Updated 2016 Environmental and Social Review Procedure Manual at: www.ifc.

org/esrp

The International Finance December 1998

Corporation
Procedure for Environmental

Procedure For Environmental

And Social Review Of Projects
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page i

List of Acronyms

CAP Corrective Action Plan

CITES Convention on International Trade in Endangered Species of Wild Fauna
and Flora
CLO/CBO Collaterized Loan Obligation/Collaterized Bond Obligation
EA Environmental Assessment
EAP Environmental Action Plan
EIA Environmental Impact Assessment
ERS Environmental Review Summary
ESCM Environmental and Social Clearance Memorandum
ESIM Environmental and Social Information Memorandum
ESQ Environmental and Social Questionnaire
FI Financial Intermediary
GP Good Practice
IAR Investment Assessment Report
IBRD International Bank for Reconstruction and Development
IDA International Development Association
IFC International Finance Corporation
IPC Investment Policy Committee
IPM Integrated Pest Management
IRM Investment Review Meeting
MFI Multilateral Financial Institutions
MIGA Multilateral Investment Guarantee Association
MOR Monthly Operations Report
NGO Non-governmental organization
ODSs Ozone Depleting Substances
OP Operational Policy
PSR Project Supervision Report
PCBs Polychlorinated biphenyls
PCDP Public Consultation and Disclosure Plan
PDS Project Data Sheet
SPI Summary of Project Information
TOR Terms of Reference
WHO World Health Organization
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Procedure for Environmental and Social Review of Projects Page ii

TABLE OF CONTENTS

LIST OF ACRONYMS............................................................................................................................................. I

INTRODUCTION .....................................................................................................................................................1

POLICIES AND GUIDELINES ..............................................................................................................................1

POLICIES ................................................................................................................................................................. 1
GUIDELINES ............................................................................................................................................................ 1
Pollution Prevention and Abatement Handbook..............................................................................................1
Occupational Health and Safety Guidelines ....................................................................................................2
Reference Materials .........................................................................................................................................2
Exclusions.........................................................................................................................................................2
IFC’S PROJECT CYCLE ........................................................................................................................................4
INTRODUCTION ....................................................................................................................................................... 4
THE PROJECT CYCLE .............................................................................................................................................. 4
ENVIRONMENTAL AND SOCIAL REVIEW PROCEDURE ...........................................................................8
INTRODUCTION ....................................................................................................................................................... 8
PURPOSE AND NATURE OF ENVIRONMENTAL ASSESSMENT (EA) ........................................................................... 8
SOCIAL REVIEW ...................................................................................................................................................... 8
IFC RESPONSIBILITY .............................................................................................................................................. 8
EARLY REVIEW ....................................................................................................................................................... 9
PROJECT SCREENING............................................................................................................................................... 9
ENVIRONMENTAL AND SOCIAL INFORMATION REQUIREMENTS ............................................................................ 10
PROJECT APPRAISAL ............................................................................................................................................. 11
Category A Projects .......................................................................................................................................12
Category B Projects .......................................................................................................................................12
Category C Projects .......................................................................................................................................12
Category FI Projects ......................................................................................................................................12
Expansions, Modernizations and Retrofits.....................................................................................................12
Privatizations..................................................................................................................................................13
Corporate Investment Programs ....................................................................................................................13
Financial Intermediary (FI) Operations ........................................................................................................13
PUBLIC CONSULTATION AND DISCLOSURE ........................................................................................................... 13
Public Consultation........................................................................................................................................13
Disclosure of Information ..............................................................................................................................14
ENVIRONMENTAL AND SOCIAL CLEARANCE MEMORANDUM ............................................................................... 15
BOARD APPROVAL ................................................................................................................................................ 15
INVESTMENT AGREEMENT .................................................................................................................................... 15
REVISION TO THE ENVIRONMENTAL ACTION PLAN AND ENVIRONMENTAL REVIEW SUMMARY ........................... 15
MONITORING AND SUPERVISION ........................................................................................................................... 16
EVALUATION ........................................................................................................................................................ 16
ANNEX A: EXCLUSION LIST.................................................................................................................................. 19
ANNEX B: PROJECT CATEGORIZATIONS AND EXAMPLES ...................................................................................... 20
Category A Projects .......................................................................................................................................20
Category B Projects .......................................................................................................................................20
Category C Projects .......................................................................................................................................21
Category FI Projects ......................................................................................................................................21
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Procedure for Environmental and Social Review of Projects Page iii

ANNEX C: TYPES OF ENVIRONMENTAL ASSESSMENT (EA) .................................................................................. 22

Environmental Impact Assessment (EIA) .......................................................................................................22
Alternatives to an EIA ....................................................................................................................................23
EA for Modernizations, Privatizations, Corporate Investment Programs and FI Lending ...........................23
ANNEX D: APPLICATION OF EA TO LARGE DAM AND RESERVOIR PROJECTS ....................................................... 25
ANNEX E: APPLICATION OF EA TO PROJECTS INVOLVING PEST MANAGEMENT ................................................... 27
Project EA ......................................................................................................................................................27
Pest Management Plan...................................................................................................................................27
Screening of Pest Control Products ...............................................................................................................28
Environmental Review....................................................................................................................................28
Supervision and Monitoring...........................................................................................................................28
ANNEX F: PROCEDURES FOR FINANCIAL INTERMEDIARY (FI) PROJECTS.............................................................. 30
Diversity of Financial Markets Operations....................................................................................................30
Definition of Subproject .................................................................................................................................30
Environmental and Social Requirements for Category FI Projects...............................................................30
Equipment Finance.........................................................................................................................................32
Special Issues Associated with Funds ............................................................................................................32
Monitoring and Supervision...........................................................................................................................33
Cofinancing with Other Multilateral Financial Institutions (MFI)................................................................33
GLOSSARY OF TERMS ........................................................................................................................................... 38
GUIDANCE NOTE A: CHECKLIST OF POTENTIAL ISSUES FOR AN EIA .................................................................... 42
GUIDANCE NOTE B: CONTENT OF AN ENVIRONMENTAL IMPACT ASSESSMENT REPORT ....................................... 44
GUIDANCE NOTE C: OUTLINE OF AN ENVIRONMENTAL ACTION PLAN (EAP) ...................................................... 46
GUIDANCE NOTE D: OUTLINE OF A PROJECT SPECIFIC ENVIRONMENTAL AUDIT ................................................. 48
GUIDANCE NOTE E: OUTLINE OF A PROJECT SPECIFIC MAJOR HAZARD ASSESSMENT ......................................... 49
GUIDANCE NOTE F: GUIDANCE FOR PREPARATION OF A PUBLIC CONSULTATION AND DISCLOSURE PLAN .......... 50
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INTRODUCTION describes the project cycle which IFC uses in

evaluating a prospective project and highlights where
1. The International Finance Corporation (IFC) is a in the cycle IFC Environment Division staff are
member of the World Bank Group, which also required to provide input; and (d) details the
includes the International Bank for Reconstruction procedures that IFC staff must follow to ensure that
and Development (IBRD), the International projects meet IFC’s commitment to environmentally
Development Association (IDA), and the Multilateral sustainable and socially responsible projects.
Investment Guarantee Agency (MIGA). IFC’s Additional procedural requirements are contained in
business is investment in private sector projects a number of annexes (e.g., project categorization
through loans, equity investment, and other financial which then dictates the type of environmental
instruments. It is IFC policy that all its operations are assessment report, procedures for financial
carried out in an environmentally and socially intermediary projects), while a number of guidance
responsible manner. To this end, IFC projects must notes contain additional information to assist IFC
comply with applicable IFC environmental, social staff and project sponsors (e.g., checklist of potential
and disclosure policies. In addition, IFC applies issues for an EIA, content of an environmental
World Bank Group environmental, health and safety impact assessment for a Category A project). The
guidelines to all projects. In sectors where no requirements under this procedure will apply to all
appropriate IFC policies or guidelines exist, IFC projects with an Investment Review Meeting on or
applies relevant internationally recognized standards. after September 1, 1998. Copies of this procedure are
Furthermore, the project sponsor must ensure available to the public on the World Wide Web at
compliance with host country requirements. http://www.ifc.org/enviro.
2. IFC’s client base and project cycle are different
from those of the World Bank. IFC’s environmental POLICIES AND GUIDELINES
and social policies, while harmonized with World
Bank policies, are adapted to the private sector nature Policies
of IFC’s business.
6. IFC environmental and social policies are
3. IFC reviews prospective projects for soundness fundamental to the project appraisal, approval and
before it invests, focusing on economic, financial, supervision process. Applicable operational policies
technical, legal, environmental and social issues are: OP 4.01, Environmental Assessment; OP 4.04,
during the project appraisal process. This Natural Habitats; OP 4.09, Pest Management; OP
environmental and social review procedure has been 4.10, Indigenous Peoples (forthcoming); OP 4.11,
prepared for IFC staff and project sponsors for the Safeguarding Cultural Property in IFC-Financed
review of a prospective project. A separate Projects (forthcoming); OP 4.12, Involuntary
environmental procedure applies to small projects Resettlement (forthcoming); OP 4.36, Forestry; OP
approved under delegated authority to management 4.37, Safety of Dams (forthcoming); and OP 7.50,
(e.g., Africa Enterprise Fund). Projects on International Waterways. A brief
summary of the important aspects of each policy is
4. IFC’s Environment Division is responsible for
included in Table 1. The full text of each policy is
the environmental and social review, clearance and
available electronically to all IFC staff and at IFC’s
supervision of projects in a manner consistent with
Information Resource Center. Copies are also
the requirements contained in this review procedure.
available to the public on the World Wide Web at
The Environment Division is part of the Technical
http://www.ifc.org/enviro.
and Environment Department, whose Director
reports to IFC’s Executive Vice President. In Guidelines
addition, to achieve better integration of
environmental and social considerations within IFC Pollution Prevention and Abatement Handbook
operations and to ensure high performance standards, 7. The World Bank Group’s Pollution Prevention
an IFC Vice President has corporate oversight for and Abatement Handbook applies to all projects
environmental and social issues and disclosure directly financed by IFC (see also Annex F). OP
matters. 4.01, Environmental Assessment, states that the
5. This procedure: (a) discusses applicable Pollution Prevention and Abatement Handbook
environmental and social policies; (b) outlines describes pollution prevention and abatement
applicable environmental and other guidelines; (c) measures and emission levels that are normally
acceptable to IFC. However, taking into account
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Procedure for Environmental and Social Review of Projects Page 2 of 51

country legislation and local conditions, the EA may Reference Materials

recommend alternative emission levels and
10. IFC consults a number of other reference
approaches to pollution prevention and abatement for
materials in reviewing projects. Some examples
the project. The EA report must provide full and
follow:
detailed justification for the levels and approaches
chosen for the particular project or site. References in a) Techniques for Assessing Industrial
this procedure to applying or meeting the guidelines Hazards: A Manual. World Bank Technical
incorporate the flexibility provided in OP 4.01. Paper No. 55, 1988.
8. The Pollution Prevention and Abatement b) The Safe Disposal of Hazardous Wastes:
Handbook is founded on the principles of sustainable Volumes I, II and III, World Bank Technical
development, cleaner production processes and Paper No. 93, 1989.
pollution prevention. It contains three parts: Part I is
c) Environmental Considerations for Port and
a summary of key policy lessons in pollution
Harbor Developments, World Bank
management based on experience gained by the
Technical Paper No. 126, 1990.
World Bank Group; Part II contains good practice
notes on implementation of policy objectives; and d) Environmental Assessment Sourcebook,
Part III sets forth the detailed provisions to be taken Volumes I, II and III, World Bank Technical
into account by project sponsors in designing and Paper No. 139, 1991.
operating projects. For a given industry sector, Part
e) Resettlement as Development: A World
III contains the permissible emission levels that IFC
Bank Sourcebook for Good Practice, World
expects the project sponsor to meet unless the
Bank (forthcoming).
environment assessment (EA) report justifies a
variance from these levels, and the Vice President, f) Doing Better Business Through Effective
Investment Operations in consultation with the Vice Public Consultation and Disclosure: A
President with corporate responsibility for Good Practice Manual, International
environmental issues, the Technical and Environment Finance Corporation.
and Legal Departments agree with the recommended
variance. Exclusions

Occupational Health and Safety Guidelines 11. IFC does not finance project activities that
would contravene country obligations under relevant
9. IFC applies provisions set forth in the World international environmental treaties and agreements,
Bank Group’s Occupational Health and Safety as identified during the EA.
Guidelines, which cover those industries and
pollutants most frequently encountered in IFC 12. There are several types of manufacturing, trade
projects. activities and/or business ventures that IFC does not
finance. A comprehensive exclusion list, together
with explanatory notes, is attached in Annex A. The
list applies to all IFC projects, with exceptions as
noted in the Annex. A reasonableness test will be
applied by IFC when the activities of the project
company would have a significant development
impact but circumstances of the country require
adjustment to the Exclusion List.
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Procedure for Environmental and Social Review of Projects Page 3 of 51

Table 1: IFC’s Environmental and Social Safeguard Policies

Policy Description
OP 4.01, Environmental Assessment IFC policy on environmental assessment (EA) states that all projects proposed for IFC financing require an EA to ensure that they
are environmentally and socially sound and sustainable. EA is a process whose breadth, depth and type of assessment varies
according to the type of project. Various instruments are used to perform the EA depending on the complexity of the project. They
include: an environmental impact assessment (EIA), an environmental audit, a hazard or risk assessment, and an environmental
action plan (EAP). The policy requires that all IFC projects be categorized. Categories are: ‘A’, ‘B’, ‘C’, and ‘FI’. Definitions of
each of these categories are described later in the procedure. OP 4.01 also sets forth the minimum requirements for public
consultation and public disclosure for projects.
OP 4.04, Natural Habitats This policy affirms IFC’s commitment to promote and support natural habitat conservation and improved land use, and the
protection, maintenance, and rehabilitation of natural habitats and their functions in its project financing. IFC does not support
projects that involve significant conversion or degradation of critical natural habitats.
OP 4.09, Pest Management IFC supports the use of biological or environmental control methods rather than the use of pesticides where there is a need for pest
management. Where pesticides are required, this policy sets forth the criteria for their use.
OP 4.10, Indigenous Peoples Pending finalization of this OP, IFC projects must comply with the World Bank’s OD 4.20, Indigenous Peoples, as appropriate in a
[forthcoming] private sector context.
OP 4.11, Safeguarding Cultural Pending finalization of this OP, IFC projects must comply with the World Bank’s OPN 11.03, Cultural Property, as appropriate in a
Property in IFC-Financed Projects private sector context.
[forthcoming]
OP 4.12, Involuntary Resettlement This policy is applied wherever land, housing or other resources are taken involuntarily from people. It sets out the objectives to be
[forthcoming] met and procedures to be followed for carrying out baseline studies, impact analyses, and mitigation plans when affected people
must move or lose part or all of their livelihoods. An annex to OP 4.12 presents the outline for a Resettlement Plan, the key
document to be prepared by the project sponsor.
OP 4.36, Forestry IFC involvement in the forestry sector aims to reduce deforestation, enhance the environmental contribution of forested areas,
promote afforestation, reduce poverty, and encourage economic development. IFC does not finance commercial logging operations
or the purchase of logging equipment for use in primary tropical moist forests. This policy is now under review.
OP 4.37, Safety of Dams [forthcoming] This policy sets forth IFC’s requirements for projects where dams are to be constructed. The owner of a dam has full responsibility
for the safety of the dam. IFC requires that dams be designed and constructed by experienced and competent professionals. For large
dams (over 15 meters high) and dams between 10 and 15 meters that present special design complexities, IFC requires reviews by a
panel of independent experts, preparation of detailed plans, and periodic safety inspections. The policy covers mine tailings dams
and dams containing other material such as ash from power plants, as well as water storage dams.
OP 7.50, Projects on International This policy sets forth required agreements and notifications regarding projects that are situated on international waterways.
Waterways
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Procedure for Environmental and Social Review of Projects Page 4 of 51

