ENVIRONMENTAL 

AND SOCIAL POLICY 

AND PROCEDURES

April 2024 

 dfc.gov
Environmental and Social Policy and Procedures Page 2

Contents

1. INTRODUCTION......................................................................................................................... 4

a. Statement of Purpose............................................................................................................................... 4

b. Scope............................................................................................................................................................ 4

c. DFC Commitment to Environmental and Social Sustainability...................................................... 4

d. Revision and Update of ESPP................................................................................................................. 5

e. DFC’s Independent Accountability Mechanism................................................................................. 5

2. ENVIRONMENTAL AND SOCIAL STANDARDS...................................................................... 6

a. Source of Requirements .......................................................................................................................... 6

b. Minimum Requirements........................................................................................................................... 6

c. Revision of Standards............................................................................................................................... 7

d. Scope of Application of Requirements................................................................................................. 7

e. Supplemental Sector-Specific Requirements ..................................................................................... 7

3. SCREENING AND CATEGORIZATION...................................................................................10

a. DFC Responsibilities..............................................................................................................................10

b. E&S Risk Categorization .......................................................................................................................10

c. Corporate Investments .........................................................................................................................12

4. ENVIRONMENTAL AND SOCIAL REVIEW ...........................................................................13

a. DFC Responsibilities..............................................................................................................................13

b. Client Responsibilities ...........................................................................................................................13

c. Environmental and Social Impact Assessments and Audits.........................................................15

5. TRANSPARENCY AND DISCLOSURE ....................................................................................16

a. DFC’s Institutional Disclosure.............................................................................................................16

b. DFC’s Project-related Disclosure Requirements ............................................................................16

c. Client Disclosure Responsibilities.......................................................................................................17

6. MONITORING AND REPORTING...........................................................................................19

a. DFC Responsibilities..............................................................................................................................19

b. Client Responsibilities ...........................................................................................................................19

7. LEGAL CONDITIONS AND COMPLIANCE.............................................................................21

a. DFC Standard Contractual Obligations.............................................................................................21

b. Non-Compliances...................................................................................................................................22

8. FINANCIAL INTERMEDIARIES..............................................................................................23

a. Overview ..................................................................................................................................................23

b. FI Screening and Categorization.........................................................................................................23

c. DFC Review of FIs and Subprojects ..................................................................................................24
Environmental and Social Policy and Procedures Page 3

d. Standard Policy Requirements for FI Transactions........................................................................24

e. Disclosure of Category A Subprojects ..............................................................................................25

9. CLIMATE..................................................................................................................................26

a. DFC Responsibilities..............................................................................................................................26

b. Client Responsibilities ...........................................................................................................................26

10. COUNTRY ELIGIBILITY – LABOR..........................................................................................28

a. U.S. Law Requirements .........................................................................................................................28

b. Determining Country Eligibility: The USTR Process......................................................................28

c. Reviewing Country Eligibility: The DFC Process ............................................................................28

d. Granting Country Eligibility on Worker Rights Grounds ..............................................................29

e. Country Eligibility Review Criteria .....................................................................................................29

f. Country Status Effect on DFC-Supported Projects.......................................................................29

APPENDIX A – Categorical Prohibitions .....................................................................................30

APPENDIX B – Illustrative List of Category A Projects..............................................................32

APPENDIX C – Glossary.................................................................................................................35
Environmental and Social Policy and Procedures Page 4

1. INTRODUCTION

The U.S. International Development Finance Corporation (DFC) is the U.S. Government’s development

finance institution. DFC partners with the private sector to support solutions to the most critical 

challenges facing the developing world today. It invests across sectors including energy, healthcare, 

critical infrastructure, and technology projects. DFC investments include financing for small businesses 

and women entrepreneurs, which create jobs in emerging markets. Environmental and social 

sustainability is an essential component of the solutions DFC supports. Therefore, DFC investments 

adhere to high standards and respect the environment, human rights, and worker rights. 

The Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act, Div. F of P.L. 

115-254, 22 U.S.C. §9612 et seq.) is the governing legislation for DFC.

a. Statement of Purpose 

The purpose of the Environmental and Social Policy and Procedures (ESPP) is to set out DFC’s

commitments for environmental and social screening, review, risk mitigation, and monitoring that will 

help ensure the environmental and social sustainability of DFC-supported projects. This ESPP also 

includes guidance for what DFC Clients* need to prepare, submit, and implement.

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b. Scope

The environmental and social requirements described in this document apply to all Projects*, 

Subprojects*, and Clients supported through DFC’s products including insurance, reinsurance, direct 

loans, guaranties, equity, and support through Financial Intermediaries*. This document also applies to 

DFC and describes its responsibilities. This ESPP does not apply to DFC’s technical assistance (TA)

activities. 

c. DFC Commitment to Environmental and Social Sustainability

i. DFC will ensure through its processes that Projects receivingsupport are environmentally 

and socially sustainable. To this end, DFC will partner with its Clients to assist them in

managing environmental and social risks, identifying opportunities to add value, promote 

longer-term sustainability, and strengthen their environmental and social management 

capacity. Specifically, DFC expects and will support Clients to: 

• Identify, assess, and avoid adverse environmental and social impacts of the Project

and, if such impacts are unavoidable, properly minimize, mitigate, compensate, 

and/or remedy impacts through application of the mitigation hierarchy (as defined in 

IFC Performance Standard* 1). 

• Review the Project for alignment with climate-resilient, low- and no-carbon 

economic development. 

• Include measures in the Project to safeguard and, where feasible, enhance 

ecosystems and the biodiversity they support with the aim of achieving no net loss 

of biodiversity as well as to sustainably manage and use living natural resources. 

• Assess and mitigate the risks of deforestation and other land conversion for

investments in infrastructure development, agriculture, land use planning or zoning, 

and energy siting and generation. 

• Promote inclusion and non-discrimination in the Project, particularly with respect to 

disadvantaged or Vulnerable Groups*. 

• Respect Human Rights*, Labor Rights*, and the rights of Project Affected People*. 

• Identify disproportionate gender-specific risks as well as gender-specific 

opportunities of the Project and take steps to mitigate the risks of exclusion, 

discrimination, and harm, including the risk of Gender-Based Violence and 

1 Bolded text in this document refers to defined terms that can be found in the Glossary – Appendix C. These terms are followed by an asterisk the first time they appear. 
Environmental and Social Policy and Procedures Page 5

Harassment (GBVH) *. 

• Undertake Meaningful Consultation* with Project Affected People regarding Project

activities, including engagement with Vulnerable Groups. 

• Undertake Projects in a host country that is taking steps to adopt and implement 

laws that extend Internationally Recognized Worker Rights*. 

• Ensure that Project Affected People are aware of and have access to Project-level 

grievance mechanisms for voicing complaints and seeking remedy for harm. 

• Not tolerate any action that amounts to retaliation or reprisals – including threats, 

intimidation, harassment, or violence – against those who voice their opinion 

regarding the activities of DFC or its Clients. 

ii. DFC will implement best practices in environmental management and reporting in 

accordance with the provisions of Executive Order 14057 – Catalyzing Clean Energy and 

Jobs Through Federal Sustainability (December 8, 2021).

iii. DFC makes information concerning its activities available on DFC’s website to enable 

members of the interested public an opportunity to better understand DFC’s business 

activities. 

d. Revision and Update of ESPP 

The ESPP will be reviewed and updated periodically as needed to reflect and align with institutional 

priorities, international best practice, and lessons learned from implementation. 

e. DFC’s Independent Accountability Mechanism

DFC has established an Office of Accountability (OOA) to assess and review complaints about DFCsupported Projects and Subprojects. The OOA, which functions as DFC’s independent accountability 

mechanism, gives local communities, which may be adversely affected by DFC-supported Projects and 

Subprojects, a means through which complaints may be raised. OOA’s mandate is to deliver problemsolving and compliance review services in a manner that is fair, objective, and transparent, thereby 

enhancing DFC's mission effectiveness.

i. OOA requires all Clients and Subprojects to disclose DFC’s potential participation in a 

proposed investment and the existence of DFC’s OOA to Project Affected People in a 

culturally appropriate, gender-sensitive, and accessible manner.

ii. Further information on the OOA and how to request its services can be found at DFC’s 

website.2 

2 https://www.dfc.gov/our-impact/transparency/office-of-accountability
Environmental and Social Policy and Procedures Page 6

2. ENVIRONMENTAL AND SOCIAL STANDARDS

Objectives: (1) to specify DFC’s required standards of performance necessary to manage 

environmental and social risks and achieve environmentally and socially sustainable outcomes; and (2) 

to specify additional sector-specific requirements.

a. Source of Requirements

i. This ESPP adopts, as a standard for assessment, review, and management of environmental 

and social risks and impacts, the International Finance Corporation’s (IFC’s) * Performance 

Standards on Social and Environmental Sustainability (Performance Standards),3 and the 

World Bank Group’s Environmental, Health, and Safety (EHS) Guidelines*.

4 Any subsequent 

revisions to those standards (and any underlying standard or guideline) are incorporated into 

this ESPP by reference.

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ii. When co-financing Projects in which a multilateral development bank (MDB), such as the 

European Bank for Reconstruction and Development, the African Development Bank, the 

Asian Development Bank, or the Inter-American Development Bank is involved, DFC may 

apply the standards, in whole or in part, (other than the Performance Standards), of the 

respective MDB to facilitate DFC participation in the transaction. In such circumstances, 

DFC may adopt a common approach with co-financiers for Project assessment, review,

management of environmental and social risks and impacts, monitoring, and reporting only 

when that approach is considered materially consistent in content and outcomes with the 

ESPP and the Applicable Standards. 

b. Minimum Requirements

i. In addition to compliance with all applicable laws, at a minimum, DFC requires that all 

Projects meet the Performance Standards, applicable EHS Guidelines, and Labor Rights in 

accordance with DFC review procedures. These are collectively referred to as DFC’s 

Applicable Standards*. The relevant provisions of this ESPP, together with the Applicable 

Standards, are referred to as DFC’s Environmental and Social Requirements*.

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ii. Performance Standard 1 (Assessment and Management of Environmental and Social Risks 

and Impacts) and Performance Standard 2 (Labor and Working Conditions) are applicable to 

all Projects and Clients regardless of their environmental and social risks and impacts. 

