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Guidance Note 1 - V 2Assessment and Management of Social and Environmental Risks and

Impacts

Guidance Note 1 corresponds to Performance Standard 1. Please also refer to PerformanceStandards 28, as well as their corresponding Guidance Notes for additional information.Bibliographical information on all referenced materials appearing in the text of this Guidance

Note can be found in the References section at the end.

Introduction

1. Performance Standard 1 underscores the importance of managing the social and

environmental performance throughout the life of a project. An effective social and

environmental assessment and management system is a dynamic and continuous process

initiated and supported by management, and involves communication between the client, its

workers, local communities directly affected by the project (the Affected Communities) and,

where appropriate, other stakeholders.1

Drawing on the elements of the established

business management process of plan, do, check, and act, the management system

entails a methodological approach to managing social and environmental risks2

and

impacts3

in a structured way on an ongoing basis. A good management system appropriate

to the nature and scale of the project promotes sound and sustainable social andenvironmental performance, and can lead to improved financial, social, and environmental

outcomes.

2. At times, the assessment and management of certain social and environmental risks

and impacts may be the responsibility of the government or other third parties over which

the client does not have control or influence.4

Examples of where this may happen include:

(i) when early planning decisions are made by the government or third parties which affect

the project site selection and/or design; and/or (ii) when specific actions directly related to

the project are carried out by the government or third parties such as providing land for a

project which may have previously involved the resettlement of communities or individuals

and/or leading to loss of biodiversity. While the client cannot control or even influence these

government or third party actions, an effective management system should identify thedifferent entities involved and the roles they play, the corresponding risks they present to

the client, and opportunities to collaborate with these third parties in order to help achieve

environmental and social outcomes that are consistent with the Performance Standards. In

addition, this Performance Standard supports the use of an effective grievance mechanism

that can facilitate early indication of, and prompt remediation for those who believe that they

have been harmed by a clients actions.------------------------------------------------------------------------------------

1 Other stakeholders are those external to the core operations of the project who have an interest in the project.These could include national and local authorities, neighboring projects, and/or nongovernmental organizations.2

Environmental and social risk refers to a combination of probability or frequency of certain hazardousoccurrences and severity of impacts resulting from such an occurrence.3 Environmental and social impacts refer to any potential change to the physical, natural, or culturalenvironment, surrounding community, or health and safety of the community.4

Contractors retained by, or acting on behalf of the client(s), are considered to be under direct control of theclient and not considered third parties for the purposes of this Performance Standard.


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Objectives

To identify and evaluate social and environmental risks and impacts of the project

To adopt a mitigation hierarchy to anticipate and avoid, or where avoidance is not

possible, minimize5

or compensate for/offset for risks and impacts to workers, Affected

Communities, and the environment

To promote improved social and environmental performance of clients through the

effective use of management systems

To ensure that grievances from Affected Communities and external communications

from other stakeholders are appropriately responded to and managed

To promote and provide means for adequate engagement by Affected Communities

throughout the project cycle on issues that could potentially affect them and to ensure

that relevant environmental and social information is disseminated____________________________________________

5 Acceptable options to minimize will vary and include: abate, rectify, repair, and/or restore impacts, as

appropriate. The risk and impact mitigation hierarchy is further discussed and specified in the context ofPerformance Standards 2 through 8, where relevant.

G1. The assessment and management of social and environmental risks and impacts is partof the larger overall set of processes that a client uses to manage its projects, but is, however,essential for successful and sustainable performance of these projects. Performance Standard1 underscores the importance of managing the social and environmental (including labor,health, safety, and security) performance throughout the life of the investment. A goodassessment and management system enables continuous improvement of social andenvironmental performance, and can lead to improved economic, financial, social, andenvironmental outcomes.

G2. IFC Policy on Social and Environmental Sustainability (the Sustainability Policy)recognizes that, at times, the clients ability to achieve social or environmental outcomes

consistent with the Performance Standards will be dependent on third party activities. A thirdparty may be a government agency as a regulator or contract party, a contractor or supplier withwhom the business activity has a substantial involvement, or an operator of an associatedfacility. A sound environment and social management system should recognize roles andresponsibilities of third parties, identify risks related to their involvement, through appropriatedue diligence, taking into account the local context, its influence and control over the third party,and measures to mitigate those risks (e.g. maintaining third party relationships) and ultimatelyidentify and address, where possible, potential limitations in achieving desired outcomes. Theoutcomes will depend on the nature of the third party and the relationship that governsinteractions between the client and the third party. For instance, the government agency thatarbitrates land use (e.g., through a regional planning approach or zoning code) plays a pivotalrole in how the activity to be funded can be designed or realized, but is an area where the clienthas little ability to control or influence the outcome and hence, possible associated impacts. A

contractual arrangement with a supplier, on the other hand, is an example of a situation wherethe client may have contractual, financial, and, therefore, operational leverage enabling a levelof control to be exerted that will directly influence how the supplier performs with respect torelated impacts and their avoidance, prevention, minimization, mitigation, or compensation. Theappropriate assessment and management of environmental and social risks and impacts willrecognize the differences in these relationships and will make provisions accordingly to bestaffect outcomes given inherent limitations and constraints or opportunities. In addition, the clientshould consider the risk of being complicit in third parties actions or omissions, including byknowingly supporting, endorsing, or benefiting from third parties human rights violation.


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G3. Before IFC proceeds with an investment, IFC reviews the clients social andenvironmental assessment and management system. For details on IFCs process of social and

environmental review, see the Environmental and Social Review Procedure, and for furtherinformation on examples and benefits of improving sustainability performance, see IFCssustainability resources (listed in the References section below).

Scope of Application

3. This Performance Standard applies to business activities with social and/or

environmental risks and/or impacts, (projects for the purpose of this Performance

Standard). In some cases, this could include aspects from the early stages of project

development through the entire project life cycle (design, construction, commissioning,

operation, decommissioning, or closure).6

Financial intermediaries will also adopt the

principles of this Performance Standard in their own Social and Environmental Management

Systems in accordance with the level of social and environmental risk that is expected to

require management.________________________________________

6Each user of this Standard should separately qualify its scope of application for their specific activities.

G4. Business activities supported and financed by IFC include a wide range of investmentand products. Products with longer tenor include (i) direct lending to private sector companies(including corporate and project finance); (ii) lending to various types of FIs, funds, and facilities;(iii) minority equity stakes in companies (including financial institutions); and (iv) guaranteefacilities, municipal finance, as well as investments by IFCs Asset Management Company, all ofwhich must meet the requirements of the Performance Standards. Products with shorter tenorinclude short-term guarantees and trade finance products, among others. These products, whendetermined to have low social and environmental risk, are subject to the IFC Exclusion List andrelevant national laws. The time period over which risks should be managed will vary dependingon the business activity, the timing of investment, and, the tenor of the debt, and/or theinvestment term. A project alternative analysis, or alternatives of various components of aproject may be appropriate for projects in the design stage. When considering the project lifecycle (design, construction, commissioning, operation, decommissioning, or closure), post-closure requirements are to be considered as part of closure.

G5. Recognizing the fact that the Performance Standards are used by financiers, insurers,and investors in connection with financing and guarantees of specific or general businessactivities, and by companies generally for compliance assessment and ongoing guidance, theterm project as used in the Performance Standards does not necessarily imply project financeor specific physical boundaries of business activities under consideration. Instead, each user ofthe Performance Standards should define the business activity to which the Performance

Standards should apply, and build its approach to assessment and management of social andenvironmental risks and impacts, consistent with this Performance Standard and in accordancewith the level of social and environmental risk that is expected to require management.