insufficient information to prepare an ESIM, the

IFC’S PROJECT CYCLE project team requests additional details from the
sponsor. The project category (A, B, C or FI –
Introduction see Annex B for project categorization and
Annex C for types of environmental assessment
13. Timing of IFC involvement in a project can vary
instruments), rationale for categorization, and
significantly. IFC’s initial involvement in a project
environmental and social issues and any policy
normally occurs after a feasibility study has been
concerns are briefly stated in the PDS-ER. Based
completed (i.e., after site selection, preliminary
on the information in the PDS-ER, IFC senior
design work, etc.). The length of the IFC project
management assesses the appropriateness of the
cycle depends upon the complexity of the project and
project as an investment for IFC and, if so,
the degree to which the project has been prepared by
authorizes project appraisal.2 If the proposal is
the project sponsor. From project identification to
approved for appraisal it is listed in the MOR, a
disbursement the project cycle can be as short as four
confidential internal document distributed to the
to six months, but it also can be considerably longer
Board. The MOR serves as an early notice to the
for complex projects. Following are descriptions of
Board of projects under consideration. The MOR
the elements in the IFC project cycle. Figure 1 shows
provides the environmental category of each
the sequence of events.
project and an outline of the major
The Project Cycle environmental and social issues. It also provides
a monthly update of projects in the project cycle,
• Project Identification and Assignment of including any significant changes, until review
Project Team: the Investment Officer (IO) is by IFC’s Board. If the PDS-ER is prepared prior
responsible for project identification. Once the to receipt of the ESIM, the MOR should be
IO receives authorization from Investment updated as necessary to incorporate final
Department management to proceed to the next language on environmental and social issues.
phase, the IO requests assignment of a project
team, including environmental and social • Project Appraisal: Appraisal is the stage in
specialists as appropriate. which IFC staff conduct a detailed evaluation of
the project in terms of business potential and
• Early Review/CIC: the purpose of the Early environmental, social and technical concerns,
Review is for IFC to give a quick decision to a and review information provided by the project
project sponsor on whether the Corporation is sponsor. The project team usually consists of an
interested in engaging in the project. As a basis investment officer, a technical specialist, an
for an early management decision the Investment economist, a lawyer, an insurance specialist, an
Department prepares the Project Data Sheet environmental specialist, and, where appropriate,
Early Review (PDS-ER), which contains a a social development specialist. During the
project description, details of the potential appraisal process, more detailed environmental
investment, highlights any policy issues and and social data are collected and analyzed for
potential dealbreakers, reviews IFC’s role in the Category A, B, and FI projects. The PDS-ER is
project and development impact.1 If sufficient updated. If the Environment Division is satisfied
information is available at this stage, the that the project can comply with appropriate IFC
Environment Division screens the project, environmental and social requirements, the
assigns the project category and issues the Division sends an Environmental and Social
Environmental and Social Information Clearance Memorandum (ESCM) to the
Memorandum (ESIM). The ESIM provides Investment Department.
environmental and social language for the PDS-
ER and the Monthly Operations Report (MOR). • Investment Review Meeting: After completion
Note: the IO cannot alter this text. If there is of the appraisal and receipt of the ESCM, the
Department Director holds an Investment
Review Meeting to review the recommendations
1
The draft PDS-ER should include a suggested Tier
categorization for the project—see the Revised
2
Operational Procedures for more information on Tier I projects are circulated to the Corporate Investment
Tiering. (Note: A project that is categorized by the Committee (CIC) for information only; Tier II and
Environment Division as Category A or a project with Tier III projects are circulated to the CIC for clearance
special issues is automatically a Tier III project.). on a five day no-objection basis.
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Procedure for Environmental and Social Review of Projects Page 5 of 51

of the project team and the updated PDS-ER, member to call for a full Board discussion.
and to discuss any outstanding issues. The project summary includes information
on environmental and social issues, which
• Negotiations: After a decision in the Investment
contains the same level of detail on
Review Meeting to process the project, IFC
environmental and social issues as a regular
negotiates with the project sponsor to establish
procedure Board Report. The significant
the primary terms and conditions of IFC
difference between streamlined and regular
participation in the project, including
procedure is that the streamlined procedure
environmental and social aspects, such as
allows for approval of a project without
conditions of disbursement and covenants,
requiring a formal meeting of the Board of
performance and monitoring requirements, and
Directors. Any member of the Board has the
resolution of any outstanding issues. Note:
right to request full discussion of any project
negotiations frequently continue over an
submitted under streamlined procedure. In
extended period.
the absence of such a request, the Board
• Board Approval: IFC projects can be submitted delegates approval authority for streamlined
to the Board using regular or streamlined procedure projects to management, with
procedures. The environmental and social due management approval reported in the
diligence process and the public disclosure Monthly Operations Report (MOR).
requirements do not vary according to
• Signing of Legal Agreements (Commitment):
procedure; only the documentation submitted to Signing constitutes the formal acceptance by the
the Board varies. All significant environmental project company, IFC, and other parties (if any)
and social issues must be satisfactorily addressed of the terms and conditions under which IFC will
prior to submission of project documents to the finance the project.
Board.3
• Disbursement: Disbursement occurs on the
- Regular Procedure: Projects with serious
terms and conditions contained in the legal
or contentious environmental and/or social
documentation.
issues or potentially significant risks must
proceed by the regular procedure. The • Supervision: IFC monitors the performance of
Board Report describes the project concept, all active projects in its portfolio to ensure
project sponsors and management, the compliance with environmental, social and other
market, the cost and financial structure, the conditions. The project company provides
IFC investment, the IFC role and annual environmental monitoring reports to IFC
development impact, and environmental and no later than 90 days after the end of each of its
social issues along with mitigating fiscal years. In addition Project Supervision
measures, outstanding issues, and other Reports (PSRs), which IFC prepares at least
appropriate details. IFC staff make a formal annually, include a section on environmental and
presentation on the project at a Board social compliance. In the case of non-
meeting. Executive Directors have an compliance, an appropriate course of action is
opportunity to ask questions about the determined by IFC, and the project company is
project. Upon conclusion of the Board notified as to required follow-up actions.
discussion, approval to proceed with the
project is sought. • Evaluation: In project evaluations,
environmental and social performance is fully
- Streamlined Procedure: The streamlined taken into account as an important element in the
procedure provides the Board with a written performance of IFC, the company and the
Project Summary of the key features and project. Investment Assessment Reports (IARs)
issues of a proposed project, with a view to summarize evaluations of the actual
permitting the Board to determine if there environmental and social impacts of the project
are issues in the project which lead a Board against the impacts anticipated in the
environmental assessment and review. They also
3
describe the effectiveness of the mitigation
IFC's Board of Directors has delegated authority to measures.
management to approve certain small projects, e.g.
under the Africa Enterprise Fund (AEF) and the Small
Enterprise Fund (SEF).
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Procedure for Environmental and Social Review of Projects Page 6 of 51
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Procedure for Environmental and Social Review of Projects Page 7 of 51

Figure 1: IFC’s Project Cycle

Project Identification

Early Review/CIC

Project Appraisal

Investment Review Meeting (IRM)

Streamlined Negotiations Regular

Procedure Procedure

Project Summary
Circulated To Board Board Report

If Board
Management Decides To
Approval Reported Discuss Project Board Meeting
In Monthly
Operations Report
(MOR) To Board

Signing Of Legal Documents (Commitments)

Disbursement

Supervision

Evaluation
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Procedure for Environmental and Social Review of Projects Page 8 of 51

interested parties. In addition, EA plays an important

ENVIRONMENTAL AND SOCIAL role in building the environmental and social
REVIEW PROCEDURE management capability of the project sponsor.
16. EA is the responsibility of the project sponsor.
Introduction Early start of the EA process and close integration of
14. IFC’s environmental and social review EA with other aspects of project preparation and
procedure outlines the process by which IFC early start of the EA process ensure that (a)
determines the adequacy of the project sponsor's environmental and social considerations are given
environmental assessment for a proposed project and adequate weight in project selection, siting, and
works with the project sponsor to address design decisions; and (b) the review process does not
environmental and social issues and opportunities delay project processing.
associated with the project. The purpose of the
environmental and social review is to ensure that the
Social Review
project complies with applicable IFC environmental 17. The general requirement to address social issues
and social polices and meets the applicable during the EA process is contained in OP 4.01,
guidelines. In sectors where no appropriate IFC Environmental Assessment. Specific policy
policies or guidelines exist, IFC applies requirements are contained in OP 4.10, Indigenous
internationally recognized standards. The project Peoples (forthcoming); OP 4.11, Safeguarding
sponsor must ensure compliance with host country Cultural Property in IFC-Financed Projects
requirements. The following sections describe who (forthcoming); and OP 4.12, Involuntary
has responsibility for the various steps in the review Resettlement (forthcoming). Where projects have the
process and then details each of the steps. Figure 2 potential to result in significant and diverse social
(p. 17 of 51) depicts the steps in the process. impacts, IFC will collect information on the potential
social impacts of the proposed project and consider
Purpose and Nature of Environmental these issues as part of its project appraisal process. In
Assessment (EA) some situations, however, the magnitude and
15. The purpose of an environmental assessment complexity of social issues go beyond the scope or
(EA) is to improve decision making and to ensure responsibility of the private sector and fall within the
that the project under consideration is domain of government. IFC recognizes the
environmentally and socially sound and sustainable. importance and sensitivity of the project sponsor-
Environmental and social consequences should be government relationship in addressing such issues.
recognized early in the project cycle and taken into Given the variations among countries, sectors, and
account in project selection, siting, planning, and individual projects, the interface between the private
design. EA identifies ways of improving a project and public sectors on these issues is best addressed
environmentally and socially and (in order of on a case-by-case basis.
priority) preventing, minimizing, mitigating, or IFC Responsibility
compensating for adverse impacts as appropriate for
individual projects. These steps help avoid costly 18. Environmental and social review involves a
remedial measures. By calling attention to broad range of environmental, social, technical,
environmental and social issues early and by commercial and legal issues and requires input from
involving stakeholders in meaningful consultations, various members of the project team. The Investment
EA (a) allows a project sponsor and IFC staff to Department has line responsibility for overall
address these issues in a timely and cost-effective performance of a project, including its environmental
fashion; (b) reduces the need for project and social performance. Environmental and social
conditionality because appropriate steps can be taken development specialists and technical specialists in
in advance or incorporated into project design, or the Technical and Environment Department provide
alternatives to the proposed project can be specialized support on environmental and social
considered; and (c) helps avoid costs and delays in matters to the project team and project sponsor.
implementation due to unanticipated problems. EA 19. The Environment Division is responsible for the
can provide a mechanism for coordination between environmental and social review of projects,
the project sponsor and relevant government agencies including formal clearance of projects from an
on environmental and social issues and for environmental and social standpoint. The
addressing the concerns of affected groups and local Environment Division, utilizing its best professional
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Procedure for Environmental and Social Review of Projects Page 9 of 51

judgment, assesses whether each project will comply if preliminary information is scant, and the
with applicable policies and meet the applicable Environment Division may change the category as
guidelines, coordinates with the World Bank as new information is received. Investment Officers
necessary, and makes the Investment Department should encourage project sponsors to contact the
aware of any issues that are not in conformity with assigned environmental and social specialists early in
these requirements. The formal clearance from the the process to discuss issues of concern. Note: staff
Environment Division states that, based on the of the Environment Division use the Environmental
information reviewed, the project, if implemented as and Social Questionnaire (ESQ) to source
designed and operated accordingly, will comply with information from the project sponsor as early as
applicable IFC policies and meet the applicable possible in the process and use this collected
guidelines. The formal clearance does not certify the information in classifying the project and identifying
project’s performance against host country environmental and social issues of concern.
requirements. The technical specialist provides
support to the Investment Departments, the Project Screening
Environment Division and the project sponsor on 22. The purpose of project screening is to decide on
technical matters, including technical aspects of the nature and extent of the environmental
environmental performance, as appropriate. The assessment needed for the project. Projects are
lawyer provides support on legal matters, including categorized by the Environment Division into
drafting the environmental and social provisions in environmental review category A, B, C, or FI in
the project’s legal documentation. accordance with IFC’s OP 4.01, Environmental
20. The Investment Department Director is Assessment. The classification of a project depends
responsible for the decision to proceed with a project, on the type, location,4 sensitivity,5 and scale of the
based on the results of the appraisal, provided that project,6 as well as the nature and magnitude of its
environmental and social clearance has been received potential impacts. IFC uses four categories for its
from the Environment Division. Where projects. They are defined as follows:
environmental and social issues are outstanding after • Category A: A proposed project is classified as
appraisal, the Vice President, Investment Operations Category A if it is likely to have significant
in consultation with the Vice President with adverse environmental impacts that are sensitive,7
corporate responsibility for environmental issues, the diverse, or unprecedented. These projects may
Technical and Environment, Legal and Investment affect an area broader than the sites or facilities
Departments, determine whether or not these issues subject to physical works. EA for a Category A
have been addressed sufficiently that the project project examines the project’s potential positive
should be approved. and negative impacts, compares them with those
Early Review of feasible alternatives (including the “without
project” scenario), and recommends any measures
21. At the earliest possible stage, the Investment needed to prevent, minimize, mitigate, or
Department requests the Environment Division to compensate for adverse impacts and to improve
allocate specialists to a proposed project. It is performance. For a Category A project, the project
beneficial to the project sponsor and IFC for the sponsor is responsible for preparing a full report,
Environment Division to provide guidance on normally an Environmental Impact Assessment
environmental and social requirements at the earliest
possible opportunity. A project sponsor can request
4 .
such guidance in advance of an investment mandate “Location” refers to proximity to or encroachment on
and IFC may provide such guidance under properly environmentally sensitive areas, such as mangroves,
established terms and conditions. As soon as the wetlands, and rain forests.
5
“Sensitivity” is defined in footnote 7.
Investment Department decides that a project will 6
“Scale” needs to be judged by the environmental and
proceed, the investment officer and technical social specialist in the project context; if large, the
specialist provide the PDS-ER and any other relevant project is more likely to be a Category A project.
information to the Environment Division and request 7 .
A potential impact is considered “sensitive” if it may be
in writing initial project screening and preparation of irreversible (e.g., lead to loss of a major natural habitat),
the Environmental and Social Information affect vulnerable groups or ethnic minorities, involve
Memorandum (ESIM). The Environment Division involuntary displacement and resettlement, or affect
also completes the appropriate sections of the PDS- significant cultural heritage sites.
ER. These sections may undergo significant revisions
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 10 of 51

(EIA) and for preparing and updating an screening, no further EA action is required for a
Environmental Action Plan (EAP). Category C project.
• Category B: A proposed project is classified as • Category FI: A proposed project is classified as
Category B if its potential adverse environmental Category FI if it involves investment of IFC
impacts on human populations or funds through a financial intermediary in
environmentally important areas – including subprojects that may result in adverse
wetlands, forests, grasslands, and other natural environmental impacts. In addition, in some
habitats – are less adverse than those of Category financial markets projects IFC funds are not
A projects. These impacts are site-specific; few targeted to specific subprojects (e.g. equity in a
if any of them are irreversible; and in most cases financial institution such as a commercial bank),
mitigation measures can be designed more but the financial institution has operations which
readily than for Category A projects. The scope may have adverse environmental impacts (e.g.
of EA for a Category B project may vary from project finance). In such cases IFC may also
project to project, but it is narrower than that of classify the project as Category FI. If subprojects
EA for a Category A project. Like Category A potentially result in minimal or no adverse
EA, it examines the project’s potential positive environmental impacts, the project is
and negative impacts and recommends any characterized as C.
measures needed to prevent, minimize, mitigate,
23. Annex B contains additional procedural
or compensate for adverse impacts and improve
requirements on project categorization, while Annex
environmental performance. The project sponsor
C further specifies the appropriate Environmental
is responsible for providing the required
Assessment (EA) tools. Annexes D and E contain
environmental and social information. The
procedural requirements related to EA for large dams
findings and results of Category B EA are
and reservoirs and EA for projects involving pest
described in the project documentation (i.e.
management, respectively. Due to the variety of FI
Environmental Review Summary).8
projects encountered and the complexity of many of
• Category C: A proposed project is classified as these projects, detailed procedural requirements for
Category C if it is likely to have minimal or no categorizing FI projects and assessing their
adverse environmental impacts. Beyond requirements are set forth in Annex F. Contents of a
resettlement plan are specified in Annex A to OP
4.12, Involuntary Resettlement. A Glossary of Terms
8 .
When the screening process determines, or national is presented at the end of the Annexes.
legislation requires, that any of the environmental and
social issues identified warrant special attention, the 24. A number of Guidance Notes are provided to
findings and results of EA for Category B projects assist IFC staff and project sponsors during the EA
may be set out in a separate report. Depending on the process. Guidance Note A provides a checklist that
type of project and the nature and magnitude of the can be used to identify potential issues during
impacts, this report may include, for example, a preparation of an EIA. Guidance Notes B, C and D
limited environmental impact assessment, an provide outlines of an EIA for a Category A project,
environmental mitigation or action plan, an
an Environmental Action Plan (EAP), and an
environmental audit, a limited resettlement plan, a
limited indigenous peoples action plan, or a hazard
environmental audit, respectively. Guidance Note E
assessment. For Category B projects that are not in provides an outline of a project specific major hazard
environmentally sensitive areas and that present well- assessment. Finally, Guidance Note F contains best
defined and well-understood issues of narrow scope, practice guidance for preparation of a Public
IFC may accept alternative approaches for meeting Consultation and Disclosure Plan (PCDP). The
EA requirements: for example, environmentally sound requirements for a Resettlement Plan are contained in
design criteria, siting criteria, and pollution standards, an Annex in OP 4.12, Involuntary Resettlement.
acceptable to IFC, for small and medium-scale
industrial plants; environmentally sound design Environmental and Social Information
criteria, siting criteria, and construction standards, Requirements
acceptable to IFC, for small and medium-scale
agribusiness and agricultural projects; and specific 25. Upon receipt of the PDS, the Environment
environmental and social siting and design criteria, Division issues an ESIM to the investment officer
construction standards, fire and life safety (and to the technical specialist), documenting the
requirements, and inspection procedures, acceptable to following:
IFC, for tourism projects.
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 11 of 51

