INTRODUCTION                                                

1. The International Finance Corporation (IFC) is a member of the World Bank Group, which also includes the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), and the Multilateral Investment Guarantee Agency (MIGA). IFC's business is investment in private sector projects through loans, equity investment, and other financial instruments. It is IFC policy that all its operations are carried out in an environmentally and socially responsible manner. To this end, IFC projects must comply with applicable IFC environmental, social and disclosure policies. In addition, IFC applies World Bank Group environmental, health and safety guidelines to all projects. In sectors where no appropriate IFC policies or guidelines exist, IFC applies relevant internationally recognized standards. Furthermore, the project sponsor must ensure compliance with host country requirements.

2. IFC's client base and project cycle are different from those of the World Bank. IFC's environmental and social policies, while harmonized with World Bank policies, are adapted to the private sector nature of IFC's business.

3. IFC reviews prospective projects for soundness before it invests, focusing on economic, financial, technical, legal, environmental and social issues during the project appraisal process. This environmental and social review procedure has been prepared for IFC staff and project sponsors for the review of a prospective project. A separate environmental procedure applies to small projects approved under delegated authority to management (e.g., Africa Enterprise Fund).

4. IFC's Environment and Social Development Department is responsible for the environmental and social review, clearance and supervision of projects in a manner consistent with the requirements contained in this review procedure. The Director of the Environment and Social Development Department reports to IFC's Executive Vice President. In addition, to achieve better integration of environmental and social considerations within IFC operations and to ensure high performance standards, an IFC Vice President has corporate oversight for environmental and social issues and disclosure matters.

5. This procedure: (a) discusses applicable environmental and social policies; (b) outlines applicable environmental and other guidelines; (c) describes the project cycle which IFC uses in evaluating a prospective project and highlights where in the cycle IFC Environment and Social Development Department staff are required to provide input; and (d) details the procedures that IFC staff must follow to ensure that projects meet IFC's commitment to environmentally sustainable and socially responsible projects. Additional procedural requirements are contained in a number of annexes (e.g., project categorization which then dictates the type of environmental assessment report, procedures for financial intermediary projects), while a number of guidance notes contain additional information to assist IFC staff and project sponsors (e.g., checklist of potential issues for an EIA, content of an environmental impact assessment for a Category A project). The requirements under this procedure will apply to all projects with an Investment Review Meeting on or after September 1, 1998.

POLICIES AND GUIDELINES                      

Policies

6. IFC environmental and social policies are fundamental to the project appraisal, approval and supervision process. Applicable operational policies are: OP 4.01, Environmental Assessment; OP 4.04, Natural Habitats; OP 4.09, Pest Management; OP 4.10, Indigenous Peoples (forthcoming); OP 4.11, Safeguarding Cultural Property in IFC-Financed Projects (forthcoming); OP 4.12, Involuntary Resettlement (forthcoming); OP 4.36, Forestry; OP 4.37, Safety of Dams (forthcoming); and OP 7.50, Projects on International Waterways . A brief summary of the important aspects of each policy is included in Table 1. 

Pollution Prevention and Abatement Handbook

7. The World Bank Group’s Pollution Prevention and Abatement Handbook applies to all projects directly financed by IFC (see also Annex F). OP 4.01, Environmental Assessment, states that the Pollution Prevention and Abatement Handbook describes pollution prevention and abatement measures and emission levels that are normally acceptable to IFC. However, taking into account country legislation and local conditions, the EA may recommend alternative emission levels and approaches to pollution prevention and abatement for the project. The EA report must provide full and detailed justification for the levels and approaches chosen for the particular project or site. References in this procedure to applying or meeting the guidelines incorporate the flexibility provided in OP 4.01.

8. The Pollution Prevention and Abatement Handbook is founded on the principles of sustainable development, cleaner production processes and pollution prevention. It contains three parts: Part I is a summary of key policy lessons in pollution management based on experience gained by the World Bank Group; Part II contains good practice notes on implementation of policy objectives; and Part III sets forth the detailed provisions to be taken into account by project sponsors in designing and operating projects. For a given industry sector, Part III contains the permissible emission levels that IFC expects the project sponsor to meet unless the environment assessment (EA) report justifies a variance from these levels, and the Vice President, Investment Operations in consultation with the Vice President with corporate responsibility for environmental issues, the Environment and Social Development, and Legal Departments agree with the recommended variance.

Occupational Health and Safety Guidelines

9. IFC applies provisions set forth in the World Bank Group’s Occupational Health and Safety Guidelines, which cover those industries and pollutants most frequently encountered in IFC projects.