Externally and internally facing grievance mechanisms as described in Performance Standard

1 and 2 are part of these minimum requirements. 

iii. Applicability of the other Performance Standards and any other sector-specific 

requirements are dependent on the nature of the Project and its environmental and social

risks and impacts.

iv. In accordance with the provisions of Performance Standard 3 (Resource Efficiency and 

Pollution Prevention), alternative pollution prevention and control technologies may be 

approved, provided that (1) the alternative performance levels are consistent with the overall 

requirements of Performance Standard 3; and (2) the alternative performance levels are 

3 The IFC Performance Standards can be found here:

https://www.ifc.org/content/dam/ifc/doc/2010/2012-ifc-performance-standards-en.pdf 4 The World Bank EHS Guidelines can be found here: 

https://documents1.worldbank.org/curated/en/157871484635724258/pdf/112110-WP-Final-General-EHSGuidelines.pdf

5 The EHS Guidelines incorporate by reference standards issued by other international organizations, such as the 

World Health Organization (WHO). If an international organization updates such standards, then DFC will apply the 

updated standards. 6 The applicability of this ESPP to Subprojects is addressed in Section 8.
Environmental and Social Policy and Procedures Page 7

protective of the environment and Project Affected People within the Area of Influence*. 

v. Where host country law and environmental, health, safety, and social requirements differ 

from the Applicable Standards, the Project is expected to meet whichever is more stringent.

c. Revision of Standards

i. The U.S. Government, international organizations, and industry groups periodically revise 

guidelines and standards referenced in DFC’s Environmental and Social Requirements to 

reflect technological advances and improved understanding of environmental, health, safety, 

and social risks. Complete Client applications to DFC that are received after the effective

date of a new guideline or standard will be assessed against that new guideline or standard. 

ii. Complete Client applications to DFC that are received before the effective date of a new 

guideline or standard will be assessed against the guideline or standard in effect on the date 

of application, provided that DFC’s commitment to provide support is achieved within one 

year of the effective date of the new guideline or standard. If the commitment is not 

achieved within one year after the effective date, the Project will be subject to the new

guideline or standard. 

d. Scope of Application of Requirements 

i. The Environmental and Social Requirements apply to all Project-related activities including 

those carried out by on-site contractors and sub-contractors of the Project that work for a 

substantial duration of time on the Project or are material to the Core Business Processes* of 

the Project. Clients are responsible for ensuring that on-site contractors and sub-contractors 

meet the requirements. 

ii. Projects that involve new facilities or business activities must be designed to meet the 

Applicable Standards. 

iii. For existing projects, including privatizations, compliance with the Applicable Standards

must be attained within a designated period of time following the receipt of DFC support

that is considered acceptable to DFC and specified in DFC Agreements*. If material 

compliance has not been demonstrated at the time of DFC approval, Clients will be required 

to implement additional measures within a specified time period (See Section 8). 

e. Supplemental Sector-Specific Requirements 

DFC is responsible for identification of supplemental standards when additional preventive or protective 

measures are necessary to adequately mitigate specific Project-related environmental and social risks and 

impacts. 

Supplemental standards may include (1) relevant and applicable U.S. federal standards; (2) standards 

issued by other international organizations relating to public health, safety, and the environment such as 

those from the International Labour Organization, the World Health Organization, the International 

Maritime Organization (IMO), the Food and Agriculture Organization, or the International Civil Aviation 

Organization; and (3) standards of best practice developed by governments other development finance 

institutions, industry associations, or non-governmental organizations.

i. Construction and Operations of Dams

For projects involving the construction and operation of dams that are not otherwise 

categorically prohibited (See Appendix A), DFC applies screening and environmental and 

social assessment criteria consistent with international best practice, including the core 

values and strategic priorities as identified in the November 16, 2000, Report from the 
Environmental and Social Policy and Procedures Page 8

World Commission on Dams.7 Specific factors that are considered in DFC’s screening and 

review of projects involving dams may be found at:

• IFC Good Practice Handbook on Environmental Flows for Hydropower Projects (March

2018)8

• World Bank Good Practice Note on Dam Safety: New Guidance on Managing Risks

Associated with Dams (April 2021)9

• IFC Good Practice Note: Environmental, Health, and Safety Approaches for

Hydropower Projects (March 2018)10

• International Council on Mining and Metals (ICMM), UN Environmental Programme,

and UN Principles for Responsible Investment Global Industry Standard on Tailings

Management11

ii. Forestry Projects

• DFC will not support Projects that directly or indirectly involve the extraction of timber

from or the conversion or degradation of Critical Habitats (See Appendix A).

• All other Projects involving timber extraction from forests, including all boreal,

temperate, and plantation forests, must be certified by an independent nongovernmental organization. The purpose of certification is to demonstrate that timber

extraction activities are managed sustainably and can include traceability of wood to

the point of harvest. Certification must be maintained throughout the term of DFC

support. The cost of this certification is the responsibility of the Client.

• Any forest product labeling associated with a certified forest must be guaranteed by a

credible independent certification body that connects the labeled product to its

certified forest of origin.

• Projects involving forest products that source raw materials from third parties must

demonstrate that the raw materials are not being sourced from a Critical Habitat and

that the raw material extraction is conducted in compliance with the Applicable

Standards.

iii. Health Care

All Projects providing patient care must be certified by a local regulatory health authority

and work toward obtaining satisfactory accreditation based on:

• A quality evaluation of the institution’s resources and organization by an

internationally recognized accreditation organization12 or similarly aligned

accreditation organization,

13

• An assessment of the institution by a nationally recognized accreditation organization, or

• A high-quality rating by a third-party expert in the health care field satisfactory to

DFC.

7 https://archive.internationalrivers.org/sites/default/files/attachedfiles/world_commission_on_dams_final_report.pdf 8https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/sustainability-atifc/publications/publications_handbook_eflows

9 https://www.worldbank.org/en/topic/watersupply/publication/good-practice-note-on-dam-safety-new-guidanceon-managing-risks-associated-with-dams 10 https://www.ifc.org/content/dam/ifc/doc/mgrt/gpn-ehshydropower.pdf 11 https://globaltailingsreview.org/wp-content/uploads/2020/08/global-industry-standard_EN.pdf 12 Such as those accredited by ISQua https://www.isqua.org/

13 One example is SafeCare https://www.safe-care.org/
Environmental and Social Policy and Procedures Page 9

Once obtained, all Projects must maintain this accreditation, certification, or high-quality 

rating throughout the term of DFC support. The cost of this accreditation or certification is 

the responsibility of the Client.

14

All healthcare service providers that purchase pharmaceuticals for the purpose of providing 

them, directly or indirectly, to patients shall restrict drug purchasing to pharmaceuticals that 

comply with national regulatory requirements and are registered for use in the host country.

Projects involving the manufacturing of pharmaceuticals or medical equipment are reviewed 

closely by DFC. All Projects manufacturing pharmaceuticals or medical equipment must obtain 

satisfactory facility certification of good manufacturing practices by the appropriate national 

regulator as well as satisfactory product approval or authorization by the appropriate national 

regulator. Evidence that the safety and effectiveness of such products are certified by the 

national regulatory authorities and if relevant, the World Health Organization, U.S. Food and 

Drug Administration, or other similar regulatory authority, must be received as determined by 

DFC. 

iv. Biomass as Fuel Projects

Projects involving the use of Renewable Biomass as fuel that are not otherwise categorically 

prohibited (see Appendix A) must demonstrate that (1) the fuel was sourced in a sustainable 

manner, i.e., that avoids or adequately mitigates pollution or degradation of the source 

ecosystem; (2) the fuel supply did not result in the conversion of Critical Habitats*; (3) the 

fuel supply does not compete with food feedstock; and (4) combustion of the Renewable 

Biomass* results in fewer Greenhouse Gas (GHG) * emissions than the least GHG-intensive 

fossil fuel alternative. 

v. High-Risk Supply Chain

DFC applies screening and environmental and social assessment criteria consistent with 

international best practice for Projects utilizing a Supply Chain* at risk for the use of forced 

or child labor, significant health and safety issues, or conversion of Critical Habitat. For 

Projects with high-risk Supply Chains, Clients must provide relevant information on suppliers 

within the Supply Chain that provide products essential to the Project’s Core Business 

Processes. 

14 In the case of micro, small, and medium enterprises providing needed healthcare goods and services to the most 

economically disadvantaged segments of a country’s population and third-party accreditation is prohibitively 

expensive, but there is a well-established consultation process in place to identify the most appropriate standards to 

apply given the country context, minimum requirements for accreditation or certification may be determined in 

conjunction with United States Agency for International Development’s (USAID’s) mission health officer and 

documented accordingly.
Environmental and Social Policy and Procedures Page 10

3. SCREENING AND CATEGORIZATION

Objectives: (1) to determine whether the Project and Client are eligible to receive, or are precluded 

from receiving, DFC support on environmental and social grounds; (2) to determine a risk 

categorization for the Project based on the nature and magnitude of environmental and social risks and 

impacts; (3) to identify issues to be investigated in detail in the environmental and social review 

process; and (4) to determine requirements for documentation, consultation, disclosure, monitoring, 

and reporting.

a. DFC Responsibilities

i. DFC screens applications as early as possible to identify the risk of adverse environmental 

and social impacts of proposed projects and determine if a Project is eligible for DFC 

support. 

ii. Support for a Project will be declined when (1) a Project is a Categorically Prohibited

Project* (Appendix A); (2) a Project fails to address environmental and social issues in a 

satisfactory manner and cannot be expected to meet the requirements of the Applicable 

Standards over a time frame considered reasonable and feasible; (3) residual impacts after 

mitigation are unacceptable; (4) a Project does not comply with the host country’s 

environmental and social laws or regulations and cannot be expected to comply over a time 

frame considered reasonable and feasible; and/or (5) a Project does not respect Human

Rights and Labor Rights. 

iii. During the screening process, DFC reviews the Project’s anticipated risks and impacts, its 

defined Area of Influence, and information on Project Affected People to determine 

whether the information is adequate, accurate, objective, and appropriate to the significance 

and severity of potential impacts of Project activities. Additional information may be 

required from the Client and from independent experts.

iv. In screening Projects, environmental and social impacts that are direct, indirect, induced, 

supply-chain related, regional, trans-boundary, associated-facilities related, contextual, and 

cumulative are considered. DFC assesses risk at key stages in the Project life cycle including 

pre-construction, construction, operations, decommissioning, closure, and where applicable, 

post-closure.

v. In screening investments in existing Projects, DFC assesses environmental and social impacts

and risks associated with (1) current operations; and (2) planned expansions or modifications.

b. E&S Risk Categorization

i. DFC categorizes Projects based on a preliminary assessment of (1) the potential 

environmental and social risks and impacts within a Project’s Area of Influence in the 

absence of any required mitigation; (2) the Client’s commitment and capacity to effectively

manage the environmental and social risks and impacts, including the ability to implement 

any required mitigation; (3) the potential role of third parties in achievement of successful 

outcomes; and (4) the scope and profile of Project Affected People, including Workers*. 

ii. Projects under consideration for direct DFC support are categorized as Category A, B, or C 

based on environmental and social risk factors. See Chapter 8 on Financial Intermediaries

(FIs) for risk categorization and additional requirements specific to FIs. 
Environmental and Social Policy and Procedures Page 11

Environmental and Social Risk Categories for Direct Support

Category Description Examples

Category A Projects that may have significant adverse 

environmental and/or social impacts that are 

irreversible, sensitive, diverse, or 

unprecedented in the absence of adequate 

mitigation measures. Category A Projects are 

considered high risk.

Appendix B provides an 

illustrative list of sensitive 

sectors and project-siting 

factors that may lead to a 

Category A categorization.

Category B Projects that are likely to have limited adverse 

environmental and/or social impacts that are 

fewer in number, generally site-specific, 

largely reversible, and readily addressed 

through mitigation measures. Category B 

Projects are considered medium risk. The 

scope of environmental and social assessment

for Category B projects may be narrower than 

that required for Category A projects.

Examples of Category B 

Projects may include small-tomedium-scale construction, 

manufacturing, and processing; 

commercial/retail businesses; 

and rooftop solar and facility 

expansions within an existing 

footprint.

Category C Projects that are likely to have minimal 

adverse environmental or social impacts.

Category C Projects are considered low risk. 

Examples of Category C 

Projects may include financial 

services, web-based platforms, 

software development, and 

project development activities 

that do not involve physical 

impacts.

iii. Below are aspects of Projects that may lead to a higher categorization of environmental or 

social risk:

• Projects that discharge high levels of contaminants (including Greenhouse Gases) into 

the environment in the absence of pollution controls or sound environmental and social 

management, consistent with international goals (Sustainable Development Goals, Paris 

Agreement) and standards. 

• Large-scale Projects are generally considered to represent a higher risk because of the 

greater potential to impact the environment and/or people in nearby communities over 

large geographic areas outside of a Project’s immediate boundary. Although 

quantitative screening thresholds that define what is meant by “large-scale” are not 

available for all Projects, several examples are provided in Appendix B. 

