ifc sba 2012 annual review

7/30/2019 IFC SBA 2012 Annual Review

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2012 ANNUAL REVIEW

IFC ADVISORY SERVICES IN

Sustainable BusinessCREATING VALUE FOR COMPANIES, COMMUNITIES AND THE ENVIRONMENT

IN PARTNERSHIP WITH

Australia Austria Belgium Brazil Canada Denmark European Union Finland Germany Iceland Ireland Italy Japan Korea Luxembourg The Netherlands New Zealand Norway South Africa Spain Sweden Switzerland

United Kingdom United States Disney Global Alliance for Improved Nutrition Foundation Mastercard Foundation


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An Alliance or the FutureTe world changed last year, at least or those o us working to promote practices and technologies that enable businesses tocontribute to environmental and social sustainability. It changed in June, in Rio de Janeiro, Brazil. And it changed or the better.

Te United Nations Conerence on Sustainable Developmentalso known as Rio+20had been predicted by many to beincapable o tackling the real issues at hand, with government delegates split by diverging priorities and vested interests. But whiledelegates negotiated the outcome document, entitled Te Future We Want, something else happened, too.

wo decades ago, when the United Nations hosted the Earth Summit in Rio, ew companies were exploring the notion osustainable business and the long-term impacts o their operations on the environment and society. wenty years later, some 2,700participantsapproximately hal rom the business and investor communityconvened at the Rio+20 Corporate SustainabilityForum to explore ways to advance sustainable development through public-private collaboration, transormative nance, and

innovative business models.At one o the many Rio+20 events, which was co-hosted by the United Kingdom and the World Bank Group, a consensus

emerged among ministers, civil servants, investors, and corporate leaders about the centrality o the value o nature and itsresources to the uture o mankind. Over 62 countries that jointly comprise 57 percent o the worlds gross domestic productsigned on to the World Bank Groups 50:50 campaign in support o natural capital accountingthe idea that accounting orclean air, clean water, orests, and other ecosystems will allow countries, communities, and companies to better manage and investin nature. More than 90 companies supported the eort, and many o them will move orward with piloting and demonstratingthe economic, social, and environmental benets o scaled-up and integrated approaches to natural capital accounting.

Introducing concepts related to natural capital into company perormance measures and country policy decisions will changethe way we all live and do business. Tis, o course, will take a while. Methodologies need to be developed and conrmed,consensus on the details must be built, and governments and corporate leaders will have to take decisions. But the chances orundamental change to occur are much higher now than ever beoremainly because this time a broad alliance o diverse and

powerul, public- and private-sector players is keen to see it happen.At the Rio+20 Summit, governments also agreed to introduce Sustainable Development Goals to pursue ocused and

coherent action on sustainable development. As these surpass the Millennium Development Goals in 2015, attention willincreasingly shit even urther toward environmental and social sustainability, and good corporate governance. We are committedto help accelerate this shit, one company at a time.

As you peruse the 2012 Review o IFCs Advisory Services or Sustainable Business beore you, and as you read projectdescriptions, tables on results, and discussions o strategies and approaches, you will see how well placed we are to seize the newstrategic opportunities that emerged in Rio. We have invested, with the strong support o 26 donor partners, in building practicalinsights into why and how environmental, social, and governance practices adopted by each rm matter or every other business.

Tis is the rst annual review since the Board endorsed a new strategic orientation or IFCs Advisory Services in SustainableBusiness and adopted the new multi-donor Facility in 2011. It shows that our eorts are o to a good start: the portolio is ontrack, perormance ratings are solid, and cost eciency is steady. Sustainable Business Advisory has grown, become more ocused,

and zeroed in on delivering concrete value in areas that are critical to deliver on the uture we wanthelping drive sustainablebusiness practices and creating opportunities or more women and men.

Monika Weber-Fahr

Global Business Line Leader 2007-2012Sustainable Business Advisory

FOREWORD


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We work with companies to adopt environmental,social, and governance practices and technologiesthat create a competitive edge. We seek the broadadoption o these practices to transorm markets

and improve peoples lives.We work in agribusiness, inrastructure, oil, gas,mining, manuacturing, services, and other sectors.

Our programs promote good corporate

governance and strategic community investments;advance women in business, small-scale armers,and small rms; and engage the private sector inclimate change solutions.

Sustainable Business Advisory

IN A NUSHELL


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5 | Executive Summary

Part ONE 8 | Results and Impact

14 | Strategy

18 | What Our Clients Say

Part WO 21 | Clean Energy

PROJECT EXAMPLE Gujarat Solar

24 | Resource EciencyPROJECT EXAMPLE Russia Resource Eciency

27 | Strategic Community InvestmentPROJECT EXAMPLE Municipal Royalty Investment in Peru

30 | Farmer and SME TrainingPROJECT EXAMPLE Farmer Training and DCM ShriramConsolidated Limited

33 | Environmental, Social and Trade StandardsPROJECT EXAMPLE ECOM Coee Global Program

36 | Corporate GovernancePROJECT EXAMPLE Pakistan Institute o Corporate Governance

39 | Sustainable and Inclusive InvestingPROJECT EXAMPLE Climate Change Investment Support

42 | Women in BusinessPROJECT EXAMPLE Bank o Deyang

Part HREE 46 | Knowledge Sharing and Thought Leadership

Part FOUR 51 | Sustainable Business Advisory Portolio:

Key Highlights

53 | Sustainable Business Advisory Project List

126 | Women in Business Project List

Part FIVE 132 | Financial Resources

134 | Key Contacts in Sustainable Business Advisory

CONENS


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ABBREVIATIONS AND ACRONYMS

ESG Environmental, Social, and

Governance

FY Fiscal year

G-20 Group o 20 major economies

GBA Global Banking Alliance or Women

GDP Gross Domestic Product

GHG Greenhouse Gases

IEA International Energy Agency

ILO International Labour Organization

MW Megawatts

PPP Public-Private Partnerships

SBA Sustainable Business Advisory

SEZ Special Economic ZonesSME Small- and Medium-sized Enterprise

UNIDO United Nations Industrial

Development Organization

WIN Women in Business

ables, Graphs, and Charts 9 | TABLE 1

Sustainable Business Line Results Indicators

10 | CHART 1FY12 Perormance Ratings

10 | TABLE 2Client Survey Results in FY11 and FY12

15 | BOX 1Seven Global Products o SBA

16 | BOX 2Women in Business

16 | BOX 3Partnerships or Sustainability

34 | BOX 4IFC Perormance Standards

47 | BOX 52012 FT/IFC Sustainable Finance Awards

48 | BOX 6

Creating and Sharing Knowledge orImproved Corporate Governance

49 | BOX 7Rio+20

51 | CHART 2IFC Advisory Services Portolio

52 | CHART 3Funding Composition

52 | TABLE 3Regional Portolio by Status

132 | TABLE 4Status o Donor New Funding and Receipts

133 | TABLE 5Standard Advisory Services ActivityExpenditures

133 | TABLE 6FY12 Cumulative Funding and Expenditure


7/1405 IFC ADVISORY SERVICES IN Sustainable Business

Tis annual review covers IFCs Advisory Services in Sustain-able Business (SBA) during scal year (FY) 2012 (July 1,2011June 30, 2012).

Te targets established or SBA in FY12 were exceeded byrelatively large margins, with a ew exceptions. Trough theprovision o technical assistance, we helped our clients mobilizesome $891 million in nancing, o which $279 millionconstituted IFCs own investment. Clients sales revenue grewby $186 million, 12 percent more thanthe target o $165 million.

Our clients expected to avoid 611,000metric tons o greenhouse gas emissions,and 609,000 megawatt-hours in energyuse last year, which is a refection o ourstrong environmental sustainability.

SBA projects contributed to all six oIFCs strategic priorities: Agribusinessand Food Security, Climate Change, Gender, Small- andMedium-sized Enterprises, Inrastructure, and Fragile andConfict Situations. With the expertise and track record othe business line, we are now taking leadership in the rstthree, as the primary ocal point or Advisory Services across

the Corporation.Consistent with the strategy set out in the 2011 Board Paperon the Facility or Sustainable Business Advisory Services, ourportolio o projects seeks to:

Address climate change mitigation and resilience;

Create access or local producers to investors, markets,and global supply chains; and

Introduce market-based solutions to increase access tosustainable inrastructure services.

By the end o FY12, our portolio stood at 173 projectsin 59 countries and was valued at $266 million. Tevast majority o SBA projects are classied within one oseven products, each with associated results rameworks.

When approving the new Facility in 2011, IFCs Boarddetermined that SBA projects should continue to supportindividual rms, and that SBA should strive to achievegreater sector-wide impact by encouraging replication across

sectors, building market capacity, andpromoting industry standards.