Requirements

Social and Environmental Assessment and Management System

4. The client, in coordination with other responsible government agencies and third

parties as appropriate,7

will conduct a process of social and environmental assessment, and


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establish and maintain a management system appropriate to the nature and scale of the

project and commensurate with the level of its social and environmental risks and impacts.

The management system will incorporate the following elements: (i) Policy; (ii) Identification

of Risks and Impacts; (iii) Management Programs; (iv) Organizational Capacity andCompetency; (v) Emergency Preparedness and Response; (vi) Stakeholder Engagement;

and (vii) Monitoring and Review.________________________________________

7That is, those parties legally obligated and responsible for assessing and managing specific risks

and impacts (e.g., government-led resettlement).

G6. The social and environmental management system required by this Performance Standardshould contain all the elements that are deemed to be appropriate in order to plan, do, check,act with regard to social and environmental risks and impacts. In this way it can be seen to besimilar, but not identical, to the ISO 14001 environmental management system. Regardless, inthe same manner as any management system approach, it must be tailored to fit the needs ofthe organization. The management systemand it must contain all four constituent parts (plan,

do, check, act) to function as a management systemgoverns a process. This process startswith planning, that is the identification of what is important (i.e., the risks and impacts). Next theorganization must decide what it is going to do about these risks and impacts (throughdevelopment and implementation of management programs, plans and agreements) and withwhat resources (organizational capacity and competency). While this is happening, theorganization must keep an eye on the unexpected (emergency preparedness and response)and keep those informed who need to know while also learning from them (stakeholderengagement, external communication, and grievance mechanisms). The organization must alsocheck on their own performance and act when that performance is not appropriate or needsenhancing, so as to ensure progress stays on track (monitoring and review). Underpinning theprocess is the policy at all stages, which is the statement of all that is summarily important to theorganization and a document that should constantly provide direction and context to all actionsrelated to the assessment and management of social and environmental risks and impacts.

G7. The level of detail and complexity of the social and environment management system andthe resources devoted to it will depend on the level of impacts and risks of the project to befinanced, and the size and nature of the clients organization. A social and environmentalmanagement system can therefore take a variety of forms and complexities. It can be standalone or fully integrated with all business processes, formal or informal, externally certified orself-declared to be sufficient in its scope, content and operation. The design and implementationof such a system should, however, be singular in its intent. It should provide an organizationwith a structure, within which a sufficient level of understanding of what the social andenvironmental risks and impacts associated with their activities can be better gained, and ameans to ensure these risks and impacts are identified and subsequently managed. Asatisfactory management system appropriate to the nature and scale of the project to be

financed and commensurate with the level of social and environmental risks and impacts is acondition of IFCs investment. If the client does not have a satisfactory management system atthe time of IFCs appraisal of the project to be financed, one should be developed andimplemented over a reasonable period of time agreed with IFC, and be in effect in time tomanage activities financed by IFC.

G8. A management system that meets the requirements of Performance Standard 1 should bein place at the level of the clients organization in which the funds from IFCs investment will beutilized (i.e., at the corporate or at the activity-specific level). In the case of financing of specificoperating units or activities, whether greenfield or existing, the system structure should address


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the social and environmental issues arising from the project being financed. In the case ofcorporate investments or other types of investments, such as financial intermediaries orinvestment funds, without identified specific facilities (i.e., site-based assets) at the time of

investment, this will often mean establishing, building on, or maintaining a corporate- orinstitution-level management framework.

G9. The social and environmental assessment and management system requirements ofPerformance Standard 1 draw on the established dynamic business management process ofplan, do, check, and act. In the context of accepted international frameworks for quality andenvironmental management systems (for examples, see the References section), thismanagement process can be summarized as follows:

Definition of a set of policies and objectives for social and environmental performance ofthe activities;

Identification of the social and environmental impacts and risks of the activities; Establishment of programs of mitigation and improvement measures and specific actions

that address identified risks and impacts, and that achieve the performance objectives; Establishment of an organizational structure to implement the program; Monitoring and review of the system and effectiveness and performance of the impact

and risk mitigation program.

G10. The effort needed to establish a management system depends on the clients existingpolicies and practices. Production- and quality-based management systems operating within theclients organization can be used as a foundation on which to build the elements of a systemconsistent with Performance Standard 1 in the absence of an existing environmental, health,and safety, human resource or social management system. Where a client has an existingenvironmental, health, and safety, human resource and/or social management system, itselements may meet or can be appropriately modified or expanded to meet the requirements of

Performance Standard 1. Where a client has developed and implemented a formalenvironmental, labor, health and safety, and/or social management system consistent with aninternationally accepted standard, the explicit incorporation of the applicable PerformanceStandards in the policy and objectives elements of such system(s) (in addition to the relevantlaws and regulations applicable to their activities, and other corporate priorities and objectives)and implementation of an appropriate management program may be sufficient to meet therequirements of Performance Standard 1. Formal management systems certified underinternational standards are not required by Performance Standard 1. While certified systems arelikely to meet most of IFCs requirements, they may still need to be revised to incorporate all theobjectives of the applicable Performance Standards for the particular project.

G11. Even though many formal management systems address external communicationprocesses, paragraphs 23 - 37 of Performance Standard 1 define requirements for stakeholder

engagement, depending on projects risks and adverse impacts and projects phase ofdevelopment. Performance Standard 1 requires external communications requirements to beexpanded to include specific grievance mechanisms, where the project involves specificallyidentified physical elements, aspects, and facilities that are likely to generate ongoing risks to oradverse impacts on Affected Communities. These mechanisms serve as a way to meetPerformance Standard requirements, prevent and address community concerns, reduce risk,and assist larger processes that create positive social change.


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Policy

5. The client will establish an overarching Policy defining the social and environmental

objectives and principles that guide the project to achieve sound social and environmental

performance.

8

The Policy provides a framework for the social and environmentalassessment and management process, and will specifies that the project (or business

activities, as appropriate) will comply with the applicable laws and regulations of the

jurisdictions in which it is being undertaken, including those laws implementing host

country obligations under international law. The Policy should be consistent with the

principles of the applicable Performance Standards. Under some circumstances, clients

may also subscribe to other internationally recognized standards, certification schemes, or

codes of practice and these too should be included in the Policy. The Policy will indicate

who, within the clients organization, will ensure conformance with the Policy and be

responsible for its execution (with reference to an appropriate responsible government

agency or third party, as necessary). The client will communicate the Policy to all levels of

its organization.______________________________________________________

8This requirement is a stand-alone, project-specific policy and is not intended to affect (or require alteration of)

existing policies the client may have defined for non-related projects, business activities, or higher-levelcorporate activities.

G12. Clients, companies, projects or organizations can have a need for many different types ofpolicies. For example, policies may affect matters of human resources, ethics, travel or anynumber of other business-related activities that must be defined, understood and communicatedto those whose actions need to be governed or guided by its content. The Policy as required byPerformance Standard 1 pertains i) in case of projects with defined scope and assets (e.g.,project finance) expressly to the project to be financed and ii) in case of projects with undefinedscope of assets (e.g., some corporate lending) to corporate level performance. For instance, asuccessful Policy for a green field investment contains language that makes it clear it waswritten specifically for the project to be financed. In so being, employees, contractors, suppliers,and others directly involved in the project can relate to the policy. They can apply it when

making decisions to ensure what was deemed to be important in governing social andenvironmental risks and impacts when the policy was written is acted upon and reflected indecision making and outcomes. In this way the Policy becomes a living document and notsomething that is written once and then forgotten.