• Projects that could result in significant impacts on priority ecosystem services or social 

values at a particular site. Ecosystem services are benefits that people obtain from 

ecosystems including food, freshwater, shelter, timber, surface water purification, 

carbon storage and sequestration, climate regulation, and protection from natural 

hazards. Examples of social values include site attributes important for ethnic or 

religious reasons or attributes of cultural or historic significance, including those 

considered important to indigenous peoples. 

• Projects in locations, industries, or sectors with greater potential for adverse impacts on 

Project Affected People and Human Rights, including impacts to land and resources; 

health and safety; physical and/or economic displacement; demonstrated local 

opposition; significant in-migration; impacts to cultural heritage; gender-related 

impacts; or impacts to indigenous peoples or Vulnerable Groups. 

• Projects that are in locations, industries, or sectors that are labor-intensive; involve 

hazardous work with a documented history of Labor Rights issues; rely on large pools 

of contracted, migrant, casual, or unskilled Workers, including within the Supply Chain; 
Environmental and Social Policy and Procedures Page 12

or are in locations, industries, or sectors with elevated risks of gender discrimination, 

exclusion, or GBVH may also be higher risk. Examples of such Projects are those that 

involve significant construction activities, manual harvesting of agricultural 

commodities, Extractive Industries, or are in industries in which Workers face difficulty 

in exercising trade union rights or have a higher likelihood of using forced (including 

trafficked) or child labor, including in their Supply Chains. 

• Contextual Risk factors in the external environment that the Client does not control 

may further exacerbate the Project’s environmental and social risks and lead to a higher

risk categorization. 

c. Corporate Investments

i. Where the use of proceeds of a Corporate Investment and the environmental and social 

footprint of the business activities are known at the time of DFC’s environmental and social 

review, the risk categorization of a Corporate Investment will be based on the potential 

environmental and social risks of the known use of proceeds. Where the use of proceeds is 

unknown or not well-defined, the risk category will be based on the inherent risks associated 

with the particular sector, the environmental and social characteristics of the business 

activity, and the country context.

ii. Where the use of proceeds of a Corporate Investment is known and understood, the 

environmental and social review should proceed as it is done for traditional project finance, 

and the Applicable Standards will apply only to the business activities financed using the 

DFC funds. Corporate Investment Projects deemed to be Category A will have the same 

requirements as for traditional project finance Category A Projects including Environmental 

and Social Impact Assessment (ESIA)/Baseline Audit and disclosure requirements as 

described in Sections 5 and 6. Where the use of proceeds involves working capital, equity, or 

an investment in holding companies, the DFC review will consider the full range of 

operations undertaken by the entity in which DFC is investing, and the Applicable Standards

will apply to the entire company, including its subsidiaries and companies in which it has 

management control. In all cases, the DFC review involves investigation of the capacity, 

maturity, and reliability of the company’s corporate environmental and social management. 
Environmental and Social Policy and Procedures Page 13

4. ENVIRONMENTAL AND SOCIAL REVIEW

Objectives: (1) to determine whether the Project seeking DFC support can be implemented in 

accordance with this ESPP and the Applicable Standards; (2) to identify opportunities to avoid adverse 

impacts and, if impacts are unavoidable, to identify required mitigation measures; and (3) to identify 

opportunities to improve the environmental and social performance of the Project seeking DFC

support.

a. DFC Responsibilities

i. After screening and categorization, and prior to DFC approval, DFC undertakes a review of 

the Project and the Client’s organizational capacity and past environmental and social 

performance to determine whether the Client meets or can meet the requirements of the 

Applicable Standards. This may involve reviewing a Project’s ESIA (See Section 5), its 

Environmental and Social Management System (ESMS) *, and/or the Client’s relevant policies,

plans, and procedures.

15 

ii. DFC reviews the available documents related to the environmental and social performance 

of the Project as well as the Client’s organizational capacity to assess whether they are

adequate to address identified environmental and social risks and impacts and are 

appropriate to the significance or severity of the Project activity’s potential impacts. During 

the review process, DFC will identify the relevant Performance Standards that the Project is 

required to meet in addition to project-specific conditions and actions required to reach or 

maintain compliance with the Applicable Standards. 

iii. DFC’s review will consider direct, indirect, induced, Supply Chain-related, associated 

facilities, regional, trans-boundary, and cumulative environmental and social risks and

impacts. DFC will also consider Contextual Risks and their potential to affect the 

environmental and social risk profile of the Project. 

iv. As part of its review, DFC will assess Meaningful Consultation undertaken as per the 

requirements of the IFC Performance Standards, including those required when 

Performance Standard 7 is applicable. For those projects with the potential for significant 

adverse impacts on Project Affected People, DFC will confirm prior to Project approval that 

there is Broad Community Support* for theProject. DFC may rely on support from 

independent experts to assess Meaningful Consultation, Broad Community Support, and/or

applicable consultation requirements under Performance Standard 7 (Indigenous Peoples). 

v. During due diligence, DFC consults with the U.S. Department of State* on how Projectspecific activities interact with country-level human rights concerns. For consistency across 

U.S. Government agencies, DFC relies on guidance provided by the U.S. Department of 

State, the lead U.S. agency on Human Rights matters and determinations.

vi. As needed, DFC may undertake on-site due diligence visits for higher-risk projects and/or 

engage independent experts for additional support in its review. 

b. Client Responsibilities

i. The Client must demonstrate a sound understanding of the Project and have undergone a 

process to (1) identify all factors that define the Project’s Area of Influence, including direct 

15 Additional guidance on the format and content requirements for ESMS, ESIAs, and Baseline Audits may be found in 

Guidance Note 1 (Social and Environmental Assessment and Management Systems) at: Guidance Note 1: Assessment 

and Management of Environmental and Social Risks and Impacts - Published January 1, 2012 (updated June 14, 2021) 

(ifc.org)
Environmental and Social Policy and Procedures Page 14

and indirect impacts; (2) identify potential project-related environmental and social risks and 

impacts; (3) identify and commit to appropriate mitigation measures including adequate 

resources for implementation; and (4) identify and engage with relevant Project Affected 

People and other interested Stakeholders that may be directly or indirectly affected by the 

Project, including Vulnerable Groups. The process of identifying risks, impacts, Area of 

Influence, and Project Affected People shall be adequate, accurate, objective, and 

appropriate to the severity of Project risks and significance of Projectimpacts. 

ii. For higher-risk Projects, additional assessment and analysis may be required. For Category A 

and B Projects, the Client should submit one or more documents during DFC’s review that 

describe the following aspects. The level of detail required will vary depending on the 

nature, size, and level of risk of the Project. Key aspects include:

• The Project activities and/or key components, its Area of Influence, and its

environmental and social aspects. 

• Maps, drawings, or schematics of the Project and its Area ofInfluence. 

• Key potential environmental impacts and risks, including impacts on biodiversity and 

estimated Direct and Indirect Emissions* of GreenhouseGases. 

• Key potential social impacts and risks, including identification and a description of 

impacts on any Project Affected People and disadvantaged or Vulnerable Groups, as 

well as gender-related risks and impacts including discrimination, exclusion, and harm

(including GBVH). 

• An ESMS and/or related policies and management plans that describe proposed 

mitigation measures. 

• A description of the process of Meaningful Consultation, including a Stakeholder 

engagement plan (if available). 

• Organizational capacity and resources for environmental and social management. 

iii. Category C Projects are not required to establish a formal ESMS but are required to have in 

place appropriate environmental and social policies and procedures that will guide the 

Project (as described in Performance Standard 1), human resource management systems,

and internal and external-facing grievance mechanisms. 

iv. Clients are required to undertake, and provide demonstration of, Meaningful Consultation 

with Project Affected People and meet the requirements related to Stakeholder*

engagement of Performance Standard 1. The form and scope of the consultation should be

commensurate with the project risks and the nature and scope of the Project. Meaningful 

Consultation must be safe and inclusive, and Stakeholder analysis and engagement should 

capture the views of diverse groups including women, men, youth, the elderly, displaced or 

disabled persons, and any other disadvantaged or Vulnerable Groups. In some contexts, 

separate engagements with certain groups may be required to obtain different perspectives, 

priorities, and concerns about impacts, mitigation mechanisms, and project benefits. For 

those Projects with the potential for significant adverse impacts on Project Affected People, 

the Client is also required to demonstrate there is Broad Community Support for the 

Project. For those projects where Performance Standard 7 is applicable, the Client will be 

required to meet the applicable consultation requirements of that Performance Standard. 

v. Clients are required to have in place and maintain over the life of DFC support adequate 

organizational capacity and resources to manage the environmental and social risks

associated with the Project and implement the Project in accordance with the terms of the 

DFC Agreement. 
Environmental and Social Policy and Procedures Page 15

c. Environmental and Social Impact Assessments and Audits

i. For Projects that involve significant greenfield development or expansions or modifications 

of existing projects, the Client is required to prepare an ESIA aligned with DFC’s Applicable 

Standards (or other standards deemed equivalent by DFC). ESIAs are required to include a

Climate-related Vulnerability* assessment (See Section 10). This is applicable to all greenfield 

Category A Projects, and some greenfield Category B Projects. 

ii. For any Category A and for some Category B Projects that include existing or operating 

facilities, DFC requires the submission of a Baseline Audit or targeted study depending on 

potential environmental and social risks. The purpose of a Baseline Audit or targeted study is 

to identify past and present concerns, current status of regulatory and Applicable Standards

compliance, management systems and performance, as well as potential risks and liabilities 

of the Project. 

iii. For lower risk, Category B Projects that don’t fall under Paragraph 4.c.i and 4.c.ii above, such 

as those that include modernization and upgrade of existing production facilities or no major 

expansion or transformations, a limited or focused environmental and social analysis or study

may be sufficient. 

iv. Projects that have been screened as Category C (i.e., Projects with minimal environmental or 

social impacts) are not required to prepare an ESIA or Baseline Audit.
Environmental and Social Policy and Procedures Page 16

5. TRANSPARENCY AND DISCLOSURE

Objectives: (1) to enhance transparency and accountability related to DFC’s environmental and social

management; and (2) to enhance transparency and the provision of information to Stakeholders of 

DFC-supported Projects. 

a. DFC’s Institutional Disclosure

i. Institutional information that is made available on DFC’s website includes this ESPP, annual 

reports, audited financial statements, program handbooks, Board resolutions, claims 

determinations, arbitral awards, bilateral agreements, and annual Greenhouse Gas

accounting for DFC’s portfolio.

ii. DFC may withhold records or portions of records that are exempted from public disclosure

under the Freedom of Information Act (FOIA) or as required under other laws or 

regulations.

16

iii. DFC provides advance notice and information about potential Projects to be voted on by 

DFC’s Board of Directors to ensure that interested parties are aware in advance of public 

hearing dates and have sufficient information to prepare for the public hearing.

17 

iv. DFC is committed to disseminating information that meets its standards for objectivity, 

integrity, and utility in accordance with its Information Quality Guidelines.

18

v. DFC reports annually to Congress and the public regarding its implementation of this ESPP. 

That report, which is contained within DFC’s Annual Report, is published on the DFC 

website.

b. DFC’s Project-related Disclosure Requirements

i. DFC prepares and discloses project information summaries that contain environmental and 

social information for each Project. The summaries include the following environmental and 

social information as appropriate to the nature and scale of the Project and commensurate 

with the potential environmental and social risks and impacts:

• Rationale for environmental and social risk categorization. 

• Environmental and social standards applicable to the Project. 

• Description of the major environmental and social risks and impacts of the Project. 

• Approved alternative pollution prevention and control technologies that meet 

Performance Standard 3 (if applicable). 

• Description of action(s) required to achieve compliance with Applicable Standards. 

• Information related to DFC environmental and social due diligence visits (if applicable). 

