Environmental and Social Due Diligence

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Environmental and Social Due Diligence
Wind Farms and the Environment impact on birds
and bats Summary of EBRD/IFC ES due diligence
requirements Serbia May 2015

• Robert Adamczyk
• European Bank for Reconstruction Development
• Environment and Sustainability Department

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Agenda

• Why do environmental and social issues matter to
  the EBRD and IFC
• EBRD approach to environmental and social due
  diligence
• Summary and discussion

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Why do Environmental and Social Issues Matter
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Environmental and social due diligence

• Environmental and (increasingly) social issues
  pose substantial reputational and financial risk
  to Lenders
• IFIs do environmental and social due diligence
  on all projects
• Due diligence designed proportional to risk
• Projects ultimately required to meet national
  standards and IFI requirements and EU
• Why EU standards EU accession process, European
  Energy Community, EBRD requirements
• Results of due diligence and ES compliance
  considered by Bank management and Board of
  Directors during project approval process

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Environmental and Social Policy (2014)

• ES Policy applies to Bank
• Categorization of Project based on risk and EU
  EIA requirements (Annex 1 projects)
• 10 Performance Requirements (PRs) apply to all
  clients and projects
• EBRD PRs have same titles and are broadly
  equivalent to IFC Performance Standards
• Also broadly equivalent to Equator Principles
• Reference to EU environmental standards
• Policy and PRs currently under review for
  updating in 2014

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Stakeholder engagement and consultation

• Always important
• All projects are disclosed for meaningful
  engagement, prior to Bank approval A vs B,
  public vs private
• May require more than national EIA
• Category A projects require participatory
  engagement (meetings)
• Engagement with local stakeholders needed,
  including NGOs

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The risk is real
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EBRD approach to due diligence for wind power
project
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EBRD and IFC due diligence

• Each project different
• Assessment of cumulative issues and site
  sensitivity
• Need to develop Stakeholder Engagement Plan (SEP)
  and Non Technical Summary (NTS) to ensure
  meaningful public consultation on all projects
• IFIs unlikely to finance projects that are in
  sensitive bird areas (inclusive Natura 2000 etc).
  
• We will not finance projects where appropriate
  assessments conclude there are significant
  unavoidable adverse impacts
• Major projects ESIA, SEP, NTS disclosed for at
  least 60 days (private sector, 120 public sector)

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Scope of Due Diligence

• Adequacy of Bird and Bat assessments
• Cumulative impacts
• Eg. Via Pontica
• Migratory bird issues
• Breeding and wintering birds
• Noise and Landscape issues
• Public consultation
• Does it meet EU Standards?
• Poor EIA could result in annulment of building
  permit and/or delays in due diligence.

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Bird Migratory issues

• Some Projects can be located in key bird
  migratory corridors of international importance

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PR1 Appraisal (1)

• All EBRD projects are subject to appraisal of
  potential environmental and social impacts
• A-Category projects undergo special formalised
  and participatory assessment processes,
  generally a comprehensive environmental and/or
  social impact assessment.
• Greenfield and major expansions that can cause
  significant adverse effects are Category A.
• B-Category projects also undergo due diligence
  process to identify and assess potential future
  impacts.

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PR1 Appraisal (2)

• Is it Category A or B?
• Some EU countries use number of turbines and/or
  megawattage as thresholds
• Former rule of thumb was A for gt 50MW. now
  threshold is roughly 100MW (and under discussion)
• Transmission lines could trigger A category
• EBRD has few hard and fast rules
• We can usually tell an A when we see it, or a
  B. Not always.
• Direct effect on Natura 2000 triggers
  A-categorization
• Otherwise, decision generally based on
  consideration of size, location, and associated
  facilities.

