IFC’s as well as ACE’s own screening of the potential sub-projects covered under IFC financing and the environmental assessments completed so far for some of the sub-projects confirm that they are not located in or result in adverse impacts on critical habitats, or the modified habitat that include significant biodiversity values. Therefore, PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources is not applicable for this project.

No impacts from potential sub-projects on lands to which ethnic minorities maintain collective attachment or impacts on cultural heritage were identified, hence PS 7 – Indigenous People and PS 8 - Cultural Heritage are not applicable to this project.

Potential E&S impacts and applicability of all the performance standards will further be evaluated as part of the E&S impact assessment process of any additional sub-projects to be considered under IFC’s financing.

 The proposed project involves development and operation of renewable energy sub-projects, many of which are yet to be designed and developed. The key E&S issue for this investment, therefore, is to assess the company’s capacity, corporate systems and procedures to manage the E&S risks and impacts associated with the development of the renewable energy sub-projects in compliance with the applicable local regulatory requirements and those of the IFC Performance Standards / good international industry practices (GIIP).

ACE’s proposed pipeline of renewable energy projects includes solar and wind power sub-projects, none of which result in a) significant involuntary resettlement, b) risk of adverse impacts on lands to which ethnic minorities maintain collective attachment, c) significant risks to, or impacts on, the environment including biodiversity, or d) significant occupational health and safety (OHS) risks. For these reasons, this investment is classified as Category B according to IFC’s Policy on Environmental and Social Sustainability.

 Policy

In 2012, Ayala’s group management committee approved its sustainability philosophy (http://www.ayala.com.ph/commitment-sustainability), whereby the Group commits to creating shared value and improving the impact of its businesses on society and the environment. The Group aligns its sustainability objectives with the United Nations Sustainable Development Goals, which guide the day to day operations and management of E&S issues and risks across all the group companies.

Accordingly, all the group companies, including ACE, are expected to improve the economic value while managing the impact on the environment and society, practice good governance and remain responsive to stakeholders’ inputs and expectations on sustainability and pursue opportunities to improve operating efficiencies and further satisfy shareholder requirements. Further, the group companies integrate environmental parameters into business operations and establish green practices in the workplace and aim to go beyond regulatory compliance, apply best practices, and adopt global voluntary standards on environmental and social responsibility.

Building upon the Group level sustainability approach, as noted in E&S Action Plan (ESAP) action #1, ACE will develop a corporate Environmental, Health Safety and Social (EHSS) policy defining its EHSS objectives and principles aligned with applicable laws and regulations and consistent with the objectives of the IFC Performance Standards (IFC PSs). This policy will indicate who within the company will be responsible for its implementation. The company will communicate the policy to all levels of its organization. 

Identification of Risks and Impacts

Whenever a new development opportunity is presented for consideration, ACE screens out those, which involve: (i) land acquisition requiring significant involuntary resettlement or, (ii) significant impacts on environmentally sensitive areas. Accordingly, in several cases, ACE’s review of the legal and land related due diligence during the project development / acquisition process has resulted in a decision to not pursuing the opportunities further.

Before entering into a joint venture (JV) with the local partner, acquiring shares and during its internal due diligence process, ACE reviews the legal status of each project including the applicable environmental licensing requirements. If the project is at a very early stage of development, ACE or one of the other project partners assumes the responsibility for completing the environmental licensing process, including contracting of qualified consultants to prepare ESIAs per local requirements. In some cases, the company or the local partners commission additional studies, based on internationally recognized standards (i.e. IFC PSs).

The environmental licensing process for new projects in involves the preparation of an ESIA by qualified, government registered consultants in accordance with local regulatory requirements. ESIAs in Vietnam follow a standard approach to the identification of E&S impacts including collection of baseline information from primary or secondary data sources, description of potential impacts, and presentation of proposed mitigation measures. The preparation of the ESIA report is followed by consultation with the local People’s Committee (PC) as well as other stakeholders such as local inhabitants and project affected persons. The ESIA is formally reviewed by an ESIA Evaluation Committee appointed by the local PC and the Department of Natural Resources and Environment (DONRE). This committee approves the ESIA and sends its recommendation to the national authority for ESIA approval.