• Description of the Client’s engagement with Project Affected People (if applicable). 

ii. For Projects that require Board of Directors approval, DFC provides advance notice by 

disclosing the project information summaries at least 7 days in advance of the Board meeting

or action. 

16 Additional information on DFC’s FOIA implementing regulation is available at: https://www.dfc.gov/who-weare/transparency-and-accountability 17 DFC Board of Directors disclosure requirements are contained in the DFC Board of Directors Public Engagement 

Policy: 

https://www.dfc.gov/sites/default/files/media/documents/BDR21%2805%29BoardPublicEngagementPolicy_0.pdf

18 DFC’s Information Quality Guidelines are available at: https://www.dfc.gov/who-we-are-transparency/informationquality-guidelines 
Environmental and Social Policy and Procedures Page 17

iii. For all Category A Projects (including Category A Subprojects), Clients are required to 

submit to DFC an ESIA and/or Baseline Audit, a local language translation of the executive 

summary of the ESIA/Baseline Audit, and a Stakeholder engagement plan (See Section 5c). 

DFC will post these documents for disclosure on DFC’s website for a public comment period

of at least 60 days. DFC may require additional, topic-specific environmental and social 

documents to be disclosed alongside the ESIA/Baseline Audit on DFC’s website depending 

on the nature and type of the Project and the materiality of the specific plan or report. All 

Project documents posted for public disclosure must be deemed adequate by DFC. DFC 

may require revision to the documents to achieve adequacy. 

iv. After the 60-day public comment period ends, DFC will post on its website any comments

received, as well as DFC management’s response, at least 7 days prior to the final decision 

on whether DFC will support a Project. If no comments are received, DFC may proceed 

directly to final project approval. 

v. No Category A Project may be approved without this public disclosure, opportunity for 

public comment, and management response (if needed). Disclosure of documents for public 

comment does not imply project approval. 

vi. At the same time the ESIA and/or Baseline Audit is released for public comment, DFC drafts 

and posts on its website an initial project summary. The initial project summary outlines: 

• Project name, location, and description. 

• DFC’s initial environmental and social screening and categorization. 

• Description of the anticipated major environmental and social risks and impacts of the 

Project. 

• Anticipated Applicable Standards. 

• Location of local disclosure of ESIA and/or Baseline Audit. 

vii. DFC notifies host-country governments of any Category A Project considered for support. 

This notification is required to identify guidelines and other standards of international 

organizations relating to public health, safety, or the environment that are applicable to the 

Project and, to the maximum extent practicable, any restriction related to public health or 

safety that would apply to the Project if it were undertaken in the U.S. All Host Country 

Notifications* are disclosed on DFC’s website. 

viii. A Project’s ESIA and/or Baseline Audit submitted for disclosure may not contain all of the 

final negotiated measures to mitigate or remediate environmental and social risks and 

impacts. DFC’s project summary describes additional measures required to achieve 

compliance with the Applicable Standards. 

c. Client Disclosure Responsibilities 

i. As per the Performance Standards, Clients are expected to maintain appropriate 

communication channels with Stakeholders, including regular reporting on Project activities 

to Stakeholders. This communication must be in a language and format that is accessible to 

Stakeholders, particularly Project Affected People. 

ii. For Category A Projects, Clients are required to submit to DFC an ESIA and/or Baseline 

Audit and Stakeholder engagement plan for public disclosure on the DFC website. 

iii. ESIAs, Baseline Audits, and any other environmental and social documents requested by 

DFC that are submitted for public disclosure must be in English or accompanied by an 

English language translation. 
Environmental and Social Policy and Procedures Page 18

iv. The Client is required to provide to DFC a local language translation of the executive 

summary of the ESIA and/or Baseline Audit and make the summary available to Project 

Affected People in a format that is readily understandable, at a location that is accessible 

locally to the Project, and tailored to meet the information needs of Project Affected 

People. The translated summary should be distributed by means that account for the ability 

of Project Affected People to receive, address, and effectively comment on the content. The 

location of local disclosure by the Client will be disclosed in DFC’s initial project summary 

(see Section 5.b.vi). 
Environmental and Social Policy and Procedures Page 19

6. MONITORING AND REPORTING

Objectives: (1) to review and evaluate DFC-supported Projects’ compliance with the Applicable Standards; 

and (2) to evaluate the effectiveness of mitigation measures, action plans, and corrective actions, including

input received from Stakeholders. 

a. DFC Responsibilities

i. DFC monitors Projects’ compliance with all Environmental and Social Requirements (and 

underlying representations) that are reflected in conditions and covenants in DFC 

Agreements throughout the term of the contract. DFC also monitors changes in the Project

and its local context that may affect its environmental and social risk profile and the 

Project’s ability to achieve ongoing compliance.

ii. Monitoring visits are intended to check for on-the-ground compliance, identify areas where 

the Project is implementing good practices and/or potential areas for improvement, and 

enable an opportunity for Workers, Project Affected People, and other Stakeholders to 

interact and provide feedback on the Project’s performance including its engagement 

practices to DFC.

iii. The extent and frequency of monitoring will be commensurate with the environmental and 

social risks associated with the Project. DFC undertakes monitoring through review of

environmental and social reports (client self-reporting and/or third-party reports),

communication with Clients regarding the Project’s environmental and social performance, 

and/or site visits to Projects by DFC’s environmental and social specialists and/or 

independent experts.

iv. Selection for monitoring site visits is determined through a risk-based prioritization process. 

The scope, timing, and periodicity of the visits are commensurate with the significance and 

severity of environmental and social risks and impacts of a Project, Client, or Financial 

Intermediary. 

v. For Category A and some Category B Projects, DFC requires a third-party audit to monitor

the environmental and social performance of the Project against the Applicable Standards. 

At least one third-party audit is required for all Category A Projects. The audit should be 

performed at a time specified in the DFC Agreement, and no later than three years after 

receiving DFC support. For certain Projects, additional third-party audits may be required 

during the construction phase. DFC must approve the scope of work of the monitoring 

activities and selection of the independent experts.

vi. If DFC identifies deficiencies in performance and/or non-compliance with the Applicable 

Standards, DFC will work with Clients to identify recommendations for improvements and 

appropriate corrective measures in cases of non-compliance. If the Client fails to comply 

with the agreed corrective measures, DFC may take such action and/or exercise such rights 

and/or remedies contained in the DFC Agreement as it deems appropriate (See Section 7).

b. Client Responsibilities

i. Clients are required to submit a Development Outcomes Survey (DOS) starting 12 months 

after receiving DFC support and on an annual basis thereafter. The DOS reporting 

requirement provides an avenue for DFC to evaluate project data regarding development 

impact outcomes. 

ii. All DFC Agreements require timely notification to DFC of any incident occurring at the

Project site that results in the loss of life or that has a material, adverse impact on or poses 

material risk to the environment, Workers, or Project Affected People.
Environmental and Social Policy and Procedures Page 20

iii. All Category A and some Category B Projects are required to submit annual environmental 

and social reports. At a minimum, environmental and social reports must include information 

on the following:

• Compliance with all conditions and covenants in DFC Agreements. 

• Client’s progress on implementation of the Project’s Environmental and Social 

Management Plan, the Environmental and Social Action Plan (ESAP)*, and/or any 

corrective actions. 

• Results of environmental and social monitoring activities. 

• Project-related environmental and social incidents. 

• Summary of training provided on environment, social, health, and safety issues. 

• Results of any environmental and social audits conducted, including any deficiencies 

identified by the auditors or local regulatory authorities as well as any remedial actions 

taken. 

• Stakeholder engagement activities. 

• Summary of grievances received from Project Affected People or Stakeholders and 

actions taken to resolve them. 

iv. Clients are required to facilitate the third-party audit(s) as required by DFC, including 

covering all costs associated with conducting the audit. Clients are required to submit to 

DFC the third-party audit reports so DFC can ensure that the audit was conducted in 

accordance with the agreed scope of work and that the Project is in compliance with the 

Environmental and Social Requirements contained within the DFC Agreement. 

v. In the event that monitoring by DFC, DFC’s independent experts or third-party audits finds

gaps in the Project’s or Client’s compliance with the Environmental and Social Requirements

of the DFC Agreement, Clients will be required to implement corrective actions within a 

time frame that is reasonable and feasible as determined by DFC in order to achieve 

compliance and to provide DFC with periodic updates on implementation. The Client may be 

subject to additional monitoring by DFC or its independent experts to ensure corrective 

actions are adequately implemented and that compliance has been achieved and maintained. 

vi. Clients are required to retain the rights afforded under each investment structure to ensure

that DFC has the rights to (1) visit and inspect Project site(s); (2) access Project and 

Subproject environmental and social performance monitoring records, including human

resources records; and (3) meet with Project and Subproject management and Project 

Affected People, including Workers. 
Environmental and Social Policy and Procedures Page 21

7. LEGAL CONDITIONS AND COMPLIANCE

Objectives: (1) to establish specific requirements for environmental and social performance in DFC 

Agreements; and (2) to define corrective actions in the event such requirements are not met.

a. DFC Standard Contractual Obligations

i. In addition to compliance with all applicable laws, DFC requires that all Projects must meet 

the Applicable Standards. 

ii. At a minimum, all DFC Agreements include standard project requirements to have an 

overarching environmental and social policy statement, commensurate human resources 

policies, and appropriate internal and external grievance mechanisms. For all Category A and 

B Projects, Clients are required to establish and maintain an ESMS that meets the 

requirements in Performance Standard 1.19 The level of detail and complexity of the ESMS

should be risk-based and commensurate with the significance of potential impacts or the 

severity of the risks of the Project. 

iii. Based on DFC’s environmental and social review (See Section 4), DFC develops appropriate, 

project-specific conditions required of the Client to achieve compliance with the Applicable 

Standards. These conditions are included in the DFC Agreement as part of the 

Environmental and Social Requirements and remain in effect throughout the term of the 

DFC Agreement. This may come in the form of an ESAP. ESAPs are required for all Category 

A projects and for some Category B Projects that are dependent on mitigation and 

monitoring measures to avoid or reduce potentially significant environmental and social 

impacts. 

iv. All DFC Agreements include contractual language that addresses Internationally Recognized

Worker Rights in substantially the following form (as outlined in Section 1451(d)(2) of the 

Build Act of 2018):

• The person receiving support agrees not to take actions to prevent employees of the 

foreign enterprise from lawfully exercising their right of association and their right to 

organize and bargain collectively. The person further agrees to observe applicable laws 

relating to a minimum age for employment of children, acceptable conditions of work with 

respect to minimum wages, hours of work, and occupational health and safety, and not 

to use forced labor or the worst forms of child labor (as defined in section 507 of the 

Trade Act of 1974 (19 U.S.C. 2467)). The person is not responsible under this paragraph 

for the actions of a foreign government.

v. The terms of the DFC Agreement are applicable to all project-related activities including 

those carried out by on-site contractors and sub-contractors of the Project that work for a 

substantial duration of time on the Project or are material to the Core Business Processes of 

the Project. 

vi. Clients are required to comply with all contractual conditions, including any applicable ESAP, 

and require compliance according to the Client’s controlling interest in the Project. The 

terms of the conditions take into account, among other things, the level of project control 

the Client will have regarding compliance with Applicable Standards and the Client’s role in 

the Project. 

