While all Performance Standards are applicable to this investment, IFCs environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
SLUB Phase 2 is located within the 3 hectare site whose use rights were acquired by the Sponsor in 2007 from the Ulaanbaatar Municipal Government to set up both phases of SLUB. The land is owned by the state, and IFC’s PS5 review in 2010 did not identify any physical or economic displacement of local communities or persons associated with the 3 hectare site. The project is located in a significantly modified urban environment and risks on biodiversity are limited – PS6 is therefore not considered applicable. PS 7 and PS 8 are not considered applicable as no Indigenous Peoples or cultural properties are known to be present or adversely impacted.

The investment has been classified as Category B according to IFC’s Policy on Social and Environmental Sustainability as adverse environmental and social risks and impacts arising from the projects are limited, generally site specific and could be addressed through the implementation of Good International Industry Practice (GIIP). Key issues and impacts identified during appraisal, discussed in more detail in the following paragraphs, include: E&S management system implementation; EHS management during construction; labor and working conditions including occupational health and safety during construction and operation; waste management; and community health and safety including life and fire safety management associated with the public access component (i.e. retail podium) of the project.

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.

Identification of Risks and Impacts:



As per national regulatory requirements, an Environmental Impact Assessment (EIA) report, consisting of an impact assessment section, an environmental protection plan, and an environmental monitoring program section, was prepared by an external consultant in 2012 for SLUB Phase 2. The EIA concludes that identified risks and impacts could be reasonably managed by implementing actions detailed in the environmental protection plan, and by effective monitoring of impacts. The EIA required disclosure of key findings and mitigations to local residents in the vicinity of the project site as part of the permitting process; and the same has been disclosed here together with this ESRS.



Policy:



The sponsor’s corporate sustainability policy, key tenets of which are available at the following web link, focuses on the five thematic areas of Environment, Health and Safety, Employees, Supply Chain, and Stakeholder Relations: http://www.shangri-la.com/corporate/about-us/corporate-social-responsibility/sustainability/mission-statement/.



Management Programs (Construction Phase):



The sponsor at the corporate level adopted a set of internal Contractor Guidelines in September 2010, which define SL corporate requirements on such aspects as EHS permitting, contractor and sub-contractor training, a requirement for contractors to have in place a waste management plan including on-site hazardous material lists and material safety data sheets, and requirements on site-inspections, reporting, and record keeping, etc. The Contractor Guidelines are supported by “House Rules & Conditions” procedures detailing requirements for site management.



Accordingly, a reputed international engineering, procurement and construction (EPC) contractor was selected for the project, where, one of the key selection criteria included the contractor’s EHS capabilities.



Oversight by SLUB of construction-phase E&S impacts commenced with submission by the selected EPC contractor of its own EHS policy for review and approval by SLUB. This EHS policy document included description of: the overall occupational health and safety (OHS) goal for Phase 2 construction activities, key elements of the site OHS management plan, a flow chart delineating the on-site environmental management process and roles and responsibilities, key performance indicators, and description of pollution minimization and control pertaining to noise and vibration, erosion and sedimentation, and waste management and disposal.



In relation to OHS, the EPC Contractor’s EHS policy document included: (i) an overall policy statement stating: zero-incident-upon-project-completion as the key H&S goal; description of systemic-level factors (e.g. lack of effective communication within the construction workforce) which could lead to adverse health and safety incidents, and solutions to address those factors; 5 areas of high-risk work streams (e.g. scaffolding; working at heights) an
d means to address resulting risks (e.g. implementation of permit-to-work procedures; collection and analysis of near-miss statistics).



During Phase 2 construction, on-site inspections were conducted by project team members of SLUB, the main contractor, and sub-contractors, against requirements of the Contractor EHS policy and SLUB contractor management policy.



Management Programs (Operational Phase):



SLUB Phase 1 has implemented a set of standard operating procedures (SOPs) for hotel operations since June 2015 when Phase 1 operations commenced. These SOPs were developed by the SLUB hotel operation team, with oversight from the sponsor to ensure adherence to core requirements of the sponsor’s global corporate social responsibility policies which describe corporate commitments on aspects such as sustainability, environment, employees, and stakeholder relations.



SLUB Phase 1 SOPs cover various EHS management aspects such as those on the control of fire exit obstruction, a detailed fire emergency plan, fire alarm response procedures, handling of flammable and combustible materials, etc. Phase 1 Life and fire safety (LFS) SOPs also directly correspond to requirements as described in the sponsor’s Corporate Policy – Fire and Life Safety, which has 24 sub-policies describing various LFS aspects such as hazard elimination, personnel and organizational setup requirements, compartmentation, electrical fire safety, etc.