G13. The Policy should reflect the clients investment philosophy regarding management ofsocial and environmental risks and impacts of the activities being financed, and include specificobjectives and aspirations the client has set in regard to its social and environmentalperformance, consistent with applicable Performance Standards. The Policy should have thecommitment of the clients senior management.

G14. In addition to the commitment to comply with all applicable social and environmental laws

and regulations of the host country(ies) in which the project is undertaken, the Policy shouldalso include other major social and environmental commitments of the client such ascompliance with international protocols or industry-specific codes of practice standards to whichthe client has committed.

G15. An effective Policy is one that is actively endorsed by the clients senior managementteam and actively communicated to employees at all levels and all functions of the clientorganization. Good practice also includes externally communicating the Policy by publicdisclosure, presenting it in client statements and reports, publishing it on the clients website,and communicating it to Affected Communities and, where appropriate, other stakeholders in


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meetings and through other communication tools. Particularly where the project involvesspecifically identified physical elements, aspects, and facilities that are likely to generateongoing risks to or adverse impacts on Affected Communities, those communities who are

aware of the content of the Policy can make informed statements regarding social andenvironmental risks and impacts. This type of communication can be valuable in assisting aproject in improving social and environmental performance.

Identification of Risks and Impacts

6. The client will establish and maintain a process for identifying the social and

environmental risks and impacts of the project (see paragraph 17 for competency

requirements).9

The type, scale, and location of the project guide the scope and level of

effort devoted to the risks and impacts identification process. The scope of the risks and

impacts identification process will be consistent with good international industry practice,10

and will determine the appropriate and relevant methods and assessment tools.11

The

process may comprise a full-scale social and environmental impact assessment, a limited or

focused environmental and social assessment, or straightforward application of

environmental siting, pollution standards, design criteria, or construction standards. Whenthe project involves existing assets, social and/or environmental audits or risk/hazard

assessments can be appropriate and sufficient to identify risks and impacts. If assets to be

developed, acquired or financed have yet to be defined, the establishment of a social and

environmental due diligence process can be sufficient to ensure that risks and impacts will

be adequately identified at a point in the future when the physical elements, assets, and

facilities are reasonably understood. The risks and impacts identification process will be

based on recent social and environmental baseline data at an appropriate level of detail. The

process will consider all relevant social and environmental risks and impacts of the project,

including the issues identified in Performance Standards 2 through 8, and those who are

likely to be affected by such risks and impacts. The risks and impacts identification process

will also consider the emissions of greenhouse gases and potential transboundary effects,

such as pollution of air, or use or pollution of international waterways.

______________________________________________________9Relevant risks and impacts to consider and identify if reasonably expected to be significant include,among others, those related to human health, gender differences, ecosystem services, and access towater resources.10

Defined as the exercise of professional skill, diligence, prudence and foresight that wouldreasonably be expected from skilled and experienced professionals engaged in the same type ofundertaking under the same or similar circumstances globally.11

In limited high risk circumstances, clients may choose to use a human rights impact assessment to

help further identify risks and impacts.

7. Where the project involves specifically identified physical elements, aspects and

facilities that are likely to generate impacts. Environmental and social risks and impacts will

be identified in the context of the projects area of influence. This area of influence

encompasses, as appropriate:

The area likely to be affected by the project12

and the clients activities, assets,

and facilities that are directly owned, operated, or managed (including by

contractors) and that are a component of the project;13

Associated facilities, which are facilities that are not funded as part of the

project and that would not have been constructed or expanded if the project did

not exist and without which the project would not be viable;14

Areas potentially affected by cumulative impacts15

from further planned

development of the project and other project-related developments, any


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existing project or condition whose impacts may be exacerbated by the project,

and other developments of the same type that are realistically defined at the

time of the risks and impacts identification process;16

Areas where project activities may indirectly impact on biodiversity or on

ecosystem services upon which Affected Communities livelihoods are

dependent;

Areas potentially affected by impacts from unplanned but predictable

developments caused by the project that may occur later or at a different

location.______________________________________________________

12Examples include the projects sites, the immediate airshed and watershed, or transport corridors.13

Examples include power transmission corridors, pipelines, canals, tunnels, relocation and access roads,borrow and disposal areas, construction camps, and contaminated land (e.g., soil, groundwater, surface water,and sediments).14

Examples of facilities related to the project might include: railways, roads, captive power plants ortransmission lines, pipelines, utilities, warehouses, and logistics terminals.15

Cumulative impacts are those that result from the incremental impact of the project when added to other

existing, planned and reasonably predictable future projects and developments. Their identification can befurther limited to only those impacts generally recognized as important on the basis of scientific concerns and/orconcerns from affected communities. Examples of cumulative impacts include: incremental contribution ofgaseous emissions to an airshed; reduction of water flows in a watershed due to multiple withdrawals;increases in sediment loads to a watershed; interference with migratory routes or wildlife movement; or moretraffic congestion and accidents due to increases in vehicular traffic on community roadways.16 Other developments of the same type may, based on specific conditions, include any combination of planned,proposed, or permitted developments by third parties in the same geographical area of the project. Examplesinclude: multiple hydro-electric plants in the same watershed, coastal port zones; oil or mining developments inareas with oil or mining reserves; forestry concessions; and wind farms within the same bird migratory corridor.

8. The area of influence does not include potential impacts that would occur without the

project or independently of the project. It is recognized that the client should address these

risks and impacts in a manner commensurate with the clients control and influence over

third party actions.

9. Where the client can reasonably exercise control, the risks and impacts identification

process will also consider those risks and impacts associated with supply chains, as

defined in Performance Standard 2 (paragraphs 27 and 28) and Performance Standard 6

(paragraphs 30 and 31).


facilities that are likely to generate social and environmental impacts, the identification of

risks and impacts will take into account the findings and conclusions of related and

applicable plans, studies, or assessments prepared by relevant government authorities or

other parties that are directly related to the project and its area of influence.17

These include

master economic development plans, country or regional plans, feasibility studies,

alternatives analyses, and cumulative, regional, sectoral, or strategic environmentalassessments where relevant. The risks and impacts identification will reflect the outcomes

of consultation with Affected Communities as appropriate.


facilities that are likely to generate impacts, and as part of the process of identifying risks

and impacts, the client will identify individuals and groups that may be directly and

differentially or disproportionately affected by the project because of their disadvantaged or

vulnerable status.18

Where individuals or groups are identified as disadvantaged or


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vulnerable, the client will propose and implement differentiated measures so that adverse

impacts do not fall disproportionately on them and they are not disadvantaged in sharing

development benefits and opportunities.______________________________________________________

17 The client can take these into account by focusing on the projects incremental contribution to selectedimpacts generally recognized as important on the basis of scientific concern or concerns from the affectedcommunities within the area addressed by these larger scope regional studies or cumulative assessments.18

This disadvantaged or vulnerable status may stem from an individuals or groups race, color, sex, language,religion, political or other opinion, national or social origin, property, birth, or other status. The client should alsoconsider factors such as gender, age, ethnicity, culture, literacy, sickness, physical or mental disability, povertyor economic disadvantage, and dependence on unique natural resources.

G16. For projects to be financed, whether greenfield or existing, where their scope and assetsare known, the client should identify and document potential adverse impacts and risks for eachall stage of the project life-cycle to which financing applies, including planning and design,construction, commissioning, operations, and decommissioning or closure, including post-closure, as appropriate, and for their short-term, long-term, direct, indirect and cumulative

contexts, keeping in mind the dynamic and shifting nature of these impacts and risks. In case ofprojects with undefined scope and assets (e.g., corporate-level finance) the identificationprocess should be based on a due diligence process that identifies inherent risks related toparticular sector and project settings. IFC within its due diligence will review and evaluateclients existing environment and social management system and capacity to identify andaddress those inherent risks. Methods and assessment tools for risks and impacts identificationare discussed in paragraphs G23 G32 below.

