A robust and clearly defined Environmental and Social Impact Assessment (ESIA) process is critical to the bankability of a project, such as an offshore and onshore wind development. The ESIA process provides assurance to developers, investors, lenders’ regulators, government and its agencies, wider stakeholders and the general public that the potential environmental and social impacts of the development have been assessed and measures have been incorporated into the project to mitigate and minimise any identified potential adverse impacts.

Projects seeking international investment will require an ESIA process that is compliant with the Equator Principles and that typically uses a systematic, evidence-based approach to evaluate and interpret the likely impacts of project activities on the environment. The ESIA process will typically:

• Provide consultees with technical information to enable an understanding of the project;
• Provide an understanding of the existing localised environment;
• Describe the methodology used within the ESIA process;
• Present the potential environmental and social impacts that may arise as a result of the project;
• Propose potential mitigation measures that could prevent, minimise, reduce or offset identified potential adverse environmental and social impacts; and
• Provide an indication of the main reasons for the project selection.

Typically, to obtain the national permitting to construct and operate a project, the development must complete an Environmental Impact Assessment (EIA), compliant with the national regulations in the country. In order to obtain access to international financing from a bank which is a signatory to the Equator Principles, a project development may require additional impact assessment work, over and above what is required by national regulations. This requirement can be fulfilled via the completion of an ESIA designed to be compliant with the requirements of the Equator Principles as well as the national regulations.

The Equator Principles provide a common framework for assessing and managing environmental and social risks when financing projects and are adopted by most International Financial Institutions (IFIs). In the area of environmental and social assessments and standards, the Equator Principles are underpinned by the International Finance Corporation (IFC) Performance Standards. In some countries, the scope of an ESIA required under IFC Performance Standards is broader than that required by national law. The Equator Principles Financial Institutions (EPFIs) will not provide project finance to developments that do not comply with the relevant Equator Principles and IFC Performance Standards.

For this reason, it is important for projects to consider requirements of the EIA to meet national regulations, alongside the requirements of a bankable ESIA to meet the Equator Principles and IFC Performance Standards for financial close when seeking project finance from EPFIs and Export Credit Agencies (ECAs). In our experience, projects will significantly benefit from the development of a permitting strategy at the outset, that considers the differing requirements of the national EIA and the bankable ESIA.

Successfully navigating this process requires knowledge and insight into the regulatory requirements for the national EIA, alongside a deep understanding of the Equator Principles and IFC Performance Standards. It is a significant benefit for both aspects to be underpinned by a track record of successfully delivering ESIAs for large scale project developments in countries with demanding permitting requirements. This provides the experience to efficiently comply with the differing requirements of the national EIAs and bankable ESIAs, and to successfully navigate this stage in the development lifecycle to secure project permitting and financial close. ITPEnergised’s team has many years of experience in delivering ESIAs to national and international standards and has an in-depth knowledge of the complexities and requirements involved.

The Equator Principles apply to an increasing number of financial institutions and associated project financing globally. These 10 Principles require project-related risks to be evaluated against the IFC Performance Standards and not simply the assessment of compliance with national law.

The IFC Performance Standards provide a framework for ensuring sustainable development in emerging economies. From an Environmental and Social Sustainability perspective, they define a developer’s responsibility for managing the environmental and social risks and impacts of a project. The standards are designed to help avoid, mitigate, and manage risks and impacts as a way of doing business in a sustainable way. There are eight IFC Performance Standards:

• Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts
• Performance Standard 2: Labor and Working Conditions
• Performance Standard 3: Resource Efficiency and Pollution Prevention
• Performance Standard 4: Community Health, Safety, and Security
• Performance Standard 5: Land Acquisition and Involuntary Resettlement
• Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
• Performance Standard 7: Indigenous Peoples
• Performance Standard 8: Cultural Heritage

ITPEnergised has worked and is working on a number of onshore and offshore developments, including but not limited to offshore and onshore wind farm developments in the UK, solar and various energy projects throughout Africa, and large infrastructure developments such as ports and accompanying dredging works in Asia-Pacific, etc. As part of SLR Consulting, ITPEnergised has access to an international network of offices and local partners covering multiple countries in Africa, Americas, Asia-Pacific, Europe, and the Middle East, who perform various national EIAs and IFC-compliant ESIAs for clients internationally. This global reach provides our team with an in-depth understanding of the broader Environmental, Social and Governance (ESG) issues that are becoming increasingly important as our clients strive to develop and operate projects that meet the needs of all stakeholders including investors, lenders regulators, Non-Governmental Organisations (NGOs), communities and employees.

For more information on how to obtain a bankable ESIA, national permitting strategies and on how we can support you, please contact Nynke Venema, Associate at nynke.venema@itpenergised.com.