• the category of the project and the rationale assist in defining a detailed scope of work for the
for the categorization; appraisal stage. If insufficient information is
available, or if during the project appraisal significant
• the major environmental and social concerns additional issues are identified, the Environment
that have been identified or may be Division may re-evaluate the category of the project
associated with the project; as well as the relevant information requirements.
• the draft of the environmental language for Investment Officers should encourage project
the PDS and the MOR; sponsors to contact the assigned environmental and
social specialists early in the process to discuss issues
• the details of the environmental and social of concern.
information required from the project
sponsor to enable the Environment Division 27. Following authorization for appraisal, the
to complete the review process; investment officer sends environmental and social
requirements (provided in the ESIM) to the
• typical standards for a project of this type Controller’s and Budgeting Department for inclusion
(e.g., IFC’s environmental and social in the MOR. This information includes the project
policies, applicable guidelines, host country category, the rationale for the categorization, and a
requirements and/or internationally summary of the environmental and social issues
recognized standards) which will be applied associated with the project. Information is thereby
in reviewing the project; and provided to IFC’s Board of Directors on relevant
• for a Category A project (and category B issues as early as possible in the IFC project cycle.
projects where there are small scale Project Appraisal
resettlement and/or pest management
issues), a general outline of the project’s 28. Early project screening and identification of
public consultation and disclosure plan for environmental and social information requirements
inclusion in the PDS as well as details of the ensure that the project sponsor can provide the
requirement for the project sponsor to information in a timely and cost-effective manner
prepare a detailed Public Consultation and and that these issues can be addressed during the
Disclosure Plan (PCDP) for the project. The project appraisal process without delaying the project
project sponsor is responsible for preparing processing cycle. Upon receipt of the ESIM, the
the PCDP, with guidance provided by the investment officer, in consultation with the technical,
Environment Division. A preliminary PCDP environmental, and social development specialists, as
must be submitted to the Environment appropriate, communicates in writing the relevant
Division for review and approval as soon as information requirements and the general
possible and in advance of the appraisal requirements of this procedure to the project sponsor.
mission. On approval of the PCDP by the This includes the requirement for public release of
Environment Division, the Investment environmental information (including information
Department submits the PCDP to the related to the public consultation process). Copies of
Investment Policy Committee for their IFC’s applicable policies, guidelines and guidance
review and approval. During project documents such as Doing Better Business Through
appraisal the PCDP is periodically updated Effective Public Consultation and Disclosure: A
and any significant changes, after Good Practice Manual are also sent to the project
Environment Division approval, are brought sponsor.
to the attention of the Investment Policy 29. It is the project sponsor’s responsibility to
Committee by the Investment Department. prepare and submit the necessary environmental
26. The Environment Division must have sufficient information to IFC for review during project
information on the environmental and social aspects appraisal. The Environment Division, in coordination
of a project to allow for proper project screening and with the investment officer, can provide guidance to
preparation of the ESIM. In most cases, an the project sponsor to ensure that this activity is
Environmental and Social Questionnaire (ESQ) will completed in a responsive manner. The length of
be sent to sponsors for completion and return. The time required for the environmental and social review
ESQ provides information to allow environmental depends on the completeness of the information
and social specialists to undertake a basic evaluation provided by the project sponsor, the overall
of the sponsor’s environmental capabilities and to
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 12 of 51

complexity of the project, and potential impacts on Category A Projects

the physical, biological and human environment.
• Visit to the project site by one or more
30. In exceptional circumstances where a Category Environment Division staff or an IFC selected
A project is highly risky or contentious, or involves consultant to gain first hand knowledge of the
serious and multidimensional environmental and project and to meet with the project sponsor and
social concerns, IFC normally requires the project representatives of affected groups to discuss
sponsor to engage an advisory panel of independent, environmental and social concerns and
internationally recognized environmental specialists information needs, to explain public consultation
to advise on all aspects of the project relevant to the and disclosure requirements, and to determine
EA, including during project implementation. the issues which must be addressed in the EA.
31. Review of environmental and social information • Desk review by IFC of the EA report provided
provided by the project sponsor normally occurs by the project sponsor and other relevant
during project appraisal, although it may occur information provided by the project team.
earlier in IFC's project cycle if the information is
available. During the review, data gaps or other Category B Projects
deficiencies in the project sponsor's environmental • Desk review by IFC of environmental and social
assessment may be identified. In addition, questions information provided by the project sponsor and
or concerns about the environmental and social the project team. A site visit may be required by
information may arise. In these cases, the a member of the Environment Division or an
environmental specialist and social development IFC consultant depending on the complexity of
specialist, where appropriate and in consultation with the project.
the investment officer, contacts the project sponsor to
seek clarification or additional information. Category C Projects

32. During the environmental and social review, IFC • No further environmental review required.
works with the project sponsor to enhance project Category FI Projects
benefits or correct any deficiencies. The review of a
project is an interactive process requiring • Verification that the financial intermediary will
communication between the Investment Department, be capable of and committed to meeting IFC
the Technical and Environment Department, the requirements. See Annex F for procedures for FI
Legal Department, and the project sponsor. Specific projects.
activities associated with the review process depend Expansions, Modernizations and Retrofits
on the category of the project as follows:
33. In plant expansion and modernization projects,
the entire plant (existing and proposed new facilities)
undergoes an evaluation of environmental and social
issues. Any new facilities or investments financed by
IFC must conform to applicable IFC policies and
meet applicable guidelines. In addition, IFC usually
requires the project sponsor to retain an independent
consultant to complete an environmental audit of the
existing plant and may require the project sponsor to
undertake programs to bring the existing plant into
compliance with applicable IFC policies and meet
applicable guidelines within a reasonable time frame
(see Annex C for more details).
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 13 of 51

Privatizations Public Consultation and Disclosure

34. For privatization projects, IFC usually requires Public Consultation
the project sponsor to retain an independent
consultant to complete an environmental audit of the 37. During the EA process for Category A projects
facilities. Depending on the results of the audit, IFC and for Category B projects where there are special
makes recommendations and may require the project issues of concern, such as small scale resettlement or
sponsor to agree on programs to bring the facilities pest management issues, the project sponsor is
into compliance with applicable IFC policies and required to conduct meaningful consultation with
meet applicable guidelines within a reasonable time relevant stakeholders including affected groups,
frame. If new facilities are also involved, the new nongovernmental organizations (NGOs) and local
facilities financed by IFC must comply with authorities about the project's environmental and
applicable IFC policies and meet applicable social aspects and take their views into account. The
guidelines (see Annex C for more details). Where project sponsor initiates such consultations as early
privatization is expected to result in significant social as possible. For meaningful consultations, the project
and economic impacts due to loss of direct and sponsor provides relevant information in a timely
indirect employment and/or impacts on the provision manner and in a form and language that are
of basic social services, IFC may require the understandable and accessible to the groups being
collection of information on the social impacts of the consulted. For Category A projects, these actions,
privatization. These issues will be considered during and future consultations to be undertaken during the
appraisal of the project, in accordance with the construction and operation of the project, are
principles set forth in para 17 above (Social Review). incorporated into a public consultation and disclosure
plan (PCDP) (see Guidance Note F). All project
Corporate Investment Programs sponsors should consult IFC’s Doing Better Business
35. For investments in general corporate activities, Through Effective Public Consultation and
the overall environmental and social performance of Disclosure: A Good Practice Manual. This Manual
the project sponsor is assessed, and, if necessary, provides guidance on effective public consultation
recommendations made to strengthen and improve and disclosure for the private sector.
the corporate environmental management system. In 38. For Category A projects, the project sponsor
this regard, IFC may require the project sponsor to consults relevant stakeholders at least twice: (a)
complete an environmental audit by an independent during scoping and before the terms of reference for
consultant and to discuss and agree with IFC on the EA are finalized, and (b) once a draft EA report is
programs to achieve, within a reasonable time frame, prepared. For the initial consultation, the project
compliance with applicable IFC policies and meet sponsor provides a summary of the proposed
applicable guidelines (see Annex C for more details). project’s objectives, description, and potential
Financial Intermediary (FI) Operations impacts; for consultation after the draft EA report is
prepared, the project sponsor provides a non-
36. Financial intermediary operations involve a technical summary of the report’s findings. In both
broad range of financial institutions and financial cases, the summaries should be provided in advance
products. The requirements for a particular project of consultation and proactively disseminated to local
depend on the kind of financial institution and stakeholders in a form and language meaningful to
financial products involved. Requirements are set those being consulted.
forth in three “types” as outlined in Annex F, which
provides detailed information about how the 39. Following the public consultation on the draft
requirements are applied to various types of Category EA, the project sponsor supplements the EA by
FI projects. When IFC funds are not directly targeted adding details of the public consultation process, as
to specific subprojects but support a financial necessary, including the project sponsor’s responses
institution whose investments may have adverse to concerns raised by the various stakeholders and
environmental impacts, IFC focuses on the process of details of measures taken to incorporate these
environmental management in the institution. When concerns into project design and implementation.
IFC funds are targeted to specific subprojects 40. The project sponsor continues to consult with
through the financial institution, IFC focuses on both relevant stakeholders throughout project construction
the process and the subprojects. and operation, as necessary, to address EA related
and other issues that affect them. IFC requires the
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 14 of 51

project sponsor to report on ongoing consultation as staff do not continue work on the project. Once the
part of its annual reporting requirements. project sponsor officially provides an EA report to
IFC, IFC distributes the summary (in English) to the
41. In those cases where the EA has been completed
members of IFC’s Board of Directors. In addition,
prior to IFC involvement in the project, the
IFC may require disclosure of addenda which
Environment Division reviews the public
document significant consultation post-EA report
consultation and disclosure activities carried out by
release, but this would not re-start the 60 day period.
the project sponsor during and after EA preparation.
For FI operations involving investment of IFC funds
If necessary the Environment Division and project
directly in specific subprojects, the FI ensures that
sponsor then agree on a supplemental public
EA reports for Category A subprojects are made
consultation and disclosure plan (PCDP) to address
available in a public place readily accessible to
any identified deficiencies. The supplemental PCDP
affected groups and local NGOs.
must be submitted to the Environment Division for
review and approval as soon as possible and in 44. For Category B projects, on completion of
advance of the appraisal mission. On completion of IFC's review of the project sponsor's environmental
this program, the project sponsor prepares a report analysis, the Environment Division prepares an
detailing the additional work undertaken and the Environmental Review Summary (ERS) which
results achieved. The EA will only be considered contains a project description, the rationale for the
complete and made available to the World Bank project categorization, the list of key environmental,
InfoShop once the report on additional work is social, health and safety issues, details of the
complete. mitigation measures to bring the project into
compliance with IFC’s requirements, an outline of
42. For Category B projects IFC may determine
any outstanding issues and information on the
that there are special issues of concern, such as
project’s monitoring and reporting program to ensure
small-scale resettlement or pest management issues,
compliance. After endorsement by the project
that require the project sponsor to consult early in the
sponsor, the Investment Department releases this
project cycle with potentially affected stakeholders.
ERS as well as the results of any consultations
Disclosure of Information required by IFC for Category B projects with special
issues (see paragraph 42), to the World Bank
43. For Category A projects the project sponsor
InfoShop no later than 30 days prior to Board
gives public notification and makes the draft EA
consideration (regular procedure) or Closing Date
report available at a public place readily accessible to
(streamlined procedure). If the project sponsor
project stakeholders as early as possible and no later
objects to IFC’s releasing the ERS or consultation
than 60 days prior to Board consideration (regular
results through the World Bank InfoShop, IFC staff
procedure), Closing Date (streamlined procedure), or
do not continue work on the project. Since project
management approval date (delegated authority).
affected people may not have reasonable access to a
This document should include all supplements and
World Bank or IFC office, the sponsor is also
addenda to the EA report requested by IFC and the
required to release locally the ERS (as amended by
responses to the public consultation process. In
IFC if necessary), and the results of any consultations
addition, a non-technical EA report summary in the
required by IFC, translated into the local language, in
local language shall be proactively disseminated to
a culturally appropriate manner, to facilitate
local stakeholders. With the project sponsor's
awareness by relevant stakeholders that the
consent, IFC releases the EA report to the public
information is in the public domain for review. This
through the World Bank InfoShop as early as
local release should occur no later than 30 days prior
possible and no later than 60 days prior to Board
to Board consideration (regular procedure) or
consideration (regular procedure), Closing Date
Closing Date (streamlined procedure). For example,
(streamlined procedure), or management approval
if a Category B project requires preparation of a
date (delegated authority). The 60 day period
limited resettlement plan, this plan must be prepared
commences only when IFC determines that all
in accordance with the requirements of OP 4.12,
relevant information requested from the project
Involuntary Resettlement (forthcoming), including
sponsor has been provided to IFC and placed in the
local consultation and disclosure. In addition, IFC
World Bank InfoShop. Such release does not
releases the resettlement plan to the World Bank
constitute IFC endorsement of the project. If the
InfoShop and the project sponsor releases it locally
project sponsor objects to IFC releasing this
no later than 30 days prior to Board consideration.
information through the World Bank InfoShop, IFC
IFC’s Vice President, Investment Operations may, in
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 15 of 51