G17. In case of investment through financial intermediaries (such as banks and leasingcompanies) and investment funds (collectively, financial institutions or FIs), IFC delegates to FIsthe responsibility for transaction appraisal and monitoring as well as overall portfoliomanagement. Environmental and social risk management is, therefore, part of theresponsibilities delegated to FIs. IFC conducts due diligence of the business portfolio of its FI

clients to identify potential exposure to environmental and social impacts and risks to determinethe requirements and systems the FI would need to follow to manage these impacts and risks.IFC also reviews implementation capacity of FIs against its requirements as well asenvironmental and social management systems in line with relevant sections of PerformanceStandard 1. These systems should be commensurate with the level of environmental and socialrisks associated with their projects and type of investment made by with IFC. FI clients shouldrequest their clients (sub-projects) to identify potential adverse impacts and risks and have adue diligence process and have a due diligence process to verify risk and impact identificationconducted by their clients (see paragraph G32 below).

G18. The process of identifying social and environmental risks and adverse impacts addressesin an integrated manner the full scope of impacts and risks (including environmental, social,labor, health, safety, and security) associated with the project to be financed. If reasonablyexpected to be significant, relevant risks and impacts to identify include, among others, thoserelating to human health, gender differences, ecosystem services, and access to waterresources. The risks and impacts identification process is an important first step in managingand improving social and environmental performance, as it helps the client to screen andassess all relevant potential impacts and risks associated with the project to be financed(whether addressed through the Performance Standards or not), and identify any mitigation orcorrective measures that will enable the projects to meet the applicable requirements inPerformances Standards 2 through 8, any applicable local laws and regulations, as well as anyadditional priorities and objectives for social or environmental performance identified by the


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client. For guidance on how to address labor and occupational health and safety issues in theprocess of, or in addition to, the clients process of risk and impact identification, seePerformance Standard 2 and Guidance Note 2. Requirements and guidance on how to identify

impacts from emissions, including those contributing to climate change, and their reduction, aswell as on efficient use of natural resources and energy efficiency are provided in PerformanceStandard 3 and Guidance Note 3. Requirements and guidance on community health and safety,including guidance on health impact assessment process and critical elements in health risksand impacts identification can be found in Performance Standard 4 and Guidance Note 4.Requirements and guidance on risk assessment related to security issues can also be found inPerformance Standard 4 and Guidance Note 4. Requirements and guidance on identification ofrisks and impacts on ecosystem services can be found in Performance Standard 6 andGuidance Note 6. Requirements and guidance on how to identify impacts, such as loss ofownership or access to water and natural resources (i.e. ecosystem services such as fire wood,fishing, foraging, hunting, etc) are provided in Performance Standard 5 and Guidance Note 5.

G19. Even if social and environmental impacts and risks are not specifically identified in

Performance Standards 2 through 8, they should be assessed under Performance Standard 1as part of the clients approach to risk management. For example, all relevant adverse impactson the livelihoods and income of the Affected Communities within the projects area of influenceshould be assessed. Of such impacts, involuntary resettlement that result from land acquisitionand/or restrictions on land use associated with the project to be financed should be addressedthrough Performance Standard 5, while other adverse impacts on livelihoods that result fromother activities should be addressed under Performance Standard 1. Examples of adverseimpacts that should be addressed under Performance Standard 1 include loss of access tostate-owned sub-surface mineral rights by artisanal miners; demonstrated decreases inagricultural, livestock, forest, hunting or fishing yields resulting from project-related disturbanceand/or pollution or project-related disruption of access to water on land not acquired by theproject or whose use is not restricted by the project. For related guidance, see Guidance Note 5.Depending on the circumstance, it may be appropriate to model mitigation measures foradverse impacts on livelihoods assessed under Performance Standard 1 after livelihoodrestoration measures specified under Performance Standard 5 for economic displacementresulting from land acquisition or restrictions on land use. Integrating social and environmentalconsiderations in the context of an overall assessment of the project will enable clients toarticulate the overall risks and benefits and inform the clients decisions.

G20. The initial screening of the project against the applicable local laws and regulations andthe Performance Standards will indicate whether the project may pose social or environmentalrisks that should be further analyzed through additional steps of the identification process (seealso paragraphs G23 G32 below). If the initial screening indicates potential risks and adverseimpacts, the scope of the identification process should be determined and further risks andimpacts identification and analysis (based on relevant baseline data, if any, and considering

identified relevant stakeholders) will be necessary to ascertain the nature and scale of impacts,the Affected Communities, and possible mitigation measures. Where the initial screeningprocess concludes that a project will have no or minimal potential risks and adverse impacts,the client should document this screening process and its conclusions.

G21. The risks and impacts identification process should be based on recent, up-to-dateinformation, including detailed description of the project in its geographic, ecological, social,health and temporal context (the social and environmental baseline). For example, in case ofproject finance (greenfield or existing), relevant information will include any related facilities that


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may be required (e.g., dedicated pipelines, access roads, captive power plants, water supply,housing, and raw material and product storage facilities). The description will encompassfacilities and activities by third parties that are essential for the successful operation of the

project. Where the project involves specifically identified physical elements, aspects andfacilities that are likely to generate impacts, the collection and analysis of social andenvironmental baseline information and data, at an appropriate level of detail for the project, areessential to define the projects area of influence, and describe relevant physical, biological,ecological, socioeconomic, health and labor conditions, including any changes anticipated tooccur in the foreseeable future (including projected variability in climatic and environmentalconditions due to potentially significant climate change or that would require adaptationmeasures that could occur over the life of the project, and current and proposed developmentactivities within the business activities area but not directly connected to the project to befinanced. The baseline information gathering phase is an important and often a necessary stepto enable the determination of the potential impacts and risks of a project. Identification ofproject- and site-specific risks and impacts should be based on current and verifiable primaryinformation. Reference to secondary information on the projects area of influence is acceptable,

but it may still be necessary to gather primary information from field surveys to establishbaselines appropriate to the proposed projects potential impacts and risks. Relevant data maybe available from various host governmental agencies, non-governmental organizations andacademic studies. However, clients should carefully evaluate data sources and potential datagaps. Accurate and up-to-date baseline information is essential, as rapidly changing situations,such as in-migration of people in anticipation of a project or development, or lack of data ondisadvantaged or vulnerable individuals and groups within an Affected Community, canseriously affect the efficacy of social mitigation measures. Limitations on data, such as theextent and quality of available data, assumptions and key data gaps, and uncertaintiesassociated with predictions, should be clearly identified.

G22. Where the project involves specifically identified physical elements, aspects and facilitiesthat are likely to generate impacts, it should identify the extent and complexity of potentialadverse impacts and risks in the context of the projects area of influence, which is the total arealikely to be affected by both on-site and off-site impacts from project activities, assets andfacilities, including associated facilities. The size of a projects area of influence, as well as thesocial and environmental impacts and risks within the area, can vary considerably depending onthe nature of the project to be financed. Some of these impacts and risks, including thosedescribed in the Performance Standards, may be attributable to third parties within the area ofinfluence. The larger the area of influence, the more likely that third party action or non-performance could pose risks to the projects. Where relevant, the identification of risks andimpacts will also consider the role and capacity of third parties (such as local and nationalgovernments, and contractors and suppliers), to the extent that they pose a risk to the project,recognizing that the client should address these risks and impacts in a manner that iscommensurate to the clients control and influence over the third party actions.