Reference Materials

10. IFC consults a number of other reference materials in reviewing projects. Some examples follow:

a) Techniques for Assessing Industrial Hazards: A Manual. World Bank Technical Paper No. 55, 1988.

b) The Safe Disposal of Hazardous Wastes: Volumes I, II and III, World Bank Technical Paper No. 93, 1989.

c) Environmental Considerations for Port and Harbor Developments, World Bank Technical Paper No. 126, 1990.

d) Environmental Assessment Sourcebook, Volumes I, II and III, World Bank Technical Paper No. 139, 1991.

e) Resettlement as Development: A World Bank Sourcebook for Good Practice, World Bank (forthcoming).

f) Doing Better Business Through Effective Public Consultation and Disclosure: A Good Practice Manual, International Finance Corporation.

12. There are several types of manufacturing, trade 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.
                                                                                                            

Table 1: IFC’s Environmental and Social Safeguard Policies

IFC’S PROJECT CYCLE                      

Introduction

13. Timing of IFC involvement in a project can vary significantly. IFC’s initial involvement in a project normally occurs after a feasibility study has been completed (i.e., after site selection, preliminary design work, etc.). The length of the IFC project cycle depends upon the complexity of the project and the degree to which the project has been prepared by the project sponsor. From project identification to disbursement the project cycle can be as short as four to six months, but it also can be considerably longer for complex projects. Following are descriptions of the elements in the IFC project cycle. Figure 1 shows the sequence of events.

The Project Cycle

• Project Identification and Assignment of Project Team: the Investment Officer (IO) is responsible for project identification. Once the IO receives authorization from Investment Department management to proceed to the next phase, the IO requests assignment of a project team, including environmental and social specialists as appropriate.
   
• Early Review/CIC: the purpose of the Early Review is for IFC to give a quick decision to a project sponsor on whether the Corporation is interested in engaging in the project. As a basis for an early management decision the Investment Department prepares the Project Data Sheet Early Review (PDS-ER), which contains a project description, details of the potential investment, highlights any policy issues and potential dealbreakers, reviews IFC’s role in the project and development impact.¹ If sufficient information is available at this stage, the Environment and Social Development Department screens the project, assigns the project category and issues the Environmental and Social Information Memorandum (ESIM). The ESIM provides environmental and social language for the PDS-ER and the Monthly Operations Report (MOR). Note: the IO cannot alter this text. If there is insufficient information to prepare an ESIM, the project team requests additional details from the sponsor. The project category (A, B, C or FI – see Annex B for project categorization and Annex C for types of environmental assessment instruments), rationale for categorization, and environmental and social issues and any policy concerns are briefly stated in the PDS-ER. Based on the information in the PDS-ER, IFC senior management assesses the appropriateness of the project as an investment for IFC and, if so, authorizes project appraisal.² If the proposal is approved for appraisal it is listed in the MOR, a confidential internal document distributed to the Board. The MOR serves as an early notice to the Board of projects under consideration. The MOR provides the environmental category of each project and an outline of the major environmental and social issues. It also provides a monthly update of projects in the project cycle, including any significant changes, until review by IFC’s Board. If the PDS-ER is prepared prior to receipt of the ESIM, the MOR should be updated as necessary to incorporate final language on environmental and social issues.
   
• Project Appraisal: Appraisal is the stage in which IFC staff conduct a detailed evaluation of the project in terms of business potential and environmental, social and technical concerns, and review information provided by the project sponsor. The project team usually consists of an investment officer, a technical specialist, an economist, a lawyer, an insurance specialist, an environmental specialist, and, where appropriate, a social development specialist. During the appraisal process, more detailed environmental and social data are collected and analyzed for Category A, B, and FI projects. The PDS-ER is updated. If the Environment and Social Development Department is satisfied that the project can comply with appropriate IFC environmental and social requirements, the Department sends an Environmental and Social Clearance Memorandum (ESCM) to the Investment Department.
   
• Investment Review Meeting: After completion of the appraisal and receipt of the ESCM, the Department Director holds an Investment Review Meeting to review the recommendations of the project team and the updated PDS-ER, and to discuss any outstanding issues.
   
• Negotiations: After a decision in the Investment Review Meeting to process the project, IFC negotiates with the project sponsor to establish the primary terms and conditions of IFC participation in the project, including environmental and social aspects, such as conditions of disbursement and covenants, performance and monitoring requirements, and resolution of any outstanding issues. Note: negotiations frequently continue over an extended period.
   
