Comments on the 2nd Draft Policy and Performance Standards on Social andEnvironmental Sustainability, and the Draft Policy on Disclosure of Information
January 21, 2011
Japan Center for a Sustainable Environment and Society (JACSES)
Friends of the Earth Japan (FoE Japan)

A. Comments on the Policy on Social and Environmental Sustainability (PSES)
Comment A-1:
All requirements of Performance Standards should be applied for Category A and B projects.
(PSES, para. 3)
Rationale: Para. 3 in the PSES states “Proposed investments that are determined to have moderate to highlevels of social and environmental risk or the potential for adverse social and environmental impacts
will be carried out in accordance with the requirements of the Performance Standards.”
 It is unclear whether all requirements of PSs are applied for all Category A and B projects.
Comment A-2:
The word “may” before “Certain risks” should be deleted. (PSES, para. 22)
Rationale: Para. 22 in the PSES states “Certain risks may require IFC to refrain from supporting the businessactivity.” Such ambiguity of IFC will reduce motivation of companies that involve projects with undue process.
Comment A-3:
If the client fails to comply with its social and environmental commitments as expressed in legal
agreements and/or conditions for investment, the PSES should clearly stipulate the possibility ofsuspension and cancellation of IFC’s support. (PSES, paras. 23 and 44)
Rationale: The PSES (para. 23) only states “IFC works with the client to bring it back into compliance to theextent possible, and if the client fails to re-establish compliance, exercise its rights and remedies asappropriate,” when the clients fails to comply.
 The PSES (para. 44) states “If the client fails to comply with its social and environmental
commitments, as expressed in the social and environmental conditions for investment, IFC will workwith the client to bring it back into compliance to the extent feasible, and if the client fails toreestablish compliance, IFC will exercise remedies as appropriate.”
 JBIC Guidelines for Confirmation of Environmental and Social Considerations clearly state that “If it
becomes evident that the borrower and the project proponents have not met the conditions required
by JBIC under the Guidelines, or if it becomes apparent that the project will have an adverse impact
on the environment after funding is extended, due to the borrower’s or related parties' failure tosupply correct information during the environmental review process, JBIC may, in accordance withthe loan agreement, suspend the disbursement or declare all the principal outstanding at the time,with interest and any other charges thereon, to be payable immediately.”
Comment A-4:
Environmental and social impacts should include not only direct impacts but also indirect impacts
resulting from the business activity to be supported by IFC. (PSES, para. 3, footnote 2)
Rationale: Whether directly or not, the identification of impacts should be based on the extent and degree ofpotential damage to the environment and community, not whether it was a direct or indirect effect.
 JBIC Guidelines for Confirmation of Environmental and Social Considerations stipulates “In addition
to the direct and immediate impact of projects, derivative, secondary and cumulative impact are also
to be examined and investigated to a reasonable extent.” (Part 2, Scope of Impact to be Examined)
Comment A-5:
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The wording of “matters that directly affect them…” should be “matters that directly andindirectly affect them…”. (PSES, para. 9)
Rationale: Whether directly or not, the identification of impacts should be based on the extent and degree ofpotential damage to the environment and community, not whether it was a direct or indirect effect.
Comment A-6:
The wording “to minimize, restore, or compensate/offset for the impacts…” should be replaced by“to minimize, restore, or where minimization and restoration is not possible, compensate/offset
for the impacts…”. (PSES, para. 6)
Rationale: The draft states that “Central to these requirements is the application of a mitigation hierarchy to
avoid adverse impacts on workers, communities, and the environment, or where avoidance is notpossible, to minimize, restore, or compensate/offset for the impacts, as appropriate.” (para. 6)
 Minimization and restoration should be prioritized before compensation/offset for the impacts in theapplication of “mitigation hierarchy”.
Comment A-7:
Broad Community Support (BCS) should not depend substantially on community representatives,
but Affected Communities. (PSES, para. 28)
Rationale: Although there exist communities whose representative(s) is a sort of decision-maker(s) of thecommunity, how to make ensure that the representative(s) represents the view of Affected
Communities truly is extremely difficult. Hence, such stakeholder engagement process should not beallowed ideally or should be applied only to a limited case.