 
As per ESAP action #2, ACE will develop and implement a written screening policy to formalize its current practice of avoiding investing in sub-projects under IFC financing in environmentally and socially sensitive areas i.e., areas where significant involuntary resettlement would be required, or lands to which ethnic minorities maintain collective attachment.

ACE will also revise its terms of reference (ToR) for assessment of environmental and social impacts (ESIAs) in sub-projects under IFC financing to ensure consistency with IFC PS requirements. The revised ToR will include adequate environmental and social baseline studies including such aspects as: economic displacement and livelihood restoration; impacts on ethnic minorities or cultural heritage; community health and safety; and fauna and flora to identify the presence or absence of listed species and evaluation of potential presence of Critical Natural Habitat (as defined in IFC’s PS6).

Management Programs 

Management of E&S risks is currently part of the business process with a focus on compliance with regulatory/legal requirements and the corporate E&S approaches of ACE and its local development partners. As previously described, preliminary review of E&S risks is included as part of the overall business review of potential acquisitions of renewable energy projects. At the project level the company requires the contractors to comply with, and monitors, the compliance with legal obligations, including E&S, occupational safety and labor. Projects which require ESIAs have sub-project-specific environmental and social management plans (ESMPs) that comply with the environmental licensing conditions. These license conditions depend on the stage of project development and on the specific E&S impacts of the project.

 
As per ESAP action #2, ACE will develop and implement a formal, documented, E&S Management Program consistent with legal/regulatory and IFC requirements. The company’s program will include policies and plans applicable to ACE’s construction and operation activities in sub-projects under IFC financing, including management of aspects such as, where applicable: liquid effluents and solid wastes; noise and vibrations; erosion management; removal and reinstatement of soil and vegetation; water quality monitoring; ; fauna and flora rescue programs (including monitoring, rescue, and transfer); chance find procedure; occupational health and safety; labor management; workforce mobilization and demobilization; workers’ accommodations; community safety; emergency preparedness and response; contractor management (including specific contract language), stakeholder engagement and grievance redress procedure, among others, where adverse social and environmental impacts are expected. 

Organizational Capacity and Competency

ACE presently has a sustainability champion at corporate level with the responsibility related primarily to communications and reporting aligned with Ayala’s sustainability reporting. However, ACE does not, as yet, have a dedicated E&S management team and E&S management functions at corporate level. Instead, these are delegated partly to the corporate project development department and largely to the sub-project site level management.

For example, during the process of selection of potential acquisition targets, the Project Development team which is responsible for the identification of new investment opportunities prepares a summary report with key information, including significant E&S issues, to inform ACE’s corporate management team and Board of Directors in the investment decision process.

Once the sub-project is approved for development, and moves into construction phase, E&S management (including contracting the preparation of the ESIA and other legal compliance) is the responsibility of the management team of the project company developing the sub-project together with the joint venture partner. Labor compliance and OHS aspects during construction and in operating assets are primarily handled by the EPC (engineering, procurement, construction) and/or operations & maintenance contractors with supervision by the owners’ engineers as well as by the team of the sub-project management representatives.  As such, for the sub-project sites visited by IFC, three layers of safety monitoring were observed: (i) safety officer of the EPC contractor (a reputed experienced international firm), (ii) safety officer from the owners’ engineer (another reputed international project management firm) and (iii) the safety officer hired by the sub-project development company (i.e. joint venture between ACE and the local partners). Together, this safety organization on site is responsible for: managing occupational safety and hygiene aspects during construction; fire prevention and control; organizing occupational safety training and testing; and managing and upgrading technical skills and testing documents related to safety.