• Board Approval: IFC projects can be submitted to the Board using regular or streamlined procedures. The environmental and social due diligence process and the public disclosure requirements do not vary according to procedure; only the documentation submitted to the Board varies. All significant environmental and social issues must be satisfactorily addressed prior to submission of project documents to the Board.³

- Regular Procedure: Projects with serious or contentious environmental and/or social issues or potentially significant risks must proceed by the regular procedure. The Board Report describes the project concept, project sponsors and management, the market, the cost and financial structure, the IFC investment, the IFC role and development impact, and environmental and social issues along with mitigating measures, outstanding issues, and other appropriate details. IFC staff make a formal presentation on the project at a Board meeting. Executive Directors have an opportunity to ask questions about the project. Upon conclusion of the Board discussion, approval to proceed with the project is sought.

- Streamlined Procedure: The streamlined procedure provides the Board with a written Project Summary of the key features and issues of a proposed project, with a view to permitting the Board to determine if there are issues in the project which lead a Board member to call for a full Board discussion. The project summary includes information on environmental and social issues, which contains the same level of detail on environmental and social issues as a regular procedure Board Report. The significant difference between streamlined and regular procedure is that the streamlined procedure allows for approval of a project without requiring a formal meeting of the Board of Directors. Any member of the Board has the right to request full discussion of any project submitted under streamlined procedure. In the absence of such a request, the Board delegates approval authority for streamlined procedure projects to management, with management approval reported in the Monthly Operations Report (MOR).
 

• Signing of Legal Agreements (Commitment): Signing constitutes the formal acceptance by the project company, IFC, and other parties (if any) of the terms and conditions under which IFC will finance the project.
   
• Disbursement: Disbursement occurs on the terms and conditions contained in the legal documentation.
   
• Supervision: IFC monitors the performance of all active projects in its portfolio to ensure compliance with environmental, social and other conditions. The project company provides annual environmental monitoring reports to IFC no later than 90 days after the end of each of its fiscal years. In addition Project Supervision Reports (PSRs), which IFC prepares at least annually, include a section on environmental and social compliance. In the case of non-compliance, an appropriate course of action is determined by IFC, and the project company is notified as to required follow-up actions.
   
• Evaluation: In project evaluations, environmental and social performance is fully taken into account as an important element in the performance of IFC, the company and the project. Investment Assessment Reports (IARs) summarize evaluations of the actual environmental and social impacts of the project against the impacts anticipated in the environmental assessment and review. They also describe the effectiveness of the mitigation measures.
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¹ The draft PDS-ER should include a suggested Tier categorization for the project—see the Revised Operational Procedures for more information on Tiering. (Note: A project that is categorized by the Environment and Social Development Department as Category A or a project with special issues is automatically a Tier III project.).

² Tier I projects are circulated to the Corporate Investment Committee (CIC) for information only; Tier II and Tier III projects are circulated to the CIC for clearance on a five day no-objection basis.

³ IFC's Board of Directors has delegated authority to management to approve certain small projects, e.g. under the Africa Enterprise Fund (AEF) and the Small Enterprise Fund (SEF).

If Board Decides to Discuss Project

ENVIRONMENTAL AND SOCIAL REVIEW PROCEDURE                   

Introduction

14. IFC’s environmental and social review procedure outlines the process by which IFC determines the adequacy of the project sponsor's environmental assessment for a proposed project and works with the project sponsor to address environmental and social issues and opportunities associated with the project. The purpose of the environmental and social review is to ensure that the project complies with applicable IFC environmental and social polices and meets the applicable guidelines. In sectors where no appropriate IFC policies or guidelines exist, IFC applies internationally recognized standards. The project sponsor must ensure compliance with host country requirements. The following sections describe who has responsibility for the various steps in the review process and then details each of the steps. Figure 2 (p. 17 of 51) depicts the steps in the process.

Purpose and Nature of Environmental Assessment (EA)

15. The purpose of an environmental assessment (EA) is to improve decision making and to ensure that the project under consideration is environmentally and socially sound and sustainable. Environmental and social consequences should be recognized early in the project cycle and taken into account in project selection, siting, planning, and design. EA identifies ways of improving a project environmentally and socially and (in order of priority) preventing, minimizing, mitigating, or compensating for adverse impacts as appropriate for individual projects. These steps help avoid costly remedial measures. By calling attention to environmental and social issues early and by involving stakeholders in meaningful consultations, EA (a) allows a project sponsor and IFC staff to address these issues in a timely and cost-effective fashion; (b) reduces the need for project conditionality because appropriate steps can be taken in advance or incorporated into project design, or alternatives to the proposed project can be considered; and (c) helps avoid costs and delays in implementation due to unanticipated problems. EA can provide a mechanism for coordination between the project sponsor and relevant government agencies on environmental and social issues and for addressing the concerns of affected groups and local interested parties. In addition, EA plays an important role in building the environmental and social management capability of the project sponsor.

