Considering the nature of business operations and project activities and based on IFC’s review during project appraisal, no significant risks and impacts associated with the requirements of PS 5 (Land Acquisition and Involuntary Resettlement), PS 6 (Biodiversity Conservation and Sustainable Management of Living Natural Resources); PS 7 (Indigenous Peoples) and IFC PS 8 (Cultural Heritage) were identified for this proposed project. In any case, the company will develop policies and procedures to screen for E&S risks and impacts and, when such risks and impacts are identified, mitigate them consistent with all the PSs as summarized under the PS1 section below.

If IFC’s investment proceeds, IFC will periodically review the project’s ongoing compliance with the Performance Standards                                                  

  This is a Category B project according to IFC’s Policy on Environmental and Social Sustainability as the potential adverse E&S risks and/or impacts, which are generally site-specific, are largely reversible and can readily be addressed through mitigation measures. Based on the available project information, key project-related E&S issues and risks include the company’s capacity and systems to review and manage the E&S performance associated with the operations of their assets, adequate procedures for site selection acquisitions/leases for new data centers, stakeholder engagement and community grievance mechanism, and contractor E&S management during construction and O&M.

  Environmental and Social Assessment and Management System

KIO has an environmental management system certified to the ISO 14001 international standard for its operations in MEX1 (one of its assets located in Mexico City). The system has procedures for identifying and managing environmental aspects and impacts associated with the operations and considers also emergency conditions, for example the E&S aspects related to stand-by generators operation. However, as indicated by company’s management, while the other assets follow same practices developed for MEX1, they do not have a formal management system which is specific to the operation of such assets. As part of aligning the ESMS with IFC Performance Standard 1, KIO will develop, implement, and maintain a corporate ESMS across all projects and operations, considering the nature and scale of the project and commensurate with the level of its environmental and social risks and impacts. The ESMS will incorporate the following elements: (i) policy; (ii) identification of risks and impacts; (iii) management programs; (iv) organizational capacity and competency; (v) emergency preparedness and response; (vi) stakeholder engagement; and (vii) monitoring and review (ESAP Action No. 1).

Policy

The company has an integrated management system policy, which includes the environmental and social aspects of the organization. KIO will update its E&S policy, as per IFC PS1, in such a way that it (i) defines its commitment to compliance with the applicable law in the different countries where it operates and (ii) clearly defines who is responsible for its compliance and implementation (ESAP Action No. 2).

Management Programs

As indicated, KIO has management procedures and programs that define guidelines for identifying and managing the E&S risks and impacts associated with its operations, such as procedures for the handling and management of hazardous waste and environmental contingencies (spillage), which are formally implemented in MEX 1. As per ESAP Action No. 1, the company will design and implement adequate management programs for all its assets.

As IFC’s investment will be used as part of ISQ’s strategy aimed at (a) growing the core datacenter business via organic growth, and (b) investing in the construction of new datacenters to address global hyper-scaler demand, KIO will upgrade its ESMS to identify, assess and mitigate E&S risks and impacts, complying with the requirements of the IFC PSs for both operations and projects. KIO will acquire or lease land for the siting of data centers and assess legal aspects to ensure compliance with relevant country requirements. To meet the requirements of IFC’s PSs, KIO, as part of their management systems, will undertake to develop a site screening and selection procedure by defining criteria and conducting screening and, as needed, specific assessments related to: (i) land acquisition as per IFC PS5 (if applicable), (ii) potential impacts on the community surrounding and in proximity of company’s operations and projects (e.g., noise and air emissions) as per IFC PS 3 and 4, and (iii) risk and impacts to biodiversity, indigenous peoples, as cultural heritage as per IFC PS 6, 7 and 8 respectively (ESAP Action No 3).  