Risks and Impacts Identification Methods and Assessment Tools

G23. The risk and impact identification process should include all the necessary steps andmethods that are required to screen, identify, analyze, measure, or assess, in quantitative termsto the extent possible, the potential risks and adverse impacts (including environmental, social,health, safety, labor and security) associated with the projects to be financed. It is expected thatthe client will apply methods and assessment tools, consistent with current good internationalindustry practice, which are appropriate and relevant to the type of project to be financed. Those


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methods include, but are not limited to, (i) full-scale Environmental and Social ImpactAssessments (ESIAs); (ii) limited or focused environmental or and social assessments; (iii)straightforward application of environmental siting, pollution standards, design criteria, or

construction standards. (iv) where relevant, environmental and social studies such as climateimpact assessments, human rights impact assessments, health impact assessments, orrisk/hazard assessments for certain activities; and (v) environmental and social due diligenceand audits. In case of investment through FIs, the FI client should apply environmental andsocial due diligence procedure(s) to verify risk and impact identification conducted by theirclients.

Environmental and Social Impact Assessments

G24. For certain projects, and particularly for greenfield investments and projects (including,but not limited to, major expansion or transformation-conversion activities) involving specificallyidentified physical elements, aspects and facilities that are likely to generate potential significantadverse social and environmental risks and/or impacts, the client should conduct a

comprehensive full-scale ESIA process. The key process elements of an ESIA generallyconsist of (i) initial screening of the project and the scoping of the assessment process; (ii)examination of alternatives; (iii) stakeholder identification and gathering of social andenvironmental baseline data; (iv) impact identification, prediction, and analysis; (v) generation ofmitigation or management measures and actions; (vi) significance evaluation of residualimpacts; and (vii) documentation of the assessment process (i.e., ESIA report). The breadth,depth and type of analysis should be proportionate to the nature and scale of the proposedprojects potential impacts as identified during the course of the assessment process. The ESIAmust conform to the requirements of the host countrys environmental assessment laws andregulations, including the relevant disclosure of information and public consultationrequirements, and should be developed following principles of good international industrypractice (see the References section for further guidance).

G25. The ESIA process will predict and assess the projects potential positive and adverseimpacts and risks, in quantitative terms to the extent possible. It will evaluate social andenvironmental impacts and risks from associated facilities and other third party activities. TheESIA will identify and define a set of social and environmental mitigation and managementmeasures to be taken during the implementation of the project to avoid, minimize, orcompensate/offset for risks and adverse social and environmental impacts, in the order ofpriority, and their timelines, and will identify any residual negative impacts that cannot bemitigated (see also paragraphs G64 G65 on the application of the mitigation hierarchy). Thedesired outcomes of the mitigation and management measures should be set as measurableevents to the extent possible, such as performance indicators, targets or acceptance criteria thatcan be tracked over defined time periods. The assessment process will indicate the resources,including budget, and responsibilities required for implementation for the mitigation and

management program, including best estimates of the implementation costs. The assessmentwill explore opportunities for enhancement. The ESIA will also identify and estimate the extentand quality of available data, key data gaps, and uncertainties associated with predictions, andspecifies topics that do not require further attention. For those projects with potential significantadverse impacts predominantly in the social area (e.g., involuntary resettlement), the impactsand risks identification process should largely focus on generating appropriate social baselinedata, impacts analysis, and mitigation measures (e.g., Resettlement Action Plan).


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G26. The ESIA will include an examination of technically and financially feasible alternatives tothe source of such impacts, and documentation of the rationale for selecting the particularcourse of action proposed. The purpose of alternative analysis is to improve project design,

construction, and operation decisions based on feasible alternatives to the proposed projects.This analysis may facilitate the consideration of social and environmental criteria at the earlystages of development and make decisions based on the differences between real choices.The alternatives analysis should be conducted as early as possible in the process and examinefeasible alternatives, alternative project locations, designs or operational processes, oralternative ways of dealing with social and environmental impacts.

G27. The client should ensure that appropriate follow up actions are conducted to verify thatthe terms and condition of approvals are met and to implement a monitoring program tomeasure and evaluate residual impacts and effectiveness of mitigation measures.

Limited or Focused Environmental and Social Assessments.

G28. The projects to be financed may consist of specific activities with potential limited adversesocial and environmental risks and/or impacts, and for which the development of a full scaleESIA is not required by the host countrys environmental assessment laws and regulations.These projects may include, for example, modernization and upgrade of existing productionfacilities, not involving major expansions; transformations or land conversions; real estateprojects in urban areas and/or developed areas with the needed infrastructure; development ofsocial infrastructure such as health and education facilities, etc. For these projects, the clientswill conduct limited or focused social and environmental assessments that are narrower inscope than a full-scale ESIA, and that are specific to potential environmental and social(including labor, health, safety, and security) risks and/or impacts identified to be associatedwith the project. For certain projects, confirmation and documentation of the application ofenvironmental siting, pollution standards, design criteria, or construction standards will beappropriate.

G29. The scope of the limited or focused analyses and assessments needed should be definedthrough the process of initial screening (see paragraph G20). During the screening process, theclient should review in a systematic and documented manner the potential social andenvironmental risks and impacts of the project to be financed, and determine the need to (i)eliminate or minimize (mitigate) the identified risks and impacts; (ii) modify the project plan; or(iii) conduct further focused assessment. Examples of focused assessments include air pollutantemissions and air quality impact studies, noise and vibration studies, water resources impactstudies, contamination investigations and assessments, and traffic studies along transportcorridors.

Risk/Hazard Assessments

G30. As discussed under Performance Standard 3, where a project (either greenfield orexisting assets) has the potential to release toxic, hazardous, flammable or explosive material,or where project operations could result in injury to plant personnel or the public as identified bythe risks and impacts identification process, the client should conduct a hazard analysis and riskassessment. Hazard analysis is often conducted in conjunction with Hazard Identification(HAZID) studies, Hazard and Operability (HAZOP) studies, and quantitative risk assessments(QRAs). Examples of other risk/hazard assessments include life and fire safety assessments(as required under Performance Standard 4), and human health and environmental riskassessments (e.g., industrial facilities with significant emissions to the environment, brownfield


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development projects with potential existing contamination and involving conversion fromindustrial to commercial or residential uses). Further guidance on risk/hazard assessments isprovided in the References section.

Environmental and Social Audits.

G31. Environmental and social audits (or due diligence) can be appropriate in case of projectsthat involve existing assets, as well as property and asset acquisitions by the IFC client. Ifassets to be developed, acquired or financed have yet to be defined, the establishment of asocial and environmental due diligence process can be sufficient to ensure that risks andimpacts will be adequately identified at some point in the future when the physical elements,assets, and facilities are reasonably understood. Audits should be used to identify risks andimpacts, to evaluate the effectiveness of the management system in place, conformity with IFCPerformance Standards, and regulatory compliance. Environmental and social audits shouldprovide identification and quantification of environmental and social impacts and risks, includingliability, in a systematic, documented and objective process. The audit should document the

main environmental and social aspects associated with the asset (e.g., air emissions,wastewater effluents, hazardous waste generated, historical pollution and contaminated sites,land acquisition issues, occupational health and safety, public / community safety, labormanagement and standards, impacts on cultural resources, internal and external grievances,disputes), and identify the key environmental and social impacts and risks associated to theasset, including areas of past, current or potential future non-compliance with nationalrequirements and IFC Performance Standards. The audit should also assess management andmitigation measures, and identify additional corrective actions required to ensure compliance.Improvement opportunities should be considered and identified, including, but not limited to,energy efficiency, cleaner technologies, water use reduction, emission reduction, safer workingconditions, and community development programs. Audits should be aimed at establishing thebaseline for the implementation of the corrective actions and the development of an effectiveenvironmental and social management system for the project to be financed.

