International Financing Standards to Mitigate Environmental Degradation Session 12: Applying Environmental & Social Performance Standards

The Cost of Environmental Degradation A PERSGA Training Workshop 18-21 January 2015 Cairo, Egypt

IFC Performance Standards on Environmental and Social Sustainability PS1: Assessment and Management of Environmental and Social Risks and Impacts PS2: Labour and Working Conditions PS3: Resource Efficiency and Pollution Prevention Performance PS4: Community Health, Safety, and Security Performance PS5: Land Acquisition and Involuntary Resettlement PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources

PS7: Indigenous Peoples PS8: Cultural Heritage International Finance Corporation of the World Bank Group

Assessment & management of environmental & social risks & impacts IFC Performance Standard 1

• Identify and evaluate environmental and social risks and impacts of the project • Adopt a mitigation hierarchy to anticipate and avoid, or where avoidance is not possible, minimize, and, where residual impacts remain, compensate/offset for risks and impacts… • Promote improved environmental and social performance of clients through the effective use of management systems

International Finance Corporation of the World Bank Group

Resource efficiency & pollution prevention IFC Performance Standard 3

• Avoided or minimised adverse impacts on human health and the environment by avoiding or minimizing pollution from the project

• Sustainable use of resources, including energy and water • Reduced project-related GHG emissions

International Finance Corporation of the World Bank Group

Biodiversity conservation & sustainable management of living natural resources IFC Performance Standard 6

Objectives • To protect and conserve biodiversity

• To maintain the benefits from ecosystem services • To promote the sustainable management of living natural resources through the adoption of practices that integrate conservation needs and development priorities

International Finance Corporation of the World Bank Group

IFC PS6, paragraph 7 7. As a matter of priority, the client should seek to avoid impacts on biodiversity and ecosystem services. When avoidance of impacts is not possible, measures to minimize impacts and restore biodiversity and ecosystem services should be implemented. Given the complexity in predicting project impacts on biodiversity and ecosystem services over the long term, the client should adopt a practice of adaptive management in which the implementation of mitigation and management measures are responsive to changing conditions and the results of monitoring throughout the project’s lifecycle.

• Avoid – Minimize – Restore • Adaptive Management - Lifecycle

Mitigating biodiversity impacts

IFC PS6, paragraph 10 10. For the protection and conservation of biodiversity, the mitigation hierarchy includes biodiversity offsets, which may be considered only after appropriate avoidance, minimization, and restoration measures have been applied.

• Mitigation hierarchy • Offsets

Mitigating biodiversity impacts

Biodiversity mitigation strategy

Avoid  Minimize  Restore  Offset Through a process of adaptive management Over the lifecycle of the project  “No net loss and preferably a net gain of biodiversity”

Mitigating biodiversity impacts

Step 1: Avoid Measures taken to avoid creating impacts from the outset, such as careful spatial or temporal placement of infrastructure or disturbance. For example, placement of roads outside of rare habitats or key species’ breeding grounds, or timing of seismic operations when aggregations of whales are not present. Avoidance is often the easiest, cheapest and most effective way of reducing potential negative impacts, but it requires biodiversity to be considered in the early stages of a project. (The Biodiversity Consultancy)

Mitigating biodiversity impacts

Step 2: Minimize Measures taken to reduce the duration, intensity and/or extent of impacts that cannot be completely avoided. Effective minimisation can eliminate some negative impacts. Examples include such measures as reducing noise and pollution, designing power lines to reduce the likelihood of bird electrocutions, or building wildlife crossings on roads . (The Biodiversity Consultancy)

Mitigating biodiversity impacts

Step 3: Restore Measures taken to improve degraded or removed ecosystems following exposure to impacts that cannot be completely avoided or minimised. Restoration tries to return an area to the original ecosystem that occurred before impacts, whereas rehabilitation only aims to restore basic ecological functions and/or ecosystem services (e.g. through planting trees to stabilise bare soil). Rehabilitation and restoration are frequently needed towards the end of a project’s life-cycle, but may be possible in some areas during operation (e.g. after temporary borrow pits have fulfilled their use). (The Biodiversity Consultancy)

Mitigating biodiversity impacts

Step 4: Offset Biodiversity offsets are measurable conservation outcomes resulting from actions designed to compensate for significant residual adverse biodiversity impacts arising from project development and persisting after appropriate avoidance, minimization and restoration measures have been taken. A biodiversity offset should be designed and implemented to achieve measurable conservation outcomes that can reasonably be expected to result in no net loss and preferably a net gain of biodiversity; however, a net gain is required in critical habitats. (IFC PS6)

Mitigating biodiversity impacts

Biodiversity mitigation steps

(The Biodiversity Consultancy)

Mitigating biodiversity impacts

Biodiversity mitigation timeline Adaptive management over the lifecycle of the project

(Cross-Sector Biodiversity Initiative)