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Performance Requirement 6

• Committed to Biodiversity Mitigation Hierarchy
  that encompasses the precautionary principle
• Guided by applicable international law and
  conventions and relevant EU Directives
• Key EU Directives EIA Directive, SEA Directive,
  Habitats Directive, and Birds Directive
• EU Guidance Wind energy developments and Natura
  2000
• Screening assessment (potential significant
  effects?) See next slide, too
• Appropriate assessment or equivalent
• Compensation if needed
• In CEE, Poland has been developing guidance for
  wind

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PR6 EBRD due diligence (1)

• Require independent assessment of risks to birds
  and bats, regardless of proximity to Natura 2000
  or other known protected/sensitive areas
• Require independent assessment of available data,
  including previous monitoring and possible
  cumulative impacts
• When possible, consult with local affiliates of
  Birdlife International
• Along Via Pontica, EBRD provided funding for
• Strategic Environmental Review of wind
  development in Bulgaria in 2010
• SER for coastal counties of Romania

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PR6 EBRD due diligence (2)

• Pending completion of SER in Romania, all large
  projects along Via Pontica are Category A
• Sponsored SER for renewables, including wind, in
  Ukraine
• similar SER in Kazakhstan
• May consider SER for other countries, including
  SEMED (Jordan, Egypt)

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PR6 EBRD challenges

• EU guidance calls for four seasons of monitoring
  data.
• Two issues
• Are data for 4 seasons sufficient to assess
  impacts and significance?
• Are all data needed before approval?
• Further monitoring and independent evaluation of
  results are ALWAYS required, including several
  years of operation (mirrors Poland guidance
  calling for 3 years post construction)
• Some countries of operation are EU members. Even
  so, authorities may be less than rigorous in
  applying EU Directives

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PR6 EBRD challenges (2)

• Most countries of operation are not in EU
• What areas are equivalent to Natura 2000 areas?
• What species are equivalent to those listed in
  Annex I?
• Who is the competent authority?
• Ensuring coverage of all project and cumulative
  impacts
• Phased construction
• Salami-slicing
• Multiple regional developments
• Associated facilities (transmission lines,
  substations, control center, roads), some of
  which may be developed by others

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PR6 Future challenges and opportunities

• Consolidated monitoring data at regional,
  national, international level
• Formats
• Quality assurance
• Who would sponsor and champion, and then maintain
  system?
• Regional multi-sponsor radar systems
• Who could or would be the champion?
• Difficult to implement and fund

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Summary and Conclusion
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Experience to date in Countries of Operation

• Projects developed in staged approach (i.e.. 240
  MW wind farm broken down in 20 MW section Bank
  asked to finance 20 MW)
• EIA needs to assess full project including
  infrastructure.
• Natura 2000 areas not well defined
• EU is commencing infringement action against
  Romania. This could affect EU funding of wind
  power in New EU Member States (EIB, EU structural
  funds etc)
• Permitted projects developed by locals are being
  marketed to international companies
• Poor EIA could affect the future value of the
  asset, and permits can be withdraw or operators
  asked to reduce output.
• Lack of cumulative assessments and ornithological
  studies
• Lack of these studies could annul the EIA and
  permit (European Court of Justice)
• NonTechnical Summary is a requirements of all
  IFIs and the EU EIA Directive

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Key issues

• Bat monitoring This is not usually done in all
  countries.
• Zoologists (in some countries the ministry
  requires Doctorate degree in zoology) but they
  often dont have the expertise in this field
• Lack of experienced ornithologists.
• In some countries there are only few
  ornithologists. This becomes a bottleneck in some
  projects.
• Assessment and survey methodology is not well
  defined.
• Method is mostly determined by the experts but
  our experience so far is that the quality is
  quite low in bird assessments done locally. The
  assessment reports are usually qualitative
  assessments, mostly short, without much
  quantitative assessment.
• Social Assessment, and inclusion of local
  populations
• Will the local community benefit- any local
  taxes to local community ?
• Is this a long term risk

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Way forward

• Developers as part of Local Wind Association
  should develop dialogue with stakeholders and
  develop best practice guidance
• BirdLife/Local Ornithological Society keen to
  assist
• Should also address bats
• Local inclusion and how to support local (often
  underdeveloped) communities
• Strategic Environmental Assessment (SEA) is
  recommended for sensitive areas eg. Dobrogea area
  of Romania
• Ultimate goal local guidance on how and where to
  develop wind farms, and on cumulative assessment
• Developers need to be more aware of designated
  protected areas, such as IBAs, Natura 2000 etc
• Developers should screen consultants carefully
  for expert ornithologists and past success both
  in successful local permitting AND in satisfying
  IFI due diligence requirements

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