SLUB has put in place for Phase 2 a set of 13 Standard Operating Procedures (SOP) related to such operational aspects as: resolution of labor disputes; managing public protest events should these arise; emergency preparedness and response to scenarios of earthquakes, flooding, damages from lightning, major storms and snowstorms, telecommunication system breakdown, blackouts, etc. An LFS emergency response procedural document is also in place which is applicable to Phases 1 and 2 operations.



Emergency Preparedness and Response:



As indicated above, an operational LFS emergency response procedural document is in place which is applicable to Phases 1 and 2. This categorizes LFS events into 3 levels of severity (Codes 1-3) and outlines steps to be followed under each scenario. This document also includes an organizational chart whereby the SLUB Center General Manager has been assigned as the overall Crisis Management Team leader, to whom the Head of Security and Chief Engineer will be key reports.



Organizational Capacity:



During Phase 2 construction, project oversight was exercised by the SLUB senior project manager and his team members, to whom the EPC contractor person in charge, the SLUB chief architect, SLUB chief engineer, and their respective team members report on daily construction progress. The EPC contractor produced regular monitoring reports including monitoring against EHS parameters and KPI’s as set out in its overall site EHS policy. Contractor on-site safety inspectors regularly inspected site conditi
ons and recorded non-compliances.



When operations of Phase 2 commence, the Chief Engineer, Head of Security, and Life and Fire Safety officer will report EHS related performance information (on an exception basis) to the General Manager.

Working Conditions and Worker Relationships:



At the peak of construction, there were up to 1,000 contractor and sub-contractor workers at the SLUB2 site. At the time of appraisal visit by IFC, it had about 100 people still on site for fit-out work. During the entire construction, no labor camp was provided by the company and the workers (all local) arranged their own accommodation in the city.



During operations, SLUB expects a workforce of up to 200 full time, direct-hire workers, about 70 directly-hired security guards, and about 100 cleaners hired by a third party employer commissioned by SLUB for premise cleaning services. The SLUB2 headcount consists of employees in the administration office, facility operators, customer service professionals, property manager staff, and building maintenance staff.



The SLUB phase 2 operation team will be finalizing its human resource policy and procedures which will be very similar to those for phase 1 and will be based on the SL headquarter HR policy and procedure templates. As per Mongolian labor law requirements, formal employment contracts will be signed with all staff members, and terms of employment (e.g. on working hours; leave; mandatory social insurance scheme enrolment; etc) will be communicated to employees and written into employment contracts. Working hours for employees will be within the 40 hour per week legal limit, with certain employees (e.g. building maintenance staff) working in shifts. Overtime is not expected to any significant extent.



Retrenchment is not expected in the foreseeable future as Phase 2 operation is just ramping up. Key means of management-worker communications are drop boxes, staff sending anonymous emails to management should they wish to, regular staff meetings, and day to day direct dialogue between workers and supervisors. Where a worker feels an issue remains unresolved, s/he can escalate this to the human resource department or to senior managers. SLUB will have formal grievance procedures in place.



IFC’s review did not find any signs of the use of child or forced labor, and employment practices of SLUB phase 1 (as reference) were consistent with principles of non-discrimination and equal opportunity. The company has no intention of placing any restrictions on any staff members wishing to join or set up a labor union.



Occupational Health and Safety (OHS):



During the construction period, all SLUB project management personnel, regardless of his/her role and responsibility, were required to be always on the lookout for potential non-compliant OHS practices during their day to day site inspections. The EPC Contractor, and its sub-contractors, had formally assigned site safety officers carrying out on-site inspections.



According to the company, based on submitted statistics by the EPC contractor and on-site verification, there have been no fatalities and lost-time-accidents and injuries to its workers in the past three years of construction acti
vities, except for a limited number of first aid cases.



There were two fire incidents during construction (on 2014/9/30 at the Phase 1 construction site; and on 2016/1/28 at the Phase 2 retail podium area) which did not result in any fatalities or injuries. The police investigation report on the first incident, dated 2015/6/2, cited electric malfunction as the cause of fire but did not provide further details and was inconclusive. Available reports for the second incident did not come to a clear conclusion on the root causes of the fire.



As per the ESAP, The sponsor at the corporate level will review information on the above mentioned fire incidents, analyzing/summarizing key findings and root causes, and on this basis update and reinforce construction-related LFS and EPR requirements of its corporate EHS policy, with a goal of minimizing the potential for similar incidents at future SL construction sites.



Given the business nature of SLUB Phase 2, OHS risks during operation are expected to be limited.