16. EA is the responsibility of the project sponsor. Early start of the EA process and close integration of EA with other aspects of project preparation and early start of the EA process ensure that (a) environmental and social considerations are given adequate weight in project selection, siting, and design decisions; and (b) the review process does not delay project processing.

Social Review

17. The general requirement to address social issues during the EA process is contained in OP 4.01, Environmental Assessment. Specific policy requirements are contained in OP 4.10, Indigenous Peoples (forthcoming); OP 4.11, Safeguarding Cultural Property in IFC-Financed Projects (forthcoming); and OP 4.12, Involuntary Resettlement (forthcoming). Where projects have the potential to result in significant and diverse social impacts, IFC will collect information on the potential social impacts of the proposed project and consider these issues as part of its project appraisal process. In some situations, however, the magnitude and complexity of social issues go beyond the scope or responsibility of the private sector and fall within the domain of government. IFC recognizes the importance and sensitivity of the project sponsor-government relationship in addressing such issues. Given the variations among countries, sectors, and individual projects, the interface between the private and public sectors on these issues is best addressed on a case-by-case basis.

IFC Responsibility

18. Environmental and social review involves a broad range of environmental, social, technical, commercial and legal issues and requires input from various members of the project team. The Investment Department has line responsibility for overall performance of a project, including its environmental and social performance. Environmental and social development specialists and technical specialists in the Environment and Social Development Department provide specialized support on environmental and social matters to the project team and project sponsor.

19. The Environment and Social Development Department is responsible for the environmental and social review of projects, including formal clearance of projects from an environmental and social standpoint. The Environment and Social Development Department, utilizing its best professional judgment, assesses whether each project will comply with applicable policies and meet the applicable guidelines, coordinates with the World Bank as necessary, and makes the Investment Department aware of any issues that are not in conformity with these requirements. The formal clearance from the Environment and Social Development Department states that, based on the information reviewed, the project, if implemented as designed and operated accordingly, will comply with applicable IFC policies and meet the applicable guidelines. The formal clearance does not certify the project’s performance against host country requirements. The technical specialist provides support to the Investment Departments, the Environment and Social Development Department and the project sponsor on technical matters, including technical aspects of environmental performance, as appropriate. The lawyer provides support on legal matters, including drafting the environmental and social provisions in the project’s legal documentation.

20. The Investment Department Director is responsible for the decision to proceed with a project, based on the results of the appraisal, provided that environmental and social clearance has been received from the Environment and Social Development Department. Where environmental and social issues are outstanding after appraisal, the Vice President, Investment Operations in consultation with the Vice President with corporate responsibility for environmental issues, the Environment and Social Development, Legal and Investment Departments, determine whether or not these issues have been addressed sufficiently that the project should be approved.

Early Review

21. At the earliest possible stage, the Investment Department requests the Environment and Social Development Department to allocate specialists to a proposed project. It is beneficial to the project sponsor and IFC for the Environment and Social Development Department to provide guidance on environmental and social requirements at the earliest possible opportunity. A project sponsor can request such guidance in advance of an investment mandate and IFC may provide such guidance under properly established terms and conditions. As soon as the Investment Department decides that a project will proceed, the investment officer and technical specialist provide the PDS-ER and any other relevant information to the Environment and Social Development Department and request in writing initial project screening and preparation of the Environmental and Social Information Memorandum (ESIM). The Environment and Social Development Department also completes the appropriate sections of the PDS-ER. These sections may undergo significant revisions if preliminary information is scant, and the Environment and Social Development Department may change the category as new information is received. Investment Officers should encourage project sponsors to contact the assigned environmental and social specialists early in the process to discuss issues of concern. Note: staff of the Environment and Social Development Department use the Environmental and Social Questionnaire (ESQ) to source information from the project sponsor as early as possible in the process and use this collected information in classifying the project and identifying environmental and social issues of concern.

