This is a Category B project according to IFC's Policy on Environment and Social Sustainability (2012). Based on the information reviewed by IFC, the proposed project will have limited adverse E&S impacts that are few, site-specific, largely reversible, and readily addressed through existing mitigation measures and good international industry practices (GIIP).

Key E&S issues for the project include: (i) company's resources and capacity to manage E&S risk; (ii) labor and working conditions of staff contracted as part of the project;(iii) pollution prevention, and hazardous material and waste management (battery management and disposal as required by the bus supply contract); (iv) safety features of the E-buses; (v) universal access; and (vi) supply chain management.                      

The Company is an SPV that has been established for the project. It will own the buses and perform limited activities per the concession contract, including half-life maintenance, bus disposal, and certification of the operator's compliance with the maintenance plan. Additionally, the Company will establish a training plan for the bus operators’ staff.

Grupo Kaufmann has an integrated management system based on the ISO 9001:2015 and ISO 45001:2018 standards, managing quality and occupational health and safety (OHS), respectively. The management system covers all the activities of importation and commercialization of vehicles and spare parts, and the technical and after-sales service, which includes vehicle maintenance and repair services. The management system includes processes for continuous improvement, and auditing and tracking non-conformities. The Sponsor's management system holds valid independent certification for both ISO standards. In addition, the Sponsor has a procedure for the identification and evaluation of environmental aspects for all activities, products and services, and specific environmental protocols and procedures are in place for waste management.

The company will sign contracts with Kaufmann to perform the maintenance activities specified in the concession agreement, at Kaufmann facilities. These activities will mostly be related to spare parts supply, defects covered by warranty and half-life maintenance. As per ESAP #1 and consistent with Kaufmann's management system, the project will institute an E&S policy aligned with PS 1 covering the activities of the project and defining E&S objectives and principles in line with the requirements of IFC Performance Standards.

The direct risks and impacts associated with the project are limited to the procurement of the buses, the half-life overhaul of the buses, the training provided to the operator of the buses, and the disposal of spent batteries and buses at the end of their useful life. All these activities will be contracted to Kaufmann. As per the ESAP #1, the contract will specify that Kaufmann manage the risks and impacts associated with the project in line with local applicable requirements and IFC's PS. The Company will monitor and report on the project's E&S performance.

Kaufmann has a technical team focused on vehicle maintenance and repairs as part of after-sales support. Under the terms of the contract, Kaufmann will develop and implement an annual training plan for the bus operator's personnel, including drivers and maintenance staff. Trainings will address topics such as, passenger and community safety, emergency response procedures, and energy efficiency among others (ESAP #2). As per the ESAP #1, the contract will specify that Kaufmann and its contractors and service providers for the project have adequate E&S management capacity, commensurate to the scope and risks.

The contract will also specify that Kaufmann develop an Emergency Preparedness and Response Plan (EPRP) to address all foreseeable incidents and emergency associated with the execution of the contract for the E-bus supply and coordinate such plan and procedures with the bus operator (ESAP #3).                          

The Company will outsource all labor and administrative matters to Commercial Kaufmann S.A. (a subsidiary of Grupo Kaufmann), by means of a private instrument to be executed by the parties. As part of the instrument, the Company will ensure that human resources (HR) policies and procedures related to activities in the scope of the contract comply with the national labor regulations and meet IFC PS2 requirements, as included on the ESAP #4.

Occupational health and safety risks for the project are related to maintenance and bus disposal. The Sponsor has an OHS management system as part of its integrated management system, certified to ISO 45001:2018 and the application of the management system will be part of the project's contractual agreements. As part of the ESAP# 4, the company will identify and manage the occupational health & safety risks and impacts specific to the workshops where maintenance activities will take place.

The project's primary supply chain will involve suppliers of materials and parts essential for the maintenance of the E-buses, under the concession contract (maintaining a stock of spare parts, battery replacement and major maintenance). 

In consideration of the supply chain risks associated with the sector, CATL, the battery supplier, has policies related to Sustainable Supply Chain Management, Responsible Mineral Resources Supply Chain Grievance Mechanism, and Due Diligence Management Policy for Responsible Mineral Resources Supply Chain, including provisions regarding child and forced labor. As per the ESAP #5, the company will develop and adopt a sourcing policy that addresses child and forced labor and will develop a supply chain management procedure as part of their ESMS, focusing on materials and parts that the company will be sourcing to fulfill contract obligations for use in ongoing operations, meeting the relevant requirements under PS2.                 

The project will reduce Santiago's mass transit system's carbon footprint by replacing existing diesel buses with E-buses. Pollution risks associated with the company's activities relate to half-life maintenance, occasional repairs, battery disposal and end-of-life disposal. These activities will be undertaken by Kaufmann in its network of specialized workshops, in compliance with applicable regulatory requirements. Batteries, paint solvent, lubricant and oils are hazardous wastes. Kaufmann has a set of management instructions and a hazard identification table for hazardous waste handling, as well as a procedure for the management of hazardous waste, done through an authorized third-party waste management company responsible for the collection, transportation, treatment and final disposal of hazardous waste.

The company is required to develop a battery management plan which will include the final disposal of spent batteries or their deployment for reuse, according to applicable requirements. The current intention of the company is to identify reuse opportunities for the batteries once they no longer comply with the minimum range limit, thus avoiding the need to recycle or dispose of the batteries. Work is currently underway with local companies to identify such opportunities. Furthermore, the company must manage the final authorized disposal of buses at the end of their useful life, if requested by the MTT. As per ESAP #6, the company, directly or through Kaufmann, will develop and implement a waste, hazardous material and battery management plan which will meet Chilean Environmental Legislations and PS3.                             

Operation of the buses is out of the scope of the company's contract. Nevertheless, Kaufmann is responsible for training bus operator's drivers and maintenance personnel. The training covers safe operation and maintenance of E-buses. As per ESAP #2, the driver training, that the company will provide to the operator, will include emergency response.

With respect to passenger safety, the buses are required to be equipped with several electrical safety systems and features and the maintenance plan that the company will provide to the operator includes inspection and maintenance of safety critical systems such as braking systems, power steering systems, and battery management system, heat and smoke detectors, among others.

As per the contract, the materials used in the manufacture of the interior of the bodywork of the E-buses can reduce the damage to the occupants of the vehicle caused by fire. The E-buses comply with GB8410-2006 of the People's Republic of China. The contract also stipulates the minimum number of emergency exits.

The Class 2 bus batteries have been subjected to various safety tests such as vibration, thermal shock and cycling, fire resistance, external short circuit protection, over-temperature protection, mechanical impact, overcharge protection and over discharge protection. The buses also have design features per universal accessibility standards. The battery successfully passed all the tests and had the approval issued by Economic Commission for Europe regulations. As part of the concession contract, the MTT may also demand annual training for municipal firefighters and the company will include such training in the training plan.