Comment A-8:
For Category FI, subprojects classified as FI-1 should be cleared by IFC before subprojectapproval by the FI. IFC’s due-diligence and disclosure requirements for general direct investment
should also be adopted for FI-1 subprojects.
Rationale: The draft states that “IFC reviews the existing portfolio and prospective business activities of its FI
clients to identify activities where the FIs and IFC could be exposed to risks as a result of theirinvestments, and defines requirements for managing these risks. IFC reviews the implementation
capacity of FIs as well as their social and environmental management systems, as required by
Performance Standard 1.” (para. 32) IFC’s clearance on subprojects is not a requirement under thecurrent draft.
 Broad Community Support (BCS) is reviewed by IFC only in direct investments. (para. 28)
 In Asian Development Bank (ADB)-supported FI’s subprojects which have potential for significant
environmental or social impacts, the FI client must submit safeguard documents to ADB for clearance
before subproject approval. (ADB, Safeguard Policy Statement, Safeguard Requirements 4, para. 15)
Comment A-9:
All requirements of Performance Standards should be applied for Category FI-1 and FI-2
subprojects. (PSES, para. 33)
Rationale: The draft states that “FIs with portfolio and/or prospective business activities that present moderate tohigh social or environmental risks will require high business activities they support to apply relevant
requirements of the Performance Standards.” However, it is unclear whether all requirements of PSs
are applied for all FI-1 and FI-2 subprojects.
 The 1st draft states that “All other FIs (except minimal or no risks) will apply the Exclusion List, follow
respective national laws, and where the activity financed presents some social or environmental risks,
they will apply the Performance Standards.” The requirement of para. 33 in the 2nd draft is weaker
than that of the 1st draft.
Comment A-10:
IFC should identify and disseminate “best practice” as stated in paras. 38 and 45, not just “good”
2international practice.
Rationale: IFC should identify and disseminate “best” practice.
Comment A-11:
IFC should clearly stipulate that if there are material changes in the environmental and social
aspects of the IFC’s supported business activity after IFC made categorization, IFC will revise thecategorization and conduct environmental and social due diligence according to the changes.
Rationale: There is no provision regarding revision of categorization when there is material change inenvironmental and social aspects of the project that IFC considers to support/supports. Thus itshould be articulated in the section of “Social and Environmental Categorization”(para. 39-43) in
PSES.
 JBIC Guidelines for Confirmation of Environmental and Social Considerations stipulates “JBIC may
revise the categorization when necessary, e.g., in cases where environmental impact worth
considering comes to light even after the screening based on the information provided by theborrowers and related parties is performed.”
Comment A-12:
The requirement on extractive industries’ transparency in paras. 48-51, PSES should be in PS 1.
Rationale: Requirement for client should be included in PSs, not in PSES.
Comment A-13:
In projects involving the final delivery of essential services to the general public under monopoly
conditions, information relating to household tariffs and tariff adjustment mechanisms, service
standards, investment obligations and the form and extent of any ongoing government supportshould be made available to the public by clients. In privatization of such distribution services,
information on concession fee or privatization proceeds should be made available to the publicby clients. These requirements should also be in PS1, not in PSES.
Rationale: Tariff hikes in essential services have caused significant impacts on poor people in many projects.
 The draft PSES requires IFC to encourage public disclosure, but it does not set these requirements
to clients.
 Requirement for client should be included in PSs, not in PSES.
Comment A-14:
Regarding procedures of the Compliance Advisor/Ombudsman (CAO), the following statement inpara. 53 should be deleted: “the role of administrative and/or legal procedures available in thehost country should also be considered.”Rationale: CAO has a different role and responsibility from administrative and legal procedures in host countries.
It is not always appropriate to consider administrative and legal procedures in host countries in the
CAO process.

B. Comments on the Performance Standard 1
Comment B-1:
There are some sentences that downgrade indirect impacts and these should be rectified as
below:・ Definition of Affected Communities should include indirectly affected people. (PS1, para.
1)
・ Identifying risks and impacts should not be limited to “directly” affected groups andcommunities, but should also include those affected “indirectly.” (PS 1, paras. 11 and 27)
・ Although it is important to “prioritize those directly affected” for effective consultation, it
should delete the word “directly.” (PS 1, para. 32)
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Rationale: The current definition of Affected Communities excludes indirectly affected people, which are to be
regarded as affected people usually.