Project Screening

22. The purpose of project screening is to decide on the nature and extent of the environmental assessment needed for the project. Projects are categorized by the Environment and Social Development Department into environmental review category A, B, C, or FI in accordance with IFC’s OP 4.01, Environmental Assessment . The classification of a project depends on the type, location,⁴ sensitivity,⁵ and scale of the project,⁶ as well as the nature and magnitude of its potential impacts. IFC uses four categories for its projects. They are defined as follows:

• Category A: A proposed project is classified as Category A if it is likely to have significant adverse environmental impacts that are sensitive,⁷ diverse, or unprecedented. These projects may affect an area broader than the sites or facilities subject to physical works. EA for a Category A project examines the project’s potential positive and negative impacts, compares them with those of feasible alternatives (including the “without project” scenario), and recommends any measures needed to prevent, minimize, mitigate, or compensate for adverse impacts and to improve performance. For a Category A project, the project sponsor is responsible for preparing a full report, normally an Environmental Impact Assessment (EIA) and for preparing and updating an Environmental Action Plan (EAP).
   
• Category B: A proposed project is classified as Category B if its potential adverse environmental impacts on human populations or environmentally important areas – including wetlands, forests, grasslands, and other natural habitats – are less adverse than those of Category A projects. These impacts are site-specific; few if any of them are irreversible; and in most cases mitigation measures can be designed more readily than for Category A projects. The scope of EA for a Category B project may vary from project to project, but it is narrower than that of EA for a Category A project. Like Category A EA, it examines the project’s potential positive and negative impacts and recommends any measures needed to prevent, minimize, mitigate, or compensate for adverse impacts and improve environmental performance. The project sponsor is responsible for providing the required environmental and social information. The findings and results of Category B EA are described in the project documentation (i.e. Environmental Review Summary).⁸
   
• Category C: A proposed project is classified as Category C if it is likely to have minimal or no adverse environmental impacts. Beyond screening, no further EA action is required for a Category C project.
   
• Category FI: A proposed project is classified as Category FI if it involves investment of IFC funds through a financial intermediary in subprojects that may result in adverse environmental impacts. In addition, in some financial markets projects IFC funds are not targeted to specific subprojects (e.g. equity in a financial institution such as a commercial bank), but the financial institution has operations which may have adverse environmental impacts (e.g. project finance). In such cases IFC may also classify the project as Category FI. If subprojects potentially result in minimal or no adverse environmental impacts, the project is characterized as C.

23. Annex B contains additional procedural requirements on project categorization, while Annex C further specifies the appropriate Environmental Assessment (EA) tools. Annexes D and E contain procedural requirements related to EA for large dams and reservoirs and EA for projects involving pest management, respectively. Due to the variety of FI projects encountered and the complexity of many of these projects, detailed procedural requirements for categorizing FI projects and assessing their 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 is presented at the end of the Annexes.

24. A number of Guidance Notes are provided to assist IFC staff and project sponsors during the EA process. Guidance Note A provides a checklist that can be used to identify potential issues during preparation of an EIA. Guidance Notes B, C and D provide outlines of an EIA for a Category A project, an Environmental Action Plan (EAP), and an environmental audit, respectively. Guidance Note E provides an outline of a project specific major hazard assessment. Finally, Guidance Note F contains best practice guidance for preparation of a Public Consultation and Disclosure Plan (PCDP). The requirements for a Resettlement Plan are contained in an Annex in OP 4.12, Involuntary Resettlement.

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4 ^. “Location” refers to proximity to or encroachment on environmentally sensitive areas, such as mangroves, wetlands, and rain forests.

⁵ “Sensitivity” is defined in footnote 7.

⁶ “Scale” needs to be judged by the environmental and social specialist in the project context; if large, the project is more likely to be a Category A project.

^{7 .}A potential impact is considered “sensitive” if it may be irreversible (e.g., lead to loss of a major natural habitat), affect vulnerable groups or ethnic minorities, involve involuntary displacement and resettlement, or affect significant cultural heritage sites.

^{8 .}When the screening process determines, or national legislation requires, that any of the environmental and social issues identified warrant special attention, the findings and results of EA for Category B projects may be set out in a separate report. Depending on the type of project and the nature and magnitude of the impacts, this report may include, for example, a limited environmental impact assessment, an environmental mitigation or action plan, an environmental audit, a limited resettlement plan, a limited indigenous peoples action plan, or a hazard assessment. For Category B projects that are not in environmentally sensitive areas and that present well-defined and well-understood issues of narrow scope, IFC may accept alternative approaches for meeting EA requirements: for example, environmentally sound design criteria, siting criteria, and pollution standards, acceptable to IFC, for small and medium-scale industrial plants; environmentally sound design criteria, siting criteria, and construction standards, acceptable to IFC, for small and medium-scale agribusiness and agricultural projects; and specific environmental and social siting and design criteria, construction standards, fire and life safety requirements, and inspection procedures, acceptable to IFC, for tourism projects.