As part of the upgrade of its ESMS, KIO will also develop a contractor management procedure and will define and establish contractual E&S requirements for contractors to comply with the company’s E&S policies and procedures, including compliance with IFC’s PSs, as relevant and applicable to the contractor’s activities, oversight procedures for contractor E&S performance, and actions to be taken when contractors are found out of compliance. The contractor management procedure will include: (i) minimum E&S requirements for contractors in line with the IFC PSs (including mandatory competency trainings etc.), (ii) E&S pre-qualification criteria and process, (iii) communication and training, (iv) E&S audit, (v) requirements and process for E&S risk assessment prior to work commencement, (vi) E&S monitoring and reporting (including performance indicators), and (vii) requirements and provisions regarding compliance with labor host country law and PS2 (including non-discrimination, compensation, training, timely payment of salaries, freedom of association, no child/forced labor, grievance mechanism, occupational health and safety, etc.)  (ESAP Action No. 4).

Organizational Capacity and Competency

KIO's E&S aspects are currently managed by different company’s departments according to their competence. The permits required for its operation are obtained and managed by the legal department of the company, and the implementation of the environmental management system is under the responsibility of the compliance team. There is no E&S officer to ensure adequate supervision and integration of the different aspects of the organization. Therefore, KIO will identify dedicated personnel to screen, assess, and oversee E&S risks and impacts management and mitigation, ESG reporting, and for overseeing community/ stakeholder engagement and community grievance mechanism as discussed below (ESAP Action No. 5).

Emergency Preparedness and Response

Each of KIO’s data centers has functional emergency response plans, including appropriate emergency preparedness and response measures to be implemented in the event of potential emergency scenarios; detailing and designating committee responsibilities, addressing emergency communication, emergency drills, detailed procedures for use of alarms, firefighting, and medical emergency, among others. KIO’s data centers are fitted with appropriate fire prevention and response measures, including automatic sprinkler systems, water supply, alarm systems, portable first aid and firefighting equipment based on “clean agent” systems and comply with the National Fire Protection Association - NFPA requirements for Life & Fire Safety (LFS). Fire and emergency response drills are carried out periodically simulating scenarios based on a risk assessment. KIO will include in the referred documents (Fire Fighting Systems Procedure), clear descriptions of the equipment and system installed for each area in the data center (e.g., offices, stand-by generators, data center, etc.), and the standard procedures for O&M for each facility (ESAP Action No. 6). 

Training

KIO provides regular training mainly oriented on the E&S system’s requirements to its service providers and contractors., KIO will design and implement an additional E&S training program for their staff. Training will include health and safety aspects, risks and impacts, management of contractors, stakeholder engagement, and ESMS plans, and procedures aligned with IFC PS1. (ESAP Action No.7).

Monitoring and Review

The company has defined and implemented a number of key performance indicators (KPIs) (i.e., data center energy efficiency and carbon footprint), which are monitored monthly and reported to the compliance team who are responsible for ESMS Management. To date, KIO does not have a formal procedure to undertake monitoring and review of E&S performance at its operations and projects, including performance of their contractors and sub-contractors engaged in construction and operations & maintenance (O&M) of its facilities. KIO will undertake to develop E&S monitoring and reporting procedures, including procedures to oversee contractor E&S performance for construction and O&M. The procedures will define monitoring mechanisms and KPIs, including environmental, occupational health and safety and social KPIs, and will define roles and responsibilities within the company (ESAP Action No.8).

 Human Resources Policies and Procedures

KIO has a corporate Human Resource (HR) policy and relevant procedures, and a Code of Conduct that set out the company’s terms and conditions to meet relevant labor law requirements as well as corporate principles of safety, integrity, sustainability and respect. The HR policy makes explicit reference to recruitment procedures, employment regulations, workers compensation and benefits, disciplinary code, training and performance management.

The Code of Conduct provides guidance to all employees on dealing with stakeholders and communication; conflicts of interest; human rights; community and public relations, among other aspects. Furthermore, KIO has a diversity and inclusion policy in place that defines guidelines for gender equality, payment of equal wages for work of same and similar nature to male and female workers, and actions promote diversity and inclusion among others.

KIO has a whistleblower procedure that addresses offences, violation/non-compliance of company’s policies/procedures; health and safety risks; and unprofessional and inappropriate actions. This mechanism is anonymous and confidential.

