PS5: Land Acquisition and Involuntary Resettlement. All the land needed for construction and operation of the four projects and their respective transmission lines are within private and social property (“Ejidos”).   Involuntary Resettlement does not apply because IEnova has entered in voluntary rental and easement agreements with the landowners, and if the owners had not wanted to make those lands available they would have not been subjected to expropriation.

PS7: Indigenous Peoples does not apply because there are no traditional lands or communities of Indigenous Peoples within the vicinity of the projects’ area of influence.

PS8: Cultural Heritage was not triggered because none of the solar projects will impact any areas of archeological or cultural heritage value. Only for Don Diego Solar via standard chance find procedure there was a collection of small archeological objects of minor significance.                                                  

 This investment is classified as a Category B operation, because environmental, social, labour, and occupational health and safety impacts and risks associated with the four solar projects financed under this operation are site-specific, limited, and manageable with the application of well-established mitigation practices. Permanent impacts include conversion of land use and cover, changes in landscape, and potential issues associated with water availability to clean the solar panels during operations. Other potential impacts are mostly short-term and related to construction activities such as occupational health and safety accidents; air, dust, and noise pollution from construction traffic and operation of heavy machinery; water use and wastewater discharges; solid and hazardous waste generation; security issues/ incidents; and nuances and accidents affecting neighbour communities.                                                  

 Environmental and Social Management System:

At the Corporate level IEnova has three separate functions or groups that cover Environmental, Social, Labor and Occupational Health and Safety (E&S) aspects in all its operations, namely the Environmental, Health and Safety, and Social Management divisions. These divisions have their own policies, procedures, organizational structures. These are administered by functional systems at the subsidiary level, some of which have gone through international certification processes (e.g. ISO14001 or OHSAS18001).  

However, these different functions are not integrated into a single company-wide system and therefore it is not evident how they interact with each other. In order to help ensure consistency in the application of IFC requirements to the four PV solar projects under this operation, IEnova will review its E&S corporate system against IFC PS (ESAP Action #1)

Policy: IEnova’s E&S related policies include: Safety Policy, that recognizes safety as a fundamental value and a condition of employment; Health Policy, that describes commitments towards preserving and protecting the worker’s health; Acquisition Policy, which has a section describing the supplier’s commitment and responsibility towards sustainability; Environmental Policy, which includes principles that guide the projects developed by IEnova to achieve adequate environmental performance; and Sustainability Policy that commits IEnova to conduct its business ethically; protect the environment; ensure the safety of its workers and of potentially affected communities; and promote relationships of mutual benefit between the Company and its stakeholders. These policies guide all IEnova’s investment, including the four solar plants under the Project.

Assessment of Impacts and Risks: In compliance with Mexican legislation, all four solar plants have presented environmental impact statements and social impact assessments and the related local licenses have been issued and are disclosed together with this ESRS. These E&S impact assessments correctly identified key impacts and risks and proposed adequate mitigation measures aligned with PS requirements. Most construction impacts are temporary and can be mitigated with standard pollution prevention and control practices as well as good occupational health and safety standards. Permanent impacts are site-specific, limited in significance, and mainly related to modification of land use, cover and overall landscape. 

Given the uncertainty associated with the potential inclusion of the fifth solar plant financed under the Project, and the limited information associated with this project at time of appraisal, IFC will retain the right to exclude this fifth plant from this operation and require IEnova to undertake an ESIA process compliant with PS1 (ESAP Action #2).

At the time of appraisal, IEnova’s Environmental Division was in the process of developing corporate guidelines that included a Procedure for the Identification of Significant Environmental Aspects, and a Matrix for the identification of aspects and evaluation of environmental impacts.

The Social Division procedures are more developed and do have a Pre-feasibility Procedure (AE-01-P01) and Indigenous Communities Procedure (AE-01-P06) which application is mandated in all investments. These procedures require high-level desktop review to identify key social risks and potential presence of indigenous peoples or territories that may require IP-customized consultation. Furthermore, in compliance with National regulation, IEnova also has a Social Impact Assessment Elaboration Procedure (AE-01-P04) which describes the steps to develop project SIAs, including the need to hire expert consultants to perform the SIA, organize consultations, review the experts’ assessments, and implement the relevant mitigation measures.