19 Additional guidance on the establishment of an ESMS may be found in Guidance Note 1 – Assessment and 

Management of Environmental and Social Risks and Impacts: Guidance Note 1: Assessment and Management of 

Environmental and Social Risks and Impacts - Published January 1, 2012 (updated June 14, 2021) (ifc.org)
Environmental and Social Policy and Procedures Page 22

vii. In addition to other matters, all Projects must satisfy DFC’s “know your customer” due 

diligence process. DFC’s “know your customer” due diligence reviews the Client’s ownership 

and corporate governance structures and compliance with anti-money laundering sanctions 

and prohibited payments, as well as the Client’s organizational capacity to continue to 

comply with such laws. DFC Agreements include contractual provisions to ensure 

acceptable ownership structures, corporate governance, and continued compliance with 

such laws.

b. Non-Compliances 

i. For all Projects, material misrepresentations or material non-compliance with contractual 

environmental and social provisions, including reporting requirements, may constitute an 

event of default under the terms of the DFC Agreement. 

ii. DFC determines what is material and whether a default is curable or incurable. DFC makes 

determinations as to materiality based, for example, on the severity of the environmental, 

health, safety, social, or labor impacts or other result caused by the non-compliance and the 

nature and degree of such non-compliance by theClient. 

iii. In the case of a curable default, corrective actions are generally required by DFC to cure the 

default. In the case of an incurable default, DFC may exercise contractual remedies including 

insurance contract termination, acceleration of loan repayment, divestiture of an investment 

of a DFC-supported investment fund, or sale of a direct equity investment. 
Environmental and Social Policy and Procedures Page 23

8. FINANCIAL INTERMEDIARIES 

Objectives: (1) to define environmental and social risk categories specific to Financial Intermediaries; 

(2) to outline approach for DFC’s review of Financial Intermediaries and their Subprojects; and (3) to 

specify requirements for documentation, disclosure, and reporting.

a. Overview

i. Financial Intermediaries (FIs) are vehicles or entities that provide debt to, make equity 

investments in, or provide financial services to eligible companies (referred to as 

Subprojects). DFC supports FIs to achieve DFC’s mandated role as the U.S. Government’s

development finance institution and to more efficiently deliver and utilize DFC’s resources 

to benefit a larger number of investments with more development benefits than possible 

without the use of these intermediaries.

ii. The nature of FI Transactions* means that FIs assume partial or fully delegated responsibility 

for environmental and social assessment, risk management and monitoring, as well as overall 

portfolio management. The nature of delegation may take various forms depending upon a 

number of factors, such as the type of investment provided by DFC and the nature and type 

of investments by the FIs. 

b. FI Screening and Categorization

i. No FI may use DFC support for the purpose of investing in, lending to, or providing services 

to an entity engaged in a Categorically Prohibited Project. All DFC Agreements for FI 

Transactions will require the FI to apply DFC’s Categorical Prohibition List (See Appendix A). 

ii. DFC determines the environmental and social risk categorization for FI Transactions. The 

environmental and social risk categorization is commensurate with the environmental and 

social risk profile of the FI Transaction’s existing and/or proposed portfolio and considers

the type, size, and sector exposure of the Subprojects in the portfolio. 

Environmental and Social Risk Categories for Financial Intermediaries

Category Description Examples

Category FI-A The use of proceeds of the DFC investment is

expected to include exposure to business 

activities with potentially significant adverse 

environmental or social risks or impacts that 

are diverse, irreversible, or unprecedented in 

the absence of adequate mitigation measures. 

FI-A Transactions are not eligible for fully 

delegated environmental and social

responsibility. Category A Subprojects 

supported by FI-A Transactions must be 

referred to DFC for a policy review of each 

Subproject.

FIs that invest in major 

infrastructure construction, 

extractive industries, large-scale 

forestry, or other investments 

that entail significant involuntary 

resettlement or adverse impacts 

to indigenous peoples; and 

equity investments in banks that 

have significant portfolio 

exposure to extractive industries 

or fossil fuel-related 

infrastructure. 

Category FI-B The use of proceeds of the DFC investment is 

expected to include exposure to business 

activities that have limited adverse 

environmental or social risks and impacts that 

are few in number, generally site-specific, 

largely reversible, and readily addressed 

through mitigation measures. FI-B subproject 

environmental and social risks are often 

characterized as “moderate” or risks that are 

considered less adverse than Category A risks 

in terms of magnitude and likelihood of 

occurrence.

FIs that invest in mediumand small-to-medium-scale

construction, manufacturing, 

and processing; 

commercial/retail businesses; 

rooftop solar; and facility 

expansions within an existing 

footprint. 
Environmental and Social Policy and Procedures Page 24

FI-B Transactions are eligible for fully 

delegated environmental and social

responsibility. 

Category FI-C The use of proceeds of the DFC investment is 

expected to include exposure to business 

activities that have minimal adverse 

environmental or social risks or impacts.

FI-C Transactions are eligible for fully 

delegated environmental and social

responsibility. 

FIs that invest in tech or techenabled investments that do 

not involve significant physical 

assets and investments in 

financial institutions or fundof-funds. Also applicable to 

loans to banks where the use 

of proceeds will involve lending 

to micro, small, and medium

enterprises, mortgage and retail 

banking, leasing of small or 

light equipment, factoring, and 

insurance.

c. DFC Review of FIs and Subprojects

i. The FI’s proposed investment or lending strategy is considered in DFC’s assessment of the 

risk of adverse environmental and social impacts associated with the Subprojects at the time 

the FI’s structure is approved by DFC. 

ii. DFC will review and assess: (1) the FI’s existing environmental and social policies and 

procedures; (2) available environmental and social due diligence or monitoring reports that 

may illustrate the FI’s prior environmental and social performance; (3) environmental and 

social risks and impacts associated with the FI’s existing portfolio and expected future 

Subprojects; (4) the FI’s organizational capacity to identify environmental and social risks 

and address impacts; and (5) measures necessary to strengthen the FI’s existing ESMS. 

iii. For FI-A and some FI-B Transactions, DFC may conduct on-site due diligence to further 

evaluate the FI and its management capacity to implement the ESMS. As needed, DFC may 

engage independent experts for additional support in its due diligence. 

iv. The FI is required to submit to DFC an ESIA and/or Baseline Audit (See Section 5) and 

Stakeholder engagement plan for review prior to DFC support for all Category A and some 

Category B Subprojects, as determined by DFC. 

v. DFC will evaluate and monitor the effectiveness of the FI’s environmental and social risk 

management throughout the project life cycle. This may include review of annual 

environmental and social reports, communication, and meetings with the FI on 

environmental and social performance of its portfolio and/or on-site monitoring of the 

Subprojects. 

d. Standard Policy Requirements for FI Transactions

i. FI-A and FI-B Transactions are required to establish and maintain an ESMS that meets the 

requirements of Performance Standard 1. The level of detail and complexity of the ESMS 

should be commensurate with the potential risks and impacts of the portfolio. The ESMS is 

required to address the risks that are anticipated from the FI’s prospective Subprojects. 

ii. The ESMS must include a process for: (1) screening Subprojects against the Applicable 

Standards; (2) environmental and social risk categorization of Subprojects; (3) environmental

and social due diligence including the use of third-party support where needed and the 
Environmental and Social Policy and Procedures Page 25

establishment of ESAPs, as applicable; (4) monitoring and reporting of environmental and 

social performance of the FI and its Subprojects; (5) ensuring adequate and qualified staff 

dedicated to environmental and social performance; and (6) the FI’s external communication 

channels and the evaluation of Subprojects’ Stakeholder engagement and grievance 

mechanisms.

iii. FI-C Transactions are not required to establish an ESMS but are required to have in place

appropriate environmental and social policies and procedures, human resource management 

systems, and internal- and external-facing grievance mechanisms.

iv. The FI is required to put in place a methodology to track, monitor, and report its Greenhouse

Gas emissions at the portfolio level and to provide annual accounting to DFC.

v. The FI is responsible for ensuring the applicable requirements of this ESPP are met by the 

individual Subprojects. 

vi. The FI shall provide DFC with any requested ESIAs, environmental and social due diligence

reports, monitoring reports, Stakeholder engagement and grievance mechanism 

documentation, alternatives analyses, and other environmental and social documentation. 

vii. FI-A Transactions and some FI-B Transactions will be required to submit to DFC an annual 

report on their environmental and social performance. The report should include information 

on the implementation of the ESMS and the status of any ESAP activities for Subprojects. 

viii. All FIs are encouraged to publish relevant environmental and social policies and performance 

indicators on their website. This may include corporate environmental and social policies, a 

summary of their ESMS, and/or environmental and social performance reports, if available.

e. Disclosure of Category A Subprojects 

i. For any Subproject determined to be Category A, the FI is required to submit to DFC an 

ESIA and/or Baseline Audit and Stakeholder engagement plan for the Subproject that are 

deemed adequate by DFC for disclosure on DFC’s website for a public comment period of 

not less than 60 days. These documents will be disclosed for public comment on DFC’s 

website prior to DFC support, in line with DFC’s public disclosure requirements (See Section 

6).

ii. FIs are encouraged to list on their website the link to any publicly disclosed ESIA reports for 

Category A Subprojects. 
Environmental and Social Policy and Procedures Page 26

9. CLIMATE

Objectives: (1) to support the reduction of Greenhouse Gas emissions associated with Projects; (2) to 

promote energy efficiency and conservation; (3) to promote low- and no-carbon fuels and 

technologies; (4) to encourage carbon sequestration in Sustainable Landscapes*; and (5) to promote the 

adoption of climate adaptation and resilience measures. 

 

a. DFC Responsibilities 

i. Investments are reviewed for Climate-related Risks* and Climate-related Vulnerability.

20

Investments are reviewed for alignment with the goals of the Paris Agreement.21

 

ii. DFC is continuing Overseas Private Investment Corporation’s (OPIC’s) commitment to 

reduce the Direct Emissions* associated with Projects and Subprojects in OPIC/DFC’s active 

portfolio by 50 percent over a 15-year period (June 30, 2008 – September 30, 2023).22 The 

active portfolio includes all insurance contracts in force, equity investments, and all guaranty 

and direct loans with an outstanding principal balance. Annual accounting reports that track 

this commitment and detail the methodology associated with this commitment may be found 

on DFC’s website.23 

iii. DFC will track and annually report on portfolio Greenhouse Gas emissions in conformance 

with The Global Greenhouse Gas Accounting and Reporting Standard for the Financial Industry, 

as updated periodically by the Partnership for Carbon Accounting Financials (PCAF).24 

b. Client Responsibilities 

i. For certain sectors, the EHS Guidelines establish resource efficiency requirements, which 

require identification and implementation of technically and financially feasible and costeffective measures for improving efficiencies in consumption of energy, water, and other 

resources and material inputs. Rehabilitation and other modifications of existing Projects

should plan to meet these resource efficiency requirements within a feasible time frame. 

 

ii. Clients must demonstrate that measures to reduce significant, project-related Greenhouse 

Gas emissions were evaluated and that technically and financially feasible and cost-effective 

measures were incorporated into the final design of the Project. 

 

iii. As a condition of DFC support, all Projects must quantify and annually report to DFC the 

Direct Emissions (Scope 1) from their Project.

25 As a condition of DFC support, Clients shall 

quantify the significant Indirect Emissions (Scope 2) associated with off-site production of 

electricity, steam, heating, or cooling used or purchased by the Project. 

 

iv. As a condition of DFC support, Projects in Energy-Intensive Sectors* must meet energy 

20 Executive Order 13677 (September 23, 2014) requires the integration of climate-resilience considerations into all 

United States international development work.

21 Executive Order 14008 (January 27, 2021) requires agencies that engage in extensive international work to develop 

strategies and implementation plans for integrating climate considerations into their international work. 