 Whether directly or not, the identification of risks and impacts should be based on the extent anddegree of damage that people suffered, not whether it was a direct or indirect effect.
 Even though people are indirectly affected, the impacts may be significant. Thus indirectly affected
people should not be differentiated in such a way.
 What often happens is that not directly affected people but indirectly affected people are overlooked.
Hence, the PS should not emphasize only directly affected people.
 JBIC Guidelines for Confirmation of Environmental and Social Considerations stipulates “In addition
to the direct and immediate impact of projects, derivative, secondary and cumulative impact are also
to be examined and investigated to a reasonable extent.” (Part 2, Scope of Impact to be Examined)
Comment B-2:
Principle that environmental and social consideration should be ideally from the early stage
should be clearly mentioned somewhere in paras 1 to 4 of PS 1 where it can overarch all the
management system.
Rationale: The current wording allows projects not to consider social and environmental impacts that can be
avoided, minimized and restored from the early stage.
Comment B-3:
The draft should not allow IFC to support clients who are involved in projects that are notconsistent with the PS. This is especially the case where IFC find incompliance with PS before its
decision-making. (PS1, para. 2)
Rationale: The draft allows IFC to support the clients of projects that do not comply with PS, even if the clients
who cannot control or influence risks and impacts of the projects make efforts to achieve consistency
with PS.
Comment B-4:
The definition of “minimize” should not include the word “rectify, repair, and/or restore.” (PS 1,
footnote 5)
Rationale: Such definition will undermine the efforts of proponents to reduce the impacts as much as possible,
as the 2nd draft allows them to only to even repair and restore.
 Especially, the word “repair” and “restore” is more like an expression of “compensate” than minimize.
Comment B-5:
There are inconsistencies between each elements of management system in terms of theirrelationships with PS 1. Hence, in para 3 of PS 1, there should be a sentence “all the elements ofmanagement system are required to meet PSs.”
Rationale: In para. 5 “Policy”, the draft states that policy should be consistent with the applicable PSs.
 In para. 6 “Identification of Risks and Impacts”, the draft states that the process will be consistent withgood international industry process, while PSs are only subject to be considered regarding the risks
and impacts.
 In para. 14 “Management Programs”, the draft states that the client will identify mitigation etc to “meetthe requirements of PS1 through 8”.
 In para. 15 “Action Plans”, the draft mentions nothing about the PS’s requirements.
 In para. 21 “Monitoring and Review”, the draft states its compliance with any related legal and/or
contractual obligations and regulatory requirements, but do not mention PSs.
 In this way, it is confusing why the level of PS application to each element is so different.
Comment B-6:
The scope of the risks and impacts identification process should not be consistent with “goodinternational industry practice”, but “internationally recognized best standards” such as WCD
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recommendations. (PS 1, para. 6)
Rationale: The practice should not be limited to “industry practices.” Regardless of its origin, the best practice
should be applied to projects.
Comment B-7:
Consideration of a zero option alternative in the social and environmental assessment process
should be required. (PS 1, para. 10)
Rationale: World Bank requires considering alternatives including “without project” situation for Category A
projects (World Bank, OP 4.01 - Environmental Assessment, para. 8)
 ADB requires considering alternatives including a zero option (ADB, Safeguard Policy Statement,
Policy Principles 1-3).
 JBIC requires considering alternatives including a zero option (JBIC Guidelines for Confirmation ofEnvironmental and Social Considerations, Appendix)
Comment B-8:
The mitigation hierarchy should favor “the avoidance of impacts over minimization AND
compensation/offset, and compensation” not avoidance of impacts over minimization OR
compensation/offset. (PS 1, para. 13)
Rationale: It is not appropriate to choose either minimization or compensation/offset. Both of them should beensured.
Comment B-9:
Information including draft social and environmental documentations and draft action plans
should be disclosed by the client before consultation. (PS 1, para. 27)
Rationale: Although the draft states that “(consultation will) be based on the prior disclosure of relevant andadequate information (para. 32),“ the draft fails to set an explicit requirement for disclosing draft
social and environmental documentations and draft action plans.