Mitigating biodiversity impacts

OECD export credit agencies Members should … undertake appropriate environmental and social reviews and assessments for projects and existing operations respectively, as part of their due diligence relating to applications for officially supported export credits When undertaking a review, Members should benchmark … all eight IFC Performance Standards, in particular where justified and/or practicable due to the size and/or structure of the transaction… (OECD Common Approaches)

Environmental requirements of international finance

OECD ECAs AU: Export Finance and Insurance Corporation (EFIC) - AT: Oesterreichische Kontrollbank AG (OeKB) BE: Delcredere – Ducroire - CA: Export Development Canada (EDC) - CZ: Czech Export Bank - DK: Eksport Kredit Fonden (EKF) - EE: KredEx - FI: Finnvera Oyj & Finnish Export Credit Ltd (FEC) - FR: Compagnie française d'Assurance pour le commerce extérieur (COFACE) - DE: AuslandsGeschäftsAbsicherung der Bundesrepublik Deutschland & Euler Hermes - GR: Export Credit Insurance Organisation (ECIO) - HU: Hungarian Export Credit Insurance Ltd and Hungarian Export-

Import Bank plc (EXIM) - IL: The Israel Export Insurance Corp. Ltd. (ASHRA) - IT: SACE S.p.A. Servizi Assicurativi del Commercio Estero - JP: Nippon Export and Investment Insurance (NEXI) & Japan Bank for International Cooperation (JBIC) - KR: Korea Trade Insurance Corporation (K-SURE) & The ExportImport Bank of Korea (KEXIM) - LU: Office du Ducroire (ODD) - MX: Banco National de Comercio Exterior - NL: Atradius - NZ: Export Credit Office (ECO) - NO: The Norwegian Guarantee Institute for Export Credits (GIEK) - PL: Korporacja Ubezpieczén Kredytów Eksportowych (KUKE) - PT: Companhia

de Seguro de Créditos - SK: Export-Import Bank of the Slovak Republic ( Eximbank SR) - SI: Slovenska izvozna in razvojna banka, d.d. (SID) - ES: Compañía Española de Seguros de Crédito a la Exportación (CESCE) & Secretaría de Estado de Comercio (Ministerio de Economía) - SE: Exportkreditnämnden (EKN) & AB Svensk Exportkredit (SEK) - CH: Swiss Export Risk Insurance (SERV) - TR: Export Credit Bank of Turkey (Türk Eximbank) - UK: UK Export Finance - US: Export-Import Bank of the United States (Ex -Im Bank)

Environmental requirements of international finance

Equator Principles financial institutions For Projects located in Non-Designated Countries, the Assessment process evaluates compliance with the then applicable IFC Performance Standards on Environmental and Social Sustainability and the World Bank Group Environmental, Health and Safety Guidelines. (Equator Principles)

Note: Egypt is a ‘non-designated country’.

Environmental requirements of international finance

80 Equator banks plus others ABN Amro - Access Bank Plc - Ahli United Bank – ANZ - Arab African International Bank - ASN Bank NV - Banco Bilbao Vizcaya Argentaria - Banco Bradesco - Banco de Crédito - Banco de Galicia y Buenos Aires - Banco de la República Oriental del Uruguay - Banco do Brasil - Banco Espírito Santo - Banco Mercantil del Norte Banco PINE - Banco Popular Español - Banco Sabadell - Banco Santander – Bancolombia - Bank Muscat - Bank of America Corporation - Bank of Montreal Bank of Nova Scotia - Bank of Tokyo-Mitsubishi UFJ – Barclays - BMCE Bank - BNP Paribas - CAIXA Economica Federal – CaixaBank - Canadian Imperial Bank of Commerce – CIBanco – CIFI – Citigroup - Commonwealth Bank of Australia – CORPBANCA - Credit Suisse Group - Crédit Agricole Corporate and Investment Bank – DekaBank – DNB - DZ Bank - Ecobank Transnational Incorporated – EFIC - Eksport Kredit Fonden - Eksportkreditt Norway - Ex-Im Bank - Export Development Canada - Fidelity Bank – FirstRand – FMO – HSBC – IDFC - Industrial Bank - ING Bank Intesa Sanpaolo - Itaú Unibanco – JPMorgan - KBC Group - KfW IPEX-Bank - Lloyds Banking Group - Manulife Financial - Mauritius Commercial Bank - Mizuho Bank National Australia Bank – Natixis – Nedbank - NIBC Bank - Nordea Bank - Rabobank Group - Royal Bank of Canada - Royal Bank of Scotland - Skandinaviska Enskilda Banken - Société Générale - Standard Bank - Standard Chartered - Sumitomo Mitsui Banking Corporation - TD Bank Financial Group - UK Green Investment Bank - UniCredit Bank - Wells Fargo Bank Environmental requirements of international finance

Avoiding the costs of environmental degradation

 Apply the IFC Performance Standards & related standards  Adopting a Mitigation Strategy Avoid, Minimise, Restore, & Offset/Compensate  Timing: Environment management from planning to construction to operations to decommissioning and closure  Where to start: IFC PS1, PS3 & PS6  Why: Increasingly required by investors & donors

Thank you!

Mitigating environmental degradation from Egypt’s economic development