Management Programs: The company has detailed corporate environmental guidelines which are being applied and their implementation documented in the four IFC supported solar plants. These management programs are mostly focused on OHS and pollution prevention and control, and thus will be described under PS2 and PS3 sections below.  On the social management side, IEnova has a structured set of management programs, which include AE-01-P02 Community and Stakeholder Engagement Procedure; AE-01-P03 Grievance Mechanism Procedure; AE-01-P04 Social Impact Assessment Elaboration Procedure; AE-01-P05 Social Investment Procedure; and AE-01-P06 Indigenous Communities Procedure.  The Social Impact Assessment Elaboration Procedure (AE-01-P04) requires the development of a Social Management Plan which must include, detailed mitigation measures for all identified social impacts and risk (e.g. including fostering local employment), stakeholder engagement plan and grievance mechanism; social investment plan; and monitoring programs.

Compliance with these programs and guidelines is required from certain relevant IEnova’s contractors. Even though these programs have been developed mainly to comply with Mexican regulations, they are considered adequate to meet PS requirements given the limited nature of the E&S impacts and risks associated with these four solar projects.

Organizational Capacity and Competency: At the individual sites visited, IEnova had well-established and competent local E&S teams that include at a minimum three professionals, namely an environmental officer, an OHS manager, and a social liaison, that report to their respective corporate line divisions at the Company’s headquarters in Mexico City. These local teams apply the relevant corporate policies and procedures in the individual projects.

The company has over 50 professionals working on ESHS related issues. IEnova Sustainability Policy designates the Sustainability Manager as responsible for developing, implementing and monitoring the Sustainability Strategy. The Occupation Health and Safety and the Environmental Divisions also have their own organizational structures. The professionals within those structures are experienced and have the technical expertise and an execution capacity commensurate to IEnova’s business activities.

The Sustainability Policy created the Sustainability Committee, with senior representatives (VPs, Directors and Managers) from the different divisions in-charge of aspects related to the three pillars of sustainability (economic, social, environmental).

Emergency Preparedness and Response: IEnova’s Manual of the Health and Safety Management in Element 18 (HS-00-M02-E18) states that every business unit should have emergency response procedures and an Internal Civil Protection Program (PIPC), as required under Mexican regulation. This procedure defines the requirements for an Emergency Preparedness and Response Plan including: identification of the emergency scenarios; emergency response procedures and training of specific emergency response teams at each site; emergency contacts and communication systems/ chain of command protocols; procedures for interaction with government authorities (emergency, health, environmental authorities); protocols for the use of the emergency equipment; identification of evacuation routes and meeting points; and scheduled emergency drills and their periodicity based on assigned emergency levels or tiers. The four solar plants are subject to this corporate requirement and have prepared their EPR plans accordingly.

Reporting, Monitoring and Review: According to national E&S licensing requirements, all four projects must provide annual compliance status reports to the environmental authority, with evidence of implementation and monitoring of the applicable management programs.

The different corporate E&S procedures include monitoring, reporting, and review components designed to comply with Mexican regulation and reporting requirements to relevant authority. 

Additional, IEnova’s performs an annual assessment of key contractors and suppliers that includes reviewing compliance with E&S regulations, guidance and procedures, as well as employment practices (e.g. work days, freedom of association, child labor, non-discrimination, forced labor, human rights and disciplinary practices, occupational health and safety).

Finally, IEnova issues annual Sustainability Reports and publishes them in its webpage. The Reports are aligned with the Global Reporting Initiative Guidelines and give relevant information about the financial, environmental and social aspects of their operations.                                                  

 Human Resources Policies and Procedures: At the corporate holding level, IEnova currently employs a total of 1035 people, out of which 71% are males and 29% female. This ratio is also prevalent at top management levels, including managers, directors and VPs, where in a total of 181, 49 are women; which is representative of the energy sector in Mexico. The Company’s Human Resources (HR) policy specifically prohibits any type of discrimination based on gender, age, sexual orientation, or other socio-economic characteristics during hiring or promotion processes.  The four solar power plants under the Projects created 1,955 of temporary jobs during the months of construction and will generate 21 permanent jobs during the operating phase.

The Company has well-structured HR policies and procedures related to training, confidentiality, internal complain and grievances and a Code of Ethics that are compliant with PS2 requirements and are provided to employees upon hiring. These policies and procedure are being applied to the solar plants financed under the Project.