 
As per ESAP action #3, ACE will establish a corporate level Environmental and Social (E&S) Management Unit to manage the assessment and impact mitigation of the company’s projects in accordance with regulatory requirements and consistent with IFC’s Performance Standards. The E&S management unit will include a qualified and experienced manager and specialists covering environmental, social, and occupational health and safety aspects. The newly created unit will be responsible for oversight of development and implementation of the E&S Management Program across all the sub-projects under IFC financing during construction as well as operational phases. The E&S unit will also develop and implement a corporate level training program applicable to management and operational level personnel of ACE and covering E&S aspects of construction and operations, with a focus on OHS management, emergency planning, environmental monitoring, and stakeholder engagement. In coordination with the Human Resources unit, the E&S unit will maintain registries of the training courses, recording attendance and topics covered. The current Sustainability team may be integrated with this team, which will continue the monitoring and reporting of E&S related key performance indicators (KPIs) to Ayala.

Emergency Preparedness and Response

Emergency preparedness and response planning is performed at the construction or operating facility (sub-project) level. At the sub-project level, emergency plans are developed as part of the construction safety management plans by the EPC contractors. These plans cover preparedness and response to medical emergencies, fire, construction emergency, equipment failure, extreme weather conditions, transport incidents, extreme environmental conditions and act of sabotage/vandalism. The response plans include a communication protocol to alert local authorities and the management team in addition to specific responses and evacuation procedures. The emergency response procedure is part of regular safety training.

 
Monitoring and Review

At the sub-project level, E&S monitoring activities are presently focused on compliance with environmental licensing requirements for new construction projects and some limited internal occupational health and safety auditing activities, also focusing on compliance with local regulations. 

In addition, ACE’s sustainability team tracks E&S KPIs, including but not limited to: regulatory compliance status of all its operations, internal OHS audit results, OHS incidents involving employees and contractors, and waste management (types, quantities and forms of disposal) etc.

The KPIs from each relevant sub-project are compiled at ACE corporate level to feed into Ayala’s corporate sustainability report as per the requirements of Global Reporting Initiative GRI-G4 standards.                                                  

 Working Conditions and Management of Worker Relationship

ACE currently employs 130 permanent staff at corporate level, of which about 40 are seconded into its development platforms in the Philippines and other countries including Vietnam.

The company has a HR policy by way of “Code of Conduct”, the scope of which applies to all the company employees regardless of employment status, position and title and it extends to employees seconded to other companies (e.g. JV companies for each sub-project). This code is available to all the employees on the company intranet and is included in new employee orientation.

The code articulates the values and principles of HR management, and serves as the guide to all employees in their relationship with each other, with the company’s customers, shareholders and business partners, as well as the with government and the public. It covers issues such as: legal compliance, terms of employment, non-discrimination and sexual harassment, conflict of interests, anti-bribery policies, whistleblower policies, disciplinary actions, safety and security, etc., and is consistent with PS2 requirements. In line with the Ayala group policies, average training hours per employee was about 23 manhours in 2017.

At the sub-project level, all subsidiaries, contractors and subcontractors are required to manage labor aspects in line with regulatory requirements, which covers a range issues in this Performance Standard, including among other: labor disputes, working hours, overtime limits and payments, annual and maternity leave, salary, and social insurance. 

The Vietnamese Labor Codes define the right for all employees to work without being discriminated against based on their gender, nationality, social class, beliefs, or religion. Moreover, employers are strictly prohibited from discriminatory behavior toward female employees or conduct that degrades female employees’ dignity and honor. Employers must implement the principle of gender equality regarding recruitment, utilization, wage, and wage increase.

Workers’ Organization

Ayala respects the workers right to exercise freedom of association. Across the group, collective

bargaining agreements provide venues for employee groups to negotiate and settle labor disputes and voice out concerns regarding employee development and remuneration.