Across all activities, we have alsoexplored and, where easible, advancedthe creation o opportunities or

women in business. Our work ocuseson strengthening women in their rolesas leaders, entrepreneurs, employees,consumers, and stakeholders in theprivate sector. IFCs expertisecombin-

ing analysis with practical business and policy advicewill bea good basis or expanding the work on advancing women inbusiness beyond individual initiatives.

Results measurement is an integral part o managingAdvisory Services across IFC. Focusing on results achieve-

ment has improved project design as teams learn romprevious activities and build upon past successes. Continuousimprovements in results measurement and shared resultsrameworks have enabled better client service and improvedthe way progress and impact are reported to donor partnersand stakeholders. In FY12, the results o a survey o SBAclients and partners refected continuing progress since lastyear, and the overall client satisaction rate rose to 88 percentrom 83 percent in the year prior.

EXECUIVE SUMMARY

Work with IFC is not only about

money. What IFC requested became ourcompanys values and helped us to move

into a higher league.

Oleksander Kuzminsky, Owner, Globino


8/14062012 ANNUAL REVIEW

At the end o the scal year, in June 2012, 84 percent o SBAsprojects were on track to achieve agreed outcomes and impacts.Nine out o ten projects were delivering planned activities andoutputs on time. Tis track record ensures that SBA projectsmake a signicant contribution to IFCs Development Goals.

Critical to our success is our ability to capture lessons,acilitate replication, adapt successul business models andproject outcomes, and transer skills rom one business contextto another. Te list o publications and events (see page 46) inFY12 refects how SBA teams are proactively raising awarenessand sharing knowledge o innovative nancing and businessmodels, rom energy access to sustainable nancing and businesspractices.

In FY12, our donor partners contributed some $63 million toSBA activities across the globe, o which $29,270,614 was chan-neled through the new Facility or Sustainable Business AdvisoryServices. Furthermore, in approving the new Facility in 2011,IFC allocated $25 million in retained earnings.

During FY12, IFC strengthened the leadership team oSBA through the appointment o new Regional Business LineManagers in all six regions. otal number o sta in the BusinessLine grew rom 221 to 232 in the last year.


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Part ONE



Part ONE

Results measurement is an integral part o managing AdvisoryServices across IFC. Focusing on results has enabled continu-ous improvement in design o projects, as we are able to moreeectively learn rom our experiences and better understand

which interventions are successul. Our continuous improve-ments in results measurement will allow us to serve ourclients better and improve the way we report our progress andimpact to donor partners and stakeholders. Standard resultsrameworks or the seven Sustainable Business Advisory (SBA)products were nalized in FY11 and are now implementedacross the ull portolio o SBA projects.

Te targets established or SBA in FY12 were exceeded,apart rom a ew exceptions, by relatively large margins (seeable 1). We helped our clients mobilize some $891 millionin nancing, o which $279 million constituted IFCs owninvestment. Clients sales revenue grew by $186 million, 12percent more than the target o $165 million. As a refectiono a strong ocus on environmental sustainability, last year ourclients expected to avoid 611,000 metric tons o greenhousegas emissions and 609,000 megawatt-hours in energy use.

Te results also show, however, that the target o 27,000hectares o sustainably managed land was not met, and thatthe target o 14 million women and men with improved access

to electricity and other services was ar rom achieved.In general, target-setting or FY12 has continued to improve

across IFC, but as evidenced by our experience this past year,there is a continuing need to strengthen our capacity in thisarea. Some projects were clearly overly conservative in settingtargets, while others may have misjudged the timerame in

which their targets could be achieved. In either case, we will

continue to use the experience gathered this year to help ourteams across the globe set better targets in the uture.

Perormance RatingsIn FY12, the entire SBA portolio comprised 173 projects in59 countries and was valued at $266 million. Te portoliois reviewed twice a year through a project supervision processthat looks at key achievements; lessons learned; a plan or thenext six-month period; and outputs, outcomes, and impactsachieved over the reporting period versus previously stated

targets. Projects are rated on their perormance against keydimensions, including results achievement, timeline, nan-cials, and stang. Te project supervision inormation is usedexternally to report to donor partners and stakeholders, andinternally as part o semiannual portolio reviews. Internalportolio reviews examine results versus targets, share lessonsrom project innovation, successes and challenges, highlightpotential at-risk projects in need o corrective action, andassess the extent to which the project portolio is aligned withour strategy and priorities.

Chart 1 (see page 10) summarizes the perormance ratings othe SBA portolio rom the project supervision cycle as o June

30, 2012. Ninety-one percent o projects are on track in termso output achievement; 84 percent are on track with outcomeand impact achievement; 83 percent are on track with plannedexpenditures; and 90 percent are on track with the plannedtimeline o activities. One area needing improvement, as indi-cated by the ratings, is the collection o cash ees rom clients.

RESULS AND IMPAC



Part ONE

1 Methodology and Data Quality: IFC is reliant on our partners and clients or the provision o results inormation. Verication is not possible or every project. With the data quality checks that arein place, IFC makes best use o available resources to review the sources or our numbers and ensure that corporate indicators are understood and used in a standard way, but inevitably gaps mayappear. For this reason, we are committed to continuously improving our tracking systems to more accurately measure results. All results are rounded to the nearest round values or the ease opresentation.2 Results are reported jointly or all projects active at any point in FY12, including those that closed at some point during the FY. The rst two columns present total targets and results or theseprojects, while the second two columns show the portion o those total results achieved during FY12 to emphasize progress during the year. For example, a project active since FY08 would haveFY08-FY12 targets and results in the rst two columns, and FY12 targets and results highlighted separately in the second two columns.3 Historically, this indicator has not been tracked well by all projects. The number cannot be directly compared with the number o total participants trained, as many projects did not collect thisdata. On average, we nd that just over hal o all projects are reporting on the number o women reached, which we will continue to try to better enorce.

Cumulative results andtargets to date

Results and targetsin FY12 only2

OUTPUTS AND OUTCOMES Target Result FY12 Target FY12 Result

Entities reached by IFC projects through training or in-depth Advisory Services 92,000 135,000 55,000 87,000

Participants attending training events, workshops, seminars or conerences(including those attending training events held by project-trained trainers/institutions)

328,000 505,000 133,000 261,000

Women participants attending training events, workshops, seminars orconerences (including those attending training events held by project-trainedtrainers/institutions)3

50,000 79,000 16,000 29,000

Laws, regulations, and codes enacted by local governments, having incorporatedIFCs input

77 134 12 31

IMPACT

Value o nancing received by clients rom all sources (IFC and others), catalyzedby Advisory Services ($)

730 M 1.6 B 451 M 891 M

From IFC Investment Services ($) only 226 M 464 M 76 M 297 M

Increased sales revenue or clients rom IFC project-relevant revenue streams ($) 303 M 407 M 165 M 186 M

Number o people receiving improved access to services (e.g. electricity) enabledby Advisory Services

25 M 20 M 14 M 4 M

Greenhouse gas emissions expected to be avoided (metric tons/year) as a result otechnology, installation or improvements acilitated by Advisory Services

787,000 1.8 M 443,000 611,000

Energy use expected to be avoided (MWh/year) as a result o technology,installation, or improvements acilitated by Advisory Services

302,000 933,000 79,000 609,000

Renewable energy expected to be produced (MWh/year) including, solar(photovoltaic and thermal), wind, geothermal, biomass, biogas, and hydro,acilitated by Advisory Services

453,000 1 M 213,000 266,000

Hectares o sustainably managed land (land enabled to be used productively whilemaintaining or improving its environmental, social, and economic characteristicsand qualities) acilitated by Advisory Services

34,300 163,000 27,000 20,000

Costs saved ($) as a result o technology, installation, or improvements acilitatedby Advisory Services

38 M 50 M 23 M 20 M

TABLE 1 Sustainable Business Advisory Results Indicators1



Part ONE

Development EectivenessFor completed projects, the key indicator o perormanceis the development eectiveness rating, assigned at projectcompletion and reviewed by the central results measurementdepartment o IFC, known as the Independent EvaluationGroup. Te development eectiveness rating is a synthesisrating covering strategic relevance; output, outcome, andimpact achievement; and eciency. For the FY10FY12period, 66 percent o SBA projects received positive develop-ment eectiveness ratings, exceeding the corporate target o 65percent. Te business lines development eectiveness ratingshave continued to rise over the last three years; in FY12, thedevelopment eectiveness rating was 76 percent. Further, ouro the seven global products o SBAFarmer and Small- andMedium-sized Enterprise (SME) raining, Resource Eciency,Strategic Community Investment, and Sustainable and Inclu-sive Investingachieved positive development eectivenessratings or 100 percent o their projects in FY12.

Client SurveyEvery year, IFC commissions a survey o its clients to assess theirdegree o satisaction with our advisory products and services.Organizations, rms, or entities that received at least $25,000 oassistance (in terms o sta or consultant time) during the scalyear are contacted or responses by a third party.