rare and compelling circumstances, issue a waiver in Board Approval

writing of the 30 day period.
47. After management approves the project at the
45. After completion of the appraisal, the Investment Review Meeting, the Environment
Department Director holds an Investment Review Division prepares an outline of the findings of the
Meeting (IRM) to review the recommendations of the environmental and social review for inclusion in the
project team and the updated PDS-ER, and to discuss report to the Board, including the project category,
outstanding issues. The Investment Department major environmental and social issues and mitigation
management prepares a Summary of Project measures, other appropriate details, and a statement
Information (SPI). The SPI provides a brief factual regarding compliance of the project with relevant
summary of the main elements of the evolving requirements.
project for disclosure to the public through the World
Bank InfoShop. After the project sponsor’s approval Investment Agreement
of the SPI, the Investment Department transmits it to 48. After project approval, the investment officer, in
the World Bank InfoShop a minimum of 30 days consultation with the lawyer and environmental and
prior to Board consideration (regular procedure) or social development specialists, ensures that
Closing Date (streamlined procedure) as described in environmental and social requirements are reflected
detail in IFC’s Disclosure Policy. IFC’s Vice in the IFC legal documentation for the project. The
President, Investment Operations may, for investment agreement contains covenants which
compelling business reasons, issue a waiver in require the project company to comply with IFC and
writing of the 30 day period. The Environment host country requirements. Annexes to the
Division prepares the section of the SPI entitled investment agreement include applicable IFC policies
“Environmental Category and Issues.” It describes and guidelines, as appropriate. In addition, the
the environmental category for the project, provides a investment agreement stipulates that the project
brief summary of any environmental and social company must, no later than 90 days after the end of
issues, and sets out the mitigation measures designed the company’s fiscal year, submit annual
to address those issues. environmental monitoring and performance reports to
Environmental and Social Clearance IFC, in a format agreed by IFC. For Category A
projects, the investment agreement requires the
Memorandum
project company to comply with the requirements
46. Prior to of the Investment Review Meeting for described in the agreed Environmental Action Plan
the project and upon satisfaction that the project can (EAP). IFC also requires that the annual
comply with the applicable IFC policies and meet the environmental monitoring and performance reports
applicable guidelines, the Environment Division for Category A projects be completed or verified for
issues the Environmental and Social Clearance completeness and accuracy by an independent
Memorandum (ESCM) to the Investment consultant acceptable to IFC.
Department. The ESCM clears the project for Board
consideration and details outstanding issues as well Revision to the Environmental Action Plan
as the actions required to address those issues. and Environmental Review Summary
Project monitoring and reporting requirements are 49. For Category A projects, the Environmental
also identified, as are other obligations of the project Action Plan (EAP) (see Guidance Note C for a
sponsor. The Investment Officer conveys these detailed outline of an EAP) is an essential and critical
requirements to the project sponsor. The part of the EA report and must be included as a part
Environment Division also prepares a summary of of the draft EA report that is released locally for
the findings of the environmental and social review public consultation. After release of the EA report to
for inclusion in the Decision Memorandum and for the World Bank InfoShop, the project sponsor
the ERS. updates the EAP to reflect the final understandings
on environmental and social issues with IFC. After
approval of the final EAP by the Environment
Division, the Investment Department releases the
EAP to the World Bank InfoShop and the project
sponsor releases it locally in a culturally appropriate
manner. For Category B projects, the Environment
Division if necessary updates the ERS to reflect the
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 16 of 51

final understandings between the project sponsor and responsible for follow-up with both the project
IFC on environmental and social issues. After the company and the Environment Division until the
final ERS is endorsed by the project sponsor, the non-compliance situation is resolved.
Investment Department releases the ERS to the
52. Project Supervision Reports (PSRs), which IFC
World Bank InfoShop and the project sponsor
prepares at least annually, must include a section on
releases it locally in a culturally appropriate manner
environmental and social compliance with regard to
(see paragraph 44). If the project sponsor objects to
covenants in the investment agreement. In addition,
IFC releasing the EAP, the updated EAP, or the
the PSR must state whether the Environment
updated ERS, IFC staff do not continue to work on
Division has received the Annual Monitoring Report
the project.
(as required in the investment agreement), the date
Monitoring and Supervision9 submitted to IFC and the date reviewed by the
Environment Division.
50. IFC monitors the environmental and social
performance of projects in its investment portfolio. Evaluation
Project monitoring usually occurs in one or more of
53. During the course of selected projects an
the following ways:
Investment Assessment Report (IAR) is prepared
a) Review of annual monitoring reports which summarizes the evaluations of the actual
prepared by the project company (in a environmental and social impacts of the project
format agreed by IFC); against the impacts anticipated in the EA report, and
assesses the effectiveness of the mitigating measures.
b) Supervision missions carried out by the
The Environment Division provides input to the
Investment Department and the Technical
IARs and signs off on the relevant draft text and
and Environment Department; and/or
attendant project performance ratings.
c) Project site visits by staff of the
Environment Division. The frequency of the
site visits depend on the environmental and
social complexity of a project.
51. The investment officer, in cooperation with the
technical specialist and after consultation with the
environmental and social development specialists, is
responsible for ensuring that supervision reports
include information on the project company’s
compliance with environmental and social
requirements. The investment officer is also
responsible for ensuring that annual environmental
monitoring reports are provided to the Environment
Division as required in the legal documentation for
the project. The Environment Division is responsible
for reviewing such reports and determining whether
the project company’s compliance with
environmental and social requirements is satisfactory.
In the case of non-compliance, the Environment
Division discusses an appropriate course of action
with the Investment and Legal Departments and
specialists in the Technical and Environment
Department. The investment officer notifies the
project company of this action and any necessary
follow-up requirements. The investment officer is

9 .
IFC uses the term “supervision” differently from the
Bank, due to differences in project cycles of the two
institutions. Accordingly, the Bank’s OD 13.05
Project Supervision does not apply to IFC.
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 17 of 51

Figure 2: Environmental Review Steps

• Project Data Sheet-ER (continually updated during appraisal)

Early Review/CIC • Categorization of Project
• Environmental and Social Information Memorandum (ESIM)
• Public Consultation and Disclosure Plan (PCDP)

• Environmental Assessment by Project Sponsor

• EIA (Category A project), Environmental Action Plan,
Environmental Audit, Resettlement Plan
• Environmental Review Summary (ERS) (Category B project)
Appraisal • FI Assessment Form and Commitment Letter
• Disclosure of EA information to the World Bank InfoShop (as
early as possible; minimum of 60 days before Board approval for
Category A projects and 30 days before Board approval for
Category B projects)

• Environmental and Social Clearance Memorandum (ESCM)

Investment Review • Summary of Project Information (SPI). Disclosure to the World
Meeting (IRM) Bank InfoShop a minimum of 30 days before Board/Management
approval.

Negotiation

Board Approval or
• Board Report or Project Summary
Management Approval

• Updated Status Memo

Commitment and Disbursement • Investment Agreement
• Updated EAP and ERS released to the InfoShop

• Corrective Action Plan (if non-compliance)

Supervision • Annual Monitoring Report
• PSR Environment Section

• Ratings of project’s environmental

Evaluation
and social performance
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 18 of 51

ANNEXES

Annex A - Exclusion List

Annex B - Project Categorizations and Examples

Annex C - Types of Environmental Assessment (EA)

Annex D - Application of EA to Large Dam and Reservoir Projects

Annex E - Application of EA to Projects Involving Pest Management

Annex F - Procedures for Financial Intermediary (FI) Projects

The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 19 of 51

Annex A: Exclusion List primary tropical moist forest (prohibited by

the Forestry policy).7
1. IFC does not finance the following projects:
• Production or trade in products containing
• Production or activities involving harmful PCBs.8
or exploitative forms of forced • Production or trade in pharmaceuticals
labor1/harmful child labor2. subject to international phase outs or bans.9
• Production or trade in any product or • Production or trade in pesticides/herbicides
activity deemed illegal under host country subject to international phase outs or bans.10
laws or regulations or international
conventions and agreements. • Production or trade in ozone depleting
substances subject to international phase
• Production or trade in weapons and out.11
munitions.3
• Drift net fishing in the marine environment
• Production or trade in alcoholic beverages using nets in excess of 2.5 km. in length.
(excluding beer and wine).3
A reasonableness test will be applied when the
• Production or trade in tobacco.3 activities of the project company would have a
• Gambling, casinos and equivalent significant development impact but circumstances of
enterprises.3 the country require adjustment to the Exclusion List.
• Trade in wildlife or wildlife products
regulated under CITES.4
• Production or trade in radioactive materials.5 7
See IFC OP 4.36, Forestry.
• Production or trade in or use of unbonded 8
PCBs: Polychlorinated biphenyls—a group of highly
asbestos fibers.6 toxic chemicals. PCBs are likely to be found in oil-
• Commercial logging operations or the filled electrical transformers, capacitors and
purchase of logging equipment for use in switchgear dating from 1950-1985.
9
A list of pharmaceutical products subject to phase outs or
bans is available from the Environment Division.
10
1 A list of pesticides and herbicides subject to phase outs
Forced labor means all work or service, not voluntarily
or bans is available from the Environment Division.
performed, that is extracted from an individual under 11
Ozone Depleting Substances (ODSs): Chemical
threat of force or penalty.
2 compounds which react with and deplete stratospheric
Harmful child labor means the employment of children
ozone, resulting in the widely publicized ‘ozone
that is economically exploitive, or is likely to be
holes’. The Montreal Protocol lists ODSs and their
hazardous to, or to interfere with, the child’s
target reduction and phase out dates. A list of the
education, or to be harmful to the child’s health, or
chemical compounds regulated by the Montreal
physical, mental, spiritual, moral, or social
Protocol, which includes aerosols, refrigerants, foam
development.
3 blowing agents, solvents, and fire protection agents,
This does not apply to project sponsors who are not
together with details of signatory countries and phase
substantially involved in these activities. “Not
out target dates, is available from the Environment
substantially involved” means that the activity
Division.
concerned is ancillary to a project sponsor’s primary
operations.
4
CITES: Convention on International Trade in Endangered
Species of Wild Fauna and Flora. A list of CITES
listed species is available from the Environment
Division.
5
This does not apply to the purchase of medical
equipment, quality control (measurement) equipment
and any equipment where IFC considers the
radioactive source to be trivial and/or adequately
shielded.
6
This does not apply to the purchase and use of bonded
asbestos cement sheeting where the asbestos content is
less than 20%.
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Annex B: Project Categorizations and • Manufacture, transportation, and use of

Examples hazardous and/or toxic materials

Category A Projects • Domestic and hazardous waste disposal

operations
1. A proposed project is classified as Category A if
it is likely to have significant adverse environmental • Projects which pose serious occupational or
impacts that are sensitive,1 diverse or unprecedented. health risks
These projects may affect an area broader than the • Projects which pose serious socioeconomic
sites or facilities subject to physical works. concerns.
Environmental Assessment (EA) for a Category A
project examines the project's potential positive and Category B Projects
negative impacts, compares them with those of 2. A proposed project is classified as Category B if
feasible alternatives (including the “without project” its potential adverse environmental impacts on
scenario), and recommends any measures needed to human populations or environmentally important
prevent, minimize, mitigate, or compensate for areas - including wetlands, forests, grasslands, and
adverse impacts and improve performance. A full other natural habitats - are less adverse than those of
environmental assessment is required which is Category A projects. These impacts are site-specific;
normally an Environmental Impact Assessment few if any of them are irreversible; and in most cases
(EIA). Although decisions on categorization are mitigatory measures can be designed more readily
made on a case-by-case basis, examples of Category than for Category A projects. The scope of EA for a
A projects are: Category B project may vary from project to project,
• Large dams and reservoirs but it is narrower than that of an EA for Category A
projects. Like Category A EA, it examines the
• Forestry (large scale) project's potential positive and negative impacts and
• Agro-industries (large scale) recommends any measures needed to prevent,
minimize, mitigate, or compensate for adverse
• Industrial plants (large-scale) impacts and improve environmental performance. A
wide range of environmental guidelines have been
• Major new industrial estates
developed by local or country authorities, as well as
• Major oil and gas developments, including by a number of organizations, including the World
major pipelines Bank Group (e.g., Pollution Prevention and
Abatement Handbook, Occupational Health and
• Large ferrous and non-ferrous metal Safety Guidelines). In addition, specific
operations environmental design criteria can be developed for
• Large port and harbor developments individual projects. Examples of Category B projects
are:
• Projects with large resettlement components
and all projects with potentially major • Agro-industries (small scale)
impacts on human populations • Electrical transmission
• Projects affecting indigenous or tribal • Aquaculture and mariculture
populations
• Renewable energy (except large hydro-
• Large thermal and hydropower development electric power projects)
• Projects that include the manufacture, use or • Tourism (including hotel projects)
disposal of environmentally significant
quantities of pest control products • Rural water supply and sanitation
• Rehabilitation, maintenance, and
modernization projects (small scale)
1
A potential impact is considered “sensitive” if it may be
irreversible (e.g., lead to loss of a major natural habitat), • Manufacture of construction materials
affect vulnerable groups of ethnic minorities, involve
involuntary displacement and resettlement, or affect • General manufacturing
significant cultural heritage sites. • Textile plants
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• Telecommunications Category FI Projects

• Greenfield projects in existing industrial 4. A proposed project is classified as Category FI if
estates. it involves investment of IFC funds through a
financial intermediary in subprojects that may result
Category C Projects in adverse environmental impacts. In addition, in
3. A proposed project is classified as Category C if some financial markets projects, IFC funds are not
it is likely to have minimal or no adverse targeted to specific subprojects, but the financial
environmental impacts. Beyond screening, no further institution has operations which may have adverse
EA action is required for a Category C project. environmental impacts (e.g. project finance). In such
Examples of Category C projects are: cases IFC may also classify the project as Category
FI.
• Advisory assignments
5. Due to the variety of FI projects encountered and
• Factoring companies the complexity of many of these projects, Annex F
• Life insurance companies has been prepared which describes in detail the
procedures which IFC has developed for categorizing
• Mortgage securitization FI projects and assessing their requirements.
Examples of Category FI projects are:
• Securities underwriters and broker/dealers
• Corporate loans to banks
• Technical assistance
• Credit lines
• Rights issues
• Private equity funds.
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Annex C: Types of Environmental 2. Project-specific environmental assessments,

Assessment (EA) including, as necessary, a review of social issues, are
used to examine specific investment projects (e.g.
1. The EA involves consideration of the following, mines, factories, power plants). The detail and
as appropriate to specific projects: sophistication of EA should be commensurate with
the expected impacts. Depending on the potential
• Assessment of the baseline environmental
environmental and social impact of a proposed
and social conditions
project, the project sponsor must provide
• Requirements under host country laws and environmental and social information to IFC in the
regulations, applicable international treaties form of (a) an environmental impact assessment
and agreements (EIA), (b) an environmental audit, (c) a corrective
action plan, (d) a resettlement plan, or (e) an
• Sustainable use of natural resources environmental analysis in specific areas of concern
• Protection of human health, cultural (e.g., pollution control, occupational health and
properties, endangered species, and safety), as described below. A major hazard
sensitive ecosystems assessment is required for projects involving the
transportation, storage and handling of sufficient
• Use of dangerous substances quantities of dangerous materials to present the
• Major hazards potential for an incident of major consequence.