 The current PS requires it and this requirement is very important for affected people.
Comment B-10:
The PS should not easily allow clients to depend substantially on community representatives, but
Affected Communities. (PS 1, para. 29)
Rationale: Although there exist communities whose representative(s) is a sort of decision-maker(s) of thecommunity, how to make ensure that the representative(s) represents the view of Affected
Communities truly is extremely difficult. Hence, such stakeholder engagement process should not beallowed ideally or should be applied only to a limited case.
Comment B-11:
Information disclosure should occur “at the latest” before the project construction commences(PS 1, para. 31)
Rationale: As the project or project site/design has been already decided when the project constructioncommences, ideally, information disclosure should occur much before that.
Comment B-12:
It should be clearly mentioned that the translation of Social and Environmental Assessment
Documentations, Action Plans and Monitoring Reports into languages understandable by affected
peoples is a requirement under the Performance Standard. (PS 1, para. 31)
Rationale: Language is key for affected peoples to participate in the development process. The draft fails to set
a minimum range of documents that clients must translate.
 According to CAO’s review, there were only 53% projects that Action Plans were disclosed to5communities, and many local stakeholders voiced concerns that engagement with companies
operating in their community does not sufficiently address the impact remains even after taking
mitigation measures. The lesson learned should be reflected to the new standard.
Comment B-13:
Disclosure of Client’s Annual Monitoring Reports and periodic reports should be required. (PS 1,
para. 37)
Rationale: The Draft (PS 1, para. 37) states “clients are encouraged to publish periodic reports accessible to all
stakeholders on their environmental and social performance,” and it is not a requirement.
 Client’s Annual Monitoring Reports are required to submit to IFC for supervision in para. 44, PSES.
However, it is not required to make available to the public by clients.
 The CAO’s review states that “None of these projects demonstrated that affected communities were
updated at least annually on the Action Plan’s implementation, as required by Performance Standard
1.” The lesson learned should be reflected to the new standard.
 In ADB, the client is required to disclose social and environmental monitoring reports in ADB private
sector projects (ADB, Safeguard Policy Statement, Policy Principles 1-7, 2-12, 3-9).

C. Comments on the Performance Standard 5
Comment C-1:
In the 3rd point of Objectives in the PS 5, the target of compensation at replacement cost should
not be limited only to “loss of assets” but also to “access to assets.”
Rationale: It states that “(i) providing compensation for loss of assets at replacement cost” in this version, butthat “(i) providing compensation for loss of assets or access to assets at replacement cost” in theprevious version. The phrase of “or access to assets” should not be deleted.
 It states that “Prompt compensation of economically displaced persons for loss of assets or access toassets at full replacement cost” in the 1st point of para. 26.
Comment C-2:
To mitigate adverse social and economic impacts from non-land related restrictions on assets/
access to assets should be added as one of the Objectives of the PS 5.
Rationale: Whether the adverse impacts are from land related restrictions or not, the effects of the project suchas loss of livelihoods can be significant for the affected communities.
 Para. 7 of the PS 5 states that “Where direct project impacts affect land, assets or access to assets…adversely…, the client will apply the requirements of Performance Standard 5, even where no landacquisition or land use restriction is involved”. However, mitigating impacts from non-land related
restrictions on assets/ access to assets is not articulated as the Objectives.
Comment C-3:
“Indirect and” in para. 6 should be deleted.
Rationale: It states “It also does not apply in situations where impacts are indirect and not attributable to a
project’s change of the land used by the affected groups…” The definition of “indirect” is vague, but
only the words of “not attributable to a project’s…” are enough to show the condition in this sentence.
Comment C-4:
The wording of “direct project impacts…” should be “direct and indirect project impacts.”
Rationale: Indirect project impacts should be also covered by the requirements of the PS 5.
Comment C-5:
The illustration of “Disruption of access to mineral deposits by artisanal miners” stated in the10th footnote of PS 5 is inappropriate, and should be deleted.
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Rationale: “Disruption of access to mineral deposits by artisanal miners” should be covered by the PS 5. For
when such disruption of access to mineral deposits attributable to a project leads to loss of income
sources, the livelihood and standards of living should be improved, or at least restored, in
accordance with the requirements of the PS 5.