In FY12, the survey o SBA clients and partners showedprogress over the previous year, both in terms o response rateand overall satisaction, as seen in able 2. Sixty-our percento SBA clients listed credibility and reputation among the topthree reasons or choosing to work with IFC, while 46 percent

listed IFCs global experience and knowledge, and 29 percentindicated that they were drawn to IFC or its reputation as areliable, long-term partner, as well as or its technical expertise.Te areas most commonly listed as needing urther improve-ment were lack o experience with the local market, bureau-cracy, and infexibility o program design. SBA is working withour teams to address client concerns in these areas.

CHART 1 FY12 Perormance Ratings

FY11 FY12

Survey response rate 71% 87%

Overall satisaction rate 83% 88%

Satisaction with quality o servicesdelivered

88% 93%

Satisaction with the timeliness oservices delivered

84% 82%

TABLE 2 Client Survey Results in FY11 and FY12

0% 20% 40% 60% 80% 100%

OUTPUT

ACHIEVEMENT

FUNDING

SECURED

EXPENSES

ON TRACK

STAFFING

IN PLACE

TIMELINE

OUTCOMES & IMPACT

ACHIEVEMENT

CLIENT CASH FEE

COLLECTION

CLIENT NON-CASH

COLLECTION

UnsatisfactorySatisfactoryExcellent Partly Unsatisfactory

IFC is an important partner in helping us strengthen

our competitiveness by reducing energy consumption and

minimizing our environmental ootprint. With IFCs

support, we will also be able to expand into higher-margin

products, while lowering our costs by modernizing our

production acilities.

Anatoliy Ogarkov, Chie Engineer, Kuibyshev Azot



Part ONE

11

IFC Development GoalsTe IFC Development Goals (IDGs) are corporate-leveldevelopment goals that IFC began testing in 2011. Tey wereinspired by the Millennium Development Goals as a way tobetter integrate our results measurement with strategy.

Te IDGs are high-level targets or the incremental reachwe aim to achieve through Investments and Advisory Services.

IFC aims to use the IDGs, along with volume targets, to driveimplementation o strategy and infuence operational decision-making.

IFC contributions are counted as expected results at thetime projects are committed or signed, and IFCs regularmonitoring and evaluation system tracks the results thatmaterialize during project implementation.

Tere are six IDGs in total. As o July 2012, two IDGs havebeen ormally launchedi.e., nancial services and healthand educationand our are still in the testing phase. Te sixIDGs are:

SBA projects contribute to all the IDGs, but our mostsignicant contribution is on IDG1. In FY12, IFCs AdvisoryServices cumulatively reached 30,000 armers with increasedor improved sustainable arming opportunities; 18,000 othose were reached through SBA projects. In addition, SBA

has actively contributed to developing the methodology onIDG6, which is being tested in FY13.

IDG1 Increase or improve sustainablearming opportunities

IDG2 Improve health and education services

IDG3a Increase access to nancial servicesor micro/individual clients

IDG3b Increase access to nancial servicesor SME clients

IDG4 Increase or improve inrastructure

servicesIDG5 Contribute to economic growth

(value-added)

IDG6 Reduce greenhouse gas emissions



TOTAL PORTFOLIO VALUE OF

$43.3 million,with the largest programs in CleanEnergy and Resource Efficiency

Key results from active projects include: Over 21,000 people trained 69 new laws/regulations enacted $404 million in financing facilitated 521,000 metric tons of GHG emissions

expected to be avoided


$23 million,

with the largest portion of theportfolio in the extractives sector

Key results from active projects include: Over 42,000 people trained Over 2,200 firms implementing

IFCs recommendations $34 million in financing facilitated $16 million in increased sales

revenue for clients


$55.7 million,with nearly $30 million inFarmer and SME Training projects

Key results from active projects include: Nearly 123,000 people trained Over 2,600 firms implementing

IFCs recommendations $48.6 million in financing facilitated $84.7 million in increased sales revenue

for clients

-

WHERE WE WORK




$26.1 million,with the largest programsin the agribusiness sector

Key results from active projects include: Close to 18,000 people trained Over 8,000 firms obtaining certification $82 million in financing facilitated


$15.3 million,with the largest programs inCorporate Governance and Farmerand SME Training

Key results from active projects include: 16,000 people trained 7 new laws/regulations enacted $7 million in increased sales

revenue for clients


$24.9 million,with the largest programs

in the agribusiness sectorKey results from active projects include: Over 122,000 people trained Almost 19,000 entities (primarily farmers)

implementing IFCs recommendations $33 million in increased sales revenue

for clients 479,000 metric tons of GHG emissions

expected to be avoided


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Part ONE

Implementing the New Strategy orSustainable Business AdvisoryIn FY12, SBA ocused on strategy implementation through:

(i) Providing Advisory Services in seven product categories.

Having introduced the seven product categories and theirassociated results rameworks in mid-FY11, we streamlinedoerings across new projects in FY12 (see Box 1). By the endo FY12, SBA activities covered 173 projects in 59 countries,and were valued at $266 million (reer to Part Four or moredetail on these projects and their application during FY12).Forty-two o these projects with a value o $66 million werestarted during FY12. During the same period 59 projects wereclosed, and in 76 percent o the cases, ater having achievedtheir objectives successully.

(ii) Supporting in-country implementation with global thoughtleadership and advocacy.

While project delivery continues to be the primary responsibil-

ity o IFCs sta in country oces, as they are closest to ourclients, successul implementation o SBA activities relies onboth global and regional teams. Te SBA Facility primarilynances key global unctions, but SBAs donor partners areincreasingly channeling unds or regional projects through

the Facility as well. In FY12, the global team maintained itsprimary role in assuring technical quality or SBA projects inthe regions by providing support to project teams across theglobe, while also developing strategy, managing knowledgeresources and platorms, acilitating best-practice networks,supporting global partnerships and initiatives, and deliveringmulti-region projects.

(iii) Prioritizing sector engagement.While working actively with companies across many dierentindustries, SBA has collaborated with IFCs investment depart-ments to identiy priority sectors and industries where we can

work with our clients to achieve the greatest possible impact.Argibusiness is a key priority or SBA, and we also work closelywith IFCs Investment Services in manuacturing, inrastruc-ture, extractives, and nancial markets. We are also beginningto look at opportunities in health and education.

(iv) Contributing to IFCs strategic ocus areas.

SBA contributes to all six strategic priority areas o IFC:

Agribusiness and Food Security, Climate Change, Small- andMedium-sized Enterprises, Inrastructure, Fragile and ConfictSituations, andstarting in FY13Gender. SBA plays aleadership role or three o them, serving as the organizationsocal point or agribusiness, climate change, and gender.

BOX 1 SBA Products

In CLEAN ENERGY, we work with rms to develop

competitive, replicable clean energy business

models and support private-sector projects that

provide energy access to the underserved.

In RESOURCE EFFICIENCY, we work with rms to

save costs, prevent waste, and reduce greenhouse

gas emissions through more ecient use o

energy, water, and materials.

In STRATEGIC COMMUNITY INVESTMENT, we work

with rms to increase benets to the local

communities in which they operate as well as

mitigate local risks.

In FARMER AND SME TRAINING, we work with small-

and medium-sized enterprises (SMEs) and armersto enhance their productivity by strengthening

local capacity-building skills.

In ENVIRONMENTAL, SOCIAL, AND TRADE

STANDARDS, we work with rms to increase

their access to markets by setting, adopting,

and deploying internationally-recognized

environmental, social, and trade standards.

In CORPORATE GOVERNANCE, we work with

rms to attract and retain investment by

promoting the adoption o corporate governance

best practices and standards.

In SUSTAINABLE AND INCLUSIVE INVESTING, we

mobilize institutional capital into sustainable and

inclusive equity investment unds and indices by

working with (a) rms to identiy and report; (b)

investors to recognize; and (c) markets to reward

sustainable and inclusive business practices.

See pages 2144 or more inormation about progress made under each o these global products in FY12.



Part ONE

Agribusiness and Food Security | IFC prioritizes programsthat respond to the increasing pressure on global oodsupply. SBAs role includes helping local rms to accesssustainable supply chains by supporting the adoption ostandards, increasing productivity, and providing resourceeciency solutions or armers and rms.

Climate Change | IFCs commitment to address climatechange includes a ocus on supporting private sectorinvestment in clean energy and resource eciency, as wellas building climate change resilience in emerging markets.SBA provides the technical and market expertise thatunderpins IFCs work in these sectors.

Gender | SBA anchors IFCs work to promote businessopportunities or women by helping banks increaselending to women business owners, strengthening policiesaecting women entrepreneurs, and improving workingconditions or women workers (see Box 2).