Environmental and Social Due Diligence for Financial Intermediaries and Investment Funds.

G32. When required, as per the provisions of the Performance standards and the FIs SEMS,the level of environmental and social due diligence (ESDD) conducted by an FI on a projectshould be based on the projects environmental and social risk profile and potential impacts,whether they are significant (e.g., irreversible, unprecedented, diverse, involving largeresettlement) or limited (generally site-specific, largely reversible and mitigable). The ESDDshall typically consist of: (i) review of all relevant documents and information provided by theinvestee (sub-project level for IFC) and other sources; and (ii) site reconnaissance comprisingvisual observations of relevant areas and meetings and interviews with relevant stakeholders(investee personnel, governmental officials, Affected Communities, etc.). The results of the

ESDD should be appropriately documented including findings, conclusions andrecommendations. When required to apply the Performance Standards, the FI client shouldrequest from its borrowers or investees conducting a process of risks and impacts identificationconsistent with paragraphs 1631 above, and in accordance with the level of social andenvironmental risk that is expected to be associated with borrowers or investees businessactivities.


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Global Impacts

G33. While individual project impacts on climate change, ozone layer, biodiversity or similar

environmental issues may not be significant, when taken together with impacts created by otherhuman activities, they can become nationally, regionally or globally significant. When a projecthas the potential for large scale impacts that can contribute toward adverse globalenvironmental impacts, the impacts identification process should consider these impacts.Specific requirements and guidance on biodiversity and ecosystem services can be found inPerformance Standard 6 and its accompanying Guidance Note, while climate changeconsiderations can be found below, as well as in Performance Standard 3 and its accompanyingGuidance Note, where project-related risks and impacts associated with greenhouse gases andozone-depleting substances are discussed.

Climate Change

G34. Climate change may affect social and environmental performance associated with a

clients project, and significantly impact on sustainable development objectives. Changingweather patterns due to climate change, including climate variability and extremes, may have animpact on projects in a variety of ways, including physical risks arising from damage associatewith significant climatologic events, such as storms or floods, but also including impactsassociated with availability of natural resources such as water or other ecosystem services, andpotential effects on the supply chain (for instance increasing costs of raw materials), as well ason operations or working practices of the projects. Other potential effects associated withchange in climatic conditions are related to possible changing patterns in demand for goods andservices provided by the projects to be financed.

G35. A projects vulnerability to climate change and its potential to increase the vulnerability ofecosystems and communities to climate change will dictate the extent of climate changeconsiderations to be developed in the risks and impacts identification process. Projectsvulnerability is a function of the type of infrastructure involved, the activities supported by theproject, and the geographical location of the project. As defined by the Intergovernmental Panelon Climate Change (IPCC), vulnerability is the degree to which a system is susceptible to, orunable to cope with, adverse effects of climate change, including climate variability andextremes. Vulnerability is a function of the character, magnitude and rate of climate change andvariation to which a system is exposed, its sensitivity, and its adaptive capacity.

G36. Where the project involves specifically identified physical elements, aspects and facilitiesthat are likely to generate impacts, the client should consider incorporating certain aspectsrelated to climate into their baseline analyses, using recently updated climatologic data andaccounting for projected variability in climatic and environmental conditions that could occurover the life of the project. The client should use recently updated climatologic data in the

design of projects infrastructure, and for other relevant studies, such as, for example, pollutantsfate and transport models, and water resources impact studies.

G37. For projects located in climate sensitive areas (i.e., those potentially affected by impactsof climate-related stimuli, including extreme weather events, such as floods and droughts,extended periods of warm temperatures, variability in precipitations, windstorms, cold spells andfreeze-thaw cycles, coastal erosion, and coastal flooding due to sea-level rise), consumingsignificant amounts of water that could compromise the availability to Affected Communities,emitting significant amounts of greenhouse gases or impacting ecosystem services, and thatwill have potential significant adverse impacts, should conduct a specific assessment of risks


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associated with climate change effects. The assessment should: (i) identify potential direct andindirect climate-related adverse effects that may affect the project during its life cycle (ii) identifypotential direct and indirect climate-related adverse effects that may be exacerbated by the

project, and (iii) define monitoring program and mitigation and adaptation measures, asappropriate.

Transboundary Impacts

G38. Transboundary impacts are impacts that extend to multiple countries, beyond the hostcountry of the project, but are not global in nature. Examples include air pollution extending tomultiple countries, use or pollution of international waterways,1 and transboundary epidemicdisease transmission.2 If the risks and impacts identification process determines that (i) theproject entail activities that may cause adverse effects through air pollution or abstraction ofwater from or pollution of international waterways; (ii) the affected countries and the hostcountry have entered into any agreements or arrangements or have established any institutionalframework regarding the potentially affected airshed, waterway, subsurface water, or other

resources; or (iii) there are unresolved differences between the affected countries and hostcountry regarding the potentially affected resource, and the likelihood of a resolution is notimminent, the client may be required to provide notice of the proposed project to the affectedcountry or countries. When requested by the client, IFC will assist the client with notifyingcompetent authorities of the affected countries. IFCs role in this regard is outlined in paragraphX of the IFC Policy on Social and Environmental Sustainability (Sustainability Policy). IFCsprocedure for notification of competent authorities can be found in the Environmental and SocialReview Procedure. Examples of regional systems of assessment and notification oftransboundary impacts can be found in the References section.

Cumulative Impacts

G39. Government concessions and/or business developments often concentrate aroundavailable natural resources (e.g., watersheds with hydro-electric potential, wind resources,coastal port zones, oil reserves, mining resources, forests), potentially leading to multipleprojects in the same geographical area. Multiple environmental and social impacts from existingprojects, combined with the potential incremental impacts resulting from the proposed and/oranticipated future projects may result in significant cumulative impacts that would not beexpected in the case of a stand-alone project or business activity.

G40. As outlined in paragraph 7 of Performance Standard 1, where the project involvesspecifically identified physical elements, aspects and facilities that are likely to generateimpacts, the risks and impacts identification process will include an assessment of the combined

1 IFC defines an international waterway as: i) any river, canal, lake, or similar body of water that forms a boundary between, or anyriver or body of surface water that flows through, two or more states, whether IFC members or not; ii) any tributary or other body ofsurface water that is a component of any waterway described in i) above; and iii) any bay, gulf, strait, or channel bounded by two ormore states or, if within one state, recognized as a necessary channel of communication between the open sea and other statesand any river flowing into such waters.2

Transboundary epidemic disease transmission is well known and has been observed in many settings. Many infectious diseases,such as cholera, influenza and meningitis, can be rapidly and easily spread across national borders, particularly when a projectattracts a large influx of potential job seekers during a construction phase. Similarly, a project may bring in large numbers ofoverseas workers for short-term specialty construction work. In some situations, the disease spectrum of the imported workers maybe quite different than the host country and/or the projects affected communities, e.g., multi-drug resistant tuberculosis, vivaxversus falciparum forms of malaria. In some cases, it may be appropriate to consider the potential for global or regional leveldisease epidemic transmission, e.g., avian influenza and SARS.