DFC’s Climate Action Plan can be found at https://www.sustainability.gov/contributing-agencies.html#dfc 22 Public Law 111-117 Sec 7079(b) (12/16/2009) required OPIC/DFC to implement a revised climate change plan to 

reduce the Greenhouse Gas emissions associated with its projects by at least 30 percent over 10 years and by 50

percent over 15 years. 23 https://www.dfc.gov/media/reports/archived 24 https://carbonaccountingfinancials.com/ 25 Clients shall use the highest-quality data available for each Project for emissions calculations and, where relevant, 

improve the quality of the data over time. Types of emissions data, listed from highest to lowest quality according to 

the PCAF Standard, include: verified emissions data; unverified, calculated emissions data; primary data on energy 

consumption; primary data on economic production; and sectoral data.
Environmental and Social Policy and Procedures Page 27

efficiency guidelines and benchmarks established by international organizations or develop 

and implement an energy management program to achieve these guidelines and benchmarks 

within a feasible time period. Energy management programs should be appropriate to the 

nature and scale of project operations. The Project shall document methods to reduce 

overall energy usage patterns through reduction in energy losses and improvements in 

energy conversion efficiency. In some Projects, process modifications will be required to 

achieve such guidelines and benchmarks. 
Environmental and Social Policy and Procedures Page 28

10. COUNTRY ELIGIBILITY – LABOR

Objectives: (1) to outline DFC’s approach to country eligibility based on statutory labor requirements; 

and (2) to outline interagency coordination regarding country-level determinations on Internationally 

Recognized Worker Rights. 

a. U.S. Law Requirements

Section 1451(d) of the Build Act of 2018* contains the following provision:

The Corporation shall only support projects under title II [“Authorities”] in countries that are taking 

steps to adopt and implement laws that extend internationally recognized worker rights (as defined 

in section 507 of the Trade Act of 1974 (19 U.S.C. 2467)) to workers in that country, including any 

designated zone in that country.

b. Determining Country Eligibility: The USTR Process

i. The statute establishing the U.S. Generalized System of Preferences (GSP)* trade preference 

program provides that the president of the United States shall not designate a country as a 

GSP beneficiary if it “has not taken or is not taking steps to afford Internationally 

Recognized Worker Rights to workers in that country” (See 19 U.S.C. 2462). For consistency 

of worker rights country-level determinations across the U.S. Government, DFC accepts the 

determinations made by the president on the “taking steps” worker rights standard for the 

purpose of the GSPprogram.

ii. Through the Office of the U.S. Trade Representative (USTR)*, theTrade Policy Staff

Committee (TPSC), an interagency committee chaired by USTR and made up of specialists 

from the U.S. Department of State, U.S. Department of Labor, and other U.S. Government 

agencies, advises the president as to which countries should be designated as GSP 

beneficiaries. Any person may request to have the GSP status of any beneficiary country 

reviewed with respect to any of the eligibility criteria, including the “taking steps” country 

standard for worker rights, in accordance with USTR’s petition process. The TPSC may also 

self-initiate a review of a beneficiary country’s GSP eligibility.

iii. If a petition is accepted for review, the TPSC review typically includes an examination of the 

issues raised in the petition, as well as engagement with the foreign government to 

implement worker rights reforms. USTR also solicits comments through the Federal Register 

and holds a public hearing.

iv. Upon completion of a country review, a country’s eligibility status may remain unchanged, or 

be withdrawn, suspended, or limited. Modifications to a country’s GSP eligibility are 

implemented by Executive Order* or Presidential Proclamation* and are published in the 

Federal Register. Based on the country review, should the president determine that a 

country is failing to meet the statutory “taking steps” worker rights standard, then the 

country will become ineligible for DFC programs. DFC will determine an effective date for 

ineligibility. The country list on DFC’s website is updated to remove the country as of the 

effective date of the country’s ineligibility, and DFC staff are notified of the change of 

country status. However, if a country becomes ineligible for GSP benefits on grounds other 

than worker rights, that country remains eligible for DFC programs. 

c. Reviewing Country Eligibility: The DFC Process

i. Countries that were previously GSP-eligible but whose benefits were withdrawn or 

suspended for failure to meet the statutory worker rights standard are considered for 

eligibility under the USTR process in 10.1. In non-GSP-eligible countries where DFC 

programs are being offered, DFC utilizes a petition and review process similar to the USTRled process to determine a country’s ability to meet the statutory worker rights standard. 
Environmental and Social Policy and Procedures Page 29

Petitions can be submitted to DFC at its public hearings to reexamine whether the status of 

any such country should be changed on worker rights grounds.

ii. Upon an initial petition review, if DFC makes the determination that the petition merits a 

formal review, DFC will follow a similar interagency process and consult with, at a minimum, 

the U.S. Department of State, U.S. Department of Labor, and USTR to carry out such a 

review. 

d. Granting Country Eligibility on Worker Rights Grounds

For non-GSP-eligible countries that are deemed particularly sensitive on worker rights grounds 

due to a documented history of issues relating to Internationally Recognized Worker Rights, and 

where DFC seeks to implement its programs for the first time or to lift suspension of DFC 

programs due to foreign policy or other priorities, DFC will also follow an interagency process 

and consult with, at a minimum, the U.S. Department of State, U.S. Department of Labor, and 

USTR in making its “taking steps” determination.

e. Country Eligibility Review Criteria

i. In addition to interagency consultation, DFC may use additional instruments to inform its 

country reviews on worker rights, including:

• The U.S. Department of State’s Annual Country Reports on Human Rights Practices*, 

Trafficking in Persons Reports; Investment Climate Statements; and Business 

Advisories, 

• The U.S. Department of Labor’s* International Child Labor & Forced Labor Reports;

• Comments and reports of the International Labour Organization (ILO)*;

• International Trade Union Confederation (ITUC) annual reporting;

• Third-party specialist review of country-level worker rights practices; 

• Information received through DFC’s public hearings; and

• Consultations with labor organizations. 

ii. The “taking steps” standard is a purposely flexible standard to reflect the varying levels of 

economic and social development in developing countries. In its country reviews, DFC takes 

into account the totality of circumstances and facts available relevant to Internationally 

Recognized Worker Rights, and uses certain general criteria to assess whether countries 

meet the statutory standard, including: (1) ratification of the relevant ILO fundamental 

conventions; and (2) the progress the country has taken or is taking to adopt and implement 

laws and practices that extend Internationally Recognized Worker Rights in areas where 

national law and practice have not met the international standard.

f. Country Status Effect on DFC-Supported Projects

If a country becomes ineligible for DFC support on worker rights grounds, the change of status does 

not affect Projects to which DFC made a legally binding commitment prior to the date on which the 

country status changed. DFC's monitoring of the Projects in such country will be commensurate to 

the elevated labor risks. All other Projects that have not been formally committed to by DFC prior to 

the official ineligibility date will not be eligible for DFC support during the term of the country’s 

ineligibility. If a country is under a formal review on worker rights grounds (by either USTR’s TPSC or 

DFC), Projects that are in the application process are subject to a review that is sensitive to the labor

issues highlighted in the GSP or DFC petition. 
Environmental and Social Policy and Procedures Page 30

APPENDIX A – Categorical Prohibitions

1. Conversion or degradation of Critical Habitat unless it can be demonstrated though a 

Biodiversity Action Plan (as defined by IFC Performance Standard 6) that efforts to avoid, 

minimize, rehabilitate, or restore the habitat will ensure no net loss of threatened or 

endangered species.

2. Construction of dams that significantly and irreversibly impact: (a) biodiversity; (b) natural 

ecosystems, upstream or downstream of the dam; (c) natural hydrology; (d) large land areas; 

or (e) that will displace, physically or economically, large numbers of inhabitants (5,000 

persons or more).

3. Production or trade in any product or activity deemed unlawful under host country laws or 

regulations; international agreements, including multilateral conventions; or subject to 

international phase-outs or bans such as pharmaceuticals;

26 pesticides/herbicides;27 ozone 

depleting substances;

28 polychlorinated biphenyls (PCBs),29 and other hazardous 

substances;

30 wildlife or wildlife products regulated under the Convention on International 

Trade and Endangered Species of Wild Fauna and Flora (CITES);

31 and trans-boundary trade 

in waste or waste products.32 

4. The export of mercury and mercury compounds, and the manufacture, export, and import of 

a large range of mercury-added products.

5. Shipment of oil or other hazardous substances in vessels that do not comply with IMO 

requirements.

6. Resettlement of 5,000 or more persons.

7. Any impact on World Heritage Sites33 unless it can be demonstrated through an 

environmental and social assessment that the Project (i) will not result in the degradation 

of the protected area; and (ii) will produce positive environmental and social benefits.

8. Any impact on areas on the United Nations List of National Parks and Protected Areas34 unless it 

can be demonstrated through an environmental and social assessment that the Project (i) will not 

result in the degradation of the protected area; and (ii) will produce positive environmental and 

social benefits.

9. Extraction or infrastructure in or impacting protected area Categories I, II, III, and IV (Strict Nature 

Reserve/Wilderness Areas, National Parks, Natural Monuments, and Habitat/Species 

Management Areas), as defined by the International Union for the Conservation of Nature (IUCN) 

unless it can be demonstrated through an environmental and social assessment that (i) there is no 

degradation of the protected area; and (ii) there are positive environmental and social benefits.

26 World Health Organization Pharmaceuticals: Restrictions in Use and Availability

https://www.who.int/publications/i/item/9789240014770 27 WHO Recommended Classification of Pesticides by Hazard and Guidance to Classification. 2019 Edition

is available at: https://www.who.int/publications/i/item/9789240005662 28 As defined by the Montreal Protocol, a list of the chemical compounds that react with and deplete stratospheric 

ozone together with target reduction and phase-out dates is available at: https://www.epa.gov/ozone-layerprotection/ozone-depleting-substances 29 Polychlorinated biphenyls (PCBs) are likely to be found in oil-filled electrical transformers, capacitors, and 

switchgear dating from 1950 to 1985.  30 As defined by the Rotterdam Convention, A list of hazardous chemicals is available at: 

http://www.pic.int/TheConvention/Chemicals/AnnexIIIChemicals/tabid/1132/language/en-US/Default.aspx 31 A list is of CITES species is available at: http://www.speciesplus.net 32 As defined by the Basel Convention; see: https://www.basel.int/default.aspx 33 The list can be found here: https://whc.unesco.org/en/list/ 34 The list can be found here: https://www.protectedplanet.net/
Environmental and Social Policy and Procedures Page 31

10. Activities prohibited by host-country legislation or international conventions relating to the 

protection of biodiversity resources or cultural heritage.

11. The manufacture, placing on the market, and use of asbestos fibers, and of articles and mixtures 

containing these fibers added intentionally. 

12. Marine and coastal fishing practices, such as large-scale pelagic drift net fishing and fine mesh net 

fishing using nets in excess of 2.5 kilometers in length.

13. Production or activities involving forced labor35 or child labor.36 

14. Projects or companies known to be in material violation of local applicable law related to

protection of the environment, and of social, health, safety, and labor, and public disclosure

requirements. 

15. Projects where the primary business activities are in the following prohibited sectors: gambling; 

media communications of an adult or political nature; military production or sales; alcoholic 

beverages (if contrary to local religious or cultural norms); or tobacco and related products.

16. Projects or companies that replace U.S. production or are likely to cause a significant reduction in 

the number of employees in the U.S., including “runaway plants” and outsourcing the provision of 

goods and services (e.g., business process outsourcing) from the U.S.

17. Projects or companies that provide significant, direct support to a government that engages in a 

consistent pattern of gross violations of internationally recognized Human Rights, as determined 

by the U.S. Department of State.

18. Projects or companies that perform abortions as a method of family planning; motivate or coerce 

any person to practice abortions; perform involuntary sterilizations as a method of family planning; 

coerce or provide any financial incentive to any person to undergo sterilizations; or perform any 

biomedical research that relates in whole or in part, to methods of, or in the performance of, 

abortions or involuntary sterilization as a means of family planning.