SMEs |As part o IFCs response to reduce barriers acingSMEssuch as a lack o access to nance, markets, andinrastructure, red tape, and a lack o skillsSBA ocuseson strengthening SMEs through business training andimproving corporate governance, as well as by acilitatingmarket access through the adoption o environmental andsocial standards.

Inrastructure |As IFC works to enable delivery o basicservices through the private sector to the 1.5 billion

without access to sae water, sanitation, and energyservices, SBA specically supports the development andadoption o innovative business models to improve accessor the underserved.

Fragile and Confict Situations |While strengthening the

investment climate lies at the heart o IFCs work withFragile and Confict Situations, SBA contributes to thegeneration o economic opportunities and employmentin Fragile and Confict Situations through our rm-and sector-level interventions, with a ocus on theagribusiness sector.

Changing Markets, One Firm at a imeSBA projects all aim to link rm-level support to market-wideresults. Tereore, projects not only include technical assis-tance to individual rms, but also encourage replication, buildmarket capacity, and promote industry standards.

(i) Encouraging replication.

SBA teams regularly develop and share best practices throughpublications and conerences, but the most important parto our work is to encourage replication, taking lessons romone rm to another, and rom one market to another. Forexample, FY12 brought the design o the Lighting Asiaproject, drawing heavily rom the rst ve years o experience

with the Lighting Arica program. aking the experience

o promoting sae, aordable, and modern o-grid lightingsolutions or low-income households and small businessesrom one continent to another o course required adjustmentsto dierent business contexts and constraints, but the closeinvolvement o the global SBA team allowed or inclusion o

new insights. Other examples o cross-country, cross-regional,or cross-sector replication in FY12 include, the launch o theIndonesia palm oil project that draws on Strategic Commu-nity Investment experience in Arica, and the Latin Americancocoa program, which draws rom that regions experience

with coee projects. Going orward, SBA teams will continueto identiy opportunities or project replication, with atten-tion given to the need or customization required by speciccircumstances o clients, industries, locations, and context.

BOX 2 Women in Business

Sustainable Business Advisory (SBA) hosts

the IFCs Women in Business (WIN) Program,

promoting opportunities or womenbe they

entrepreneurs, employees, consumers, or those

with roles in local communities or on companyboards. This takes place across all investment and

advisory activities, including global partnerships

and initiatives. Most advisory engagements,

undertaken with nancial institutions, rms, and

governments, aim to:

increaseaccesstonanceandmarketsfor

women entrepreneurs;

reducegender-specicbarriersfor

entrepreneurs and employees in the

business environment; and

createbetteremploymentopportunitiesforwomen.

All IFCs advisory and investment activities that

promote opportunities or women are based on

the same approach. They start with identiying

measurable business opportunities that a rm

or nancial institution can derive rom including

women, and then build change processes around

the related value proposition. An important

element o the work o the WIN team is thus

piloting, documenting, disseminating, and

promoting insights that can lead to improvedworking conditions or emale employees,

women-ocused market segmentation, and

the inclusion o both men and women when

engaging with local communities.


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WHA OUR CLIENS SAY

Te act thatwe have hada continuingrelationship withIFC has opened

the door to hala dozen otherbanks or us.

DAVID ROSENBERG, GroupSustainability Advisor, Ecom

IFC is showing us that we cansuccessully reach out to thosein what was once perceived arisky and dicult market.

MARIE-ANDREE BEMBONG,Head, Ecobank

IFCs Financial Valuation ool lls one othe most paramount needs in our eld: to beas robust in valuing sustainability as we areabout other elements o risk management andcommercial perormance.

AARON PADILLA, Senior Advisor, Community Engagement;Policy, Government, and Public Aairs, Chevron

(IFCs) resource eciency measures greatlybenet the countrys textile industry and are

nancially rewarding. We will implementthem more broadly.

M.A. JABBAR, Managing Director, DBL Group

IFC gave me the motivation, the tools, and thecondence to become a successul businesswoman.

LEELAWATHI JAYAWARDANA, Small Business Entrepreneur in Sri Lanka

IFCs level o involvementand concern has been a keyingredient in the success othis project, assisting ourcompany to increase itsolive oil exports six old byaccessing new markets.

OSAMA ODEH, General Manager,Agricultural Techno-Chemical Co.

One o the main benets o using IFCsmethodology and tools is that investmentbecomes more fuid because there is planning,order, and coordination amongst all the areasinvolved in the investment process.

VICTOR CABELLO ANDIA, Planning Manager,Municipality o Independencia, Ancash

Improving the environmental, social, and governance perormanceo businesses contributes to their nancial resilience andprotability. (IFCs) project is an innovative and practical stepor the industry to help address the challenges that South Arica isacing while improving returns or pensions and society.

WANJIRU KIRIMA, Chairperson, Principal Ocers Association, South Arica


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OVERVIEW Greenhouse gas emissions are rapidly rising and contributing signicantly to climate change. At

the same time, around 1.6 billion people around the globe do not have access to electricity, and some threebillion people lack modern cooking methods. To address the twin challenges o environmental sustainabilityand energy access, solutions must be developed to help countries shit toward low-carbon technologies andgrowth paths. The private sector and IFC play a critical role in delivering clean energy, both in serving thosewho lack basic services and by achieving a more sustainable mix o electricity generation.

Accomplishments in FY12In FY12, IFC continued to engage with the private sector todevelop competitive, replicable clean energy business models,and to provide energy access to the underserved. It does this inseveral ways: by advising rms on the commercial and techni-cal advantages o renewable energy technologies, by develop-ing eective ways to serve the market, by acilitating access tocommercial and concessional nance, and by promoting bestpractices and replication o standards across markets. Moreover,Sustainable Business Advisory (SBA) teams increased the work

with governments and industry to dene sector-level strategiesthat help rms identiy commercial opportunities, includingreorms o regulatory rameworks and the structuring o nan-cial incentives that allow these opportunities to be realized.

Over the past year, the portolio o Clean Energy projectsgrew in the regions with the greatest needs. Te success o theLighting Arica program set the stage or an expansion o theprogram in other countries on that continent, as well as thelaunch o a similar program in South Asia. Tese programs aimto develop commercial o-grid lighting markets as part o the

World Bank Groups wider eorts to improve energy access tothe underserved. o date, this program has provided over threeand a hal million women and men access to clean energy.

In South Arica, SBA has worked closely with the Depart-ment o Energy and key stakeholders rom across the public

and private sectors to design a National Electrication RoadMap. Tis strategic document sets targets or universal electri-cation, outlines key needed changes to current electricationplanning and delivery processes, estimates nancing needs and

ways o closing this gap, and articulates incentives required orsignicantly scaling-up solar home systems in rural areas.

Te Balkans Renewable Energy program supportedimprovements in renewable energy legislation, advised bankson potential investments in renewable energy projects, andprovided technical advice to project developers and indepen-dent power producers in Albania, Bosnia-Herzegovina, and theormer Yugoslav Republic o Macedonia. Based on its initialsuccess, the program is now expanding to Kosovo, Montene-

gro, and Serbia. Te program supports a shit rom thermalpower plants and toward renewable energy sources, such assmall hydro-power plants important or the development osmall communities and the private sector in these countries.Beyond the immediate business opportunity apparent inthese projects, the plants can support job creation, help secureelectricity supply, and increase income without harmul green-house gas emissions.

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A new cooperation between IFC and the Global System orMobile Communications Association (GSMA) builds uponsuccessul global and South Asian programs that advance theuse o renewable energy sources by the telecommunicationsindustry to power new and existing o-grid base stations indeveloping countries.

IFC provided industry thought leadership with a ground-breaking report launched at the United Nations Conerenceon Sustainable Development (Rio+20), entitled From Gapto Opportunity: Business Models or Scaling Up Energy

Access. Te report identies an annual base-o-the-pyramidmarket or improved lighting and cooking services valued atapproximately $37 billion, and explores innovative businessmodels that can cater to the needs o more than one-th othe worlds population, which lacks modern energy services.

Finally, IFC developed and tested services that support ourclients and the energy sector as a

whole. Tis includes an interna-tional testing standard or o-gridenergy devices that has since been

adopted by the InternationalElectrotechnical Commission(IEC). Similarly, an assessmenttool or small hydro power plantsnow helps IFC clients veriy thetechnical and economic viabilityo such installations.

Lessons LearnedStandardization and replication o programs improves eective-ness and increases their developmental impact. Tis happens

when know-how is shared among programs and regions, allow-ing expertise and economies o scale to be reached, which inturn helps IFC more eectively assist clients across the globe.

Knowledge management led by the global SBA team andthe Clean Energy Practice Network is critical or the successo the products initiatives and the portolio as a whole. Tetools and approaches shared through these channels can helpsolve operational problems and provide the undamentalstrategic direction or the portolio as well as or specicprojects. For example, a guide or developers and investorsthat SBA published, Utility Scale Solar Power Plants, helpssolar power project developers learn rom and ollow industrybest practices that improve project perormance and acilitate

access to unding. It also establishes a common understand-ing among regulators, project developers, and local experts

with respect to project risks and costs as a basis or eectiveproject development.

