Environmental Aspects of International Project Financing

Transcription

1 Environmental Aspects of International Project Financing Overview of the Equator Principles and the IFC s Performance Standards Prepared for the 2011 IADC Environmental Conference & Exhibition Trinidad & Tobago May12, 2011 Presenters: Troy M. Boley, Ph.D. Ruth Benning, MBA 1

2 Whose Rules Do You Follow? Purpose of this presentation: To provide awareness International projects introduce new complexities: Language Culture Business ethics Fast-paced project timelines Design basis and regulatory requirements Corporate minimum standards Mobile offshore drilling: Locations and jurisdictions change Owner Operator (merging of standards) Financing changes?? 2

3 Differing Approaches and a Chain of Overlapping Standards FINANCIAL APPROACH Financing Application Equator Principles IFC Performance Standards IFC EHS General Guidelines IFC Sector EHS Guidelines OPERATIONAL APPROACH Project Development Country Assessment Trade Group Standards Application / Agency Permitting Potential EMS Registrar Review Voluntary 3

4 Presentation Agenda Key Topics The Equator Principles The World Bank & the IFC Performance Standards IFC s General EHS Guidelines IFC s EHS Standards for the Oil & Gas Industry IADC s HSE Guidelines 4

5 The Equator Principles Past project failures highlighted the need for financial institutions (FIs) to better understand environmental risk. Non-government organization pressure Ethical investment funds Reputation management Corporate social responsibility (CSR) FIs created a framework to manage environmental and social issues at the project finance phase used NGO input sessions to build consensus. This is a voluntary, private-sector initiative. No one institution could do it alone: Level the playing field Need a common framework and baseline 5

6 How Did It Happen? Request by International Finance Corporation (IFC) to convene a meeting of banks to discuss the problem (October 2002) IFC is a lending arm of the World Bank. Working group is formed to explore options. (ABN Amro, Barclays, Citigroup, WestLB, IFC) Proposal is presented (February 2003). Consultations are held with clients and significant NGOs. Agreement is made to move to adoption and development of timetable (April 2003). Result June 4, 2003: 10 banks announce adoption of Equator Principles at IFC headquarters, Washington, D.C. 6

7 The 10 Equator Principles A process of engagement, not a list of standards 1. Review and Categorization 2. Social and Environmental Assessment 3. Applicable Social and Environmental Standards 4. Action Plan and Management System 5. Consultation and Disclosure 6. Grievance Mechanism 7. Independent Review 8. Covenants 9. Independent Monitoring and Review 10. Reporting 70 financial institutions currently arrange more than 85% of the international project finance market. 7

8 Implementation of the Equator Principles Incorporates a risk-management process across the complete project cycle. Conformity to local regulations AND World Bank Guidelines. Environmental and social review will be integrated into the business process and linked to project financing. Non-descriptive: There may be many different implementation models; EP is a performance-based management system. Banks will put in place their own internal policies and procedures that are consistent with the Principles (banks can be more stringent). There is no oversight or monitoring agency, but third-party reviews. Transparency will be expected or an Equivalency Demonstration. 8

9 The Equator Principles Preamble Policy Statement in the Preamble: We will not provide loans directly to projects where the borrower will not or is unable to comply with our environmental and social policies and processes. The Equator Principles outline a 6-step process for the assessment of a proposed project: (10 principles, 6 steps) Scoping and Categorization Environmental Impact Assessment Environmental Management Plan Covenant and Disclosure Financial Closure Reporting and Review 9

10 Presentation Agenda Key Topics The Equator Principles The World Bank & the IFC Performance Standards IFC s General EHS Guidelines IFC s EHS Standards for the Oil & Gas Industry IADC s HSE Guidelines 10

11 World Bank Historical Review Safeguard Policies adopted in 1998 Adjusted for application to the private sector and various industry sectors Referenced in many country-specific regulations worldwide Acted as a Combination of WB policies and IFC technical guidance Enabled IFC to tackle complex projects But cumbersome, outdated, and non-enforceable in many cases 11

12 In Search of a Comprehensive Set of Tools... Safeguards review was required by IFC Compliance Advisor, Ombudsman (2001). Effectiveness of safeguards depended on Institutional and operational factors, client capacity, and commitment The content of safeguard policies not filling policy gaps, no transparency IFC s business model was in transition. Sustainability Initiative 2000 Going beyond compliance to value creation Articulating the business case for sustainability in the developing world Equator Principles adopted June 2003 EPs were wanted, but forced to reference back to the old safeguards EHS Guidelines were totally revamped and updated with new IFC Performance Standards (2006) and supporting Guidelines (2007). [Many EHS professionals were unaware of these changes!] 12

