Asia Society Policy Institute

Requirements for developers and contractors to manage environmental and social risks and impacts for projects financed by the International Finance Corporation (IFC). Recommended guidance for all developers and contractors on how to identify, avoid, mitigate, and manage environmental and social risks and impacts.

Offers a comprehensive set of environmental and social performance standards to achieve more sustainable development outcomes.

Developers and Contractors (originally, the “Client”) must:

• Establish an overarching policy of principles and environmental and social objectives to guide each project.
• Ensure each project complies with host countries’ laws and regulations and aligns with the IFC’s “Performance Standards on Environmental and Social Sustainability.”

Developers (and Contractors, where applicable) must:

• Disclose relevant information on the following:
  • The purpose, nature, and scale of each proposed project.
  • The duration of the project’s activities.
  • The project’s risks and potential impacts on communities.
  • The mitigation measures for these risks and potential impacts.
  • The proposed stakeholder engagement process.
  • The grievance redress mechanism (GRM).
• Identify a full list of stakeholders who may be interested in their activities and consider how external communication may facilitate dialogue between these stakeholders.
• Develop and implement a stakeholder engagement plan that is scaled to a project’s risks and impacts.
  • Include differentiated measures to allow for effective participation of individuals who are disadvantaged or vulnerable on the basis of race, color, sex, language, religion, property, birth, political or other opinions, national or social origin, property, birth, or other statuses.
• Ensure that community representatives support the views of their people if stakeholder engagement depends on them.
• Establish a GRM to receive and promptly resolve affected communities’ concerns/complaints about a project’s environmental and social performance.
  • This mechanism must be clear, transparent, free, readily accessible, and culturally appropriate.
  • It should ensure that complainants are not punished for their complaints.
• Consider feasible alternative project designs to avoid or minimize physical and/or economic displacement while balancing environmental, social, and financial costs and benefits.
  • Pay particular attention to impacts on the poor and other vulnerable groups.
• Provide workers with two documents:
  • A clear explanation of their rights under national labor and employment laws.
  • An applicable collective agreement that summarizes their hours of work, wages, overtime, compensation, and benefits when the working relationship begins or material changes occur.
• Offer affected people compensation for the loss of their assets at the full replacement cost if displacement cannot be avoided.
  • Provide other forms of assistance to either improve or restore affected people’s living standards or livelihoods.
• Develop a resettlement action plan for projects that require physical displacement and a livelihood restoration plan for ones that involve economic displacement.
• Obtain the Free, Prior and Informed Consent (FPIC) of potentially affected Indigenous peoples.
• Retain competent professionals to help document, conduct field-based studies on, and protect cultural heritage.

IFC must:

• Screen and categorize each project as soon as possible to determine the nature and level of the environmental and social impact assessment (ESIA), information disclosure, and stakeholder engagement required of developers and contractors.
  • Examine applicable Environmental and Social Safeguards (ESSs) and required environmental and social instruments.
• Assign projects to one of the following three categories:
  • Category A projects have significant adverse environmental and social impacts that are irreversible, cumulative, diverse, or unprecedented. Both an ESIA and an environmental and social management plan (ESMP) are required.
  • Category B projects have potentially adverse environmental and social impacts. Only a few, if any, impacts are irreversible or cumulative, but they are limited to project areas and can be successfully managed. An initial review of environmental and social risks and impacts must be conducted. An appropriate environmental and social instrument must be prepared to assess impacts.
  • Category C projects have minimal or no adverse environmental and social impacts. An ESIA is not required, but an analysis of each project’s environmental and social aspects must be prepared.
• Monitor each project’s environmental and social aspects during the project implementation process. Independent consultants may be retained for monitoring.

Developers (and Contractors, where applicable) must:

• Conduct an ESIA that examines potential environmental and social risks and impacts, considers feasible alternatives (including the “no project” alternative), and recommends measures to avoid, mitigate, offset, or compensate for adverse impacts and improve their environmental and social performance.
• Conduct a social impact assessment (SIA) that involves meaningful consultation with relevant parties such as the private sector, governments, nongovernmental organizations (NGOs), and affected people.
  • The assessment must be culturally appropriate and gender sensitive.
  • It should use similar methods to assess each project’s impacts on Indigenous peoples and their use of resources.
• Prepare a land acquisition and resettlement plan (LARP) that addresses the monitoring and reporting framework; the budget and time-bound implementation schedule; the displaced people’s entitlements, income, and livelihood restoration strategy; institutional arrangements; and provisions for the GRM.
• Prepare an Indigenous peoples plan (IPP) if projects can impact Indigenous communities.
• Conserve and avoid impacts on cultural resources.
  • If this is not possible, a cultural resources management plan (CRMP) must be prepared.
• Provide progress reports to affected communities.
  • These reports must focus on the implementation of action plans to address risks to or impacts on affected communities, ongoing consultation, or concerns identified through the GRM.