For the sub-projects in Vietnam, as per the Vietnam Labor Code, all employers are required to facilitate the establishment of a trade union organization within their company. All the employees of the sub-project company are members of the Vietnam National Union of Industrial and Commercial Workers, one of 18 affiliated unions under the Vietnam General Confederation of Labor (VGCL), the country’s sole national trade union. Union representatives are elected from among all the employees at the individual project level. The main function of a trade union is to represent and protect employees’ legal rights and interests. Therefore, most decisions relating to employee benefits should involve the trade union representative, such as execution of a collective labor agreement, decisions regarding labor discipline, and termination of labor contracts. The standing collective bargaining agreement between the sub-project management company and its employees is reviewed by all union membership annually. Recommendations for updating this agreement are put forward management’s consideration by the union leadership and are incorporated into the agreement prior to its renewal each year. 
 

Grievance Mechanism

At sub-project level, primarily for the contract workers during construction phase for the projects in Vietnam, internal regulations have been developed in accordance with local labor law requirements. The contractor’s employees can raise their grievances, (i) directly with supervisor, (ii) with the company’s HR department, or (iii) through labor union.

Occupational Health and Safety

For its ongoing sub-projects in Vietnam, ACE, together with the JV partner/s, has developed and implemented documented OHS management plans and procedures covering construction and related activities and contractors. During the construction phase, ACE contractually delegates OHS management activities to construction companies (EPC contractors and subcontractors), including those specialized in certain aspects such as installation of wind turbines.

ACE, together with its JV partner, has multiple layers of oversight on OHS issues at the site during construction. For example, the sub-project management team has its own EHS team (with a dedicated safety officer) that, together with the owners’ engineer team (with their own dedicated safety officer), oversees the construction of the project. As per the contractual and local labor law requirements, the EPC contractor also has its own safety team, including dedicated safety officer(s).

During the operational phase, ACE applies OHS procedures focusing on safety and maintenance activities (e.g. working at heights). 

Similar OHS plans will be developed for future sub-projects to be developed.

Workers Engaged by Third Parties

Recruitment and staffing at the sub-project level for both construction and operations is the responsibility of the ACE and the local JV partner. The project managers hired by ACE and the JV partner are directly responsible for overseeing the EPC contractor and other service providers regarding compliance with labor laws including payment of minimum wages, social benefits, OHS training and provision of PPEs, workers’ accommodations (if provided) and contractor adherence to minimum age of employment (18 years).

ACE ensures construction contractor compliance with labor laws as well as its own HR policies and practices, through its contractor screening and selection process, contract agreements and project site contractor supervision. ACE also requires contractors to meet environmental, occupational safety, life and fire safety and security standards established by the concerned authorities applicable to each project site and monitors the relevant KPI’s for disclosing through Ayala group sustainability report.                                                  

 ACE, as part of Ayala’s sustainability report, discloses E&S related KPIs and other information to its stakeholders (http://www.ayala.com.ph/investors/annual-reports). Additionally, it welcomes any comments and queries about the E&S / sustainability issues through its website as well as using a dedicated email address sustainability@ayala.com.ph.

At the sub-project level, in addition to the consultation and negotiation process related to land acquisition described under PS5 above, the sub-project management engage with the local government officials, communities and other stakeholders as part of the ESIA, permitting process and related pubic consultations as well as on an ongoing basis through corporate social responsibility (CSR) activities. Currently, grievances in Vietnam, which are mostly related to the land acquisition process, are managed through the relevant Commune Peoples’ Committee.

In the case of Vietnam, public consultation linked to the ESIA process follow the requirements of Decree No. 18 of 2015 and Circular No. 27 of 2015, which require developers to consult the draft ESIA with local communities and People’s Committees and consider their feedback to address E&S impacts. The final ESIA should be disclosed locally once stakeholders’ feedback is incorporated and prior commencement of civil works. 

In the case of Vietnam, grievances, which are mostly related to the land acquisition process, are managed through the relevant Commune Peoples’ Committee and escalated to the Province or the courts as needed.

Per ESAP #2, the company will develop and implement a stakeholder engagement and grievance redress mechanism in line with IFC PS1 as part of its E&S Management Program.