Strategic OrientationsFollowing the emphasis on portolio growth and increasedregional implementation in FY12, the coming year will beone o replication and targeted expansion. For example,in the Middle East and North Arica, developing captivepower sources and promoting energy access will be a priority,especially in Pakistan because o its conducive environment or

captive power. IFC will launch new projects in Central Asiaand Ukraine because there is signicant clean energy potentialin these countries. In the East Asia and Pacic region, theteam will work both on energy access and with large utilitiesin several renewable energy sectors, ocusing on Tailand,Vietnam, and Papua New Guinea. In South Asia, IFC willcontinue to expand energy access in India and Bangladesh,

while developing urther on-grid projects to tackle greenhousegas emissions throughout the region.

In Sub-Saharan Arica, theexpansion o the Lighting Aricaprogram is planned, including toNigeria. A ocus on captive powerand mini-grids in anzania andsupporting expansion o grid-con-nected renewables in Kenya willbe the cornerstone o our strategyin East Arica. Replication o the

work to develop a national elec-trication map in South Aricais an additional service we willbe providing. In Latin Americaand the Caribbean, geothermal

and wind energy in Central America and Mexico will be themain ocus o our eorts in response to large untapped market

potential and the major public benets that could be realizedthrough accelerated market development o these renewableenergy options.

As an international investor in small hydropower

plants, we ace a lot o challenging situations in

emerging markets like Albania. We are always surprised

at how fexible and ast the IFC Advisory Services team

has been acting and reacting to all issues during the

project. We are proud to have such partners and are

more than satised rom our cooperation with IFC.

Wolgang Krpf, Chie Technology Ocer, Enso GmbH



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J

GUJARAT SOLARPublic Private Partnerships or solar power in India

PROJECT AT A GLANCE

The state o Gujarat, located in western India, hasembraced the idea o renewable energy. With morethan 300 sunny days a year, the state governmentplans to develop 500 megawatts (MW) o solarpower capacity by March 2014 to meet its energyneeds. It also aspires to make its capital, Gandhi-nagar, a model solar city. However, many technical,regulatory, and commercial challenges lie ahead.

As a rst step, the government o Gujarat turnedto IFC to help it set up an innovative, 5MW solarrootop public-private partnership to add power-generating capacity, develop contractual models orurther solar projects, and demonstrate the techni-

cal and economic easibility o rootop-based solarpower. Although modest, the project will addressissues that have constrained the adoption o dis-tributed solar power, while adding power capacityto the grid, and helping reduce greenhouse gasemissions.

Azure Power and SunEdison each won 25-yearconcessions to provide 2.5MW solar rootop instal-lations or this project. Under the agreement, thedevelopers will install solar photovoltaic panels on therootops o public buildings and private residencesand connect them to the grid in Gandhinagar.

IFCS ROLE

IFC was appointed lead transaction adviser or thepilot project by Gujarats Department o Energyand Petrochemicals. Besides providing transac-tional advice, IFC also provided technical, legaland analytical advice, and marketing support. Weexamined the technical options or solar panels,established project cost estimates, developed termsor rental agreements, resolved connectivity issues,and determined maintenance requirements. IFCalso recommended a transaction structure andmanaged the bidding process. Finally, a conerence

was organized to discuss the project with potentialinvestors and to obtain their eedback.

IMPACT & RESULTS

The developers in this project will place thousandso solar panels on rootopsboth on public build-ings and private residencesthroughout the city.

Total project cost is estimated to be $15 million,all o which will be provided by the developer. Thegovernment o Gujarat will give access to roos obuildings it owns, acilitate purchasing agreementswith the power procurer or the electricity gener-ated, and guarantee a subsidy, i required. Interestin the project was strong, with 38 rms submitting

expressions o interest.When nished, about 10,000 people are expectedto benet rom the project through improved accessto better energy services. The transaction also pro-vides the government with a net annual revenue o$400,000 or 25 years and reduces carbon emissionssignicantly. As a result o this initiative, IFC alreadyhas signed a mandate to advise on similar initiativesin ve other cities in Gujarat. Several other statesin India also have expressed interest in undertakingsimilar solar projects with IFC.

The rootop solar project is considered a major

step toward green and clean energy developmentin India, and this pilot should increase support orsimilar initiatives. It is expected to reduce carbonemission o greenhouse gas by about 7,200 tons ocarbon dioxide equivalent annually. It also is likelyto rm up needed policy and legal rameworksand develop a potential developer base to supportreplication o the project elsewhere in Asia.



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OVERVIEW Growing global demand and competition or scarce resources, particularly energy and

water, are placing increasing pressure on the environment. The ecient use o resources is criticalor sustainable private-sector growth, but too oten rms in emerging economies lack awareness onew technologies or access to nance or them. IFC aims to increase investment in resource eciencytechnologies by demonstrating the business case or eciency, in terms o reducing costs and increasingprotability. These technologies can help reduce waste and greenhouse gas emissions, even ascompanies output levels rise.

Accomplishments in FY12Building on past success in Latin America, Europe, andCentral Asia, in the latest year, IFC launched water and energyeciency programs in Sub-Saharan Arica, South Asia, andEast Asia and the Pacic. Tese projects aim to catalyze changeat the market level by raising the prole o resource-ecientpractices and technologies.

In FY12, IFC partnered with theWorld Business Council or Sustain-able Development (WBCSD) and theInternational Energy Agency (IEA)to pilot a Low Carbon Roadmap inthe Indian cement sector. With our

partners, we brought together govern-ment representatives and industryassociation members rom more thanhal o Indias cement manuacturersto develop a set o technical papers that inormed participantso low-carbon technologies and discussed policy incentives tocreate and maintain sustainable low-carbon growth. We arenow working with individual cement-maker clients to improvetheir operational perormance and demonstrate the practicalcase or low-carbon growth.

Focusing on projects with the highest possible impact,

SBA leveraged IFCs investment relationships to help clientsbecome more ecient and to infuence broader sectoralchange. For instance, in Ukraine, we have a longstandinginvestment relationship with Mryia, an agribusiness company.

Ater a resource eciency assessment supported by IFC, Mryiainvested $12.5 million (including $5 million nanced by IFC)to improve water and energy eciency in the companys sugar

plants. Tis will allow it to save morethan 340,000 cubic meters o waterand 60,000 megawatt-hours o energyannually. Te case has been widelypresented and discussed among otheragribusiness holdings in Ukraine.

During FY12, IFC ocused onexpanding water eciency in severalindustries and in agriculture. Itinitiated projects in industrial water

eciency in China, India, and Bangladesh, ocusing onsectors such as textiles, where water use is high, or in areas

where increasing water shortages aect clients operationalperormance. In Bangladesh, we supported resource eciencyassessments at 18 textile mills, identiying almost $1 million incost savings or clients. Based on these results, we are designing

RESOURCE EFFICIENCY

(IFCs) Cleaner Production project brings

360-degree benetsa company is getting

nancial savings, its environmental resource

consumption is reduced, plus carbon dioxide

emissions are also reduced.

Zahid Ullah, DGM Corporate



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a project to expand impact and drive improved eciency at200 actories in the country, or over 40 percent o the textilemarket there.

Agriculture accounts or more than 70 percent o globalwater use, and any water eciency interventions must includeviable irrigation solutions. In India, IFC is testing water-ecient irrigation programs or cotton and sugar crops, and isstarting early-stage eorts in rice and wheat. In Arica, anotherteam is developing a pilot or agricultural water eciency thatnot only will target operational improvements or these clients,but also will take advantage o innovative tools, such as public-private cooperation to manage and monitor water use at the

watershed level.

Overall, between sector- and rm-level work, we expect thatnew investments in resource eciency valued at $95 million

will cut one million cubic liters o water use and remove318,000 tons o greenhouse gas emissions per year, the latterbeing equivalent to taking more than 60,000 cars o the roadseach year.

Lessons LearnedEven when resource eciency opportunities exist and marketbarriers are minimal, we have ound that projects may be toosmall or direct engagement and investments. For example,an IFC green buildings project in Lebanon audited six non-residential buildings during FY12 to identiy opportunities oreciency improvements. Despite good prospects or cost-eective investments, the relatively high transaction costs madeindividual rm-level audits impractical. Instead, the SBA teamis working through local partners and the Lebanese govern-ment to scale up the National Green Buildings Rating Program,a nation-wide certicate program or commercial buildingsthere. Over the next two years, we expect at least 75 buildingsin Lebanon to improve resource eciency, be certied as greenbuildings, and avoid 10,000 metric tons o carbon dioxide-equivalent per year in greenhouse gas emissions.

