The Principles apply, globally and to all industry sectors, to four financial products: Project Finance Advisory Services, Project Finance, Project-Related Corporate Loans and Bridge Loans, as well as financings covering expansion or upgrade of an existing facility, whenever changes in scale or scope may create significant environmental and social risks and impacts.
Projects assessed in accordance with the EP must comply with the social and environmental standards (Performance Standards - PS) and the EHS Guidelines of the International Finance Corporation (IFC), the World Bank institution dedicated to the private sector.
Adopting the EP implies the application of the 8 Performance Standards, according to the version entered into force on 1 January 2012, summarised as follow:
1 - Assessing social and environmental impact deriving from projects to be financed and implementing appropriate management systems
2 - Protecting the rights of workers, health and safety and complying with international labour agreements
3 - Preventing pollution and promoting energy efficiency
4 - Avoiding or reducing health and safety risks in the communities in countries where the projects are implemented
5 - Consulting populations affected by land acquisition and involuntary resettlement (if inevitable), and assessing compensation in a transparent manner. Implementing a transparent, effective grievance mechanism
6 - Promoting the conservation of biodiversity as well as sustainable ecosystem and natural resource management
7 - Protecting the rights of the indigenous peoples
8 - Preserving cultural heritage
A fundamental step in the entire assessment process is the categorisation of projects, which involves the integrated consideration of different factors, e.g. the countries concerned, the industry sector, the background of the company proposing the project or the continued presence - even before the social and environmental impact study is undertaken - of potential critical points associated with one or more aspects envisaged in the PS. This screening, albeit done at an early stage, allows a global risk level to be assigned to projects, categorised as follows:
Category A (high) - projects with potential significant adverse social or environmental impacts that are diverse, irreversible or unprecedented
Category B (medium) - projects with potential limited adverse social or environmental impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures
Category C (low) - projects with minimal or no social or environmental impacts.
A thorough and rapid assessment of the risk level of the project ensures that a fair assessment is made and that, at the same time, all the aspects to be screened from the outset are taken into consideration.
In this way, for example, a Category A project will trigger a series of further investigation that considerably reduce the potential risks involved, as it envisages the respective mitigation measures already at preliminary stage, with subsequent time and cost savings.