KIO’s HR policy includes provisions relevant to prohibition of child and forced labor; meeting minimum employment age requirements, rights to freedom of association, collective bargaining, and worker grievance mechanisms in line with PS2 requirements.

Working Conditions and Terms of Employment

At the time of IFC’s review, KIO had approximately 2000 direct employees (71% men and 29% women). KIO complies with national requirements related to minimum wage, benefits, working hours, shift times and overtime payment.

Workers Engaged by Third Parties

KIO’s operations rely on contractors for construction and O&M activities which are mainly covered by equipment manufacturers. As indicated above, KIO will upgrade their contractor management procedures to include relevant IFC PS 2 labor provisions of their contractor’s workers (see ESAP Action No.4 above). 

Occupational Health and Safety (OHS)

KIO has adequate procedures to assess, and monitor OHS aspects associated with its operations, including an emergency response plan, LFS measures, safety training and emergency drills, incidents management, among others. According to the information provided, KIO has a low rate of accidents for operation and management activities. As per ESAP Action No. 8, KIO will develop procedures to ensure oversight of occupational health and safety procedures of their contractors during construction and O&M.

COVID-19 Response

As a result of the COVID-19 pandemic KIO has not laid-off workers but have made temporary adjustments to its workforce by adapting to both national and local labor laws. Furthermore, KIO is implementing a COVID-19 infection prevention, control and response plan, which is consistent with the provisions under PS2, PS4, and the Interim Advice for IFC Clients on Preventing and Managing Health Risks of COVID-19 in the Workplace.

  Resource Efficiency and Greenhouse Gas (GHG) Emissions

KIO has plans and programs for the efficient use of energy. As a main tool, the company implements the international standard CEEDA (Certification of Energy Efficiency in Data Centers) to ensure an efficient use of energy, as a key element of the operation. KIO monitors its consumption monthly, described as power usage effectiveness (PUE) unit, which is a metric obtained from the ratio between the total energy used in the infrastructure (air conditioning systems, lighting, UPS, etc.) and the total energy used by IT equipment (servers, computing, storage, and communications equipment). The operations team is constantly evaluating possible improvements and better technologies to increase its efficiency.

According to the information provided, KIO’s GHG emissions were estimated at approximately 2,444 tCO2e in 2020, due to the electricity consumption in its data centers and in consideration of company’s agreements for 95% of its capacity with renewable energy providers.  The company’s PUE efficiency indicators (1.3 to 2.3) reflect good performance according to industry benchmarking (1.5 efficient and 2.0 average). Records provided by the company indicates that the PUE indicator for each facility has been improving year after year, which shows the company's commitment to energy efficiency.

Pollution Prevention

KIO has procedures for waste management, including hazardous wastes (batteries, wastes containing oil or fuel and e-waste), in line with the requirements of this PS. The fuel storage tanks, required to operate diesel-fuelled stand-by generators at the company’s facilities, have the needed spill prevention and containment measures (double containment, containment basin volumes required to contain full discharge, and spill sensors). The diesel distribution pipelines are also double-walled. The stand-by generators and the pumps of the backup system for each facility are inspected annually to verify quality of engines’ filters and oil.

  Community Safety

Although the company has adequate risk and emergency response plans (ERP) in place at each facility, there are no procedures for communicating with nearby communities that could potentially be affected by an emergency. Therefore, KIO will develop adequate procedures to communicate and disclose appropriate information to affected communities, relevant government agencies, or other relevant parties, regarding KIO’s ERP (ESAP Action No. 9).

Security Personnel  

KIO has a security coordinator per facility to lead outsourced private security personnel. The private security personnel do not carry nor use weapons in the company’s facilities. The company will undertake to develop a security management protocol aligned with PS4, addressing the vetting process for the selection of security firms and their personnel to be installed at their worksite locations as well as training requirements including human rights and appropriate conduct towards data center users and potential interactions with nearby communities (ESAP Action No. 10)