IFC will use lessons gained rom the Lebanese project as itmonitors sectoral adoption o building certications among itsclients, and will measure impact to gain valuable lessons abouthow to best extend and maximize our reach in worldwideresource eciency.

Strategic OrientationsIn FY13, our resource eciency work will ocus on threeareas. First, we will continue the core mission: to drive invest-ment fows toward more resource-ecient practices, increasecompetitiveness by addressing market barriers at the rm andsector level, and catalyze market transormation by raisingawareness o the benets o resource-ecient technologies.

Second, we will ocus on industrial water eciency,helping clients recognize, monitor, and improve their wateruse. Tis will include expanding our industrial water e-ciency programs, ocusing on strategic areas in China, India,and Bangladesh. Tis work will concentrate on sectors whereeciency gains can be signicant, or where water resourcesare strained or scarce.

Tird, we will progress with implementation o agribusi-ness water eciency programs in South Asia and Sub-Saharan Arica. Tis will involve developing strong pilotsor rm-level water eciency interventions, demonstratingthe business case or water eciency, and, where possible,

experimenting with transormational watershed managementmodels by promoting and supporting cooperation amongmajor water users in these areas.


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OVERVIEW IFC estimates that oil, gas, and mining clients alone invested close to $6 billion in local

communities over the last ve years. IFC clients contribute to local development through their employmentpractices, royalties and taxes paid, inrastructure built, and voluntary investments in communities. Thispresents an important opportunity or IFC to work with rms to improve the quality and impact o theircommunity investments and to jointly develop best practices that encourage learning and replication.

Accomplishments in FY12As part o IFCs eorts to improve the quality and impact ocorporate community investments, we mainly ocus on working

with investment clients in industries with a large ootprint, suchas natural resources, agribusiness, orestry, and inrastructure.In FY12, we developed tools to address emerging issues orclients, such as the Water and Communities Framework, andstrengthened understanding o the community investment issuesin sectors new to the business line, such as orestry and agribusi-ness, and urther promoted tools available to support clients.

Tis past year, IFC worked with a more diverse group oclients than ever beore in strategic community investment.Smaller oil, gas, and mining companies are playing an impor-tant role in many developing countries. Compared with theoperations o major companies in their sectors, these smaller

players tend to have less-developed stakeholder engagement andcommunity investment programs that do not receive adequateattention and resources. o ensure that IFC addresses the needso this client group, we produced a practical how-to guideentitled Strategic Stakeholder Engagement with the Communi-ties or Junior Companies in the Extractive Industries.

In orestry, unlike other sectors, companies oten have adirect business link to communities through various types ooutgrower and wood sourcing plans. Tis economic relationshippresents a number o unique opportunities and challenges to the

way orestry companies engage and invest in local communi-ties. Poor relationships between companies and communitiescan limit the input critical to doing business eectively, butsuccessul relations can improve productivity and benets orlocal communities. Tis year, IFC worked with orestry clientsin India and Indonesia to nd ways to better address their tiesto local communities. In India, or example, we successully

worked with JK Paper Limited, one o the orestry companiesparticipating in an IFC-led, three-year, sector-wide program todevelop companies armer extension strategies by incorporat-ing good practices in community engagement. Tis project hasthe potential to positively aect more than 20,000 armers inIndia by promoting better outgrower models, strategic com-munity engagement practices, and Forestry Stewardship Councilcertication.

In FY12, IFC gained recognition or the way we have

expanded strategic community investments in partnershipswith governments, municipalities, and investment clients.In Latin America, or example, the government o Colombiarequested support in training its National Planning Depart-ments sta on the use o municipal capacity-building toolsdeveloped by SBA. In response, we developed a program toensure that the countrys government sta is able to promotegood royalty-investment practices in more municipalities. InPeru, a group o municipalities is now training their ocers ata local university that oers a degree program incorporating

SRAEGIC COMMUNIYINVESMEN



Part WO

methodologies and tools developed by SBA. In Arica,partnerships with IFC investment clients in Guinea, Ghana,and Mozambique are preparing supplier development projectsaimed at reaching wider segments o local SMEs. Altogether,these programs aim to create more than 3,000 jobs. In Guineaalone, participating companies have to date procured closeto $3 million in products and services rom Guinean sup-pliers. More than 100 small- and medium-sized enterprises

completed business training programs provided by local serviceproviders and over 600 jobs were created.

Beyond these eorts, IFCs global dissemination and train-ing events, including the 6th IFC Sustainability Exchange,have urther reached more than 800 community develop-ment practitioners (see page 48). We trained a group o 30consultants on the Financial Valuation ool (www.vtool.com), which helps companies articulate the business value andcalculate the return on their uture or actual sustainabilityinvestments. During the Mining Indaba event in South Aricain 2012, we organized a one-day Sustainability Workshopand a networking reception with more than 200 participants.

Te new Commdev.org website was launched, expanding IFCinormation, tools, and guidance on community issues tosectors outside extractives, such as agribusiness, orestry, andinrastructure. Te website has close to 2,000 visitors a dayand this number is expected to grow as our work expands tomore sectors.

Finally, across all sectors, IFC recognized the growingimportance o engaging proactively with local stakeholdersto address challenges to sustainable management o naturalresources. o do this, we have started developing guidancematerials on issues such as community aspects o managing

water resources. Soon, a handbook about managing projectimpacts on artisanal sheries will be available to help tacklesome o the main problems related to this natural resource.

Lessons LearnedAs part o the major push in 2011 to expand our work in stra-tegic community investment to sectors beyond extractives, SBAcompleted a number o client and research activities to betterorient services to these new sectors. Some key lessons emerged:

Companies in extractive sectors typically engage andinvest in communities to obtain access to land or theiroperations and to meet local supplier requirements. Incontrast, orestry and agribusiness companies undertake

community projects in a more ad hoc manner, otenunintentionally becoming dominant service providers inan area.

Tere are opportunities or IFC to support companieswork with local enterprises and armer cooperatives toensure that these businesses operate according to goodgovernance, business, and technical standards.

Strategic OrientationsIn FY13, IFC will continue its ongoing and new engagementsto implement supplier development projects, primarily in

Arica, delivering community investment strategy workshopsor IFC clients, and building the capacity o municipalities tomanage signicant increases in revenues rom royalty paymentsin Peru and Colombia. We will continue adapting and devel-oping tools to new ocus sectors o agribusiness, orestry, andinrastructure, while continuing work with extractive-sectorclients. One example is the Water and Communities Frame-

work designed to help industry practitioners anticipate typicalwater risks aecting local communities and better understandpotential solutions. Tis ramework likely will be applied withinvestment clients in Mongolia and Peru.

We also intend to develop several knowledge products: Onewill be an examination o the business case or hiring more

women and specic models or better integrating women intothe workorce. We will develop a ramework to assist compa-nies in nding options when addressing the ways that artisanaland small-scale mining aect their larger operations, which

will be piloted in Burkina Faso and Papua New Guinea. More-over, a guidance document entitled Greening Supply Chainson how a company can embed green procurement strategiesin its supply chain is also scheduled to be published. Finally, aGuide on Stakeholder Engagement or smaller rms will benalized in FY13 to assist those managing small-scale invest-ments with limited sta and resources.

Based on demand rom investment clients in mining, oil

and gas, orestry, and agriculture, SBA will continue to provideAdvisory Services to these clients. Tis eort will be expandedin the East Asia and Pacic region, particularly in Papua NewGuinea, Laos, Mongolia, and Indonesia, with a continuedemphasis on smaller companies. In addition, IFCs annualSustainability Exchange, to which donor partners are invited,

will take place in Washington, D.C., along with regional-levelSustainability Exchanges in Arica and East Asia.



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J

MUNICIPAL ROYALTY INVESTMENT IN PERUEnsuring local communities beneft rom extractive industries

PROJECT AT A GLANCE

IFC is working with local governments in Peru toinvest royalties rom extractive industries in proj-ects that benet local communities. We aim tostrengthen the investment capacity o 30 municipali-ties in eight extractive regions, ultimately beneting250,000 inhabitants through the use o IFC tools,methodology, and a ree, web-based portal ormunicipal ocials.

Oil, gas, and mining companies, also called extrac-tive industries, play a key role in Peru by contributingto economic growth and generating income or thegovernment. The National Society o Mining, Petro-leum and Energy estimates that mining and energy

investments in the country will exceed $35 billion inthe coming years. At the same time, Peruvian lawmandates that the central government transer parto the royalties received rom these investments tolocal governments.

However, many communities living in municipali-ties that receive royalty transers remain among thepoorest in Peru. More than 40 percent o the 1.5million inhabitants o these extractive regions livebelow the poverty line, with more than hal a millionlacking access to basic services such as water andsewerage systems. While the royalties received by

municipalities represent a great opportunity to litthese communities out o poverty, local governmentshave diculty translating these resources into projectsthat deliver tangible benets to the population. Weakinstitutions and lack o management skills have ledto limited investment capacity at the local govern-ment level. This gap is highlighted by the act that bythe end o 2011, hal o the royalties received by themunicipalities in Peru remained undisbursed.

