what are the benefits for sponsors in complying with sustainable development principles
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By Nancy Choophungart, Proparco, Southeast Asia Regional OfficePresented at the Mekong Forum on Water, Food and Energy Phnom Penh, Cambodia December 7-9, 2011 Session 7: Financing and Revenue Management in water and energy resources developmentTRANSCRIPT
What are the benefits for sponsors in complying with sustainable development principles
Mekong Forum, Cambodia December 2011
Proparco – Support Sustainable Development Principles
� Private sector arm of the French Development
Agency (AFD), rated AAA
� Founded in Paris in 1977
� Combines long-term developmental objectives
and private sector returns
� Covers developing and emerging countries
(Africa, Middle-East, Asia, Latin America and
Caribbean)
� Present in South-East Asia since 2004
� Offers a wide range of long term financial
instruments (debt / mezzanine / equity)
� Not tied to French Interests
Proparco’s Shareholding Structure
Aga Khan Fund For Economic Development
PROPARCO – At a glance
French Financial
Institutions 26%
AFD 59%
Investors 4%
Ethical Funds & Foundations 1%
International Financial
Institutions 11%
Commitments – Proparco
• Proparco adopted the Environmental and Social Policies of the AFD Group in June 2008.
• Proparco, also in 2008, committed to apply for co-financing, the E & S procedures common toEDFI as defined in the "Rome Consensus"
• Proparco signed, in May 2009, «Principles of ResponsibleFinancing », common to EDFI– E&S Risk management for projects financed,– Contribution to the improvement of project quality and E & S performance of
client companies,– Measurement of project’s development positive impacts
�Promote responsible financing�E & S integrated throughout project life cycle – Pre and
Post financing
Why Do We Have to Manage Project’s E & S Risks?
1. Manage technical and natural risks : natural hazards, risks relatedto human activities, public health risks
2. Control financial, legal, and reputational risks: pollution, social unrest, social acceptances of the projects
3. Improve performance and quality of projectoperations : E & S management, natural resourcesconsumption, profitability
4. Identify the costs of E & S compliance : to finance the projects properly!
From Sponsor’s Perspective – Costs and Benefits of Complying with Sustainable Development Principles
From sponsor’s point of view – E & S Compliance
1. Additional costs : pre and post financing,
2. Time consuming
3. No apparent benefits : local laws vs international standards
Is it worth it ?
From sponsor’s point of view – Risk from E & S Non-Compliance
• Financial risks : project performance, profitability
• Reputation risks : immediate / long-term impact on the sponsors’reputation
• Legal risks : local laws vs international standards
There is often a correlationbetween E & S Management
and operational performance !
In Public’s Eyes – What we see in the news?
MAE MOH POWER PLANTPower Plant loses
Lampang pollution caseBy Ekkapong Praditpong
The NationPublished on March 5, 2009
In the News
Court awarded THB 3.0 billion (US$100 million) to the villagers for pollution caused by the plant
Bo Nok coal power plant project was suspendeddue to communities’ concerns over health andenvironmental impacts
In the News
Coal-fired power plant suspended
Workers from the Philippines and Thailandstaged protest at an international garment manufacturer ’sHeadquarters in Hong Kong. The workers submitted a joint appeal denouncing and resistingthe anti-worker and unjust retrenchment of workers
Mon, 17/08/2009 - 19:45 | by prachatai
In the News
Sustainable Development Principles – Proparco’s Approach
Based on international good practices
• Declaration of human rights (United Nations)
• IFC Performance Standards and associated EHS guidelines,www.ifc.org/ifcext/enviro.nsf/Content/EnvSocStandards
• Fundamental conventions of the ILO, www.ilolex.org
IFC “Performances Standards”
• PS1 : Social and Environmental Assessment and Management Systems
• PS2 : Labor and Working Conditions
• PS3 : Pollution Prevention and Abatement
• PS4 : Community Health, Safety, and Security
• PS5 : Land Acquisition and Involuntary Settlement
• PS6 : Biodiversity Conservation and Sustainable Natural ResourceManagement
• PS7 : Indigenous Peoples
• PS8 : Cultural Heritage
New version applicable in January 2012 :=> Supply Chain, Energy Efficiency, Biodiversity,
Carbon Footprint, Consent of Indigenous People (FPIC)
Sustainable Development Principles In Practice – A Case Study
Case Study : A Palm Mill – Ivory Coast
• Oil palm mills and plantation
• Project Category A : High environmental risks (polluti ons, biodiversity…) and social (safety risks, employmentconditions…)
• E&S Audit per IFC standards for E & S project monito ring and a potential new loan
- Visits to mills, plantations and villages,
- Meeting with the managers, employees, communities around the site
Case Study : A Palm Mill – Ivory Coast
• Safety problems : frequentand serious accidents => lackof workers protection and training, machinery’smaintenance and protection
Case Study : A Palm Mill – Ivory Coast
• Environmental Issues
- Waste management
- Emissions to air
- Waste water from palm mills
- Biodiversity
Case Study : A Palm Mill – Ivory Coast
Implementation of E & S Action Plan :
• Improvement of E & S management at HQ and site levels(définition of responsabilities, training…)
• Development of Environmental and Social Management Plan (ESMP) to ensure compliance with applicable local regulations and IFC E & S standards
• Appointment of an experienced Safety Manager
• Identification of risk areas and development of an action plan for risk reduction with immediate actions for key risks
• Development of E & S Policy and Procedures
• Monitoring : Annual Audit (3 years) by an independent E&S expert on the progress of the E&S Action Plan
Case Study : A Palm Mill – Ivory Coast
• Accidents record of client in 2009 :
Thank you
Nancy CHOOPHUNGARTProparco South East [email protected]