Environmental and Social Information Requirements

25. Upon receipt of the PDS, the Environment and Social Development Department issues an ESIM to the investment officer (and to the technical specialist), documenting the following:

• the category of the project and the rationale for the categorization;
   
• the major environmental and social concerns that have been identified or may be associated with the project;
   
• the draft of the environmental language for the PDS and the MOR;
   
• the details of the environmental and social information required from the project sponsor to enable the Environment and Social Development Department to complete the review process;
   
• typical standards for a project of this type (e.g., IFC’s environmental and social policies, applicable guidelines, host country requirements and/or internationally recognized standards) which will be applied in reviewing the project; and
   
• for a Category A project (and category B projects where there are small scale resettlement and/or pest management issues), a general outline of the project’s public consultation and disclosure plan for inclusion in the PDS as well as details of the requirement for the project sponsor to prepare a detailed Public Consultation and Disclosure Plan (PCDP) for the project. The project sponsor is responsible for preparing the PCDP, with guidance provided by the Environment and Social Development Department. A preliminary PCDP must be submitted to the Environment and Social Development Department for review and approval as soon as possible and in advance of the appraisal mission. On approval of the PCDP by the Environment and Social Development Department, the Investment Department submits the PCDP to the Investment Policy Committee for their review and approval. During project appraisal the PCDP is periodically updated and any significant changes, after Environment and Social Development Department approval, are brought to the attention of the Investment Policy Committee by the Investment Department.

• Verification that the financial intermediary will be capable of and committed to meeting IFC requirements. See Annex F for procedures for FI projects.

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).

Privatizations

34. For privatization projects, IFC usually requires the project sponsor to retain an independent consultant to complete an environmental audit of the facilities. Depending on the results of the audit, IFC makes recommendations and may require the project sponsor to agree on programs to bring the facilities into compliance with applicable IFC policies and meet applicable guidelines within a reasonable time frame. If new facilities are also involved, the new facilities financed by IFC must comply with applicable IFC policies and meet applicable guidelines (see Annex C for more details). Where privatization is expected to result in significant social and economic impacts due to loss of direct and indirect employment and/or impacts on 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 above (Social Review).

Corporate Investment Programs

35. 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 (see Annex C for more details).

Financial Intermediary (FI) Operations

36. Financial intermediary operations involve a broad range of financial institutions and financial products. The requirements for a particular project depend on the kind of financial institution and financial products involved. Requirements are set forth in three “types” as outlined in Annex F , which provides detailed information about how the requirements are applied to various types of Category FI projects. When IFC funds are not directly targeted to specific subprojects but support a financial institution whose investments may have adverse environmental impacts, IFC focuses on the process of environmental management in the institution. When IFC funds are targeted to specific subprojects through the financial institution, IFC focuses on both the process and the subprojects.

Public Consultation and Disclosure                

Public Consultation

37. During the EA process for Category A projects and for Category B projects where there are special issues of concern, such as small scale resettlement or pest management issues, the project sponsor is required to conduct meaningful consultation with relevant stakeholders including affected groups, nongovernmental organizations (NGOs) and local authorities about the project's environmental and social aspects and take their views into account. The project sponsor initiates such consultations as early as possible. For meaningful consultations, the project sponsor provides relevant information in a timely manner and in a form and language that are understandable and accessible to the groups being consulted. For Category A projects, these actions, and future consultations to be undertaken during the construction and operation of the project, are incorporated into a public consultation and disclosure plan (PCDP) (see Guidance Note F). All project sponsors should consult IFC’s Doing Better Business Through Effective Public Consultation and Disclosure: A Good Practice Manual. This Manual provides guidance on effective public consultation and disclosure for the private sector.

38. For Category A projects , the project sponsor consults relevant stakeholders at least twice: (a) during scoping and before the terms of reference for the EA are finalized, and (b) once a draft EA report is prepared. For the initial consultation, the project sponsor provides a summary of the proposed project’s objectives, description, and potential impacts; for consultation after the draft EA report is prepared, the project sponsor provides a non-technical summary of the report’s findings. In both cases, the summaries should be provided in advance of consultation and proactively disseminated to local stakeholders in a form and language meaningful to those being consulted.

39. Following the public consultation on the draft EA, the project sponsor supplements the EA by adding details of the public consultation process, as necessary, including the project sponsor’s responses to concerns raised by the various stakeholders and details of measures taken to incorporate these concerns into project design and implementation.