Comment C-6:
“So” before “adversely” in para. 7 should be deleted.
Rationale: Regardless of the extent of adverse impacts, the matter of physical and/or economic displacement
should be covered by the PS 5, in order to improve or at least restore the livelihood and standards ofliving.
Comment C-7:
“Staggered compensation payments” stated in the 15th footnote in the PS 5 should be arranged
with the agreement of affected communities and persons.
Rationale: Such payment should not be made without the agreement of affected communities and persons.
Comment C-8:
It is better to describe “Livelihood Improvement and Restoration Plan” or in the other way, than“Livelihood Restoration Plan” as a document to be developed for economic displacement.
Rationale In this version of the PS 5, “Livelihood Restoration Plan” is required to develop for economic
displacement. As the Objective requires “to improve, or restore the livelihoods and standards ofliving,” it is confusing to use only the term of “Restoration.” It might send the message that the Client
is required only to restore, but not to improve.
Comment C-9:
Affected communities and persons, but not only “their representatives” should be also consulted
during the monitoring process, in para. 14 of the PS 5.
Rationale: Through the PS 5, the wording of “Affected Communities and persons” is commonly found.
 The target of the consultation even during the monitoring process should not be limited only to “theirrepresentatives.”
Comment C-10:
The words of “Alternative housing and/or cash compensation will be made available prior to
relocation” in the original PS 5 should not be deleted in para. 20 in this version.
Rationale: Alternative housing and/or cash compensation should be made available prior to relocation.
 If ever there is any exceptional case to this, it is better to mention as a footnote, such like the 15th
footnote of the PS 5.
Comment C-11:
Even in the case of projects involving economic displacement only, Livelihood Restoration Planor Supplemental Action Plan should also cover the applicable requirements of the PS 5, such as
Resettlement Action Plan or Supplemental Resettlement Plan.
Rationale: While para. 19 of PS 5 states that "In the case of physical displacement, the client will develop a
Resettlement Action Plan that covers, at a minimum, the applicable requirements of this PerformanceStandard," Para. 25 states that "In the case of projects involving economic displacement only, theclient will develop a Livelihood Restoration Plan to compensate affected persons and/or communities
and offer other assistance that meet the objectives of this Performance Standard," It is unclear why
the requirement on Livelihood Restoration Plan is so limited.
 Likewise, while para. 28 of PS 5 states that “the client will prepare a Supplemental Resettlement Plan
that (……) will address the relevant requirements of this Performance Standard,” para. 29 states that7

“the client will develop a Supplemental Action Plan to complement government action.”

D. Comments on the Performance Standard 6
Comment D-1:
Areas having biodiversity of significant social, economic, cultural and survival importance tolocal communities should be regarded as one of the criteria for the “Critical Habitat”. (PS 6, para.
16)
Rationale: The current draft text excluded the significance of habitat to local communities as one of the criteria
for the Critical Habitat although it was clearly stated in the current PS. This should be included again
with addition of “survival importance”.
 Criteria on ecosystem services are replaced to paras. 24 and 25. However, minimizing of adverse
impacts can be allowed in the draft, although the current PS 6 requires “no adverse impacts” inCritical Habitat.
Comment D-2:
“Measurable adverse impact” should be replaced by “adverse impact.” (PS 6, para. 17)
Rationale: Adverse impacts should be assessed through measures including Precautional Approach.
Comment D-3:
"A net reduction in the global and/or national/regional population of any Critically Endangered orEndangered species over a reasonable period of time" should be replaced by "a reduction in the
population of any Critically Endangered or Endangered species." (PS 6, para. 17)
Rationale: Flexibilities on duration and geography should not be accepted.

E. Comments on the Policy on Disclosure of Information (PDI)
Comment E-1:
For category A projects, Social and Environmental Assessment Documents and Action Plans
should be made available to the public at least 120 days prior to the IFC’s Board approval. (PDI,
para. 32)
Rationale: The draft includes requirement on minimum disclosure period of ESRS, it does not include that forSocial and Environmental Assessment Documents and Action Plans.
 In ADB, draft environmental assessment reports must be made available to the public at least 120
days before Board consideration (ADB, Safeguard Policy Statement, para. 53).
