and measuresestablished, among other things, to duly incorpo-rate any recommendations necessary.

The lessons learned in this follow-up can feedback into the design and focus of new operationsas part of the continual improvement of CAF’senvironmental and social management.

For the environmental and social monitoring ofthe operations, the Corporation has designedtwo technical tools to support and steer theseactivities (see Figure 3): the Guide for Environ-mental and Social Follow-Up on Operations,applicable to the periodic assessments precedingdisbursements or annual assessment of criticalprojects; and the Guide for Final Environmentaland Social Follow-Up on Operations, whichassesses operations ex post at the close of theCAF credit cycle. Following the application ofthese instruments, technical memoranda aredrafted that record the conclusions of the follow-up and any recommendations necessary.

The task of follow-up is thus approached asteamwork in conjunction with the environment,credit administration, and other areas of supportin order to effectively ensure compliance withthe principles, safeguard guidelines, and applica-ble environmental and social legislation, and theenvironmental and social conditions or recom-mendations binding the operation.

Other instrumentsThe Operations Environmental and SocialManagement System also relies on two special-ized instruments (see Figure Nº 3):

The Internal Manual of Environmental and Social Assessment and Follow-Up for Operations,which sets out the guidelines, methodologies,procedures, guides, and other instruments applicable to the CAF operations cycle describedabove.

The Environmental and Social ManagementInformation System (SIGAS), an online informa-tion system that stores and files: i) technical,legal, and financial documents; ii) designs, studies, assessments, and other informationprovided by the client; iii) the acts andpronouncements of the various CAF consulta-tion and decision-making authorities and; iv) alldocuments relating to an operation’s environ-mental and social management, including anycommunications by the relevant environmentaland social authorities, and any project, client,or community related public information.

This instrument accordingly tells us in real timeabout the progress of each operation’s environ-mental and social management from the outset,linking all CAF personnel at Headquarters and in

Actions geared to the promotion

of conservation initiatives for species,

ecosystems, and natural and genetic

resources, especially those critical in the

provision of environmental services.

its Country Offices throughout the operation’senvironmental and social management associat-ed to the credit cycle. The SIGAS thus becomes apermanent consultation and decision-making toolfor all authorities taking part in the operation.

These standardized instruments and proceduresgenerally enable highly efficient investment interms of time, human and technical resourcesmanagement, thus contributing to the supple-ness that characterizes CAF in its financing.

E.2 Institutional EnvironmentalManagement Plan

As part of its responsibility to the environment,CAF is currently drawing up a group of measuresinvolving all its professionals, geared to reduc-ing and rationalizing energy, water, and inputconsumption, and promoting practices thatreduce, reuse, and recycle waste and materials.It tends to favor dangerous waste managementand fosters a healthy working atmosphere thatstimulates constant exchange and communica-tion among its collaborators.

F. Support for the region’s environmental management

CAF has, out of principle, made significant effortsto support the conservation and sustainable useof natural resources and ecosystems, and tostrengthen the development of its shareholdercountries’ environmental sector, creating syner-gies and working in tandem with public, private,and civil society actors. The tackling of this widearray of environmental issues has resulted in thedevelopment of ten strategic lines of work (seeBox Nº 7).

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Strategic lines of work in the environment

Nature conservation.

The yield and sustainable use of natural and genetic resources, and biodiversity.

Strengthening of natural capital and valuing of services furnished by nature.

Promotion of the use of clean and alternativeenergy, and energy efficiency.

Creation and support for the development of environmental markets.

Streamlining of urban and industrial environ-mental management.

Prevention and treatment of risk associated with adverse natural phenomena.

Support for the incorporation and development of environmental and social management by financial institutions.

Support for the institutional management andstrengthening of public, private, and civil society environmental organizations.

Support and strengthening of civic participa-tion in environmental management and dispute settlement processes.

Box Nº 7

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In order to encourage support for the conserva-tion and sustainable use of natural resources andecosystems, and the development of the environ-mental sector CAF has, through these lines ofwork, created specific financing mechanisms, aswell as five strategic environmental programs.

The programs listed below are dynamic and flex-ible in the way they meet countries’ require-ments and the individual dynamics of differentissues.

F.1 Strategic environment programs

Biodiversity Program (BioCAF)

This program is rooted in the vast potential of theregion’s biodiversity and genetic resources for itscountries’ sustainable development. Some ofthese countries are classified as “megadiverse”,a status awarded at international level for thenumber and variety of their species. In view ofthis, BioCAF supports significant efforts geared toconservation of the ecosystems that are home tothis natural wealth, as well as various activitiesand initiatives to promote sustainable yield of thispotential and contribute to CAF members’ socialand economic development.