19. Companies that are treated as inverted domestic corporations under 6 U.S.C. 395(b).

35 Forced labor means all work or service, not voluntarily performed, that is exacted from an individual under threat of 

force or penalty, such as indentured labor, bonded labor, or similar labor-contracting arrangements. IFC Performance 

Standard 2, ¶ 22 (2012). 36 Child labor means the employment of children (persons below the age of 18) that is economically exploitative or is 

likely to be hazardous to or interfere with the child’s education, or be harmful to the child’s health or physical, mental, 

spiritual, moral, or social development. IFC Performance Standard 2, ¶ 21 (2012).
Environmental and Social Policy and Procedures Page 32

APPENDIX B – Illustrative List of Category A Projects

Risk categorization takes into account a number of different factors including but not limited to: sector, 

technology/methods, scale, location, leverage, and the specifics of the business relationships. Although 

decisions on categorization are made on a case-by-case basis, the following list is indicative of the types of 

Projects that are screened by DFC as Category A.

1. Large-scale industrial plants and/or estates.

2. Crude oil refineries (excluding undertakings manufacturing only lubricants from crude oil) and

installations for the gasification and liquefaction of 500 tons or more of coal or bituminous shale 

per day.

3. Major Greenhouse Gas-emitting Projects, defined as Projects with Direct Greenhouse Gas 

Emissions of more than 91,000 metric tons of CO2eq* per year.

4. Cement manufacturing with an annual production rate of greater than 1 million dry weight tons.

5. Integrated works for the initial smelting of cast iron and steel; and installations for the production 

of non-ferrous crude metals from ore, concentrates, or secondary raw materials by metallurgical, 

chemical, or electrolytic processes.

6. Installations for the extraction of asbestos and for the processing and transformation of asbestos 

and products containing asbestos; for asbestos-cement products with an annual production of 

more than 20,000 tons of finished product; for friction material with an annual production of more 

than 50 tons of finished product; and for other asbestos utilization of more than 200 tons per 

year. 

7. Integrated chemical installations, i.e., those installations that manufacture, on an industrial scale, 

substances using chemical conversion processes in which several units are juxtaposed and are 

functionally linked to one another and that produce: basic organic chemicals; basic inorganic 

chemicals; phosphorous-, nitrogen-, or potassium-based fertilizers (simple or compound 

fertilizers); basic plant health products and biocides; basic pharmaceutical products using a 

chemical process; and explosives.

8. Projects that manufacture, store, transport, or dispose hazardous or toxic materials.

9. Projects that pose significant occupational or community health or safety risks.

10. Construction of lines for long-distance railway traffic, and airports with a basic runway length of 

2,100 meters or more. Motorways, express roads and new roads with four or more lanes; or 

realignment and/or widening of an existing road so as to provide four or more lanes where such 

new road, or realigned and/or widened section of road, would be 10 kilometers or more in a 

continuous length.

11. Pipelines with a diameter of more than 800 millimeters and a length of more than 40 kilometers;

terminals; and associated facilities for the large-scale transport of gas, oil, metals/minerals, and 

chemicals.

12. Large-scale seaports and inland waterways and ports for inland waterway traffic; trading ports; 

piers for loading and unloading connected to land; and outside ports (excluding ferry piers).

13. Waste-processing and disposal installations for the incineration, chemical treatment, or landfill of 

hazardous, toxic, or dangerous waste. 

14. Large-scale waste disposal installations for the incineration or chemical treatment of nonhazardous waste with a capacity exceeding 100 tons per day. 

15. Construction or significant expansion of large dams and reservoirs not otherwise prohibited.
Environmental and Social Policy and Procedures Page 33

16. Groundwater abstraction activities or artificial groundwater recharge schemes in cases where the 

annual volume of water to be abstracted or recharged amounts to 10 million cubic meters or 

more.

17. Works for the transfer of water resources between river basins where that transfer aims at 

preventing possible shortages of water and where the amount of water transferred exceeds 100 

million cubic meters/year, or works for the transfer of water resources between river basins 

where the multi-annual average flow of the basin of abstraction exceeds 2,000 million cubic 

meters/year and where the amount of water transferred exceeds 5 percent of that flow. (In both 

cases, transfers of piped drinking water are excluded.)

18. Industrial plants for the (i) production of pulp from timber or similar fibrous materials; or (ii) 

production of paper and board with a production capacity exceeding 200 air-dried metric tons per 

day. 

19. Large-scale peat extraction.

20. Quarries and opencast mining where the surface of the site exceeds 25 hectares, or peat 

extraction where the surface of the site exceeds 150 hectares.

21. Major exploration and development of onshore oil and gas reserves.

22. Exploration and development of offshore oil and gas reserves.

23. Installations for storage of petroleum, petrochemical, or chemical products with a capacity of 

200,000 tons or more.

24. Large-scale logging or deforestation of large areas.

25. Large-scale power transmission and/or long-distance overhead transmission lines.

26. Municipal wastewater treatment plants servicing more than 150,000 people.

27. Large-scale municipal solid waste-processing and disposal facilities. 

28. Large-scale tourism and retail development.

29. Large-scale wind power installations for energy production (wind farms) with an installed capacity 

greater than 100 megawatts. 

30. Large-scale land reclamation and sea dredging operations. 

31. Large-scale primary agriculture/plantation or forestation involving intensification, land use change 

or conversion of priority biodiversity features, and/or Critical Habitat or conversion of natural 

habitat. 

32. Plants for the tanning of hides and skins where the treatment capacity exceeds 12 tons of finished 

products per day.

33. Installations for the intensive rearing of poultry or pigs with more than: 85,000 places for broilers 

and 60,000 places for hens; 3,000 places for production pigs (over 30 kilograms); or 900 places for 

sows. 

34. Greenfield housing developments that contain more than 2,500 residential units.

35. Project activities that entail significant, adverse transboundary and/or cumulative environmental, 

social, or human rights impacts.

36. Projects that require significant physical or economic displacement* and/or government-managed 

resettlement processes.

37. Projects that entail direct, adverse impacts to indigenous peoples and areas of importance for 

indigenous peoples.
Environmental and Social Policy and Procedures Page 34

38. Projects that require the utilization or reliance to a large degree on large pools of sub-contracted, 

unskilled, temporary, casual, and/or migrant Workers, including within a Project’s Supply Chain

essential to its Core Business Processes. 

39. Projects that involve a high degree of Contextual Risk that have the potential to amplify the 

significance of the Project’s environmental and social impacts. 

40. Projects, not otherwise categorically prohibited, that are located in or sufficiently near sensitive 

locations of national or regional importance, or proposed for such status by national governments 

that may have apparent negative environmental or social impacts on:

• Wetlands;

• Areas of archeological or cultural significance including critical cultural heritage;

• Areas prone to erosion and/or desertification;

• Areas of importance to indigenous peoples;

• Primary temperate/boreal forests; 

• Areas that provide significant ecosystem services;

• Coral reefs;

• Mangrove swamps;

• Habitats or other ecosystems that support priority biodiversity features;

• Nationally designated seashore areas; and

• Managed resource protected areas, protected landscape/seascape (International Union for 

the Conservation of Nature (IUCN) Categories V and VI) as defined by IUCN’s Guidelines 

for Protected Area Management Categories. Additionally, these projects must meet IUCN’s 

management objectives and follow the spirit of IUCN definitions.
Environmental and Social Policy and Procedures Page 35

APPENDIX C – Glossary

Annual Country Reports on Human Rights Practices – Reports that are submitted annually by the U.S. 

Department of State to the U.S. Congress in compliance with sections 116(d) and 502B(b) of the Foreign 

Assistance Act of 1961, as amended, and section 504 of the Trade Act of 1974, as amended.

Applicable Standards – As defined on a project-by-project basis, but includes the IFC Performance 

Standards, applicable EHS Guidelines, and Labor Rights. 

Area of Influence – The area likely to be affected by: (i) the Project and the Client’s activities and facilities 

that are directly owned, operated, or managed (including by contractors) and that are a component of the 

Project; (ii) impacts from unplanned but predictable developments caused by the Project that may occur 

later or at a different location; or (iii) indirect Project impacts on biodiversity or on ecosystem services 

upon which Project Affected People’s livelihoods are dependent. The Area of Influence also encompasses: 

• Associated facilities, which are facilities that are not funded as part of the Project and that would 

not have been constructed or expanded if the Project did not exist and without which the Project

would not be viable.

• Cumulative impacts that result from the incremental impact, on areas or resources used or directly 

impacted by the Project, from other existing, planned, or reasonably defined developments at the 

time the risks and impacts identification process is conducted.

Baseline Audit – An assessment of environmental and social impacts of pre-existing or ongoing activities 

that is required for all Category A Projects that involve the acquisition of or support to pre-existing 

facilities. For new construction or expansion to an existing site, an ESIA will also be required. 

Broad Community Support – The collective expression by Project Affected People, through individuals or 

their recognized representatives, in support of a Project. Broad Community Support may exist even if 

some individuals or groups object to a Project. 

Build Act of 2018 – Better Utilization of Investments Leading to Development Act of 2018 (P.L. 115-254).

Categorically Prohibited Project – Project of the type listed in Appendix A where potential adverse 

environmental or social impacts of the Project preclude DFC support.

Client – The direct recipient or prospective recipient of DFC support, including FIs. 

Climate-related Risks – Combination of the magnitude of the potential consequence(s) of climate change 

impacts and the likelihood that the consequence(s) will occur.

Climate-related Vulnerability – The degree to which a system is susceptible to, or unable to cope with, 

adverse effects of climate change, including variability and extremes. Vulnerability is a function of the 

character, magnitude, and rate of climate variation to which a system is exposed, its sensitivity, and its 

adaptive capacity.

CO2eq – Carbon dioxide equivalents are a metric measure used to compare the emissions from various 

Greenhouse Gases based upon their global warming potential (GWP) over a given time frame. The carbon 

dioxide equivalent for a gas is derived by multiplying the tons of the gas by the associated GWP. For 

example, the 100-year GWP for methane (CH4) is 28 and for nitrous oxide (N2O) 265. This means that the 

emissions of 1 million metric tons of methane and nitrous oxide are equivalent, respectively, to emissions 

of 28 million and 265 million metric tons of carbon dioxide.37

37 GWP values from the IPCC Fifth Assessment Report, 2014. https://www.ipcc.ch/assessment-report/ar5/ 
Environmental and Social Policy and Procedures Page 36

Contextual Risk – Risks in the external environment (at a country, sector, or subnational level) that the 

Client does not control but that could negatively impact a Project’s or Client’s ability to meet the 

Applicable Standards. Risks may be due to current circumstances or systemic, legacy, and/or historic 

issues. Key risk factors may include:

• Socially sensitive and/or labor-intensive sectors (e.g., sectors with known labor or human rights 

violations, risk of child/forced labor, hazardous work, elevated risks of gender or Vulnerable 

Group-based discrimination or GBVH, involvement of significant armed security personnel, and

major environmental and social risks associated with the supply chain and/or sectors that have 

been subject to recent, documented public opposition). 

• Broader, socially sensitive context (e.g., historic or current political or social conflict, country 

contexts with reported human rights violations, weak governance systems/enforcement of rule of 

law, recent or ongoing humanitarian crisis, war, restricted civic space/reprisal risk, relatively higher 

levels of gender inequality or GBVH, ethnic discrimination/violence, and large nearby presence of 

indigenous peoples and/or Vulnerable Groups). 

• Residual or unmitigated adverse environmental and social impacts (e.g., legacy of displacement, 

inadequate consultation, or unresolved grievances in previous development projects). 

• Environmental and community health and safety factors (e.g., biodiversity, ecosystem services, and 

climate change; access to natural resources; and health and population). 

Core Business Processes – Defined by IFC as those production and/or service processes essential for a 

specific business activity without which the business activity could not continue. 