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effects of the multiple components associated with the project (e.g., quarries, roads, associatedfacilities) in the context of the projects area of influence. The determination of the projects areaof influence should take into consideration the findings and results of any related cumulative,

regional, sectoral, or strategic environmental assessments that may have been undertaken by agovernment authority. In situations where multiple projects occur in, or are planned for, thesame geographic area, as described above, it may also be appropriate for the client to conducta Cumulative Impact Assessment (CIA) as part of the risk and impact identification process. Incertain instances, however, it may not be practical or appropriate for the CIA to be performed bythe client or individual project developers: for example (i) impacts from multiple existing andfuture third party projects or developments over a large area that may cross jurisdictionalboundaries (e.g., watershed, airshed, forest), (ii) effects that may have occurred or will occurover a longer period of time, (iii) impacts on specific ecosystem components or characteristicsthat will increase significance and/or irreversibility when evaluated in the context of a series ofexisting or future third party projects or developments, and not just in the context of effectsassociated to the project under review. In those situations, where cumulative impacts are likelyto occur from activities by third parties in the region and the impacts from the clients own

operations are expected to be a relatively small amount of the cumulative total, a regional orsectoral assessment may be more appropriate than a CIA. For further guidance on suchassessments see paragraph G58 below.

G41. Cumulative impacts are those that result from the incremental impact of the project whenadded to other existing, planned and reasonably predictable future projects and developments.Examples of cumulative impacts include effects on ambient conditions such as incrementalcontribution of pollutant emissions in an airshed, increase in pollutant concentrations in a waterbody, in soil or sediments or bioaccumulation, reduction of water flow in a watershed due tomultiple withdrawals, increases in sediment loads to a watershed or increased erosion ,interference with migratory routes or wildlife movement, increased pressure on the carryingcapacity or the survival of indicator species in a given ecosystem, wildlife population reductiondue to increased hunting, road kills and forestry operation, depletion of a forest as a result ofmultiple logging concessions, secondary or induced social impacts, such as in-migration, ormore traffic congestion and accidents along community roadways due to increases in transportactivity in a project area of influence.

G42. Even though cumulative impacts may not necessarily be different in quality from impactsanalyzed in an ESIA focused on the specific area and timeframe related to the projects directfootprint and execution timetable, a CIA enlarges the scale and timeframe of the assessment. Ata practical level, the critical element of such an assessment is to determine how large an areaaround the project should be assessed, what an appropriate period of time is, and how topractically assess the complex interactions among different projects occurring at different times.Because a CIA transcends a single project development, the resulting potential management ormitigation measures typically require participation from a larger and more diverse number of

stakeholders in order to be coordinated and implemented. Furthermore, the active participationof government authorities is typically required to assess the incremental contribution of eachproject to the cumulative impacts, monitor and enforce the implementation of the mitigationmeasures corresponding to each project, identify the additional mitigation measures required,and coordinate, ensure and document their implementation. In all other ways a CIA isfundamentally similar to an ESIA and, therefore often relies on established ESIA practices,


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including scoping, analysis of effects, evaluation of significance, identification of mitigationmeasures, and follow-up.3

G43. Paragraph 7 of Performance Standard 1 requires that, where the project to be financedinvolves specifically identified physical elements, aspects and facilities that are likely to generateimpacts, the risks and impacts identification process by the client identifies and assessescumulative impacts from further planned development of the project and other project-relateddevelopments, any existing project or condition whose impacts may be exacerbated by theproject, and other developments of the same type that are realistically defined at the time of therisks and impacts identification process. Impacts from unplanned but predictable developmentscaused by the project that may occur later or at a different location should also be identified andassessed. The assessment should be commensurate with the incremental contribution, source,extent, and severity of the cumulative impacts anticipated, and be limited to only those impactsgenerally recognized as important on the basis of scientific concerns and/or concerns fromAffected Communities. Potential impacts that would occur without the project or independentlyof the project should not be considered. The geographic and temporal boundaries of the

assessment will depend on the screening and identification of potential cumulative impacts thatcorrespond to the criteria indicated above. The assessment should determine if the project isincrementally responsible for adversely affecting an ecosystem component or specificcharacteristic beyond an acceptable predetermined threshold (carrying capacity) by the relevantgovernment entity, in consultation with other relevant stakeholders. Therefore, although the totalcumulative impacts due to multiple projects are typically identified in government sponsoredassessments, the client should ensure that its assessment determines the degree to which theproject under review is contributing to the cumulative effects.

G44. The clients baseline study should identify any relevant condition associated with existingprojects that could be exacerbated by the project to be financed and could lead to cumulativeimpacts. In terms of anticipated future projects, priority should be given to assessing cumulativeimpacts stemming from the project being considered for financing, such as further planneddevelopments associated with the project and other future developments of the same type in theproject's area of influence that are realistically defined at the time of the assessment (this mayinclude any combination of developments which are either proposed, licensed or for whichpermits exist).

G45. Where appropriate, the client should use best efforts to engage relevant governmentauthorities, other developers, Affected Communities, and, where appropriate, other relevantstakeholders, in the assessment, design, and implementation of coordinated mitigation measureto manage the potential cumulative impacts resulting from multiple projects in the same projectsarea of influence.

Human Rights

G46. The key human rights concepts can be found in the International Bill of Rights, consistingof the Universal Declaration of Human Rights (UDHR), the International Covenant on Civil andPolitical Rights (ICCPR), and the International Covenant on Economic, Social and CulturalRights (ICESCR).4 While states have the primary duty to implement the obligations contained

3 A good CIA reference for practitioners can be found in http://www.ceaa-acee.gc.ca/default.asp?lang=En&n=43952694-1&toc=show4 Other core international human rights treaties focus on womens rights, torture, childrens rights, migrants, enforceddisappearance, and persons with disabilities. For additional information, and the text of each treaty, see


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these instruments, private sector companies have a responsibility to respect these human rightsin their operations. Several important human rights analyses recently examined the relevance ofrights in the International Bill of Rights to projects, and concluded that, while the possibility that

businesses can impact all human rights expressed in the International Bill of Rights cannot beruled out, there are certain rights that are of particular relevance to the conduct of business. 5

G47. IFC has reviewed these analyses and updated the Performance Standards to align withthe relevant human rights as much as possible. As a result, the Performance Standards aregenerally supportive of many of the human rights in the Universal Declaration, and have aparticularly close affinity to the rights codified in the ICCPR and the ICESCR, given theemphasis on environmental and social development issues..

G48. Business responsibility to respect human rights has been elaborated by the SpecialRepresentative of the Secretary-General (SRSG) on Business and Human Rights, whoestablished a Protect, Respect and Remedy Framework resting on three pillars: the state dutyto protect against human rights abuses by third parties, including business; the corporate

responsibility to respect human rights; and greater access by victims to effective remedy, bothjudicial and non-judicial. The draft Guiding Principles for the implementation of this Frameworkelaborate on the operationalization of the Protect, Respect and Remedy Framework byproviding concrete and practical recommendations for implementation. The Guiding Principlesemphasize that the corporate responsibility to respect human rights applies to all human rightsand to all business enterprises, including through their relationships with other parties.Performance Standard 1 reflects the "respect" and "remedy" aspects of the SRSG Framework.Clients are required to assess and mitigate risks and impacts through a management system, ofwhich ongoing stakeholder engagement is an important part. Performance Standard 1 also callsfor a company level grievance mechanism to provide redress to concerns and complaints ofAffected Communities.