Resource Efficiency and Greenhouse Gas Emissions:



SLUB Phase 2 on an annual basis is expected to consume: 2.8 million kWh of electricity from the grid; 18,000 liters of liquefied petroleum gas (LPG) which will supply fuel to the restaurant kitchens in the retail section; and limited quantities of diesel oil. Water consumption is expected to be 2,900 cubic meters per annum (of which about 2,000 is attributable to water consumption by serviced apartment residents assuming full tenant capacity).



The project’s annual greenhouse gas emission is estimated at 2,100 tons CO2 equivalent, attributable to consumption of grid electricity and LPG. The project’s GHG footprint is low because there are no chillers for air conditioning and no heat pumps or boilers for hot water, which will come directly from the utility company.



The project has adopted a number of resource efficiency measures such as: i) installation of the building management system to proactively monitor electricity usage, and control the lighting/temperature optimally; ii) reuse of treated grey water for premises gardening and for toilet flushing; iii) use of ambient cold air through heat exchangers to cool certain parts of the buildings; and iv) auto shutters for building drive way entrances to reduce the inflow of ambient cold air into the building areas during winter months.



Pollution Prevention:



There will be no boilers installed at SLUB Phase 2, and hence there will be no air emissions. Waste water arising from Phase 2 operations will consist mainly of sanitary and kitchen wastewater, which will be treated by the on-site waste water treatment plant (WWTP), before being discharged to the municipal sewerage system for subsequent treatment at the municipal WWTP.



The on-site WWTP (based on membrane bioreactor treatment technology) will treat all wastewater coming from Phase 1 and 2 operations, and design specifications indicate that treated WW will meet World Bank Group General EHS Guideline limits. SLUB has also previously provided information confirming that discharge to surface water from the municipal WWTP will not exceed WBG General EHS Guideline limits.



Grease traps have been installed at the kitchens of the retail sections, and oils and grease (as well as sludge from the on-site WWTP) will be collected and disposed of by licensed external contractors. The quantity of solid wastes including hazardous materials and wastes arising from Phase 2 is expected to be limited. Hazardous materials such as lubricants for maintenance will be access controlled and shall be disposed of through the licensed contractors.

For SLUB Phase 2, a detailed LFS Master Plan (“Supply and Installation of Fire Services System – Particular Specification” dated October 2011) including architectural drawings are available. The master plan specifies that Phase 2 contract works will comply with the latest edition of the U.S. National Fire Protection Association (NFPA) codes and requirements or that of the British Standard Code of Practice (BS); or alternatively with the requirements of a list of other internationally recognized standards (e.g. Underwriters Laboratories), as long as the LFS system installation sub-contractor for Phase 2 can provide evidence demonstrating equivalence to the code requirements of BS. IFC’s review of the master plan confirms that it is consistent with the WBG EHS General Guideline requirements.



As per the ESAP, a post-construction audit (to certify/verify that construction has been completed as per the LFS Master Plan specifications), shall be undertaken by qualified in-house or external LFS engineers. The sponsor will provide the full audit report including the formal sign off by qualified in-house or external auditors.



The buildings of Phase 2 have been designed and constructed to be consistent with universal access design principles.

Key stakeholder groups for the project are its customers, local residents, staff, and major local suppliers. To date, there have been no known grievances or issues of public concern associated with this project. During operations, the Hotel and Phase 2 estate management offices, as well as security entry points at the SLUB premises, will be key public interfaces to receive external communications including grievances from the public if any; and members of the public can also dial into the hotel''s general inquiry phone number to communicate any concerns they may have. SLUB, as part of the SL corporate social responsibility program, will be planning and implementing community outreach activities.

In addition, at the group level, the sponsor uses its sustainability blog (at http://www.shangri-la-sustainability.com/) as a key platform for public engagement and communication of its sustainability initiatives.

Contact Person: Mr. Gary Biondo, General Manager
Shangri-La Hotel Ulaanbaatar
Address: 19 Olympic Street, Sukhbaatar District–1, Ulaanbaatar 14241, Mongolia
Tel: +976 7702 9999
Fax: +976 7702 7799

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
Shangri-La at the corporate level will analyze information on the 2014/09/30 and 2016/01/28 fire incidents which transpired at the SLUB construction sites, and on this basis update and reinforce construction-related Life and Fire Safety (LFS) and Emergency Preparedness and Response requirements of its corporate Environmental Health and Safety policy, with a goal of minimizing the potential for similar incidents at future SL construction sites.	10/31/2016
Following available wtihin 3 months of construction completion: Post-construction audit report signed off by a qualified Life & Fire Safety (LFS) professional which verifies that SLUB Phase 2 construction has been completed as per the LFS Master Plan (i.e. "Supply and Installation of Fire Services System – Particular Specification" dated October 2011 and related architectural drawings).	10/31/2016