Comment E-2:
For Category FI-1 and FI-2, subprojects’ Social and Environmental Assessment Documents andAction Plans should be made available to the public by IFC before approval by IFC's Board of
Directors. (PDI, para. 30)
Rationale:
In ADB-supported FI’s sub-projects which have potential for significant environmental or social impacts,
safeguard documents must be made available by ADB before subproject approval (ADB, Operations
Manual Section F1/OP, para. 56).
Comment E-3:
Client’s Annual Monitoring Reports referred in PSES para. 44 and Progress Reports referred in
PS1 para. 37 should be made available to the public by IFC. (PDI, para. 39)
Rationale: The draft states that third-party monitoring reports, where required by the performance standards areavailable. However, client’s Annual Monitoring Reports and Progress Reports are not required for8

disclosure in PS1 para. 37..
In ADB, disclosure of social and environmental monitoring reports on the website is required under
ADB, Public Communication Policy, para. 92.

Comment E-4:
Abbreviated version of investment proposal documents for Board approval should be madeavailable to the public. (PDI, para. 17)
Rationale: In ADB, abbreviated version of Report and Recommendation of the President (RRP) for private
sector projects has to be made available to the public no later than upon Board approval (ADB,
Public Communication Policy, para. 90).
Comment E-5:
1) Revenue payments from extractive industry projects to host governments, 2) extractive
industry contracts, 3) information relating to household tariffs and tariff adjustment mechanisms,
service standards, investment obligations and the form and extent of any ongoing government
support in project involving the final delivery of essential services to the general public undermonopoly conditions, and 4) information on concession fee or privatization proceeds inprivatization of distribution services, should be also made available to the public by IFC.
Rationale: In addition to client’s disclosure as described in Section A, stakeholders can access to theinformation easier, if IFC also disclose the information.
Comment E-6:
Access to Information Policy Advisor should be abolished. Access to Information Appeals Panelshould review requests on disclosure. (PDI, paras 55 to 68)
Rationale: Access to Information Policy Advisor is.an internal body. Fair judgment cannot be expected.
Moreover, Access to Information Policy Advisor and Access to Information Appeals Panel have
duplicated roles and functions, and it is inefficient for both IFC and requesters.

F. Questions
1. In para. 7 in the PSES, the words “decision to finance the project or not” has been replaced by“approval process”. (The new sentence is as follows; IFC’s social and environmental due diligence ofa proposed business activity is an important factor in its approval process.) Does that change any
IFC’s operation? (PSES, para. 7)
2. Why is the two years transition period for disclosure of extractive industry contracts needed? (PSES,
para. 49)
3. Why are environmental risks and impacts to be not “assessed” but “evaluate”? Does that change any
IFC’s operation? (PS1, objectives)
4. Why will financial intermediaries adopt only “the principles” of PS, not the PS themselves? And, what
does “the principles” mean here? (PS1, para. 3)
5. What does “physical” mean? Some example of physical/not physical would be useful to understand.
(PS1, para 4)
6. It is sensible that the PS states “the client should address these risks and impacts in a mannercommensurate with the client’s control and influence over third party action” (PS1, para 8), but whatkind of the case where clients can have control/influence over the “associated facilities” of the third
party, which are not funded as a part of the project? Give me some examples.
7. Throughout the PS 5, please explain the difference in practice between the case where you put theword of “at least” before “minimize” or “restore” and the case where you don’t put it. For example,
while it states that “To avoid or at least minimize…” in the 1st point of Objectives, it states that “Theclient will consider feasible alternative project designs to avoid or minimize physical and/or economic
displacement,…” in para 8. Also, while it states that “To improve, or restore the livelihoods…” in the
4th point of Objectives, it states that “…opportunities to improve, or at least restore, their means of…”
in the 7th point of para. 26.
98. In para. 10 of the PS 5, why did IFC need to delete one sentence “Affected persons and communities
will be consulted on all key aspects of the process including compensation packages, (…) and the
proposed timing of resettlement”, which had been stated in the previous version?
9. In the 2nd point of para. 26 of the PS 5, why did IFC need to put “direct” before “compensation ofaffected business owners”?

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