Corporate Investment – A transaction in which (i) the use of proceeds is not limited to specific assets and 

the application of which is at the discretion of company management (e.g., working capital); (ii) the 

proceeds are for specific corporate activities (e.g., restructuring, financial engineering, long-term strategic 

support, or corporate-wide investments); or (iii) DFC is making a subscription for shares in a private 

company (equity).

 

Critical Habitats – (a) Areas that support globally important concentrations of an IUCN Red-listed 

Endangered (EN) or Critically Endangered (CR) species (≥ 0.5% of the global population AND ≥ 5 

reproductive units of a CR or EN species). (b) Areas that support globally important concentrations of an 

IUCN Red-listed Vulnerable (VU) species, the loss of which would result in the change of the IUCN Red 

List status to EN or CR and meet the thresholds in (a). (c) As appropriate, areas containing important 

concentrations of a nationally or regionally listed EN or CR species.

Cultural Heritage – Tangible property or sites having archaeological (prehistoric), paleontological, historical, 

cultural, artistic, and religious value, as well as unique environmental features that embody cultural values, 

such as sacred groves. Cultural Heritage also includes intangible forms of culture, such as cultural 

knowledge, innovations, and practices of communities embodying traditional lifestyles.

DFC Agreement – Any contract pursuant to which DFC support is provided, including a finance agreement, 

guaranty, note, insurance contract, share purchase agreement, or subscription agreement. 

Direct Emissions – Emissions from Project sources that are owned or controlled by the Client, including 

stationary combustion emissions, mobile combustion emissions, process emissions, and fugitive emissions.

Economic Displacement – Loss of land, assets, or restrictions on land use, assets, and natural resources that 

leads to loss of income sources or means of livelihood.

Energy-Intensive Sectors – Projects in the following sectors: aluminum, brewing, cement, mining, corn 

refining, forest products, glass, metal casting, motor vehicle manufacturing, oil and natural gas production, 

petroleum refining, petrochemicals, pharmaceuticals, pulp and paper, steel and iron, and thermal power.
Environmental and Social Policy and Procedures Page 37

Environmental and Social Action Plan (ESAP) – The ESAP will include specific corrective and preventive 

actions, mitigation measures, monitoring, and reporting commitments to achieve compliance with the 

Applicable Standards. The ESAP provides an implementation schedule for measures that must be carried 

out as part of the Project and reflects sequencing, periodicity, adequate budget, and responsible parties. 

Required on all Category A Projects. 

Environmental and Social Impact Assessment (ESIA) – An instrument to identify and assess the potential 

environmental and social impacts of a proposed project, evaluate alternatives, and design appropriate 

mitigation, management, monitoring, and reporting measures. The assessment will be based on current 

and/or recent information, and environmental and social baseline data, including gender-disaggregated

data, at an appropriate level of detail and using scientifically sound methodologies. Required for all 

Projects involving significant, new (greenfield) developments or significant expansion of existing facilities.

Environmental and Social Management System (ESMS) – Part of a Project’s overall management system that 

includes the organizational structure, responsibilities, practices, and resources necessary for implementing 

the project-specific management program developed through the environmental and social assessment of 

the Project. 

Environmental, Health, and Safety (EHS) Guidelines – Technical reference documents with general and 

industry-specific examples of Good International Industry Practice with regard to environment and 

occupational health and safety and are referred to in the Performance Standards. The EHS Guidelines

contain the performance levels and measures that are normally acceptable to the World Bank Group, and 

that are generally considered to be achievable in new facilities at reasonable costs by existing technology.

Environmental and Social Requirements – The Applicable Standards and the applicable provisions of this 

ESPP. 

Executive Order – An order issued by the president – the head of the executive branch of the federal 

government.

Extractive Industry – An enterprise engaged in the exploration, development, or extraction of oil and gas 

reserves, metal ores, gemstones, industrial minerals (except rock used for construction purposes), or coal.

Federal Register – The official daily publication for rules, proposed rules, and notices of Federal agencies 

and organizations, as well as Executive Orders and other presidential documents.

Financial Intermediary (FI) – Vehicles or entities that provide debt to, make equity investments in, or 

provide financial services to eligible Subprojects. 

Financial Intermediary Transactions – Loans (corporate lending; microfinance, small and medium enterprise 

finance; and loans from debt funds, including distressed debt, credit, and mezzanine debt funds and retail 

banking); equity investments (active and passive investments from private equity funds into Subprojects, 

and limited partner equity investments by fund-of-funds and secondary funds); and other financial services 

(leasing, factoring, and insurance) provided by FIs. 

Gender-Based Violence and Harassment (GBVH) – Violence and harassment directed at persons because of 

their sex or gender, or affecting persons of a particular sex or gender disproportionately, and includes 

sexual harassment, exploitation, and abuse. 

Generalized System of Preferences (GSP) – A trade preferences program, overseen by the USTR that 

provides preferential duty-free entry for products from designated beneficiary countries and territories 

with the purpose of promoting economic growth in the developing world.
Environmental and Social Policy and Procedures Page 38

Greenhouse Gases – The following six gases or class of gases: carbon dioxide (CO2), nitrous oxide (N2O), 

methane (CH4), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6).

Host-Country Notification – A notification to government officials in the country where a Category A 

Project is located that identifies international guidelines and standards and restrictions under U.S. law that 

would be applicable to the Project. 

Human Rights – Those rights expressed in the International Bill of Human Rights and the principles 

concerning fundamental rights set out in the International Labour Organization’s Declaration on 

Fundamental Principles and Rights at Work. 

Indirect Emissions – Emissions that are a consequence of project activities but occur at Project sources 

owned or controlled by another entity. Indirect Greenhouse Gas emissions result from the generation of 

purchased or acquired electricity, steam, heating, or cooling consumed by the Project. 

International Finance Corporation (IFC) – A member of the World Bank Group that makes loans to and 

investments in private-sector projects in developing countries and emerging markets.

 

International Labour Organization (ILO) – The tripartite United Nations agency that brings together 

governments, employers, and workers of its member states in common action to promote decent work 

throughout the world.

 

Internationally Recognized Worker Rights – The term, as specified in the Trade Act of 1974 (as amended), 

includes: (1) the right of association; (2) the right to organize and collective bargaining; (3) prohibition on 

forced labor and the worst forms of child labor; (4) a minimum age for the employment of children; and (5) 

acceptable conditions of work with respect to minimum wages, hours of work, and occupational health 

and safety.

Labor Rights – Rights of Workers, which includes Internationally Recognized Worker Rights, and 

protection from discrimination with respect to employment and occupation on the basis of personal 

characteristics that are unrelated to inherent job requirements such as: race; color; social, indigenous, 

ethnic, or national origin; migrant status; health status (including HIV status or genetic background); 

marital, family, or social status; sex or gender (including gender identity or expression and sexual 

orientation); political opinion; affiliation or non-affiliation to a workers' organization; disability (including 

physical or mental disability); religion or belief; age; or other disadvantaged or vulnerable status. Special 

measures of protection or assistance taken in order to remedy past discrimination will not be deemed 

discrimination for purposes of this definition.

Meaningful Consultation – A process that (1) begins early in the project preparation stage and is carried out 

on an ongoing basis throughout the project life cycle; (2) provides timely disclosure of relevant and 

adequate information that is understandable and readily accessible to Project Affected People; (3) is 

undertaken in an atmosphere free of intimidation or coercion; (4) is gender inclusive and responsive, and 

tailored to the needs of disadvantaged and Vulnerable Groups; and (5) enables the incorporation of all 

relevant views of Project Affected People and other Stakeholders into decision-making, such as project 

design, mitigation measures, the sharing of project benefits and opportunities, and implementation issues. 

Gender-inclusive consultation should include identification of any gender-based barriers to participation in 

consultation and decision-making (such as disproportionate burdens of household care, or cultural norms) 

and the implementation of mitigation strategies.

Office of the U.S. Trade Representative (USTR) – An agency of the U.S. Government that is responsible for 

developing and coordinating U.S. international trade, commodity, and direct investment policy, and 

overseeing negotiations with other countries.
Environmental and Social Policy and Procedures Page 39

Performance Standards – International Finance Corporation’s (IFC) Performance Standards on Social and 

Environmental Sustainability, which are technical reference documents issued by the IFC with 

environmental and social impact management performance criteria.

Physical Displacement – Relocation or loss of shelter.

Presidential Proclamation – An instrument that states a condition, declares a law and requires obedience, 

recognizes an event, or triggers the implementation of a law (by recognizing that the circumstances in law 

have been realized).

Project – A set of business activities, including those where specific physical elements, aspects, facilities, or

Subprojects have yet to be identified. 

Project Affected People – Individuals, local communities, indigenous peoples, and Workers, including those 

within the Supply Chain, as well as community-based or worker groups, which are or are reasonably 

expected to be affected by the Project's Area of Influence, directly or indirectly, including as a result of 

cumulative impacts. Emphasis should be placed on those who are directly and adversely affected, 

disadvantaged, or vulnerable.

Renewable Biomass – Wood and wood processing wastes; agricultural crops and waste materials; biogenic 

materials in municipal solid waste; and animal manure.

Stakeholder – Persons or groups who are directly or indirectly affected by a Project, as well as those who 

may have interests in a Project and/or the ability to influence its outcome, either positively or negatively. 

Stakeholders may include Project Affected People and their formal and informal representatives, workers’ 

organizations, national or local government authorities, politicians, religious leaders, civil society 

organizations and groups with special interests, the academic community, or other businesses.

Subproject – A project or enterprise that receives financing or investment from a DFC-supported FI. 

Supply Chain – A tiered network of suppliers, facilities, or distribution channels that provide raw materials; 

assemble, install, or manufacture an intermediate or final product; or deliver a final good in each case 

essential for the Core Business Processes of the Project and procured by the Client during the Project life 

cycle.

Sustainable Landscapes – Sustainable Landscapes activities seek to reduce Greenhouse Gas emissions from 

land by promoting sustainable land use practices that reduce emissions or increase carbon sequestration. 

These projects support the implementation of natural climate solutions, which reduce net Greenhouse Gas

emissions through the conservation, management, and restoration of forests, peatlands, mangroves, and 

other ecosystems, as well as low-emissions practices in agriculture and other production systems, while 

supporting economic growth, resilience, and other co-benefits. 

U.S. Department of Labor – An agency of the U.S. Government that is responsible for administering labor 

laws on working conditions, unemployment insurance benefits, and re-employment services; and tracks 

national economic measurements.

U.S. Department of State – An agency of the U.S. Government that is responsible for the international 

relations of the United States.

Vulnerable Groups – Individuals or groups who, by virtue of, for example, their age, gender, race, ethnicity, 

religion, disability, social, civic or health status, sexual orientation, gender identity, gender expression, sex 

characteristics, economic disadvantages or indigenous status, human rights defender or environmental 

defender status, refugee status, head of household status, and/or dependence on unique natural 
Environmental and Social Policy and Procedures Page 40

resources, may be more likely to be adversely affected by the project impacts and/or more limited than 

others in their ability to take advantage of a Project’s benefits. Such an individual/group is also more likely 

to be excluded from or unable to participate fully in the mainstream consultation process and as such may 

require specific measures and/or assistance to do so. Vulnerability is not an inherent characteristic of 

people. Vulnerability is context-specific and should be understood through the interplay of three factors: 

(i) exposure to risk and adverse impacts; (ii) sensitivity to those risks and impacts; and (iii) adaptive 

capacity. 

Workers – Individuals who are employed directly by the Project or under a Project contract, and who 

perform on-site work for a substantial duration of time on a Project or are material to the Core Business 

Processes of a Project. Workers can be temporary or permanent.