40. The project sponsor continues to consult with relevant stakeholders throughout project construction and operation, as necessary, to address EA related and other issues that affect them. IFC requires the project sponsor to report on ongoing consultation as part of its annual reporting requirements.

41. In those cases where the EA has been completed prior to IFC involvement in the project, the Environment and Social Development Department reviews the public consultation and disclosure activities carried out by the project sponsor during and after EA preparation. If necessary the Environment and Social Development Department and project sponsor then agree on a supplemental public consultation and disclosure plan (PCDP) to address any identified deficiencies. The supplemental PCDP must be submitted to the Environment and Social Development Department for review and approval as soon as possible and in advance of the appraisal mission. On completion of this program, the project sponsor prepares a report detailing the additional work undertaken and the results achieved. The EA will only be considered complete and made available to the World Bank InfoShop once the report on additional work is complete.

42. For Category B projects IFC may determine that there are special issues of concern, such as small-scale resettlement or pest management issues, that require the project sponsor to consult early in the project cycle with potentially affected stakeholders.

Disclosure of Information

43. For Category A projects the project sponsor gives public notification and makes the draft EA report available at a public place readily accessible to project stakeholders as early as possible and no later than 60 days prior to Board consideration (regular procedure), Closing Date (streamlined procedure), or management approval date (delegated authority). This document should include all supplements and addenda to the EA report requested by IFC and the responses to the public consultation process. In addition, a non-technical EA report summary in the local language shall be proactively disseminated to local stakeholders. With the project sponsor's consent, IFC releases the EA report to the public through the World Bank InfoShop as early as possible and no later than 60 days prior to Board consideration (regular procedure), Closing Date (streamlined procedure), or management approval date (delegated authority). The 60 day period commences only when IFC determines that all relevant information requested from the project sponsor has been provided to IFC and placed in the World Bank InfoShop. Such release does not constitute IFC endorsement of the project. If the project sponsor objects to IFC releasing this information through the World Bank InfoShop, IFC staff do not continue work on the project. Once the project sponsor officially provides an EA report to IFC, IFC distributes the summary (in English) to the members of IFC’s Board of Directors. In addition, IFC may require disclosure of addenda which document significant consultation post-EA report release, but this would not re-start the 60 day period. For FI operations involving investment of IFC funds directly in specific subprojects, the FI ensures that EA reports for Category A subprojects are made available in a public place readily accessible to affected groups and local NGOs.

44. For Category B projects , on completion of IFC's review of the project sponsor's environmental analysis, the Environment and Social Development Department prepares an Environmental Review Summary (ERS) which contains a project description, the rationale for the project categorization, the list of key environmental, social, health and safety issues, details of the mitigation measures to bring the project into compliance with IFC’s requirements, an outline of any outstanding issues and information on the project’s monitoring and reporting program to ensure compliance. After endorsement by the project sponsor, the Investment Department releases this ERS as well as the results of any consultations required by IFC for Category B projects with special issues (see paragraph 42), to the World Bank InfoShop no later than 30 days prior to Board consideration (regular procedure) or Closing Date (streamlined procedure). If the project sponsor objects to IFC’s releasing the ERS or consultation results through the World Bank InfoShop, IFC staff do not continue work on the project. Since project affected people may not have reasonable access to a World Bank or IFC office, the sponsor is also required to release locally the ERS (as amended by IFC if necessary), and the results of any consultations required by IFC, translated into the local language, in a culturally appropriate manner, to facilitate awareness by relevant stakeholders that the information is in the public domain for review. This local release should occur no later than 30 days prior to Board consideration (regular procedure) or Closing Date (streamlined procedure). For example, if a Category B project requires preparation of a limited resettlement plan, this plan must be prepared in accordance with the requirements of OP 4.12, Involuntary Resettlement (forthcoming), including local consultation and disclosure. In addition, IFC releases the resettlement plan to the World Bank InfoShop and the project sponsor releases it locally no later than 30 days prior to Board consideration. IFC’s Vice President, Investment Operations may, in rare and compelling circumstances, issue a waiver in writing of the 30 day period.

45. After completion of the appraisal, the Department Director holds an Investment Review Meeting (IRM) to review the recommendations of the project team and the updated PDS-ER, and to discuss outstanding issues. The Investment Department management prepares a Summary of Project Information (SPI). The SPI provides a brief factual summary of the main elements of the evolving project for disclosure to the public through the World Bank InfoShop. After the project sponsor’s approval of the SPI, the Investment Department transmits it to the World Bank InfoShop a minimum of 30 days prior to Board consideration (regular procedure) or Closing Date (streamlined procedure) as described in detail in IFC’s Disclosure Policy. IFC’s Vice President, Investment Operations may, for compelling business reasons, issue a waiver in writing of the 30 day period. The Environment and Social Development Department prepares the section of the SPI entitled “Environmental Category and Issues.” It describes the environmental category for the project, provides a brief summary of any environmental and social issues, and sets out the mitigation measures designed to address those issues.