IFCS ROLE

IFC aims to strengthen capacity or investing extrac-tive industry royalties in Peru by providing municipal

ocers with relevant inormation, training, meth-odology, and tools. These tools include establishingan investment committee to coordinate and overseethe implementation o investment projects, andusing IFCs Assessment Methodology to systemati-cally identiy bottlenecks and weaknesses along theinvestment cycle. Municipal ocers are also encour-aged to take advantage o using Municipio al Dia, a

web-based platorm that provides inormation andreal-time on-demand advice rom experts. Municipioal Dia is a joint eort with a prestigious Peruvianthink tank (Instituto de Estudios Peruanos) that isdesigned to acilitate timely, cost-eective access toreliable inormation that can serve a large number omunicipalities throughout Peru.

In this project, IFC also is strengthening midterm plan-ning capacity to improve resource allocation or basicneeds o local communities. We are ostering partner-ships with private-sector companies and consultantsto acilitate widespread adoption o related IFC meth-

odologies and tools by more municipalities. We arealso working closely with Perus Ministry o Financeand Economics to ensure that tools are applied morebroadly and are aligned with national priorities.

IMPACT & RESULTS

To date, we have assisted 21 municipalities in Peruthat have set up investment committees to makebetter decisions and prioritize their investment port-olios. Nine municipalities have approved ongoingannual investment plans, which primarily ocus onimproving access to basic services and inrastructuresuch as education, health, water and sanitation,transportation, and agriculture. Eight municipalitiesworking with IFC have approved proposals that willreduce the implementation time or inrastructureprojects by removing bottlenecks and streamlininginternal processes. Furthermore, over two-thirdso Perus municipalitiesnumbering 1,275and15,300 individual users received advice and inorma-tion through Municipio al Dia.


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302012 ANNUAL REVIEW

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OVERVIEW IFC is helping to promote the growth o small- and medium-sized enterprises (SMEs) and

smallholder armers in emerging markets by developing local capacity to provide business management

and technical training services. Relevant training strengthens business skills and managerial capacity, which

in turn improves productivity, opens market opportunities, and removes the barriers to obtaining fnancing

that SMEs and small arm owners oten ace. Macroeconomic evidence shows that the growth o SMEs and

smallholder armers has a greater impact on poverty reduction than growth in other parts o the economy.

Accomplishments in FY12Since 2000, IFC has worked with SMEs to improve theirmanagerial practices, build revenue, create jobs, accessmarkets, and improve nance operations using Business Edge,a classroom-based training platorm, and the SME oolkit, aweb-based platorm with management inormation and train-ing resources. Since its inception,Business Edge has been deliveredto more than 150,000 traineesacross 38 markets through anetwork o 850 accredited trainers.Te bulk o trainees, some 63,851since 2005 come rom the MiddleEast and North Arica region but

demand is growing rapidly acrossArica, Latin America, wherealmost 46 percent o all traineesare women, and South Asia. InArica, training was largely usedby commercial banks to increase non-nancial services oeredto SMEs. In FY12, IFC expanded the SME oolkit into ournew markets, and it now oers 36 country-specic websitesavailable in 18 languages, which attract more than ve millionunique visitors annually.

o improve the productivity o smallholder armers, IFC part-ners with leading agribusiness companies and service providers

to oer business and technical skills training. Tis instructionis designed to help armers increase their productivity, employsustainable agricultural practices, improve their access to nance,and generate higher incomes. For example, we are working withDCM Shriram Consolidated Limited, a major sugar company

in India, to improve the productiv-ity o armers in its supply chainby training armers on advancedarming techniques (reer to projectexample on page 32).

In ragile and confict situa-tions, IFC has coped with naturaldisasters, instability, and war to

build markets or business manage-ment training where none existed.In Iraq, trainers supported by IFCtrained more than 11,000 business-people ater aid agencies and others

had determined the situation was too unsae to remain there. InAghanistan, where close to 3,000 people received training, wepaired with BBC radio to broadcast popular shows with a busi-ness angle in order to overcome the problems o physical accessto Aghani entrepreneurs. In Pakistan, we worked in remote

FARMER AND SME RAINING

By helping farmers increase their farm productivity,

IFC has not only increased farmers incomes, but has

also helped the company boost its sugarcane supply.

Tis is a true manifestation of good corporate social

responsibility, where the companys and communitys

interests are mutually aligned.

Sunil Radhakrishna, Senior Executive Director,

DCM Shriram Consolidated LImited



Part WO

and dangerous provinces as well as big cities to provide BusinessEdge training workshops to more than 4,000 aspiring entrepre-neurs and small-business owners.

Te work we do in capacity building or entrepreneurs ocusesin particular on women in a number o markets. In FY 12,almost 21,000 people had received Business Edge managementtraining, including over 7,000 womenrepresenting more than30 percent o all trainees. In Yemen, or example, women rep-resented 27 percent o small-business owners in Business Edge

workshops, an impressive eat in a socially conservative country.Te high turnout o women was the result o creative programdesign: workshops were timed to accommodate womens amilyobligations and a local womens organization provided vans toshuttle emale trainees to class, which helped them overcomecultural barriers to travel. Workshops were tailored to meet thebusiness needs o crat shop owners, dentists, and pharmacists,three areas o business that women in Yemen tend to pursue.

Working with banks to reach SMEs, IFC continued to useBusiness Edge training to improve the ability o bank sta toassist potential SME customers. In the Democratic Republic

o Congo, IFC worked with several banks to improve theiroutreach to potential emale clients using Business Edge tools,including oering training on how to write stronger businessplans, a critical step to becoming eligible or bank nancing. TeSME oolkit provides a dedicated section or women-ownedbusinesses, and has nearly 100,000 registered women users. Atleading banks in Pakistan, Kenya, India, Cameroon, and else-

where, trainees learned to help clients create solid business plansto land bank nancing. For example, in Rwanda, IFC worked

with Kenya Commercial Bank to help SMEs in the tourismsector obtain unding by teaching them business-plan writing,marketing, and management skills. More than 35 percent o theparticipating small rms received nancing ater this training,

with close to $4 million in loans approved.

During the past year, IFC launched a study entitled WhyBanks in Emerging Markets Are Increasingly Providing Non-Financial Services to Small- and Medium-sized Enterprises.

Te report, based on eedback rom 21 banks, concluded thatservices such as training and inormation-sharing increasinglyare being used by banks to raise the quality o their SME invest-ment portolio and to retain clients in a competitive environ-ment. Te report drew notable attention rom banking proes-sionals when it was presented in conerences in Beirut, Istanbul,and Lagos.

Lessons LearnedAn important lesson learned this past year is that trainingservices are most eectively and sustainably provided by quali-ed local providers with a commercial orientation, rather thanby heavily subsidized donor programs. Another lesson is thatbanks are increasingly interested in providing non-nancialservices as a way to dierentiate themselves rom the competi-tion, improve client retention, expand their SME portolios,and improve customer service.

Strategic OrientationsIn FY13, we will expand our oerings or SMEs and armers.Strongest growth is expected in the agribusiness sector, withmore than 20 new projects coming on board, mostly in theMiddle East and North Arica and Sub-Saharan Arica regions.SBA will produce a good-practice guide or companies

wanting to engage with smallholder armers and will initiatea series o roundtables with key private-sector stakeholdersinvolved in the production and trading o major topicalcommodities. We will also increasingly work with nancialinstitutions as a way to reach SMEs and armers in order tohelp the banks meet growing demand in this client area. Tis

will be done through new engagements with 10 nancial insti-

tutions in the Middle East and North Arica, Arica, Europeand Central Asia and South Asia to oer non-nancial servicesto their clientele through the SME oolkit and Business Edge,and through development and roll out o nancial literacytraining or armers and micro entrepreneurs. New SMEoolkit partnerships are planned with nancial institutions inLebanon, Gabon, and the Democratic Republic o Congo.

In the Middle East region specically, the issue o youthemployment is a growing priority. SBA will actively engage inthe Education or Employment (e4e) initiative that will targetEgypt, Morocco, unisia, and Jordan.

In FY13, to maximize eectiveness, SBA will build partner-

ships with organizations such as the International LabourOrganization; the German Agency or International Coopera-tion, or GIZ; United Nations Industrial Development Orga-nization; the MasterCard Foundation; and Youth BusinessInternational, among others. Primary challenges include theestablishment o industry-wide perormance benchmarks ortraining and making the best use o rapidly changing technolo-gies (such as mobile devices and eLearning) to achieve greateroutreach at lower cost.