G49. While not directly addressed in the Performance Standards, companies should also bemindful that host government, concession, and similar agreements they negotiate not be draftedin a way that could interfere with the enjoyment of human rights of parties potentially affected bythe project, and the states ability to protect against abuse of such rights. For example, whennegotiating stabilization clauses in these contracts, companies should not propose exemptionsfrom new laws of general application in relation to environmental protection, social development,worker protection, community health, safety and security, community engagement, and similarmatters.

G50. The human rights aspects of the risk and impact identification and managementprocesses are explained in greater detail and several scenarios of human rights risks arepresented in the Guide to Human Rights Impacts Assessment and Management, a jointpublication of the International Business Leaders Forum and IFC (see References section). The

human rights risks and impact identification process should also explicitly include the risk that

http://www2.ohchr.org/english/law/index.htm. Based on their circumstances, clients may need to consider these and otherinstruments of international human rights and humanitarian law.5

UN Human Rights Council, Protect, Respect and Remedy: a Framework for Business and Human Rights: Report of the SpecialRepresentative of the Secretary-General on the issue of human rights and transnational corporations and other businessenterprises, John Ruggie, April 2008, A/HRC/8/5; Human Rights Translated: A Business Reference Guide, Castan Centre forHuman Rights Law, International Business Leaders Forum, Office of the United Nations High Commissioner for Human Rights, andUnited Nations Global Compact Office, 2008; and the Human Rights Compliance Assessment tool of the Danish Institute for HumanRights (v1 and v2).


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the company may be complicit in a third party's violation of human rights. Complicity in thiscontext refers to indirect involvement of companies in human rights abuses (Ruggie, 2008A/HRC/8/16), and may involve the state, state agents, or private actors (e.g., joint venture

partners, suppliers, etc.). A key component of complicity is knowingly supporting, endorsing orbenefiting from a third partys violation of human rights. The human rights impact assessmentprocess should specifically review the possibility that a business may be deriving benefit fromthird parties in violation of human rights. If such benefit is identified, the business should takeappropriate management action to address the risk of being perceived to be associated withsuch situation. In these situations, the fact that the business may have no significant control orinfluence of any kind over the situation may not be an argument for not taking any action. Evenif the business decides not to take any action, IFC may for its own reason decide not to financethe project.

Disadvantaged or Vulnerable Groups

G51. There may be individuals or groups within the projects area of influence who are

particularly vulnerable or disadvantaged and who could experience adverse impacts from theproposed project more severely than others. Large scale projects with a large area of influenceand multiple Affected Communities are more likely to expose these individuals and groups toadverse impacts than smaller scale projects with site specific issues. Where it is anticipated thatthe project to be financed will impact one or more Affected Communities, the risks and impactsidentification process should use accepted sociological and health methods to identify andlocate vulnerable individuals or groups within the Affected Community population, collectingdata on a disaggregated basis. Using this disaggregated information, the client should assesspotential impacts, including differentiated impacts, on these individuals and groups and proposespecific (and if necessary separate) measures in consultation with them to ensure that potentialimpacts and risks to them are appropriately avoided, minimized, mitigated or compensated.Vulnerable or disadvantaged individuals and groups should be able to benefit from projectopportunities equally with the rest of the Affected Communities; this may require thatdifferentiated benefit-sharing processes and levels (such as ensuring that compensation for ahouse taken during resettlement is provided equally to the woman and man of the household,providing training for individuals or groups who might lack the necessary skills to find a job withthe project, ensuring access to medical treatments for medical conditions resulting from theprojects, etc.) are available. Project monitoring should track these individuals or groups on adisaggregated basis. Specific considerations and measures for Indigenous Peoples aredescribed in Performance Standard 7 and the accompanying Guidance Note. Clients shouldexercise discretion in gathering personal data and information and should treat such data orinformation as confidential (except where disclosure is required by law). Where PerformanceStandard 1 requires disclosure of plans based on personal info or data collected (such as aresettlement action plan), the client should ensure that any personal data or information cannotbe associated with particular individuals.

Disability

G52. There are country laws, regulations, and other guidance pertaining specifically to peoplewith disabilities, who are highly vulnerable to disproportionate impact from the projects to befinanced. Where no adequate legal framework exists, the client should identify appropriatealternatives to avoid, minimize, mitigate or compensate for potential adverse impacts and riskson people with disabilities. The alternatives should be focused on creating access to theresources and services for the community (e.g., accessibility to education, medical assistance,training, employment, tourism, and consumer goods; and physical accessibility to transportation,


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schools, hospitals/clinics, work facilities, hotels, restaurants, stores, and other commercialareas). See the References section for A Design Manual for a Barrier Free Environment, andThe U.S. Access Board. Clients should also consider incorporating the principles of universal

design (defined as the design of products, environments, programs and services to be usableby all people, to the greatest extent possible, without the need for adaptation or specializeddesign6) into design, construction, and operation (including emergency and evacuation plans),whether new construction or restructuring, expansion, or modernization of facilities, to maximizeuse by all potential users, including people with disabilities.

Gender

G53. Projects may have different impacts on women and men, due to their differentiatedsocioeconomic roles and their varying degrees of control over and access to assets, productiveresources, and employment opportunities. There may be norms, societal practices, or legalbarriers that impede the full participation of persons of one gender (usually women, butpotentially men) in consultation, decision-making, or sharing of benefits. These legal and

societal norms and practices may lead to gender discrimination or inequality. Gender-differentiated impacts should be assessed and the risks and impacts identification processshould propose measures designed to ensure that one gender is not disadvantaged relative tothe other in the context of the project. This may include providing opportunities to enhance fullparticipation and influence in decision-making through separate mechanisms for consultationand grievances, and developing measures that allow both women and men equal access tobenefits (such as land titles, compensation, and employment).

G54. Health performance indicators and gender are strongly associated with each other.Demographic Health Surveys (DHS) have repeatedly demonstrated the profound connectionbetween gender (usually women) and a wide variety of key health performance indicators.Proposed interventions should be sensitive to and aware of the unique role played by women inhealth. The use of peer educators and community level womens organizations should beconsidered. In many developing country settings, there are marked differences in the literacyand educational attainment levels of women. Typically, female literacy and educationalattainment levels are markedly lower than men, even if the woman is the household head.Household level education literacy/attainment is also strongly tied to many critical healthperformance indicators. Therefore, proposed mitigation interventions and/or outreach effortsshould factor this education gap into the planning process.

Third Party Impacts

G55. The client may have limited or no leverage on third parties, such as a government agencyin charge of controlling in-migration in the area, or an illegal logging operation taking advantageof access roads through forests. Nonetheless, the projects area of influence should encompass

facilities and activities by third parties that are essential for the successful operation of theproject, and the risks and impacts identification process for a project with a large area ofinfluence should identify the roles of third parties and the potential impacts and risks from theiractions or non-performance. Clients should collaborate with third parties and take action to theextent of their influence or control over them. IFC will work with the client on a case-by-casebasis to have the client and, where feasible, third parties develop appropriate mitigationstrategies.

6Universal design shall not exclude assistive devices for particular groups of persons with disabilities where this is needed (Article

2 of the United Nation Convention on the Rights of Persons with Disabilities adopted December 13, 2006).


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Impacts

G56. Among these third parties are operators of associated facilities (see paragraph 7 ofPerformance Standard 1) that have a particularly close relationship with the project. Because of

this relationship, the client will normally have some commercial leverage on the operators ofsuch facilities. Where such leverage allows, undertakings can be secured from these operatorsto operate their facilities consistent with the applicable Performance Standards. In addition, theclient should identify its own actions, if any, that will support or supplement the actions of theoperators of the associated facilities.

Supply Chain Consideration

G57. As with the third par

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