IEnova validates that compensation packages for permanent employees are aligned or better than market references. They participate in salary surveys performed by Willis Towers Watson and Mercer twice a year. These surveys are based on comparable Mexican “General Industry and Energy & Natural Resources Industry”.

Collective Bargaining Agreements: During appraisal the IFC did not see evidence of restrictions for worker to join unions and engage in collective bargaining. IEnova has several collective bargaining agreements in place with various labor unions. These collective bargaining agreements are negotiated on a facility-by-facility basis. The compensation terms under these agreements are adjusted on an annual basis, whereas all other terms are renegotiated every two years. Such practice is applied in all IEnova’s investment including those solar plants   financed by IFC, and as noted above compliance with labor requirement is ensure in all contractors and audited on an annual basis.

Occupational Health and Safety:  IEnova has a corporate Safety Policy, that recognizes safety as a fundamental value and a condition of employment, and a Health Policy, that describes commitments towards preserving and protecting the worker’s health. IEnova has an OHS Management System that is guided by the above-mentioned policies and contains key procedures such as: HS-00-M01 Health and Safety Principles Manual, and HS-00-M02 Manual of the Health and Safety Management System Elements. These procedures describe measures to prevent health and safety issues such as the use of Personal Protection Equipment (PPE), work permits, road safety rules, trainings, KPIs, among others. Reportedly, each business unit is required to establish an action plan to comply with such procedures and expected KPI targets. Periodic performance and internal audits are conducted to validate progress. Information is shared through each business unit’s SharePoint portal.

These policies and procedures are applied in IEnova’s investment including the four solar plants to be financed by IFC, and are also applied to all contractors’ personnel. IC-01-P08 Health and Industrial Safety Guidelines, describes the minimal OHS requirements that contractors and suppliers must meet. This document requires for all contractors and suppliers to carry out an OHS task risk assessments, define relevant control measures, and adequately equip and train their personnel. This process must be completed and reported through a formal Job Safety Analysis (JSA) before contractors can start any activity.

IEnova has established leading and lagging indicators to ensure all assets adhere to corporate policy. The leading indicator is referred to as Scorecard. It reflects the results of a corporate defined self-assessment, conducted at the site level for both, assets in operations as well as assets in construction phase. The 29 Element Management System is then reviewed by a team of Champions at each location, responsible for programs implementation. This process is conducted quarterly, and corporate led cross verifications are conducted annually. Each Element is evaluated on a scale from 0 to 5, five being the best score. The Score is then determined by calculating the average score among all applicable Elements for that site. IEnova's Score during 2018 was 4.26

Regarding lagging indicators, IEnova keeps track of two metrics. These are, Total Recordable Incident Rate (TRIR) and Lost Time Accident Rate (LTAR), both of which are calculated per international standards. During 2018 IEnova's TRIR was 0.58 and its LTAR was 0.18.

Solar fields’ construction projects are evaluated with these same metrics. During 2018 the three solar projects under construction recorded in 3 LTA and 9 incidents out of a total of 1,670,183 man-hours worked, resulting in a TRIR of 1.08 and a LTAR of 0.36, outperforming the respective industry averages of 2.1 and 1.59.

None of the four projects under IFC financing require to build facilities to accommodate construction or operation employees. These plants are located driving distance from towns and cities big enough to provide a source of local labor and to house additional workers required for construction and operation. During the planning process for construction of the five solar plants, IEnova’s social liaison has been holding periodic recruitment fairs to maximize sourcing unskilled labor from nearby areas.                                                  

 GHG Emissions: Mexico’s power sector is dominated by thermal generation, accounting for 79 percent of total electricity generation. The share of CO2 emissions from the power sector accounted for 44 percent of the country’s total emissions in 2014, which was higher than Latin America’s average of 35.5 percent. By 2030 the GoM committed, under the Paris Agreement, to reduce the country’s GHG emissions by 25 percent below business-as-usual projections. In January 2019, IEnova formalized its Climate Change Strategy, where it articulates a clear commitment to increase investment in renewable generation assets. The Company anticipates that this Project will kick-start their investments in solar generation. Once fully operational, the four IFC-financed solar power plants are expected to reduce GHG emissions by approximately 561,652 tons CO2 per year.