• Occupational health and safety 3. Additional information on EA may be found in

the Annexes and Guidance Notes. Annexes D and E
• Fire prevention and life safety contain procedural requirements related to EA on
large dams and reservoirs and EA for projects
• Socioeconomic impacts
involving pest management. Guidance Note A
• Land acquisition and land use provides a checklist of potential environmental and
social issues which should be considered in an EIA.
• Involuntary resettlement Guidance Notes B, C, D and E provide an outline for
• Impacts on indigenous peoples and a project specific EIA, an environmental action plan,
communities a project specific environmental audit, and a major
hazard assessment.
• Cumulative impacts of existing projects, the
proposed project, and anticipated future Environmental Impact Assessment (EIA)
projects1 4. A full Environmental Impact Assessment (EIA)
• Participation of affected parties in the is required if a project is likely to have significant
design, review and implementation of the adverse environmental and social impacts that are
project sensitive, diverse, or unprecedented. These projects
may affect an area broader than the sites or facilities
• Consideration of environmentally and subject to physical works. Project-specific EIAs
socially preferable alternatives should normally cover (a) existing environmental and
social baseline conditions; (b) potential
• Efficient production, delivery and use of
environmental and social impacts (direct and
energy
indirect), including opportunities for enhancement;
• Pollution prevention and waste this includes the cumulative impact of the proposed
minimization project and other developments which are
anticipated; (c) systematic comparison of feasible
• Pollution controls (liquid effluents and air alternative investments, sites, technologies, and
emissions) and solid and chemical waste designs; (d) preventive, mitigating, and
management. compensatory measures; (e) capacity for
environmental and social management and training
programs; (f) detailed results of the public
1
The assessment of cumulative impacts would take into consultation and disclosure program; and (g)
account projects or potential developments that are monitoring. To the extent possible, the following
realistically defined at the time the EA is undertaken, items are quantified: capital and recurrent costs,
when they would directly impact on the project area. environmental and social staffing, training,
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monitoring requirements, and the benefits of EA for Modernizations, Privatizations, Corporate

proposed alternatives and mitigation measures. Investment Programs and FI Lending
Alternatives to an EIA Expansions/Modernizations/Retrofits
5. Many investment projects do not need an EIA. 7. In plant expansion and modernization projects,
Typically, these projects are not in environmentally the entire plant (existing and proposed new facilities)
and socially sensitive areas and have potential undergoes an evaluation of environmental and social
impacts that are narrow in scope, well-defined, well- issues. Any new facilities or investments financed by
understood, and straightforward to prevent or IFC must conform to applicable IFC policies and
mitigate. Such projects may result in specific impacts meet applicable guidelines. In addition, IFC usually
which can be avoided or mitigated by adherence to requires the project sponsor to retain an independent
certain predetermined performance standards, consultant to complete an environmental audit of the
guidelines, or design criteria. Alternative approaches existing plant. Depending on the results of the audit,
may therefore be more effective in integrating IFC makes recommendations and may require the
environmental and social concerns into the project project sponsor to undertake programs to bring the
sponsor’s planning process, and in focusing on the existing plant into compliance with applicable IFC
work needed. Such alternative approaches include, policies and to meet the applicable guidelines within
for example: a reasonable time frame. A Corrective Action Plan
(CAP) can be used to detail corrective action items,
a) environmentally sound design criteria, siting
schedules for implementation and costs. For this
criteria, and pollution standards, acceptable
purpose, IFC may propose to finance environmental
to IFC, for small and medium-scale
improvements for the existing plant.
industrial plants;
Privatizations
b) environmentally sound design criteria, siting
criteria, and construction standards, 8. For privatization projects, the facilities to be
acceptable to IFC, for small and medium- privatized are subject to the environmental
scale agribusiness and agricultural projects; assessment including, as necessary, a review of social
and issues. IFC usually requires the project sponsor to
retain an independent consultant to complete an
c) specific environmental and social siting and
environmental audit of the facilities. Depending on
design criteria, construction standards, fire
the results of the audit, IFC makes recommendations
and life safety requirements, and inspection
and may require the project sponsor to agree on
procedures, acceptable to IFC, for tourism
programs to bring the facilities into compliance with
projects.
applicable IFC policies and meet the applicable
6. The environmental assessment for such projects guidelines within a reasonable time frame. In sectors
may consist, for example, of an environmental audit. where no appropriate IFC policies or guidelines exist,
An environmental audit is carried out on existing IFC applies internationally recognized standards to
plants and focuses on two elements: (a) compliance the project. A Corrective Action Plan (CAP) can be
of existing facilities and operations with relevant used to detail action items, schedules for
environmental (including occupational health and implementation and costs. For this purpose, IFC may
safety) and social laws, regulations, and IFC propose to finance environmental improvements for
requirements; and (b) the nature and extent of the facilities. If new facilities are also involved, the
environmental impacts, including contamination to new facilities financed by IFC must comply with
soils, groundwater, and structures, as a result of past applicable IFC policies and meet the applicable
activities. A Corrective Action Plan (CAP) is often guidelines. Where privatization is expected to result
an outcome of an environmental audit. The CAP sets in significant social and economic impacts due to loss
forth corrective action items, schedules for of direct and indirect employment and/or impacts on
implementation and costs. the provision of basic social services, IFC may
require the collection of information on the social
impacts of the privatization. These issues will be
considered during appraisal of the project, in
accordance with the principles set forth in para 17 of
the Procedure (Social Review).
Corporate Investment Programs
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9. For investments in general corporate activities,

the overall environmental and social performance of
the project sponsor is assessed, and, if necessary,
recommendations made to strengthen and improve
the corporate environmental management system. In
this regard, IFC may require the project sponsor to
complete an environmental audit by an independent
consultant and to discuss and agree with IFC on
programs to achieve, within a reasonable time frame,
compliance with applicable IFC policies and meet
applicable guidelines. A Corrective Action Plan
(CAP) can be used to detail action items, schedules
for implementation and costs.
Financial Intermediary Operations
10. Financial intermediary operations involve a
broad range of financial products and financial
institutions. Thus IFC’s environmental and social
requirements are tailored to the particular FI project,
as described in Annex F.
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Annex D: Application of EA to Large Dam expertise relevant to the project, to manage the
and Reservoir Projects project's environmental and social aspects.

1. Early in IFC involvement, and preferably before 6. The following plans must be submitted to IFC
preparation of the ESIM and the PDS, IFC’s for large dam projects. Requirements for submission
Environment Division ensures that the project of these plans for small dams will be specified on a
sponsor selects and engages independent, recognized case-by-case basis.
experts or firms, whose qualifications and terms of a) Plan for construction supervision and
reference (TOR) are acceptable to IFC, to carry out quality assurance. This plan is provided to
environmental reconnaissance that includes: IFC during appraisal. It covers the
organization, staffing levels, procedures,
• identifying the potential environmental,
equipment, and qualifications for
social and health impacts of the project;
supervision of the construction of a new
• ascertaining the scope of the environmental dam or of remedial work on an existing
assessment (EA); dam. IFC staff use the plan to assess the
need to fund components under the loan to
• assessing the project sponsor’s capacity to ensure that dam-safety-related elements of
manage the EA process; and the design are implemented during
• advising on the need for an independent construction.
environmental advisory panel. b) Instrumentation plan. This is a detailed plan
2. IFC’s Environment Division obtains from the for the installation of instruments to monitor
project sponsor a copy of the results of the and record dam behavior and the related
reconnaissance and ensures that they are taken into hydrometeorological, structural, and seismic
account in environmental screening, the preparation factors. It is provided to the independent
of the ESIM, and in the preparation of the EA TOR panel and IFC during project appraisal.
by the project sponsor. For dam and reservoir c) Operation and maintenance (O&M) plan.
projects that are in an advanced stage of preparation This detailed plan covers organizational
when proposed for financing to IFC, the structure, staffing, technical expertise, and
Environment Division determines whether any training required; equipment and facilities
additional EA work is needed, and whether an needed to operate and maintain the dam;
independent environmental and social advisory panel O&M procedures; and arrangements for
is needed. A field visit for this purpose is normally funding O&M, including long-term
required. maintenance and safety inspections. A
3. If the project sponsor engages an environmental preliminary plan is provided to IFC for use
and social advisory panel, IFC’s Environment during appraisal. The plan is refined and
Division reviews and indicates to the project sponsor completed during project implementation;
the acceptability of the TOR and proposed panel the final plan is to be sent to IFC for review
members. and approval not less than six months prior
to the initial filling of the reservoir.
4. In reviewing the EIA, IFC’s Environment Elements required to finalize the plan and
Division ensures that the EA, for power generation initiate operations are normally financed
projects, examines demand side management under the project.
opportunities. In appraising the project, it ensures
that the project design adequately takes into account d) Emergency preparedness plan. This plan
demand side management as well as supply options specifies the roles of responsible parties
(e.g., conservation of water and energy, efficiency when dam failure is considered imminent, or
improvements, system integration, cogeneration and when expected operational flow release
fuel substitution). threatens downstream life, property, or
economic operations that depend on river
5. IFC’s Environment Division ensures that the flow levels. It includes the following items:
project company establishes an in-house clear statements on the responsibility for
environmental and social development unit, with dam operations decision making and for the
adequate budget and professional staffing strong in related emergency communications; maps
outlining inundation levels for various
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emergency conditions; flood warning

system characteristics; and procedures for
evacuating threatened areas and mobilizing
emergency forces and equipment. The broad
framework plan and an estimate of funds
needed to prepare the plan in detail are
provided to IFC during appraisal. The plan
itself is prepared during implementation and
is provided to the independent safety panel
and IFC for review and approval not later
than one year before the projected date of
initial filling of the reservoir.
7. For tailings dams, and impoundments of other
materials such as ash from power plants, the EA must
take into consideration the location and geotechnical
aspects, potential impacts on ground and surface
waters, toxicity aspects and the need for a liner,
seepage control, leachate and runoff management,
and surface water diversions.
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Annex E: Application of EA to Projects 4. IFC’s Environment Division staff ensure that the
Involving Pest Management EA covers potential issues related to pest
management and considers appropriate alternative
1. IFC’s Environment Division ensures that any designs or mitigation measures. Depending on the
environmental assessment (EA) in the agriculture issues identified, the environmental action plan
sector evaluates the project sponsor’s capacity to (EAP)4 includes a pest management plan. The pest
manage the procurement, transportation, storage, management plan and EAP are prepared by the
handling, application, and disposal of pest control project sponsor.
products; to monitor the precision of pest control and
the impact of pesticide use; and to develop and Pest Management Plan
implement ecologically based pest management 5. A pest management plan is a comprehensive
programs. plan, developed when there are significant pest
Project EA management issues such as:

2. Early in IFC involvement, and preferably before • new land-use development or changed
preparation of the Environmental and Social cultivation practices in an area,
Information Memorandum (ESIM) and the Initial • significant expansion into new areas,
Project Summary (IPS), IFC’s Environment Division
assesses whether the proposed project may raise • diversification into new crops in agriculture,5
potential pest management issues. Projects that • intensification of existing low-technology
include the manufacture, use or disposal of systems,
environmentally significant1 quantities of pest control
products are classified as Category A. Depending on • proposed procurement of relatively hazardous
the level of environmental risk, other projects pest control products or methods, or
involving pest management issues are classified as B,
• specific environmental or health concerns (e.g.,
C, or FI.2 When substantial quantities of highly toxic
proximity of protected areas or important aquatic
materials for use under the project are transported or
resources; worker safety).
stored, a hazard assessment may be appropriate.3
A pest management plan is also developed when
3. IFC’s Environment Division staff record in the
proposed financing of pest control products
ESIM any pest management issues that the EA will
represents a large component of the project.6
address. For Category A projects, the ESIM will
report whether the project: 6. A pest management plan reflects the policies set
out in OP 4.09, Pest Management. The plan is
• will finance procurement of pest control
designed to minimize potential adverse impacts on
products directly or will provide credit that may
human health and the environment and to advance
be used to purchase pest control products (and
ecologically based IPM.7 The plan is based on on-site
whether any specific products are excluded from
evaluations of local conditions conducted by
financing), or
appropriate technical specialists with experience in
• includes components aimed at reducing participatory IPM. The first phase of the plan - an
environmental and health hazards associated initial reconnaissance to identify the main pest
with pest control and the use of pesticides, problems and the contexts (ecological, agricultural,
including support for development and public health, economic, and institutional) and to
implementation of integrated pest management define broad parameters - is carried out as part of
(IPM) programs.
As necessary, these issues will be addressed in the 4
See Guidance Note C.
IPS. 5
Particularly such crops as cotton, vegetables, and rice,
which are often associated with heavy use of
pesticides.
6
1 A pest management plan is not required for the
For the purposes of this statement, “environmental procurement or use of impregnated bednets for
significance” takes into account the impacts malaria control, or of WHO Class III insecticides for
(including benefits) on human health. intradomiciliary spraying for malaria control.
2
For environmental screening, see Annex B 7
3 See the World Bank’s GP 4.03 on Agricultural Pest
For definitions, see Guidance Note E. Management for information on IPM.
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project review and is evaluated early in IFC the environment, the IFC appraisal mission may
involvement. The second phase - development of include appropriate technical specialists.
specific operational plans to address the pest
9. In reviewing the EA report, IFC’s Environment
problems identified - is often carried out as a
Division staff note pest management concerns arising
component of the project itself.8 As appropriate, the
from the EA report and any proposed project
pest management plan specifies procedures for
interventions pertinent to pest management, for
screening pest control products. In exceptional cases,
example:
the pest management plan may consist of pest control
product screening only. • a list of pest control products authorized for
procurement, or an indication of when and how
Screening of Pest Control Products
this list will be developed and agreed on;
7. Pest control product screening is required when
a project finances pest control products. The • existing pest management practices; pesticide
screening establishes an authorized list of pest use; the policy, economic, institutional, and legal
control products approved for financing, along with a framework for regulating, procuring, and
mechanism to ensure that only the specified products managing pesticides; and the extent to which all
will be procured with IFC funds. Screening without a these are consistent with an IPM approach;
pest management plan is appropriate only when all of • proposed project activities (or ongoing parallel
the following conditions are met: activities, including other projects supported by
• expected quantities of pest control products are IFC, the World Bank Group, or other donors)
not significant from a health or environment aimed at addressing:
standpoint; − the shortcomings identified; and
• no specific environmental or health concerns − any constraints to adopting IPM.
related to pest control need to be addressed;
• proposed mechanisms for financing,
• the project will not introduce pesticide use or implementing, monitoring and supervising
other non-indigenous biological control into an components relating to pest management or
area, or significantly increase the level of pesticide use, including any role envisaged for
pesticide use; and local nongovernmental organizations;
• no hazardous products9 will be financed.10 • the capacity of responsible institutions to carry
Environmental Review out the activities described; and

8. Depending on the complexity of the issues • the overall sectoral context and other issues that
involved and the degree of risk to human health or will not be directly addressed under the project
but that should be addressed as long-term
objectives.
8
For the content of a pest management plan, see the World
10. The main elements of the pest management
Bank’s GP 4.03 on Agricultural Pest Management.
9
Hazardous products include pesticides listed in Class Ia
measures are reflected in the legal agreements
and Ib of the World Health Organization (WHO) between the project company and IFC.11
Classification of Pesticides by Hazard and Guidelines Supervision and Monitoring
to Classification (Geneva: WHO, 1994-95); materials
listed in the UN Consolidated List of Products Whose 11. Depending on the nature and complexity of the
Consumption and/or Sale have been Banned, pest management and pesticide-related issues
Withdrawn, Severely Restricted, or not Approved by
Governments (New York: UN, 1994); and other
materials that are banned or severely restricted in the 11
For example, such legal agreements may need to include
borrower country because of environmental or health requirements to ensure the effective implementation of
hazards. Copies of the WHO classification and UN project components such as, (a) establishing or
list, which are updated periodically, are available in strengthening pesticide supervision and monitoring
the IFC Information Center. Staff may consult IFC’s framework and capabilities, (b) properly operating
Environment Division for further guidance. and/or constructing pesticide storage or disposal
10
The World Bank’s GP 4.03 on Agricultural Pest facilities, or (c) agreeing on a time-bound program to
Management provides further information on pest phase out use of an undesirable pesticide and properly
control product screening. dispose of any existing stocks.
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confirmed during the environmental review, IFC

supervision missions may need to include appropriate
technical specialists.
12. The project company’s annual monitoring report
evaluates the environmental impact of pest
management practices supported or promoted by the
project, as well as the project company’s
management capacity. It also discusses whether the
project has resulted in improved pest management
practices according to the criteria that define the IPM
approach.
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Annex F: Procedure for Financial 4. Recognizing the diverse nature of financial