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PROJECTEXAMPLE

FARMER TRAINING AND DCM SHRIRAMCONSOLIDATED LIMITEDImproving armer productivity in India

PROJECT AT A GLANCE

IFC is working with DCM Shriram ConsolidatedLimited (DSCL), a major sugar company in India,to improve the productivity o armers in its supplychain by training them on advanced arming tech-niques. As a result, the productivity o armers whoreceived training is estimated to have increased by86 percent, compared with a 19 percent increase

among armers who did not receive training.In India, more than 50 million armers depend onsugarcane cultivation or their livelihood. While somestates in India have a high arm yield o more than100 tons per hectare, the our million armers inthe low-income state o Uttar Pradesh produce onlyaround 50 to 55 tons per hectare on average, result-ing in lower income rom sugarcane cultivation.

With our sugar plants and more than 150,000armers in its entire supply chain, DSCL is underpressure to increase the productivity o armers inits supply chain. Current capacity utilization is low

and i it alls any lower, it will hurt the companysperormance. In the past, measures undertaken bythe company to enhance productivity had limitedsuccess because the programs were ragmented,rather than holistic in their approach.

IFCS ROLEThe project aims to increase the productivity oarmers in DSCLs supply chain by supportingtraining in advanced arming practices related toseed management, soil improvement, water usage,planting, monitoring, and reporting. These practiceswere incorporated into a training manual or thecompany and an easy-reerence pictorial fipchart orarmers, which demonstrates arming practices to beollowed during each month o the crop cycle.

IMPACT & RESULTS

Ater the training, a productivity increase o 23percent rom baseline levels was recorded or thearmers who participated in the rst year o theproject, as compared with a productivity decreaseo 11 percent seen with those armers who didnot receive training. In the second year, preliminaryresults show that beneciary armers had a produc-tivity increase o 86 percent, while the armers inthe control group recorded an increase o only 19percent.

Initially, 2,000 armers received training; this hasbeen increased to 12,000. A goal o reaching50,000 armers has been set, and DSCL plans to ulti-mately reach all 150,000 armers in its supply chainthrough replication. There are also plans or theadoption o the program by other sugar companiesin India, and IFC is currently sharing lessons rom theproject with the sugar industry, the sugar manuac-turers association, sugarcane research institutions,and the government o India, as well as govern-ments and partners in the larger South Asia region.



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OVERVIEW With global supply chains spanning continents, environmental, social, and trade standards can

help satisy market demand or sustainably produced goods while acilitating local producers access to globalmarkets. However, in some sectors, commonly accepted standards have not yet been developed. In others,standards have been agreed upon, but their deployment is limited due to lack o inormation and capacity,the cost o local adoption, or the absence o a conducive regulatory environment. IFC has a track record as aleader in international standards earned rom developing our Perormance Standards and thus, is in a uniqueposition to promote and institutionalize environmental and social metrics. IFCs current ocus is on increasing

the number o rms and quantity o products that meet standards in specic sectors and commodities.

Accomplishments in FY12Te Sustainability Strategy Diagnostic piloted by SBA in FY12helps IFC clients translate market trends, environmental andsocial issues, and stakeholder concerns into business oppor-tunities. Te approach is designed to help companies mapand prioritize environmental and social issues related to theirbusiness strategy and stakeholders expectations, and explorebusiness opportunities linked to sustainability activities. Teycan also use this tool to engage senior executives in relevantsustainability issues, and to design an implementation strategyand communications ramework aligned with standards, such asIFCs Perormance Standards and the Global Reporting Initia-

tive Framework. Te Sustainability Strategy Diagnostic tool waspiloted with six rms in the rontier regions o Brazil, and willbe rolled out globally in the Balkans and in Arica in FY13.

IFC is always trying to nd new ways to increase environ-mental and social perormance, and engagement with thenancial sector is an ecient way to achieve scale. In China,

we have supported the China Banking Regulatory Commissionin the development o the Green Credit Guidelines. Based onIFCs Perormance Standards, the guidelines encourage Chinese

banks to lend to companies with good environmental and socialpractices, and to avoid nancing high-polluting or high-energy-consuming businesses. A similar initiative to engage Taibanks is underway, which specically targets investment in thehydropower sector o Lao Peoples Democratic Republic.

As agriculture becomes an even larger ocus area or IFC,FY12 provided an opportunity to increase the scale o what wecould oer to the sector related to sustainable business solutions.

A number o tools were developed or more eective implemen-tation o the IFC Perormance Standards in the agribusinesssector, such as a child-labor monitoring tool, environmental andsocial risk-mapping tools, and a series o comparative analyses

between the Perormance Standards and other sustainabilitystandards. Te Biodiversity and Agricultural CommoditiesProgram continues to develop technical tools that rms can useto better implement agricultural roundtables standards.

Producers in developing countries must meet internationalood saety standards to improve their competitiveness andgain access to global markets. IFC has worked on ood saetyor six years, mainly in Eastern Europe and Central Asia, andplans to help increase the uptake o ood saety standardsglobally, particularly in Arica, South Asia, and East Asia and

ENVIRONMENAL, SOCIAL ANDRADE SANDARDS



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the Pacic. We recently hosted an International Food SaetyForum in Ukraine, which brought nearly 150 participantstogetherincluding representatives rom Danone, Coca-Cola, and IFC partner Metro Cash & Carryto discuss bestpractices and standards.

IFCs main vehicle or work on labor standards continuesto be the Better Work program, the collaboration with theInternational Labour Organization (ILO) that promotes better

working conditions in garment actories. In FY12, the researchconducted by Better Work consistently ound that companiesthat put in place higher labor standards remain protable andeven can bolster their business case, as observed in the garment

manuacturing sector. IFC is now looking or opportunities inthe year ahead to use the tools and materials developed by Better

Work in the agribusiness sector.

Lessons LearnedOver the last year, SBA has identied a number o keyelements that played a role in the success o our standards-related advisory projects, particularly in agribusiness. Lessonslearned include:

continuous engagement with internal stakeholders todene market opportunities ensures the best value propo-

sition or IFC clients; the most successul projects include a scoping phase

beore implementation. Tis allows additional time toreach a clear understanding o private-sector and armerincentives through detailed cost-benet analysis, eldtrials to test extension approaches, and adequate comple-tion o baseline surveys; and

an eective results measurement system improves impactmonitoring and ensures superior reporting. Ways to evalu-ate the environmental and social impact rom deployingcertication and standards still need to be mapped.

Strategic OrientationsIn FY13, SBA will support implementation o the new IFCSustainability Framework through the development androllout o an Environmental and Social Management System(ESMS) toolkit or rms based on IFCs Perormance Stan-dards. Te toolkit will enable rms, including SMEs, to sel-diagnose and then make their own improvements to the ESMSand eventually to their environmental and social perormance.

In addition, the SBA team will deploy the SustainabilityStrategy Diagnostic to companies in Europe and Central Asia,and in Latin America, which will give company manage-

ment and IFC Investment Ocers inormation on the mostcritical sustainability areas these rms need to address. We willcontinue to engage and provide technical input on standardsto key Commodity Roundtables to help them become strongerplatorms or promotion o better environmental and socialpractices.

SBA will also continue promoting good labor standardsin the garment sector through the ILO partnership in Better

Work, which includes scoping and a potential rollout inBangladesh, and strengthening our global engagement withglobal buyers. In agribusiness, we have also been develop-ing methodology and metrics or child labor and will pilot

these within the traceability systems o several o our clients.Providing advice to rms on sustainable sourcing strategies orcommodities, which oten carry high environmental and socialrisks, also will remain a priority.

BOX 4 IFC Perormance Standards

Together, the eight Perormance Standards

establish standards that IFC investment

clients are to meet throughout the lie o an

investment by IFC:

PERFORMANCE STANDARD 1

Assessment and Management o Environmental

and Social Risks and Impacts


Labor and Working Conditions


Resource Eciency and Pollution Prevention


Community Health, Saety, and Security


Land Acquisition and Involuntary Resettlement


Biodiversity Conservation and Sustainable

Management o Living Natural Resources


Indigenous Peoples


Cultural Heritage



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J

ECOM COFFEE GLOBAL PROGRAMIncreasing productivity o smallholder coee armers

PROJECT AT A GLANCE

Coee is a heavily traded global commodity, andhigh-quality arabica beans are high in demandand the astest-growing segment o the market.The demand rom consumers or certied coee isalso growing, and the price they are willing to payappeals to traders.

Smallholder coee armers have had to adapt toseveral new standards that include environmentalcertications establishing whether the coee isorganic, bird-riendly, shade-grown, or aectedby social issues. Utz Certied, 4C, and StarbucksCAFE Practices are just a ew o the organizationsthat provide guidance on best practices or coee

growing. These certications have the potential tocreate value or smallholders, as

ifc sba 2012 annual review

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