13 The Challenges... Robust global standards But they must reflect commercial reality in developing countries. Credible enough for technical experts But they must be meaningful to business people and the board room. Specific and focused But must be general enough for all countries and all sectors. IFC does not operate the project But it has a large influence over the project. 13

14 Policy & Performance Standards Structure A modular approach: IFC only IFC / Clients IFC / Clients PART I IFC Policy Statement PART II Performance Standards PART III Implementation IFC s sustainability commitment derived from mission IFC responsibilities How IFC helps clients 8 social and environmental standards What clients do Basis of IFC project review, approval, and supervision Not policy but practice Updates to reflect changes in practice Interpretation notes for each Perf. Std. EHS Guidelines Best-practice materials 14

15 Performance Standards PS 1: Social and Environmental Assessment PS 2: Labor and Working Conditions PS 3: Pollution Prevention and Abatement PS 4: Community Health and Safety PS 5: Land Acquisition and Involuntary Resettlement PS 6: Conservation of Biodiversity and Sustainable Natural Resource Management PS 7: Indigenous Peoples and Natural-Resource-Dependent Communities PS 8: Cultural Heritage Then the creation of - EHS Guidelines for General Industry Industry-Specific EHS Guidelines (Includes Offshore Drilling) 15

16 Industry-Specific Impacts and Management Environment Air emissions Wastewater/effluent discharges Solid and liquid waste management Noise generation Terrestrial impacts and project footprints Spills Decommissioning activities 16

17 Industry-Specific Impacts and Management (cont.) Occupational Health and Safety Fire and explosion Air quality Hazardous materials Transportation Well blow-outs Emergency preparedness and response Community Health and Safety Physical hazards Hydrogen sulfide Security 17

18 Implementation of IFC s Newly Improved Performance Standards April 2007 IFC updates its EHS Guidelines, which the EPFI fully incorporates into its Equator Principles. October 2009 IFC commences a 3-year review process of the Performance Standards. Ongoing consultation with IFC and EPFI and formalized public consultation process. July 1, 2010 The Equator Principles Association is established, and the EP Association s Governance Rules are launched. Oct 19, 2010 The EP Association launches a strategic review process to ensure consistency with review of the IFC Performance Standards; objective is the new Gold Standard. May 2011 IFC Policy Team to present final program enhancements to IFC s Board for review and approval. 18

19 Presentation Agenda Key Topics The Equator Principles The World Bank & the IFC Performance Standards IFC s General EHS Guidelines IFC s EHS Standards for the Oil & Gas Industry IADC s HSE Guidelines 19

20 IADC s HSE Case Guidelines Purpose : To provide a framework for developing an integrated safety and environmental management system tailored for drilling contractors. 20

21 IADC s HSE Guideline Acceptance Adopted by Regulation Adopted as Best Practice 21

22 IADC s HSE Guidelines There are two types of guidelines: Mobile Offshore Drilling May 2009 Land Drilling July

23 IADC s HSE Case Guidelines Land Drilling Developed to address the requirements of: European Extractive Industries Directive (EID) European Framework Directive (FD) OHSAS International occupational health and safety management system 23

24 IADC s HSE Case Guidelines Mobile Offshore Drilling Units Developed to address the requirements of: European Extractive Industries Directive (EID) European Framework Directive (FD) OHSAS International occupational health and safety management system PLUS UK & Norwegian regulatory requirements Australian regulatory requirements for safety cases International Maritime Organization (IMO) s International Safety Management (ISM) Code Coastal state regimes NOTE IFC Guidelines and Equator Principles NOT INCLUDED 24

25 IADC Guidelines Content Part 1 HSE Case Introduction Part 2 Drilling Contractor s HSE Management System Part 3 MODU/Rig Description and Supporting Information Part 4 Risk Management Part 5 Emergency Response Part 6 Performance Monitoring SIMILAR in scope and purpose to the IFC Guidelines and the Equator Principles..but not aligned with IFC or EP. 25

26 IADC HSE Guidelines vs. IFC Guidelines Are the standards aligned? No. 2 Environmental examples: - Venting and Flaring - Ambient Air Quality 26

27 Conclusions and Observations Be AWARE In 2011, IFC will conclude its review and update of the Performance Standards. Next, the IFC likely will consider the reviews of its EHS guidelines. Worldwide financial institutions will incorporate the IFC s Performance Standards into the Equator Principles. More banks and financial institutions will adopt the revised IFC Standards; thus, a growing expectation of the IFC Standards and Guidelines may soon eclipse the demand for trade association standards. Many corporations are not aware of the specificity and details already contained within the IFC s General and Sector-Specific Guidelines. Country/agency discussions for EIA Terms of Reference are generally unclear concerning whose standards are being used. 27

28 THANK YOU Questions? Troy M. Boley, Ph.D. (678) Ruth Benning, MBA (512)