Intermediary (FI) Projects institutions and their operations, for categorization
purposes subproject is defined in general terms as a
1. IFC has developed special requirements for project or operation financed through a financial
Category FI projects. These requirements may range intermediary. If the FI’s subprojects may potentially
from the provision of training for FI staff to IFC result in adverse environmental and/or social
subproject review and monitoring of all subprojects. impacts, the project is categorized as FI. If
The requirements depend on the kind of financial subprojects potentially result in minimal or no
institutions and financial products involved. adverse environmental and/or social impacts, the
Requirements have been set forth according to project is categorized as C.
‘types’ (see Table 2). A matrix (see Table 3) has been
developed which sets forth IFC’s typical approach Environmental and Social Requirements for
and requirements for each type of project. The Category FI Projects
requirements under this procedure will apply to all 5. The FI category allows flexibility to tailor
financial intermediary projects having an Investment environmental and social requirements to the project
Review Meeting on or after July 2, 1998.1 and anticipated subprojects. Requirements for
Diversity of Financial Markets Operations various kinds of situations are grouped into
categories, or types, as follows.
2. IFC’s financial markets projects involve a broad
range of financial products and financial institutions. a. Type 1 Requirements. When IFC funds are
A financial markets project may establish a new not targeted to specific subprojects but the
institution such as a bank, private equity fund, or financial institution has operations which
rating agency, or it may provide funds to existing may have adverse environmental and/or
institutions through, for example, credit lines and social impacts, IFC focuses on the process
back stop facilities. Subprojects supported through of environmental and social management in
financial institutions are diverse. They may involve the institution rather than on specific
project finance or financing of a single piece of subprojects. Type 1 requirements are also
equipment, as in an equipment lease. Private equity applied in situations in which it is
funds may finance companies with diverse operations impractical or infeasible for the financial
or specific projects, and they may acquire majority or institution to impose requirements on
minority interests. Some financial markets operations subprojects other than host country laws and
involve a small number of subprojects, while others, regulations e.g., microfinance, trade finance.
such as leasing companies, may involve tens of The following requirements apply:
thousands of individual investments. i. The FI must establish an environmental
3. Moreover, IFC’s financing of subprojects and social management system (policy,
through financial institutions may take different procedure, resources) for relevant
forms. Funds may flow directly through the financial operations2 and require that activities
institution to a specific subproject, as with some conducted under those operations
credit lines. In other cases, such as an equity comply with host country
investment in a commercial bank, IFC funds are not environmental, health and safety
targeted to specific subprojects but support an requirements.
institution whose investments may have ii. The FI must appoint a senior officer
environmental and/or social impacts, such as with overall responsibility for
corporate finance or project finance. environmental and social issues and
Definition of Subproject identify an individual who will manage
and/or conduct reviews. Both must
attend IFC sponsored or approved
1
training in environmental and social
Because this procedure is better tailored to the needs of management for financial institutions.
the financial sector than previous environmental
review procedures, the requirements of this procedure
may, at the discretion of the Environment Division
2
and with the project sponsor’s agreement, be applied For example, project finance, corporate loans, or leasing
to Category FI and C projects in the portfolio and operations in a commercial bank.
pipeline prior to the effective date of this procedure.
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iii. The FI must submit an annual not normally be financed with IFC
environmental performance report funds.
which focuses on its environmental
iii. Guidelines including those set forth
and social management system.
in the Pollution Prevention and
iv. Microfinance projects, which are Abatement Handbook, and the
usually classified as Type I, are Occupational Health and Safety
required to comply with host Guidelines, may apply on a case-
country environmental, health and by-case basis, depending on the
safety requirements, and must kind of finance being offered, the
abide by the requirements in Table nature and scale of anticipated
4, Microfinance Exclusion List. subprojects, and the environmental
and social requirements of the
b. Type 2 Requirements. For Category FI
jurisdictions in which the
projects in which IFC funds are targeted
subprojects will be located. In
through the financial intermediary directly
applying the flexibility permitted in
to specific subprojects which may have
OP 4.01, Environmental
adverse environmental and/or social
Assessment, typically the FI will
impacts, IFC focuses on both the process
require that Category A subprojects
and the subproject. The following
meet applicable guidelines and
requirements apply in addition to the
comply with host country
requirements outlined in paragraphs 5(a)(ii)
requirements, and that Category B
and 5(a)(iii):
subprojects comply with host
i. The FI must establish an country requirements. Guidelines
environmental and social in effect at the time of subproject
management system (policy, appraisal apply.
procedure, resources) for
iv. IFC must clear all Category A
subprojects financed with IFC
subprojects. IFC’s review will
funds. The FI must also require that
usually include a site visit by
subprojects comply with host
Environment Division staff or a
country environmental, health and
consultant retained by IFC.
safety requirements and, IFC
environmental and social policies v. For Category A subprojects, public
unless the total project cost3 is less consultation is required during
than $500,000. The FI must require preparation of the EA report, and a
that these small projects comply draft of the EA report must be
with host country requirements and released in-country in a public
the requirements in Table 4, place accessible to project affected
Microfinance Exclusion List. FIs people and local NGOs. It is
are encouraged to apply the recommended that the draft EA
environmental and social report be released as early as
management system to all relevant possible but no later than 60 days
operations.4 prior to the final decision by the
financial institution’s management
ii. Subprojects involving items on the
(or Board, as appropriate). It is
Exclusion List (see Annex A) may
recognized that the ability of the
financial institution to impose
3
Total project cost is defined as the total value of direct requirements for consultation,
capital investment for project development, land, disclosure, policies or guidelines
infrastructure, equipment, working capital, initial may be limited under certain
marketing expense or any other expenditure incurred circumstances.5 In such cases, the
by the project as part of the initial investment,
financed by equity, debt or in-kind contributions.
4 5
See footnote 2 above. For example, a private equity fund may be asked to invest
in a project post-construction as part of a conversion
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 32 of 51

institution should make a best 8. When an FI is providing debt or lease finance for
effort to achieve consistency of the equipment or other assets which represent a relatively
subproject with IFC’s small portion of a total project or a company’s assets,
requirements, and the Environment rather than providing traditional project finance, the
Division will apply a test of FI should ensure that the equipment or assets
reasonableness during its review financed comply with host country requirements. A
process. similar requirement applies when an FI is financing a
relatively small proportion of a company’s balance
vi. The FI must submit an annual
sheet in the form of a corporate loan. The FI must
environmental performance report
exercise professional judgment regarding the scope
which focuses on both its
of its environmental and social due diligence on the
environmental and social
company or project as a whole. If the investment
management system and
represents a significant component of the total project
subprojects.
and/or the company assets, then it is in the FI’s best
vii. IFC must have access to interest to determine that the total project and/or the
subprojects for supervision site company complies with host country requirements
visits. and, as appropriate, applicable IFC requirements, and
that it does not have environmental and/or social
c. Type 3 Requirements. When IFC is the
liabilities, e.g., contaminated site, which would pose
lender of record on subprojects, the
a credit risk or other risk to the FI.
following requirements apply in addition to
Type 2 requirements: Special Issues Associated with Funds
i. IFC must clear all subprojects. 9. Environmental and social requirements for
investments in funds are particularly complex. A
ii. Subprojects must comply with the
number of issues specific to funds are addressed
applicable guidelines (e.g., Pollution
below.
Prevention and Abatement Handbook,
Occupational Health and Safety a. If IFC invests equity in a fund manager,
Guidelines). funds in which IFC has not invested which
are managed by the same company are not
iii. Disclosure requirements for IFC’s
subject to IFC requirements.
direct investments apply to subprojects.
b. If a subproject in which the fund invests
6. To assist IFC environmental and social
meets IFC requirements at appraisal but
specialists in assessing FI projects, examples of how
subsequently fails to do so, and the fund
the Type requirements would typically be applied in
does not have management control or
different situations are given in Table 3 . This list is
enough leverage to enforce compliance with
illustrative only and may change from time to time.
the requirement, the fund manager should
Requirements for specific projects may differ from
first try to resolve the problem. If this is not
these examples depending upon the nature of the
possible, the fund manager should exit as
transaction. Also, the above “Typed” methodology
soon as possible, taking into account
does not address all situations. Professional judgment
liquidity, market constraints, and fiduciary
must always be exercised by the environmental
responsibilities.
and/or social specialist in determining the
requirements for specific FI projects. c. If a company in which a fund has invested
subsequently undertakes a Category A
7. Figure 3 shows typical requirements for FIs.
subproject, the fund manager should use its
Equipment Finance and Small Corporate Loans best effort to ensure the project meets IFC’s
requirements, including clearance of the
project by the Environment Division. In
of debt to equity financing. In some situations, a fund
such cases, IFC or the fund manager may
may have to make a decision on an investment not have sufficient leverage to impose
opportunity within a matter of days. Often a fund’s requirements. The fund should report on the
position as a minor or passive shareholder may not subproject in its annual environmental
give it sufficient leverage to impose any requirements. performance report. If there are significant
issues which cannot be resolved, the fund
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 33 of 51

should exit as soon as possible, taking into

account liquidity, market constraints, and
fiduciary responsibilities.
d. Passively managed vehicles, e.g., mutual
funds, should not invest in companies
engaged in activities on the Exclusion List
(see Annex A).
Monitoring and Supervision
10. In an FI project, investment is channeled through
a financial intermediary which acts as IFC’s vehicle
to provide funding. The FI is responsible for
implementing an environmental and social
management system and, under Types 2 and 3, for
categorizing, appraising and supervising subprojects.
IFC needs to ensure the proper implementation of its
environmental and social mandate, while respecting
the principle of delegated responsibility that
characterizes this kind of operation.
11. To help FI clients develop and improve their
environmental and social review capability, IFC
provides training, specifically designed for financial
institutions, that covers a broad range of issues such
as identification of environmental and social impacts,
project categorization, and tools for managing
environmental and social risks, including IFC
policies and guidelines. IFC is available during
project implementation to assist FI clients with
development of their environmental and social
management system and to provide guidance on
review of specific subprojects.
12. Monitoring and supervision of FI projects are
handled similarly to Category A and B projects, i.e.,
through annual performance reports, supervision
missions, and project site visits. Because
responsibility for environmental and social review of
subprojects is delegated to the FI, the primary focus
of supervision is the FI’s environmental and social
management system, e.g., proper project
categorization and identification of issues, quality of
environmental and social appraisals, documentation,
and subproject supervision. Site visits to subprojects
may also be conducted to verify results on the
ground.
Cofinancing with Other Multilateral Financial
Institutions (MFI)
13. In cofinancing situations with other multilateral
financial institutions (MFIs), the Environment
Division may negotiate a single consistent set of
requirements for subprojects with the other MFI,
even if the requirements are not exactly the same as
IFC’s, providing they are acceptable to both parties.
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 34 of 51

Table 2: Category FI Requirements by Types

Type 1 Type 2 Type 3

(Process focus) (Subproject (Lender of
Requirement focus) record)

Training √ √ √

Process (policy, procedure, responsible staff) √ √ √

Annual report on process √ √ √

Annual report summarizing subprojects’ performance √ √

General Exclusion List √ √

Host-country laws √ √ √

IFC policies √ √

Category A subprojects - meet applicable guidelines √ √

Category B subprojects - meet applicable guidelines √

IFC clearance of category A sub-projects √ √

IFC clearance of each sub-project √

The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 35 of 51

Table 3: Typical IFC Requirements for FIs

(Requirements for specific projects may vary from these examples depending on the nature of the transaction)

Corporate Back-stop Equity and Credit Line Agency Credit Underwriting Risk Mgmt
Financial Institutions/Products Loan Facility Quasi-Equity Line Credit Line

Commercial Banks T1 T1 T1 T2 T3 T2 N/A

Leasing Companies T1 T1 T1 T2 T3 N/A
Securities Underwriters and Broker/Dealers N/A N/A N/A T2 N/A
Factoring Companies N/A N/A N/A N/A
Primary Mortgage Banks T1 T1 T1 N/A
Micro-finance Institutions T1 T1 N/A
Merchant and Development Banks T1 T1 T1 T2 T3 T2 N/A
Finance Companies T1 T1 T1 T2 T3 T2 N/A
Pooled Investment Vehicles
• Private Equity Funds T2
• Equity Mutual Funds N/A
• Bond Funds N/A N/A
• Privatization Funds T2 T2
Fund Management Companies
• Private Equity Funds T1 T1
• Equity Mutual Funds N/A N/A
• Bond Funds N/A N/A
• Privatization Funds T1 T1
Special Purpose Vehicles (CLO/CBO) N/A N/A
Insurance Companies
• Life N/A N/A N/A
• Property/Casualty T1 T1 T1
• Infrastructure Monoline T1 T1 T1
• General Monoline N/A N/A N/A
Stock Exchanges N/A N/A
Rating Agencies N/A N/A
Stock Registry Companies N/A N/A
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 36 of 51

Table 4: Microfinance Exclusion List • Production or trade in wood or other

forestry products from unmanaged forests.
1. IFC funds may not be used to finance the
following projects: • Production or trade in products containing
PCBs.7
• Production or activities involving harmful
or exploitative forms of forced • Production, trade, storage, or transport of
labor1/harmful child labor2. significant volumes of hazardous chemicals,
or commercial scale usage of hazardous
• Production or trade in any product or chemicals.8
activity deemed illegal under host country
laws or regulations or international • Production or trade in pharmaceuticals
conventions and agreements. subject to international phase outs or bans.9
• Production or trade in weapons and • Production or trade in pesticides/herbicides
munitions.3 subject to international phase outs or bans.10
• Production or trade in alcoholic beverages • Production or trade in ozone depleting
(excluding beer and wine).3 substances subject to international phase
out.11
• Production or trade in tobacco. 3
• Drift net fishing in the marine environment
• Gambling, casinos and equivalent using nets in excess of 2.5 km. in length.
enterprises. 3
• Production or activities that impinge on the
• Trade in wildlife or wildlife products lands owned, or claimed under adjudication,
regulated under CITES.4 by indigenous peoples, without full
• Production or trade in radioactive documented consent of such peoples.
materials.5
• Production or trade in or use of unbonded 7
PCBs: Polychlorinated biphenyls—a group of highly
asbestos fibers.6
toxic chemicals. PCBs are likely to be found in oil-
filled electrical transformers, capacitors and
switchgear dating from 1950-1985.
8
1
Forced labor means all work or service, not voluntarily A list of hazardous chemicals is available from the
performed, that is extracted from an individual under Environment Division. Hazardous chemicals include
threat of force or penalty. gasoline, kerosene and other petroleum products.
9
2
Harmful child labor means the employment of children A list of pharmaceutical products subject to phase outs or
that is economically exploitive, or is likely to be bans is available from the Environment Division.
10
hazardous to, or to interfere with, the child’s A list of pesticides and herbicides subject to phaseouts or
education, or to be harmful to the child’s health, or bans is available from the Environment Division.
11
physical, mental, spiritual, moral, or social Ozone Depleting Substances (ODSs): Chemical
development. compounds which react with and deplete stratospheric
3
This does not apply to subproject sponsors who are not ozone, resulting in the widely publicized ‘ozone
substantially involved in these activities. “Not holes’. The Montreal Protocol lists ODSs and their
substantially involved” means that the activity target reduction and phase out dates. A list of the
concerned is ancillary to a subproject sponsor’s chemical compounds regulated by the Montreal
primary operations. Protocol, which includes aerosols, refrigerants, foam
4
CITES: Convention on International Trade in Endangered blowing agents, solvents, and fire protection agents,
Species of Wild Fauna and Flora. A list of CITES together with details of signatory countries and phase
listed species is available from the Environment out target dates, is available from the Environment
Division. Division.
5
This does not apply to the purchase of medical
equipment, quality control (measurement) equipment
and any equipment where IFC considers the
radioactive source to be trivial and/or adequately
shielded.
6
This does not apply to the purchase and use of bonded
asbestos cement sheeting where the asbestos content is
less than 20%.
 The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 37 of 51

Figure 3: Decision Chart for Determining Type of FI Project

“A proposed project is classified as category
FI if it involves investment of IFC funds
Is IFC investing through an through a financial intermediary …” (para 22
Intermediary? No Not FI
of the Procedure)
“[Where] IFC funds are not targeted to specific
subprojects, but the financial institution has operations
which may have adverse environmental and/or social
impacts … IFC may also classify the project as category
Yes FI.” (para 22 of the Procedure)

Could Intermediary’s
Are subprojects targeted? operations have
No No Category C
adverse environmental
and/or social impacts?
“Type 1 Requirements. When IFC funds
are not targeted to specific subprojects but
Yes the financial institution has operations
Yes which may have adverse environmental
and/or social impacts …” (para 5a of this
Category FI, Type 1 Annex)

“Type 2 Requirements. For Category FI

projects in which IFC funds are targeted
Could subprojects have adverse through the financial intermediary directly
environmental and/or social No Category C to specific subprojects …” (para 5b of this
impacts? Annex)

“If subprojects potentially result in

Yes minimal or no adverse environmental
and/or social impacts, the project is
categorized as C.” (para 4 of this Annex)
Is the intermediary Category FI, Type 3
No (IFC Lender of
the direct lender?
Record)
“Type 2 Requirements….which may
have adverse environmental and/or social
Yes impacts …” (para 5b of this Annex)

Is it practical to impose “Type 3 Requirements. When IFC is the

Category FI, Type 1
IFC/World Bank No lender of record on subprojects …” (para
(Microfinance, 5c of this Annex)
environmental and social <$500,000)
requirements?
“Type 1 requirements are also applied in
situations in which it is impractical or
Yes infeasible for the financial institution to
impose requirements on subprojects other
than host country laws and regulations
e.g., microfinance, trade finance.” (para
Category FI, Type 2 5a of this Annex)
In summary, five points for Category FI, Type 2:
1. Intermediary
2. Targeted Subprojects
3. Possible adverse environmental and/or social impacts
4. IFC is not direct lender
5. Practical to impose
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 38 of 51

Glossary of Terms process; and typical standards for a project of this

sort which will be applied in reviewing the project.
Annual Monitoring Report - A document prepared
by the project company, outlining environmental and Environmental and Social Review - IFC’s internal
social performance for the previous year. The Annual procedure to review the project sponsor’s
Monitoring Report should be submitted to IFC no environmental assessment and to work with the
later than ninety (90) days after the end of the project sponsor to address environmental and social
company’s fiscal year (FY). issues associated with the project.