Pollution Prevention and Control: IEnova has corporate written procedures to guide management and disposal of non-hazardous solid waste; management and disposal of hazardous waste; management of air emissions and noise; spill prevention and control; water management; and a regulatory compliance-matrix, which includes environmental legislation requirement and prohibitions, as well as mechanisms to keep track of types and amounts of any sanctions or fines. These procedures are being applied and documented in the four solar plants financed by IFC. Application of these environmental guidelines is required from all subcontractors as well.

At time of appraisal, IEnova was in the process of developing additional standard procedures covering: environmental vigilance and supervision, soil management and conservation, management of rain and non-point runoff, and decommissioning process, among others.

Water Consumption: Water needs for construction has not been significant and was trucked to sites or obtained from nearby wells with the owners’ permission. At the time of appraisal, the company had not made an estimate of the quantity of water expected to be used during the operation and maintenance phase for periodic panel cleaning. The water is expected to be trucked in and supplied by authorized external vendors. As a requirement to IFC financing, IEnova will prepare an O&M Water Management Plan, outlining concrete estimates of the quantity of water needed to maximize efficiency at the four solar plants under the Project, water consumption targets and KPIs aligned with GIIP, and exploring use of emerging techniques to reduce the amount of O&M water (e.g. automated or pressurized mechanisms) (ESAP action #3)                                                  

 Community Health and Safety: As noted in previous sections, IEnova has two main procedures at the corporate level to assess and manage potential community health and safety risks of its operations, namely the Social Impact Assessment elaboration procedure and the guidance for Emergency Preparedness and Response Plan preparation. These two procedures cover key aspects related to ensuring appropriate identification and mitigation of safety risks to communities during both, regular operations and emergency situations. The SIA reports specifically include Community Health and Safety Plans, which are aligned with PS4 requirements.

For the four solar plants under the Project, these Community Health and Safety Plans identified that the key safety risks to communities are expected to occur during the construction phase from increased traffic and road safety related incidents. Therefore, the solar projects’ Plans, include defensive driving training requirements for contractors and employees, strict enforcement of speed limits, road safety travel records, and visible 1-800 numbers in all project-related vehicles. Each project health & safety liaison ensures to create awareness of the risks of increase in construction-related traffic, contacts local traffic enforcement authorities for the cooperation, and makes sure that locals are aware of the 1-800 number to report any accident or reckless behavior. Other potential adverse effects from reduced air quality or noise from construction activities and operation of heavy machinery were considered negligible and limited to areas in the immediacy of the sites which are only sparsely populated. During operation no significant risks to community health and safety were identified.

Security: The northern states of Mexico are known for high crime rates and violence associated to drug consumption and traffic to the US. For this reason, IEnova performed site Security Risk Assessments compliant with good practices and have determined that the main security risk for their sites is petit equipment theft. All solar plants are fenced and have intrusion alarms around the site perimeter. They also have controlled access, camera and drone supervision systems. Security services are outsourced to local companies. IEnova and individual plant managers indicated their clear preferences for firms guided by principles of proportionality, including the avoidance of armed guards.                                                  

 The sites of the four solar projects are considered modified habitat, three of which have been used for cattle ranching and agriculture for many years. The environmental assessments for Rumorosa and Tepezala plants identified some species protected under Mexican laws.  Approximately half of Rumorosa’s project site is covered with vegetation corresponding to Microphile Desert Scrub, where according to NOM-059-SEMARNAT-2010 the Dessert Ironwood (Olneya tesota) is under risk. Furthermore, 18 wildlife species were registered in the project area, of which birds were the most represented group; and four species are protected under NOM-059-SEMARNAT-2010, namely the long-nosed Leopard Lizard (Gambelia wislizenii), the Zebra-tailed Lizard (Callisaurus draconpides), the Kit Fox (Vulpes macrotis), and the American Badger (Taxidea taxus).

In Tepezala, the environmental assessment identified a total of 19 flora species, none of which were found to be under protection in Mexico. In terms of fauna, birds were the most represented faunal group, followed by mammals and reptiles. The Common Black Hawk (Buteogallus anthracinus) and the Harris’s Hawk (Parabuteo unicinctus) were the only species listed in NOM-059-SEMARNAT-2010.

All species listed above are classified as of Least Concern (LC) in the IUCN Redlist, with the exception of the Dessert Ironwood which is considered Near Threaten (NT).

The environmental licenses have required fauna capture and release and selected plant species rescue and replanting efforts, which is considered aligned with good industry practices.