Within the scope of its work, BioCAF has estab-lished three subprograms, through which it hasbeen making significant contributions to support:i) the promotion of species and ecosystem conser-vation initiatives; ii) the development of promo-tion mechanisms and tools for biodiversity basedproducts and services, and other natural resources(e.g. green markets, biotrade, and biotechnolo-gy); and iii) activities promoting environmentalservices as a strategy to contribute to the conser-

vation of natural ecosystems and promote activ-ities that enhance the populations’ quality of life.

Latin American Carbon, Clean and Alternative Energies Program (PLAC+e)

Through the PLAC+e, CAF contributes to reducingglobal warming and promotes the use of cleanand alternative energy in Latin America by under-taking and financing innovative projects.

Efforts have so far been directed at: i) promotingand actively participating in the development ofthe GHG emissions reduction market, with theparticipation of the public and private sectors; ii)supporting countries, production sectors, andprojects in securing buyers and generallycontributing to the consolidation of a sustaineddemand for reductions in GHG emissions forLatin America and the Caribbean; iii) supplyingtechnical, intermediation, and financing supportto projects with potential in GHG emissionsreduction; iv) strengthening national institutionsand mechanisms to stimulate and consolidate theGHG market; and v) supporting the region’scountries in the identification and developmentof clean and alternative energy, and energy effi-ciency projects with specialized lines of financing.

Cleaner Cities and Industries Program

The Cleaner Cities and Industries Program was setup in response to the growing environmentalpollution in urban areas and that caused bymanufacturing, mining, and service industries inthe region, and in order to contribute solutionsthat lead to efficient energy use and lowerconsumption levels of inputs and naturalresources. The Program’s activities fall into three

main lines of action: i) the environmental urbanmanagement, ii) the implementation of CleanProduction techniques in Small, Medium, andLarge Enterprises, and iii) the promotion of CleanProduction financing incentives and mechanisms.

In the operations it finances under this program,CAF also supports the adoption of best environ-mental practices geared to the saving and effi-cient use of water and energy, the use of cleantechnologies and processes, and of renewableenergies, the substitution of pollutant inputs andraw materials, and the pollution reduction of thecities and the various production, mining, andservice processes.

Disaster Risk Management Program (PREVER)

For more than five years, PREANDINO gavemomentum to national and sectoral policy-making that prevented and mitigated the risk ofnatural disasters, and to the incorporation ofprevention in planning development in theAndean region.

Building on the results of PREANDINO, CAF iscurrently directing its efforts at its new DisasterRisk Management Program, which aims tosupport the prevention, mitigation, and treat-ment of socioeconomic and environmentalimpacts associated with natural disasters.

The Risk Management Program-PREVER has, aslines of action, established support for projectsand activities to do with: i) El Niño-related riskmanagement and vulnerability reduction; ii)adaptation and vulnerability to climate change;iii) contingent treatment in response to disasters;and iv) risk prevention from the municipalperspective.

Program to Promote Sustainable Development inFinancial Institutions

This Program seeks to foster the internalizationof environmental management principles andpractices in the region’s financial sectors.

Among its long-term objectives, the Programraises the possibility of incorporating changes inthe countries’ financial system through a jointagenda with local actors and financial institu-tions that are also CAF partners and clients. Thesechanges would encourage the adoption of envi-ronmental management in financial practicesand build a training and dissemination strategyfor organizations to reduce risk, cut operatingcosts, and create new business opportunitiesthrough the incorporation of the concept ofsustainable development in their management.

Coordination of Environmental Strategy withother CAF programs

The environmental and social principles, safe-guard guidelines, strategic lines of work, andothers matters set out in this EnvironmentalStrategy are involved horizontally in the widerange of CAF programs. These include the SocialResponsibility Programs, the CompetitivenessSupport Program, the Governance Program, theAndean Education Agenda, and many more.

F.2 Environmental sector financing

CAF also supports its shareholder countries’public, private, and mixed sectors through vari-ous forms of financing aimed at strengtheningand developing the environmental sector. Theseinclude credits, asset investment, and guaran-tees, either independently or cofinanced withother financial institutions.

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G. Implementation and follow-upof CAF Environmental Strategy

CAF periodically assesses the procedures andinstruments in this Environmental Strategy docu-ment in the framework of continual improve-ment, seeking at all times to optimize and ration-alize the use of technical, economic, and humanresources. This assessment also pays attention tothe inherent dynamics of the region’s political,economic, cultural, social, and natural processes.

CAF includes the widespread participative consul-tation of all the organization’s internal andexternal authorities in its periodic assessments,with the participation of governments, NGOs,and civil society representatives.

On this basis, CAF can modify its instruments,procedures, and programs while, at the sametime, seeking a healthy environment, and theprotection and conservation of nature.

This book was printed in November 2008Caracas-Venezuela.This editions is for a thousand copies.