Corrective Action Plan - In the case of existing Environmental Assessment (EA) - The process of
operations, plant modernizations, privatizations and evaluating the environmental and social impacts of a
corporate investment programs, a Corrective Action project and identifying ways to improve the project
Plan (CAP) may be required to address remediation by preventing, minimizing, mitigating, or
or corrective action to bring facilities into compliance compensating for adverse impacts. Environmental
with IFC requirements. The CAP should also provide assessment is the responsibility of the project
details of an implementation schedule and costs. sponsor.

Environmental and Social Clearance - An internal Environmental Audit - A process to determine the
determination by IFC, based on results of the nature and extent of all environmental areas of
environmental and social review, that a proposed concern (including occupational health and safety) at
project complies with applicable IFC environmental an existing facility or with corporate practices. The
and social policies and meets applicable guidelines. audit identifies and justifies the appropriate measures
to mitigate the areas of concern, estimates the cost of
Environmental and Social Clearance the mitigation measures, and recommends a schedule
Memorandum (ESCM) - Issued by IFC’s for implementation of these mitigation measures.
Environment Division to the Investment Department,
the ESCM is a document which states that the project Environmental Impact Assessment (EIA) - An
complies with applicable environmental and social instrument to identify and assess the potential
requirements. It also details outstanding issues and environmental impacts of a proposed project,
actions required to address those issues, and evaluate alternatives, and design appropriate
monitoring requirements and recommendations mitigation, management, and monitoring measures.
regarding any other obligations of the project Environmental Review Summary (ERS) - A
sponsor. The investment officer conveys these document prepared by IFC which summarizes the
requirements to the project sponsor. key findings of IFC’s environmental and social
Environmental Action Plan (EAP) - A document review of a Category B project.
consisting of mitigation, management, monitoring IFC Project Cycle - The progression of a project
and institutional measures to be taken during from the point of initial contact with IFC by the
implementation and operation to eliminate or offset project sponsor through project appraisal, approval,
adverse impacts or reduce them to acceptable levels. supervision, and evaluation. The IFC project cycle is
The plan also includes the actions, schedules for outlined in Figure 1.
implementation and costs needed to implement these
measures. Investment Assessment Report (IAR) - A
confidential internal report prepared by IFC’s
Environmental and Social Information Investment Departments (and required by IFC’s
Memorandum (ESIM) - A document prepared by Board), the IAR is a tool which IFC uses to learn
IFC’s Environment Division and issued to the from past experience. All IARs should evaluate the
investment officer (and technical specialist) upon actual environmental and social impacts of the
receipt of the project description. The ESIM details project against the impacts anticipated in the EA
the following information: the category of the report, and should assess the effectiveness of the
project; the major environmental and social concerns mitigating measures adopted by the project sponsor.
associated with the project; the draft of the
environmental language for the PDS and the MOR; Investment Policy Committee (IPC) – members of
details of the environmental and social information this committee which reviews policy issues are the
required from the project sponsor to enable the Vice Presidents of Investment Operations and
Environment Division to complete the review Portfolio Management, and the Vice President and
General Counsel.
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 39 of 51

Investment Review Meeting (IRM) – after Public Consultation and Disclosure Plan (PCDP) -
completion of project appraisal, the Investment A PCDP defines a technically sound and culturally
Department Director chairs this meeting, which is the appropriate approach to meaningful consultation and
basis for IFC management approval of the project. disclosure. The plan describes local requirements for
The full project team attends the IRM as appropriate. consultation and disclosure, identifies key
stakeholder groups, provides a strategy and timetable
Major Hazard Assessment - A process for
for sharing information and consulting with each of
identifying, analyzing and controlling hazards
these groups, describes resources and responsibilities
associated with the presence of dangerous materials
for implementing the PCDP and details
at an installation. IFC requires a major hazard
reporting/documentation of the consultation and
assessment for projects involving selected
disclosure activities.
flammable, explosive, reactive, and toxic materials
when the quantity of these materials present at the Public Disclosure - The process of making
site is above the specified threshold level. information available to affected people and other
interested parties, particularly with regard to the
Project Appraisal - The collection and evaluation of
environmental and social aspects of projects.
detailed information about a proposed project to
Disclosure of information should be done in a timely
determine whether IFC should invest in it.
manner, in publicly accessible locations and in a
Project Company - The legal entity which enters language and format readily understood by affected
into the investment agreement with IFC. groups.
Project Cycle - The progression of a project from Resettlement Plan - The document prepared
conception through construction, implementation, whenever people are displaced physically or
and evaluation. The IFC project cycle is a subset of economically from land or other fixed resource rights
this project cycle. they own or occupy, without there being a “willing
seller” or the possibility of rejecting the loss. The
Project Data Sheet (PDS) - a document prepared by plan is the record of the process of analyzing baseline
the project team which contains a project description, conditions, predicting impacts, consulting affected
details of the potential investment, highlights any people, and drawing up a detailed strategy for (a)
policy issues and potential dealbreakers, reviews minimizing or avoiding resettlement; (b)
IFC’s role in the project and development impact, compensating for losses, (c) relocating and rebuilding
and outlines environmental and social issues and as necessary, and (d) ensuring that affected people
policy concerns (including project categorization). are afforded the opportunity to improve the incomes,
The PDS is continually updated during project income-producing activities, and standards of living
appraisal and is a key decision document for the that they had before the project affected them, or at a
Investment Review Meeting. minimum to restore the incomes and living standards
Project Sponsor - The investor or project proponent that they would have had if the project had not
or borrower, as the case may be, requesting IFC affected them. The Resettlement Plan is linked to the
financing for a proposed project. EA process, is subject to public disclosure, and is
normally the responsibility of the project sponsor.
Project Supervision Report (PSR) - A confidential
internal report prepared by IFC’s Investment Stakeholders - Stakeholders are persons or groups
Departments at least once a year for each project. who are affected by or can affect the outcome of a
The PSR must include a section on compliance with project. These can include affected communities,
regard to covenants on environmental and social local organizations, NGOs and government
matters. authorities. Stakeholders can also include politicians,
commercial and industrial enterprises, labor unions,
Public Consultation - The process of engaging academics, religious groups, national social and
affected people and other interested parties in open environmental public sector agencies and the media.
dialogue through which a range of views and
concerns can be expressed in order to inform Summary of Project Information (SPI) - A
decision-making and help build consensus. To be document prepared by the Investment Department
meaningful, consultation should be carried out in a after the Investment Review Meeting. The SPI
culturally appropriate manner, with information in provides a brief factual summary of the main
local languages distributed in advance. elements of the evolving project. The SPI is released
to the World Bank InfoShop a minimum of thirty
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 40 of 51

(30) days prior to Board consideration (regular

procedure), Closing Date (streamlined procedure), or
management approval date (delegated authority), and
includes the environmental category for the project, a
brief summary of any environmental and social
issues, and the mitigation measures designed to
address those issues.
World Bank InfoShop - The World Bank InfoShop
(formerly called the Public Information Center—
PIC) allows interested parties to request and obtain
publicly available information about IFC’s activities.
The World Bank InfoShop deals only with requests
for specific documents (including ERSs, SPIs and
EA reports), not blanket requests for information
related to the World Bank Group.
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 41 of 51

GUIDANCE NOTES

Guidance Note A: Checklist of Potential Issues for an EIA

Guidance Note B: Content of an Environmental Impact Assessment Report
Guidance Note C: Outline of an Environmental Action Plan (EAP)
Guidance Note D: Outline of a Project Specific Environmental Audit
Guidance Note E: Outline of a Project Specific Major Hazard Assessment
Guidance Note F: Guidance for Preparation of a Public Consultation and Disclosure
Plan (PCDP)
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 42 of 51

Guidance Note A: Checklist of Potential • Indigenous Peoples. An indigenous peoples

Issues for an EA action plan is required for every project
impacting on indigenous peoples. The
1. Where applicable, the environmental assessment current World Bank OD 4.20, Indigenous
should address the following issues, which are Peoples (OP. 4.10 Indigenous Peoples is
subject to applicable IFC policies and applicable forthcoming) contains the requirements for
guidelines: the action plan.
• Agrochemicals. OP 4.09 promotes the use • Induced Development and Other Socio-
of integrated pest management and the cultural Aspects. Secondary growth of
careful selection, application, and disposal settlements and infrastructure, often referred
of pesticides. Due to their potential impacts to as “induced development” or
on surface and groundwater quality, the use “boomtown” effects, can have major
of fertilizers must also be carefully assessed. indirect environmental and social impacts,
• Biological Diversity. IFC promotes which relatively weak local governments
conservation of endangered plant and may have difficulty addressing. Such
animal species, critical habitats, and impacts should be taken into account in
protected areas. project design.

• Coastal and Marine Resources • International Treaties and Agreements

Management. Guidelines are available on on the Environment and Natural
the planning and management of coastal Resources. There are a number of
marine resources, including coral reefs, international treaties and agreements on a
mangroves, and wetlands. range of environmental and natural resource
issues (e.g. ozone depletion, global
• Cultural Properties. IFC is committed to warming, sea level rise, ocean dumping,
protecting nonreplicable cultural property. pollution of international waters, marine
Sites, structures, and remains of environmental protection, transport of
archaeological, paleontological, historical, hazardous wastes and biodiversity). IFC
religious, cultural, aesthetic, or unique requires these treaties and agreements to be
natural value are covered. considered in a project’s environmental
analyses, where relevant and feasible, with a
• Dams and Reservoirs. Large dams (over
view to minimizing possible adverse
15 meters in height) and dams with special
impacts on global environmental quality.
design complexities require review by a
panel of independent experts. • International Waterways. OP 7.50 sets
forth obligations upon the project sponsor
• Energy Efficiency. IFC is committed to
and IFC for projects located on international
ensuring that projects are energy efficient.
waterways. International waterways border
Where appropriate, in the project appraisal
on two states but the definition also includes
process the technical specialist reviews
tributaries.
options for improved energy efficiency with
the project sponsor. • Involuntary Resettlement. A resettlement
plan (see Annex J) is required for every
• Environmental Guidelines. Industrial
project involving involuntary resettlement
operations and projects in other sectors
and impacts from land acquisition. OP 4.12
where relevant must meet applicable
(forthcoming) contains the requirements for
environmental guidelines as set forth in the
resettlement plans.
World Bank Group’s “Pollution Prevention
and Abatement Handbook”. • Land Settlement. The managed process of
opening new lands to planned permanent
• Hazardous and Toxic Materials.
occupancy. Due to the complex physical,
Guidelines are available from the
biological, socioeconomic, and cultural
Environment Division on the safe
impacts, land settlement, land use, land title
manufacture, use, transport, storage, and
and land acquisition should be carefully
disposal of hazardous and toxic materials.
reviewed.
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 43 of 51

• Major Hazards. All projects which involve supporting prior land use, equivalent uses or
dangerous materials in sufficient quantities other acceptable uses. The restoration and
to represent a significant hazard with the rehabilitation plan must be submitted to IFC
potential for an incident of major for review and approval (see for instance:
consequence are required to complete a “Base Metal and Iron Ore Mining, Industry
major hazard assessment and establish a Sector Guidelines,” Pollution Prevention
formal plan to prevent and manage hazards. and Abatement Handbook).
The World Bank document “Techniques for
• Tropical Forests. Commercial logging
Assessing Industrial Hazards: A Manual.”
operations or the purchase of logging
Technical Paper No. 55, Washington DC,
equipment for use in primary tropical moist
1988, should be consulted.
forests are not financed by IFC (OP 4.36).
• Natural Hazards. The environmental
• Watersheds. IFC promotes the protection
assessment should review whether the
and management of watersheds as an
project may be affected by natural hazards
element of lending operations for dams,
(e.g., earthquakes, floods, volcanic activity)
reservoirs, and irrigation systems.
and should propose specific measures to
address these concerns when appropriate. • Wetlands. IFC promotes conservation and
management of wetlands (e.g., estuaries,
• Natural Resources. Exploitation of natural
lakes, mangroves, marshes, and swamps) in
resources must be carried out in an
its project work.
environmentally and socially sound manner
and on a sustainable basis. • Wildlands. IFC is committed to protecting
wildlands and sponsors must provide for
• Occupational Health and Safety. All
compensatory measures when the project
industry and energy projects, and projects in
results in adverse impacts.
other sectors where relevant, should include
formal plans to promote occupational health
and safety. See World Bank Group’s
Occupational Health and Safety Guidelines.
• Ports and Harbors. Guidelines are
available on addressing common
environmental and social concerns
associated with port and harbor
development. See World Bank,
“Environmental Considerations for Port
and Harbor Developments,” Technical
Paper No. 126, Washington, DC, 1990.
• Restoration and Rehabilitation of
Disturbed Land. A comprehensive
restoration and rehabilitation plan should be
prepared by the project sponsor. The aim of
the plan will be to ensure that land is
returned to a condition capable of
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 44 of 51

Guidance Note B: Content of an d) Baseline data. Assesses the dimensions of

Environmental Impact Assessment Report the study area and describes relevant
physical, biological, and socioeconomic
1. IFC’s Operational Policy 4.01, Environmental conditions, including any changes
Assessment, requires a full Environmental anticipated before the project commences.
Assessment for Category A projects - this is normally Also takes into account current and
an Environmental Impact Assessment. An proposed development activities within the
environmental impact assessment (EIA) report for a project area but not directly connected to the
Category A project1 identifies and assesses the project. Data should be relevant to decisions
potential environmental and social impacts of the about project location, design, operation or
project, evaluates alternatives, and recommends mitigatory measures. The section indicates
appropriate mitigation, management, and monitoring the accuracy, reliability and sources of the
measures. The report’s scope and level of detail data.
should be commensurate with the project’s potential
impacts. The report submitted to IFC is prepared in e) Environmental and social impacts. Predicts
English, French, or Spanish, and the Executive and assesses the project’s likely positive and
Summary in English. The Executive Summary and negative impacts, in quantitative terms to the
other supplemental information used as part of the extent possible. Identifies mitigation
local public consultation and disclosure program measures and any residual negative impacts
must also be produced in the local language. that cannot be mitigated. Explores
opportunities for enhancement. Identifies
2. An EIA report should include the following and estimates the extent and quality of
items (not necessarily in the order shown): available data, key data gaps, and
a) Executive summary. Concisely discusses uncertainties associated with predictions,
significant findings and recommended and specifies topics that do not require
actions. further attention.

b) Policy, legal, and administrative f) Analysis of alternatives.2 Systematically

framework. Discusses the policy, legal, and compares feasible alternatives to the
administrative framework within which the proposed project site, technology, design,
EIA is carried out. Explains the and operation—including the “without
environmental and social requirements of project” scenario—in terms of their
any cofinanciers. Identifies relevant potential environmental and social impacts;
international environmental agreements to the feasibility of mitigating these impacts;
which the country is a party. their capital and recurrent costs; their
suitability under local conditions; and their
c) Project description. Concisely describes the institutional, training, and monitoring
proposed project and its geographic, requirements. For each of the alternatives,
ecological, social, and temporal context, quantifies the environmental and social
including any off-site investments that may impacts to the extent possible, and attaches
be required (e.g., dedicated pipelines, access economic values where feasible. States the
roads, power plants, water supply, housing, basis for selecting the particular project
and raw material and product storage design proposed and justifies recommended
facilities). Normally includes a map emission levels and approaches to pollution
showing the project site and the project’s prevention and abatement.
area of influence.