Environmental and Social Clearance Memorandum

46. Prior to of the Investment Review Meeting for the project and upon satisfaction that the project can comply with the applicable IFC policies and meet the applicable guidelines, the Environment and Social Development Department issues the Environmental and Social Clearance Memorandum (ESCM) to the Investment Department. The ESCM clears the project for Board consideration and details outstanding issues as well as the actions required to address those issues. Project monitoring and reporting requirements are also identified, as are other obligations of the project sponsor. The Investment Officer conveys these requirements to the project sponsor. The Environment and Social Development Department also prepares a summary of the findings of the environmental and social review for inclusion in the Decision Memorandum and for the ERS.

Board Approval

47. After management approves the project at the Investment Review Meeting, the Environment and Social Development Department prepares an outline of the findings of the environmental and social review for inclusion in the report to the Board, including the project category, major environmental and social issues and mitigation measures, other appropriate details, and a statement regarding compliance of the project with relevant requirements.

Investment Agreement

48. After project approval, the investment officer, in consultation with the lawyer and environmental and social development specialists, ensures that environmental and social requirements are reflected in the IFC legal documentation for the project. The investment agreement contains covenants which require the project company to comply with IFC and host country requirements. Annexes to the investment agreement include applicable IFC policies and guidelines, as appropriate. In addition, the investment agreement stipulates that the project company must, no later than 90 days after the end of the company’s fiscal year, submit annual environmental monitoring and performance reports to IFC, in a format agreed by IFC. For Category A projects, the investment agreement requires the project company to comply with the requirements described in the agreed Environmental Action Plan (EAP). IFC also requires that the annual environmental monitoring and performance reports for Category A projects be completed or verified for completeness and accuracy by an independent consultant acceptable to IFC.

Revision to the Environmental Action Plan and Environmental Review Summary

49. For Category A projects, the Environmental Action Plan (EAP) (see Guidance Note C for a detailed outline of an EAP) is an essential and critical part of the EA report and must be included as a part of the draft EA report that is released locally for public consultation. After release of the EA report to the World Bank InfoShop, the project sponsor updates the EAP to reflect the final understandings on environmental and social issues with IFC. After approval of the final EAP by the Environment and Social Development Department, 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 and Social Development Department if necessary updates the ERS to reflect the final understandings between the project sponsor and IFC on environmental and social issues. After the final ERS is endorsed by the project sponsor, the Investment Department releases the ERS to the World Bank InfoShop and the project sponsor releases it locally in a culturally appropriate manner (see paragraph 44). If the project sponsor objects to IFC releasing the EAP, the updated EAP, or the updated ERS, IFC staff do not continue to work on the project.

Monitoring and Supervision⁹

50. IFC monitors the environmental and social performance of projects in its investment portfolio. Project monitoring usually occurs in one or more of the following ways:

a) Review of annual monitoring reports prepared by the project company (in a format agreed by IFC);

b) Supervision missions carried out by the Investment Department and the Environment and Social Development Department; and/or

c) Project site visits by staff of the Environment and Social Development Department. 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 and Social Development Department as required in the legal documentation for the project. The Environment and Social Development Department 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 and Social Development Department discusses an appropriate course of action with the Investment and Legal Departments and specialists in the Environment and Social Development Department. The investment officer notifies the project company of this action and any necessary follow-up requirements. The investment officer is responsible for follow-up with both the project company and the Environment and Social Development Department until the non-compliance situation is resolved.

52. Project Supervision Reports (PSRs), which IFC prepares at least annually, must include a section on environmental and social compliance with regard to covenants in the investment agreement. In addition, the PSR must state whether the Environment and Social Development Department has received the Annual Monitoring Report (as required in the investment agreement), the date submitted to IFC and the date reviewed by the Environment and Social Development Department.

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^{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.

Evaluation

53. During the course of selected projects an Investment Assessment Report (IAR) is prepared which summarizes the evaluations of the actual environmental and social impacts of the project against the impacts anticipated in the EA report, and assesses the effectiveness of the mitigating measures. The Environment and Social Development Department provides input to the IARs and signs off on the relevant draft text and attendant project performance ratings.