social due diligence in eib lending : an introduction to eib’s social standards eleni kyrou,...

Social Due Diligence in EIB Lending : an Introduction to EIB’s Social Standards

Eleni Kyrou, Social Development Specialist

PJ/ECSO

November 5th, 2014

1European Investment Bank

2 European Investmen

t Bank

I. The Foundation of EIB’s E&S FrameworkEIB’s general approach to the environment and social well-being is derived from the Lisbon Treaty (2009)

The Charter of Fundamental Rights of the EU as the main reference for EIB’s social standards; and supplemented by good practice requirements (MFIs’ standards, ILO Core Labour Conventions, UN Guiding Principles on Business & Human Rights, etc)

EIB Statement of Environmental and Social Principles and Standards (2009) as its highest-level policy articulating EIB’s commitments to environmental and social sustainability

EIB E&S Practices Handbook (updated 2013) operationalizes the Statement, introduces HR language, and provides guidance to promoters on compliance and alignment to E&S performance

EIB E&S Standards apply to all regions (exceptions indicated); all types of financing; both public and private sector projects; throughout the project cycle

Foundation of EIB’s Environmental & Social Framework


• Highest-level policy of the Bank articulating EIB’s commitments to environmental and social sustainability

• Applicable to all regions, all types of financing, to the whole project, throughout the project cycle

EIB Environmental and Social Framework


Lisbon Treaty

EU Charter of Fundamental Rights

Inform

ing

Transparency Policy

Environmental and Social Standards

1. Assessment and Management of Environmental and Social Impacts and Risks

2. Pollution Prevention and Abatement 3. Standards on Biodiversity and Ecosystems 4. Climate-related Standards 5. Cultural Heritage 6. Involuntary Resettlement 7. Rights and Interests of Vulnerable Groups 8. Labour Standards 9. Occupational and Public Health, Safety

and Security 10. Stakeholder Engagement

Statement on Environmental and Social Principles and Standards

Environmental and Social Practices and

Procedures

Thematic and Sector Guidance

Sourcebooks

Operationalised by

The Integrated Approach

EIB E&S Framework

EIB E&S SPS committing to

sustainability and the protection and respect of human

rights

Integration: Environment,

climate change, social issues,

biodiversity and ecosystems

Standards apply to both public and private

sector and to all regions

10 EIB E&S Standards :

key requirements for Bank

supported operations

Internal due diligence

procedures for the Bank

COMPLIANCE QUALITY ENHANCEMENT

RISK & IMPACT MANAGEMENT

What do EIB’s E&S policies and Standards Encompass?

EIB Environmental and Social Standards


• Requirements to be met throughout the life of an EIB-supported operation

• Help promoters manage E&S impacts and risks

• Help promoters improve their E&S performance through implementation of sound environmental and social practices, transparency and accountability.

The Role of the EIB vs the Role of the Promoter


The Social Standards: Key Messages & Specific Outcomes Defined

The social standards that need to be achieved are defined, but not the way in which they are achievedAvoid impacts – Application of the Mitigation HierarchyAvoids prescription and allows promoters to develop solutions that are appropriate to the circumstances and locationIncreases both opportunities and risks for promoters and their financiers

Opportunity•Innovation

•License to operate

•Cost effectiveness solutions

•Efficiency

Risk•Promoter and EIB need to understand what they have to do

•Capacity constraints of the promoter can mean that impacts are not managed


EIB Social Due Diligence Guiding Principles

Appraisal in the context of the project’s definition, covering relevant stages of the project cycle, proportional to impacts and risks;

Support positive environmental and social outcomes;

Comply with national laws (but if not adequate – EIB/EU/IFI policies should be the substitute) but sometimes not enough to say project is acceptable because it has national approval;

Apply international best practices;

Create ownership among stakeholders;

Assess implementation capacities and systems;

Support the rights of the project affected people;

Monitoring and review;

Not to be dogmatic but use experience, sector and country knowledge, judgement and common sense.


III. Human Rights Integration: Key Principles

HR impact assessment seen as an integral part of a robust social impact assessment – not required as a stand-alone instrument

HR mitigation hierarchy as key principle -- premised on the principle of remedy rather than off-setting

Focus on materiality of risk to affected persons, now acknowledged as rights-holders

Guided by considerations of likelihood, severity, and frequency of HR impacts anticipated, hence ordering the prioritization of mitigation measures accordingly (with exceptions in supply chain)

Likelihood is often linked to: (i) the country context related to specific rights, and (ii) specific business relationships posing particular HR risks

Severity is to be appraised on basis of gravity of anticipated impacts (scale), scope and remediability of the said impact

Considerations of influence over potential impact and leverage over those able to affect change should inform attribution of responsibility and obligation for action


III. Human Rights Integration: Key Challenges

Supply chain risks remain due to the decision to limit the requirement to the application of standards and due diligence on the first-tier supplies

Application of standards in environments with poor governance (and particularly with public promoters)

Challenges related to monitoring and follow-up of implementation of commitments by promoters


Understand Promoter Capacity and Commitment


What’s in the Standards?

Objectives

Definitions

General guidance

Screening questionnaire

Specific requirements where sensible

Further references

European Investment Bank 31

What’s not in the Standards?