2
An EIA is normally best suited to the analysis of
1
The EA report for a Category A project is normally an alternatives within a given project concept (e.g., a
environmental impact assessment (EIA), with geothermal power plant, or a project aimed at meeting
elements of other instruments, such as an local energy demand), including detailed site,
environmental audit, included as appropriate. Any technology, design, and operational alternatives. Where
report for a Category A project uses the components a project has broad environmental implications (e.g.
described in this annex. IFC’s Environment Division large reservoir), these should be addressed through a
can provide detailed guidance on the focus and careful and comprehensive analysis of the project’s area
components of the various EA instruments. of influence and the proper scoping of the EIA.
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 45 of 51

g) Environmental Action Plan (EAP). A h) Appendixes

project’s EAP (see Guidance Note C)
i) List of EIA report preparers -
consists of the set of mitigation, monitoring,
individuals and organizations.
and institutional measures to be taken during
implementation and operation to eliminate ii) References - written materials, both
adverse environmental and social impacts, published and unpublished, used in
offset them, or reduce them to acceptable study preparation.
levels. The plan also includes the actions
iii) Record of interagency and consultation
needed to implement these measures. The
meetings, including consultations for
action plan is sometimes also known as a
obtaining the informed views of the
“management plan” or “corrective action
affected people and local non-
plan” when used in conjunction with a project
governmental organizations (NGOs).
specific environmental audit (see Guidance
The record specifies any means other
Note D). This section of the EIA is prepared
than consultations (e.g., surveys) that
in a stand-alone format and is updated by
were used to obtain the views of
the project sponsor to reflect the final
affected groups and local NGOs.
understandings between IFC and the project
sponsor on environmental and social issues. iv) Tables presenting the relevant data
referred to or summarized in the main
text.
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 46 of 51

Guidance Note C: Outline of an the EAP recommends the establishment or

Environmental Action Plan (EAP) expansion of such units, and the training of
staff, to allow implementation of EA
1. Every IFC Category A project must have an recommendations. Specifically, the EAP
EAP. An EAP consists of the set of mitigation, provides a specific description of the project
management, monitoring, and institutional measures company’s arrangements - who is
to be taken during implementation and operation to responsible for carrying out the mitigation,
eliminate adverse environmental and social impacts, management and monitoring measures (e.g.,
offset them, or reduce them to acceptable levels. The for operation, supervision, monitoring of
plan also includes the actions needed to implement implementation, remedial action, financing,
these measures.1 Action plans are essential elements reporting, and staff training). To strengthen
of EIA reports for Category A projects; for many the project company’s environmental
Category B projects, the EA may result in an action management capability, most EAPs cover
plan only. In the case of a project specific one or more of the following additional
environmental audit, the result may be termed a topics: (a) technical assistance programs, (b)
“corrective action plan”. To prepare an action plan, procurement of equipment and supplies, and
project sponsors and their environmental assessment (c) organizational changes.
team (a) identify the set of responses to potentially
adverse impacts; (b) determine requirements for b) Mitigation and Development: The EAP
ensuring that those responses are made effectively identifies feasible and cost-effective
and in a timely manner; and (c) describe the means measures that may reduce potentially
for meeting those requirements.2 More specifically, significant adverse environmental and social
the EAP includes the following components: impacts to acceptable levels and promote
development benefits. The plan includes
a) Environmental Management: Effective compensatory measures if mitigation
implementation of an EAP begins with measures are not feasible, cost-effective or
sound company policies on environmental sufficient. Specifically, the EAP:
and social issues, together with senior
management commitment to their effective i) identifies and summarizes all
implementation. The goal should be to anticipated significant adverse impacts
continually improve performance in these (including those involving indigenous
areas. This section of the EAP should detail peoples or involuntary resettlement);
the project sponsor’s environmental and ii) describes - with technical details - each
social policies and the arrangements in place mitigation or development measure,
to ensure these policies are implemented including the kind of impact to which it
effectively and in a timely fashion. To relates and the conditions under which
support timely and effective implementation it is required (e.g., continuously or in
of environmental and social project the event of contingencies), together
components and mitigation measures, the with designs, equipment descriptions,
EAP draws on the EA’s determination of the and operating procedures, as
existence, role, and capability of appropriate;
environmental staff on site.3 If necessary,
iii) estimates any potential environmental
and social impacts of these measures;
1
The action plan is sometimes known as a “mitigation and and
management plan” or “corrective action plan”.
2 iv) provides linkage with any other
For projects involving rehabilitation, upgrading, expansion,
or privatization of existing facilities, remediation of mitigation plans (e.g., for involuntary
existing environmental problems may be more resettlement or indigenous peoples)
important than mitigation and monitoring of expected required for the project.
impacts. For such projects, the action plan focuses on
c) Monitoring: Environmental monitoring
cost-effective measures to remediate and manage these
problems. during project implementation provides
3
For projects having significant environmental implications,
it is particularly important that the project company
have an in-house environmental unit with adequate budget and professional staffing strong in expertise
relevant to the project.
The International Finance Corporation December 1998
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information about key environmental and mitigation and monitoring measures and its
social aspects of the project, particularly the assignment of responsibilities, and it must
impacts of the project and the effectiveness be integrated into the project’s overall
of mitigation measures. Such information planning, design, budget and
enables the project company and IFC to implementation. Such integration is
evaluate the success of mitigation as part of achieved by establishing the EAP within the
project supervision, and allows corrective project so that the plan will receive the
action to be taken when needed. Therefore, necessary resources and supervision along
the EAP identifies monitoring objectives with the other components.
and specifies the kind of monitoring, with
f) Consultation and Disclosure: The EAP
linkages to the impacts assessed in the EA
should include the measures the sponsor will
report and the mitigation measures
take to achieve ongoing consultation with
described in the EAP. Specifically, the
stakeholders affected by the project as
monitoring section of the EAP provides:
outlined in the Public Consultation and
i) a specific description, and technical Disclosure Plan (PCDP).
details, of monitoring measures,
including the parameters to be
measured, methods to be used,
sampling locations, frequency of
measurements, detection limits (where
appropriate), and definition of
thresholds that will signal the need for
corrective actions; and
ii) monitoring and reporting procedures to
(a) ensure early detection of conditions
that necessitate particular mitigation
measures, and (b) furnish information
on the progress and results of
mitigation. IFC requires, at a minimum,
annual monitoring reports - these
reports should be submitted to the
Investment Officer no later than 90
days after the end of the project
company’s fiscal year.
d) Implementation Schedule and Cost
Estimates: For all three aspects
(environmental management, mitigation and
monitoring), the EAP should provide (a) an
implementation schedule for measures that
must be carried out as part of the project,
showing phasing and coordination with
overall project implementation plans; and
(b) the capital and recurrent cost estimates
and sources of funds for implementing the
EAP.
e) Integration of EAP with Project: The
project sponsor’s decision to proceed with a
project, and IFC’s decision to support it, are
predicated in part on the expectation that the
EAP will be executed effectively.
Consequently, IFC expects the plan to be
specific in its description of the individual
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 48 of 51

Guidance Note D: Outline of a Project d) Audit Procedure: Details of the approach

Specific Environmental Audit used to conduct the audit, including the
audit protocol. This section should include
1. An environmental audit is normally a specifics relating to historical research and
requirement for projects that involve expansion, records review, interviews, site inspections,
modernization, privatization or a corporate and other aspects of the audit procedure.
investment program.
e) Areas of Concern: Detailed discussion of
2. The purpose of an environmental audit is to all environmental and occupational health
determine the nature and extent of all environmental and safety areas of concern. The areas of
areas of concern (including occupational health and concern should be discussed in terms of
safety) at an existing facility or with corporate both existing facilities and operations and
practices. The audit identifies and justifies the contamination or damages due to past
appropriate measures to mitigate the areas of activities.
concern, estimates the cost of the mitigation
measures, and recommends a schedule for f) Mitigation: Specifics on the appropriate
implementation of these mitigation measures. The mitigation measures and why they are
target audience is the project sponsor and IFC staff. necessary, and a discussion of whether the
appropriate mitigation measures are readily
3. An environmental audit focuses on two available in the project’s host country.
elements: (1) compliance of existing facilities and
operations with relevant environmental (including g) Costs and Schedule: Estimates of the cost
occupational health and safety) laws, regulations, and of implementing the mitigation measures
IFC requirements; and (2) the nature and extent of and a schedule for their implementation.
significant adverse environmental impacts, including Cost estimates are to be based on host
contamination to soils, groundwater, and structures, country conditions. Schedules should be
as a result of past activities at the existing facility. recommended within the context of any
planned capital expenditures for the facility.
4. An environmental audit is normally performed
by an independent consultant having broad and h) Annexes: These should include references,
extensive industrial experience in the areas of the copies of interview forms, any details
environment and occupational health and safety. regarding the audit protocol not already
included in (d), and data obtained during the
5. The environmental audit report should include audit but not included directly in (e), (f) and
the following sections: (g) above.
a) Executive Summary: A concise discussion
of all environmental and occupational health
and safety areas of concern, recommended
mitigation measures and their priority, the
cost of mitigation, and a schedule for
compliance.
b) Project Description: A concise description
of the project, including both past and
current operations. The description should
focus on project components with potential
environmental and occupational health and
safety concerns.
c) Regulatory Setting: Details of host country,
local, and any other applicable
environmental and occupational health and
safety laws, regulations, guidelines, and
policies as they may directly pertain to the
project.
The International Finance Corporation December 1998
Procedure for Environmental and Social Review of Projects Page 49 of 51

Guidance Note E: Outline of a Project d) Major Hazard Incidents: A description of

Specific Major Hazard Assessment the potential conditions and events which
could lead to a major incident, estimates of
1. A major hazard assessment is required for the expected impacts on the site, community
projects which involve the transporting, storing, and environment, and the measures taken to
handling, and processing of dangerous (flammable, prevent, control or minimize the expected
explosive, reactive or toxic) materials. The threshold consequences of the incident. This section
quantities and further details on completing a major should include the criteria under which the
hazard assessment are provided in the World Bank’s emergency relief system was designed and
manual, Techniques of Assessing Industrial Hazards: an outline of the emergency response plan
A Manual, Technical Paper No. 55, Washington, dealing with a major incident.
D.C., 1988.
e) Management Systems: A summary of the
2. The purpose of the major hazard assessment is to management systems, including staffing and
identify the scope of the use of dangerous materials training, to ensure the safe design,
at the installation; the kind, relative likelihood and construction and operation of the project, as
broad consequences of major incidents that might well as to maintain the effectiveness of
occur; appropriate mitigating measures, including emergency equipment and the emergency
safety design, operating methods and emergency response plan.
procedures to prevent or control major incidents; and
the schedule for implementing the mitigating
measures.
3. A major hazard assessment focuses on three
areas: (1) information about the project’s site,
operations and surroundings; (2) estimates of the
impacts of potential major incidents which may occur
at the installation and the surrounding area; and (3)
the means to prevent or mitigate the potential
incidents.
4. The assessment is normally performed by an
independent consultant having extensive industrial
experience in the areas of risk assessment and control
of major hazards, as well as expertise in assessing the
specific dangerous materials and potentially
hazardous operations associated with the project. The
major hazard assessment report should include the
following sections:
a) Executive Summary: A concise discussion
of the hazard concerns and potential
consequences of a major incident, and the
recommended mitigation measures and
implementation schedule.
b) Project Description: A review of the
project’s site, operations and employment,
and the nature of the land use and
distribution of the population in the vicinity
of the installation.
c) Dangerous Materials: Details relating to
the specific dangerous materials and
quantities present at the installation, and the
hazards associated with their transportation,
storage and processing.
The International Finance Corporation December 1998
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Guidance Note F: Guidance for • clear mechanisms to respond to people’s

Preparation of a Public Consultation and concerns, suggestions and grievances.
Disclosure Plan Contents of a PCDP
4. The sponsor must submit to IFC a Public
IFC Consultation and Disclosure Requirements
Consultation and Disclosure Plan (PCDP). The contents
1. Project sponsors are required to meaningfully of the plan should include the following:
consult with stakeholders on preparation and results of
a) Introduction. Briefly describe the project,
the Category A EA and disclose to the public the results
including locational and design elements.
of the EA process. Ongoing consultation is also
required during the construction and operation phases b) Regulations and Requirements. Summarize
of the project. Project sponsors should consult IFC’s the in-country, local requirements (i.e.,
Doing Better Business Through Effective Public policies, laws, regulations and review
Consultation and Disclosure: A Good Practice Manual. processes) for public consultation and
The Manual provides guidance on effective public disclosure related to local EIA legislation or
consultation and disclosure techniques for the private other aspects of the project.
sector, in accordance with international good practice.
c) Review of Any Previous Public Consultation
2. A Public Consultation and Disclosure Plan (PCDP) and Disclosure. Summarize all public
should: (i) describe local requirements for consultation consultation and information disclosure
and disclosure; (ii) identify key stakeholder groups; (iii) undertaken to date, including:
provide a strategy and timetable for sharing information
and consulting with each of these groups during various • the kinds of information disseminated, the
phases of the project; (iv) describe resources and forms this took (oral, brochure, report,
responsibilities for implementing the PCDP activities; posters, radio etc.), and the means of
and (v) detail reporting/documentation of consultation dissemination;
and disclosure activities. • the location and dates of meetings;
Key Principles • a description of the individuals, groups
3. The Plan submitted by the sponsor to the IFC must and organizations consulted;
define a technically sound and culturally appropriate • an overview of the issues discussed;
approach to consultation and disclosure. The goal is to
ensure that adequate and timely information is provided • description of how the issues raised were
to project affected people and other stakeholders, and responded to by the project sponsor,
that these groups are given sufficient opportunity to including an explanation if issues were
voice their opinions and concerns. Important not addressed; and
considerations include: • explanation of how these responses were
• written and oral communications in local communicated to those consulted and the
languages and readily understandable formats wider public.

• easy accessibility to both written information d) Stakeholders. Provide an inventory of key

and to the consultation process by relevant stakeholder groups who will be informed and
stakeholders consulted about the project. Stakeholders are
persons who are affected by or can affect the
• use of oral or visual methods to explain outcome of a project. These can be affected
information to non-literate people communities, local organizations, NGOs and
• respect of local traditions of discussion, government authorities. Stakeholders can also
reflection, and decision making include politicians, commercial and industrial
enterprises, labor unions, academics, religious
• care in assuring that groups being consulted groups, national social and environmental
are representative (with adequate public sector agencies and the media.
representation of women, vulnerable groups,
and ethnic or religious minorities, and separate e) Public Consultation and Disclosure Program
meetings for various groups, where necessary) Disclosure of Information: The draft
Category A EA must be made available in the
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Procedure for Environmental and Social Review of Projects Page 51 of 51

project country as early as possible and not f) Timetable. Provide a schedule detailing when
later than 60 days prior to the proposed Board consultation and disclosure activities will take
date. The sponsor should proactively place for each stage of the process and each
disseminate a non-technical summary of the stakeholder group identified.
EA findings, in a form and language
g) Resources and Responsibilities. Indicate what
meaningful to those being consulted, to local
staff and management resources will be
stakeholders prior to consultation activities.
devoted to undertaking the public consultation
IFC will release the Category A EA through
and disclosure program and who within the
the World Bank InfoShop as early as possible
company will be responsible for carrying out
and at least 60 days prior to Board
these activities? IFC encourages the hiring of
consideration (regular procedure), Closing
a Community Liaison Officer to arrange and
Date (streamlined procedure), or management
facilitate these activities.
approval date (delegated authority).
Effective consultation and information
Consultation: The PCDP should set out a
disclosure may require assistance from
program for public consultation and
specialized consultants. The sponsor,
information disclosure during the following
however, should be involved in all
stages: a) during the early scoping phase,
consultations related to the project.
before the terms of reference for the Category
Appointment of a Community Liaison Officer
A EA are finalized; b) once a draft of the
is a good way to ensure and sustain this
Category A EA has been prepared; and c)
involvement.
during the construction and operation phases.
This section should: h) Grievance Mechanism. Describe the process
by which people affected by the project can
• summarize the goals of the program; and
bring their grievances to the sponsor, in a
• briefly describe the kinds of methods that culturally appropriate manner, for
will be used to communicate information consideration and redress.
to each of the stakeholder groups i) Reporting. Identify where and when the
identified in d) above. Methods used may results of the public consultation and
vary according to target audience, for information disclosure will be reported. This
example: should include:
• mass media, (newspapers, posters, • the draft EA report;
radio, television);
• information centers and exhibitions, • details of the results of consultation on
with brochures, leaflets, posters, and the draft EA, as necessary;
reports available;
• annual monitoring reports submitted to
• meetings and workshops; and
IFC.
•posters and other visual displays, etc.;
• briefly describe the methods that will be
used to consult with each of the
stakeholder groups identified in section d)
above. Methods used may vary according
to target audience, for example:
− interviews with key people and
groups;
− surveys, polls and questionnaires;
− public meetings;
− public hearings;
− continuous participation processes
involving agents or committees in
the project zone; and
− other traditional mechanisms for
consultation and decision-making.