Detailed step-by-step directions

Coverage of all likely project scenarios

Detailed methodologies for further studies

=>Social Development Specialist

Further resources

European Investment Bank 31

European Investment Bank

Standard 1: Assessment and Management of Environmental and Social Impacts and Risks

Objective

To anticipate, avoid, minimize, and compensate for impacts and risks;

To mitigate or minimise negative impacts to affected communities and the environment;

To promote effective use of environmental and social management systems

To promote adequate engagement and communication with project-affected communities

In sum:

Standard 1 establishes the importance of (i) integrated assessment to identify the environmental and social impacts, risks, and opportunities of projects; (ii) effective community engagement through disclosure of project-related information and consultation with local communities on matters that directly affect them; and (iii) management of environmental and social performance throughout the life of the project .


Standard 1: Assessment and Management of Environmental and Social Impacts and Risks

Key elements

Assessment

Management

M&E

Stakeholder engagement

Relevant frameworks of reference

SEA

Assessment area, taking into account: assets or facilities or associated works directly owned or managed by the Promoter and integral parts of the main project intervention; supporting/enabling activities; associated facilities or businesses; areas and communities likely to be affected by cumulative impacts

When do we undertake a comprehensive environmental and/or social assessment?

Environmental and Social Management Plans (ESMPs)

Organizational and Management Systems

Intermediated Operations; Corporate loans


Standard 8: Labour Standards

Objectives

To promote fair treatment, non-discrimination, equal opportunity and safe conditions for workers and employees;

To ensure compliance with national employment and labour laws;

To protect workers and avoid the use of forced or child labour;

To promote the right to freedom of association.

Key elements

The Bank is expected to undertake a labour assessment, follow up in monitoring

Requires comparable terms and conditions for all workers;

Defines first-tier supplier and contractor, requiring application of due diligence at that level, too;

Introduces requirements for workers’ accommodation;

Ensures worker access to a grievance mechanism;

Introduces the notion of labour audit.


Standard 8: Labour Standards

Red linesNo child labour is admissibleNo forced or bonded labour is acceptable

Highly desirableFreedom of association and the right to collective bargaining

Screening

Check Promoters’ awareness of ILO Core Labour Standards and compatibility with national law

Assess risk in terms of labour problems [downtime, union problems, worker-management relationships, working conditions, etc ]

Is there an internal grievance mechanism for workers?

Review the Promoter’s employment policies (HR), their adequacy, and management’s capacity to implement

Are the actions required to meet necessary standards articulated in the ESMP?

How to handle subcontractors and supply chain?

Do not rely automatically on fellow IFIs in the transaction


Standard 9: Occupational and Public Health, Safety and Security

Objectives

To anticipate and avoid or manage health, safety and security impacts on workers and the public;

To safeguard people and property in accordance with relevant human rights principles.

Key highlights•The Standard applies to 1st-tier suppliers and primary contractors. Promoters are recommended to seek to apply the Standard through the supply chain with the use of a human rights due diligence assessment.•Where health impacts on the public and/or the workers of significant magnitude, an ESHIA is expected. Specifically for the labour domain, a hazard assessment is foreseen.•Labourers’ accommodation and health, hygiene & safety considerations•Security management enters the scene in our due diligence•Different risks related to HSS that the promoter needs to address, managed through a variety of plans, such as: influx management plan; emergency preparedness plan; traffic management plan; security management plan etc. •IFI differences on OSHS


Standard 9: Occupational and Public Health, Safety and Security

Screening

Assess health, safety and hygiene risks for workers and communities alike transportation and access, waste disposal, security personnel, in-migration of workers – exposure to disease, etc.

Plans or measures to deal with these risks

Is there a formal structure to deal with the HSH issues? Reporting measures of incidents?

Are there any significant security threats? Is the Promoter considering the hiring of public or private security forces?

Check living and hygiene conditions at labourers’quarters

Monitoring can be done by site visits for major projects by lenders advisors

EIB Project Cycle and Social Due Diligence Elements


Project cycle Paper trail E&S issues

Social

screening

Env. eligibility

Upstream

Identification

Issues meeting

COP Business plan

ESIA (s)

EA

ESDS

E&S Rating

REM

PreAppraisal

PIN

Appraisal AFS

Opinion for

Appraisal (OA)

Appraisal report

E&S

covenants

(loan conditions)

Approval CA

Loan negotiation

Contract

E&S - REM

indicators

Implementation

Operation

Progress reports

Completion

Completion

report

Stages of the EIB Project Cycle and Relevant Points of Disclosure and Engagement


• Appraisal • Disbursement • Supervision• Approval

EIB:

Publication of NTS/EIS

• Pre-Appraisal

Promoter: Community

engagement and consultation

Promoter:

On-going Community Engagement /

Documentation Updates

EIB:

Publication of ESDS

ECSO: What We Strive For

ECSO: Environment, Climate and Social Office (PJ)• Three (3) social specialists in place available for full attribution and/or

helpdesk function

• Social screening process once PIN is issued

• Social Working Group (inter-directorate)

We work towards:

Adding value

A collaborative and transparent process;

Engage stakeholders in a variety of ways;

Adapt to ever changing global E&S needs;

Obtain feedback from directly-affected communities and promoters.


THANK YOU

Eleni Kyrou

PJ/ECSO


social due diligence in eib lending : an introduction to eib’s social standards eleni kyrou,...

Documents

eib environmental

social principles

social standards standard

social impacts

social practices

social issues

social wellbeing

european investment